SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 19, 1997
Quality Food Centers, Inc.
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(Exact name of registrant as specified in its charter)
Washington
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(State or other jurisdiction of incorporation)
0-15590 91-1330075
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(Commission File Number) (IRS Employer Identification No.)
10112 N.E. 10th Street
Bellevue, Washington 98004
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (206) 455-3761
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(Former name or former address, if changed since last report)
Page 1 of __ Pages
Exhibit Index on Page 4
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 19, 1997, QFC acquired Hughes Markets, Inc. ("Hughes") for
approximately $358.8 million in cash (the "Hughes Acquisition"). The Hughes
Acquisition was financed by (i) the public offering of 5,175,000 shares of QFC's
common stock (the "Common Stock Offering") under QFC's universal shelf
registration statement; (ii) the private placement pursuant to Rule 144A of
$150,000,000 aggregate principal amount of QFC's 8.70% Senior Subordinated Notes
due March 15, 2007 (the "Notes Offering"); and (iii) borrowings under QFC's
amended and restated credit facility (the "New Credit Facility") entered into
concurrently with the closing of the Hughes Acquisition. Included under Item 7
hereof are documents relating to the Common Stock Offering, the Notes Offering
and the New Credit Facility.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Filed as Exhibit 99.1 is the U.S. Common Stock Purchase Agreement dated as
of March 13, 1997 between QFC, Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and each of the other underwriters named in Schedule
A thereto.
(b) Filed as Exhibit 99.2 is the International Common Stock Purchase Agreement
dated as of March 13, 1997 between QFC, Merrill Lynch International and each of
the other underwriters named in Schedule A thereto.
(c) Filed as Exhibit 99.3 is the Senior Subordinated Notes Purchase Agreement
dated as of March 13, 1997 between QFC, Quality Food Holdings, Inc., Hughes
Markets, Inc., KU Acquisition Corporation, Donaldson, Lufkin & Jenrette
Securities Corporation, Merrill Lynch, Pierce Fenner & Smith Incorporated and
BancAmerica Securities, Inc.
(d) Filed as Exhibit 99.4 is the Senior Subordinated Notes Registration Rights
Agreement dated as of March 19, 1997 between QFC, the Guarantors named on the
signature pages thereof, Donaldson, Lufkin & Jenrette Securities Corporation,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and BancAmerica Securities,
Inc.
(e) Filed as Exhibit 99.5 is the Senior Subordinated Notes Indenture dated as of
March 19, 1997 between QFC, the Guarantors named therein and First Trust
National Association.
(f) Filed as Exhibit 99.6 is the Amended and Restated Credit Agreement dated as
of March 14, 1997 among QFC, Quality Food Holdings, Inc., Quality Food, Inc.,
Bank of America National Trust and Savings Association, the Chase Manhattan Bank
and the Other Financial Institutions Party Thereto.
(g) Filed as Exhibit 99.7 is the Guaranty dated as of March 19, 1997 executed in
favor of Bank of America National Trust and Savings Association and the Other
Agents and Lenders under the Amended and Restated Credit Agreement.
(h) Filed as Exhibit 99.8 is the Pledge Agreement dated as of March 19, 1997
between Quality Food, Inc. and Bank of America National Trust and Savings
Association.
(i) Filed as Exhibit 99.9 is the Pledge Agreement dated as of March 19, 1997
between QFC and Bank of America National Trust and Savings Association.
(j) Filed as Exhibit 99.10 is the Agreement, Waiver and Amendment No. 1 to
Agreement and Plan of Merger relating to the acquisition by QFC of Keith
Uddenberg, Inc.
(k) Filed as Exhibit 99.11 is the Agreement, Waiver and Amendment No. 2 to
Agreement and Plan of Merger relating to the acquisition by QFC of Keith
Uddenberg, Inc.
(l) Filed as Exhibit 99.12 is the Press Release annoucning the completion of the
Hughes Acquisition.
EXHIBITS
99.1 U.S. Common Stock Purchase Agreement dated as of March 13, 1997 between
QFC, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
each of the other underwriters named in Schedule A thereto.
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99.2 International Common Stock Purchase Agreement dated as of March 13,
1997 between QFC, Merrill Lynch International and each of the other underwriters
named in Schedule A thereto.
99.3 Senior Subordinated Notes Purchase Agreement dated as of March 13, 1997
between QFC, Quality Food Holdings, Inc., Hughes Markets, Inc., KU Acquistition
Corporation, Donaldson, Lufkin & Jenrette Securities Corporation, Merrill Lynch,
Pierce Fenner & Smith Incorporated and BancAmerica Securities, Inc.
99.4 Senior Subordinated Notes Registration Rights Agreement dated as of
March 19, 1997 between QFC, the Guarantors named on the signature pages thereof,
Donaldson, Lufkin & Jenrette Securities Corporation, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and BancAmerica Securities, Inc.
99.5 Senior Subordinated Notes Indenture dated as of March 19, 1997 between
QFC, the Guarantors named therein and First Trust National Association.
99.6 Amended and Restated Credit Agreement dated as of March 14, 1997 among
QFC, Quality Food Holdings, Inc., Quality Food, Inc., Bank of America National
Trust and Savings Association, the Chase Manhattan Bank and the Other Financial
Institutions Party Thereto.
99.7 Guaranty dated as of March 19, 1997 executed in favor of Bank of
America National Trust and Savings Association and the Other Agents and Lenders
under the Amended and Restated Credit Agreement.
99.8 Pledge Agreement dated as of March 19, 1997 between Quality Food,
Inc. and Bank of America National Trust and Savings Association.
99.9 Pledge Agreement dated as of March 19, 1997 between QFC and Bank of
America National Trust and Savings Association.
99.10 Agreement, Waiver and Amendment No. 1 to Agreement and Plan of Merger
relating to the acquisition by QFC of Keth Uddenberg, Inc.
99.11 Agreement, Waiver and Amendment No. 2 to Agreement and Plan of Merger
relating to the acquisition by QFC of Keth Uddenberg, Inc.
99.12 Press Release announcing the completion of the Hughes Acquisition.
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SIGNATURES:
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
QUALITY FOOD CENTERS, INC.
March 24, 1997 By: /s/ MARC W. EVANGER
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Marc W. Evanger, Vice President
and Chief Financial Officer
and Secretary/Treasurer
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4
INDEX TO EXHIBITS
Exhibit Number Exhibit Page
99.1 U.S. Common Stock Purchase Agreement dated as of March 13, 1997 between
QFC, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
each of the other underwriters named in Schedule A thereto.
99.2 International Common Stock Purchase Agreement dated as of March 13,
1997 between QFC, Merrill Lynch International and each of the other underwriters
named in Schedule A thereto.
99.3 Senior Subornated Notes Purchase Agreement dated as of March 13, 1997
between QFC, Quality Food Holdings, Inc., Hughes Markets, Inc., KU Acquistition
Corporation, Donaldson, Lufkin & Jenrette Securities Corporation, Merrill Lynch,
Pierce Fenner & Smith Incorporated and BancAmerica Securities, Inc.
99.4 Senior Subonated Registration Rights Agreement dated as of March 19,
1997 between QFC, the Guarantors named on the signature pages thereof,
Donaldson, Lufkin & Jenrette Securities Corporation, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and BancAmerica Securities, Inc.
99.5 Senior Subonated Indenture dated as of March 19, 1997 between QFC, the
Guarantors named therein and First Trust National Association.
99.6 Amended and Restated Credit Agreement dated as of March 14, 1997 among
QFC, Quality Food Holdings, Inc., Quality Food, Inc., Bank of America National
Trust and Savings Association, the Chase Manhattan Bank and the Other Financial
Institutions Party Thereto.
99.7 Guaranty dated as of March 19, 1997 executed in favor of Bank of
America National Trust and Savings Association and the Other Agents and Lenders
under the Amended and Restated Credit Agreement.
99.8 Pledge Agreement dated as of March 19, 1997 between Quality Food,
Inc. and BAnk of America National Trust and SAvings Association.
99.9 Pledge Agreement dated as of March 19, 1997 between QFC and Bank of
America National Trust and Savings Association.
99.10 Agreement, Waiver and Amendment No. 1 to Agreement and Plan of Merger
relating to the acquisition by QFC of Keth Uddenberg, Inc.
99.11 Agreement, Waiver and Amendment No. 2 to Agreement and Plan of Merger
relating to the acquisition by QFC of Keth Uddenberg, Inc.
99.12 Press Release announcing the completion of the Hughes Acquisition.
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QUALITY FOOD CENTERS, INC.
(a Washington corporation)
4,500,000 Shares of Common Stock
U.S. PURCHASE AGREEMENT
Dated: March 13, 1997
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Table of Contents
Page
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U.S. PURCHASE AGREEMENT.................................................... 1
SECTION 1. Representations and Warranties........................... 5
(a) Representations and Warranties by the Company....... 5
(b) Officer's Certificates.............................. 15
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.......... 15
(a) Initial Securities.................................. 15
(b) Option Securities................................... 15
(c) Payment............................................. 16
(d) Denominations; Registration......................... 17
SECTION 3. Covenants of the Company................................. 17
(a) Compliance with Securities Regulations and Commission
Requests............................................ 17
(b) Filing of Amendments................................ 17
(c) Delivery of Registration Statements................. 18
(d) Delivery of Prospectuses............................ 18
(e) Continued Compliance with Securities Laws........... 18
(f) Blue Sky Qualifications............................. 19
(g) Rule 158............................................ 19
(h) Use of Proceeds..................................... 19
(i) Preparation of Prospectus Supplement................ 19
(j) Listing............................................. 19
(k) Restriction on Sale of Securities................... 19
(l) Reporting Requirements.............................. 20
SECTION 4. Payment of Expenses...................................... 20
(a) Expenses............................................ 20
(b) Termination of Agreement............................ 21
SECTION 5. Conditions of U.S. Underwriters' Obligations............. 21
(a) Effectiveness of Registration Statement............. 21
(b) Opinion of Bogle & Gates P.L.L.C.................... 21
(c) Opinion of Simpson Thacher & Bartlett............... 22
(d) Opinion of O'Melveny & Myers LLP.................... 22
(e) Opinion of Rosenberg & Liebentritt, P.C............. 23
(f) Opinion of Counsel for U.S. Underwriters............ 23
(g) Officers' Certificate............................... 24
(h) Accountants' Comfort Letters........................ 24
(i) Bring-down Comfort Letter........................... 24
(j) Approval of Listing................................. 24
(k) Lock-up Agreements.................................. 24
(l) Consummation of Hughes Merger....................... 24
(m) Effectiveness of New Credit Agreement............... 25
(n) Purchase of Notes................................... 25
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Page
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(o) Purchase of International Securities................ 25
(p) Conditions to Purchase of U.S. Option Securities.... 25
(q) Additional Documents................................ 26
(r) Termination of Agreement............................ 26
SECTION 6. Indemnification.......................................... 27
(a) Indemnification of U.S. Underwriters................ 27
(b) Indemnification of Company, Directors and Officers.. 28
(c) Actions against Parties; Notification............... 28
(d) Settlement without Consent if Failure to Reimburse.. 29
(e) Currency.............................................29
SECTION 7. Contribution............................................. 29
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery .............................................. 30
SECTION 9. Termination of Agreement................................. 31
(a) Termination; General................................ 31
(b) Liabilities......................................... 31
SECTION 10. Default by One or More of the U.S. Underwriters.......... 31
SECTION 11. Notices.................................................. 32
SECTION 12. Parties.................................................. 32
SECTION 13. GOVERNING LAW AND TIME................................... 33
SECTION 14. Effect of Headings....................................... 33
SCHEDULES
Schedule A - List of Underwriters.............................Sch A-1
Schedule B - Pricing Information..............................Sch B-1
Schedule C - List of Persons Subject to Lock-up...............Sch C-1
Schedule D - Persons Holding Shares with Registration Rights..Sch D-1
EXHIBITS
Exhibit A - Form of Opinion of Bogle & Gates P.L.L.C..............A-1
Exhibit B - Form of Opinion of Simpson Thacher & Bartlett.........B-1
Exhibit C - List of Subsidiaries..................................C-1
Exhibit D - Form of Opinion of Rosenberg & Liebentritt, P.C.......D-1
Exhibit E - Form of Lock-up Letter................................E-1
Exhibit F - Form of Parent Lock-up Letter.........................F-1
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QUALITY FOOD CENTERS, INC.
(a Washington corporation)
4,500,000 Shares of Common Stock
(Par Value $.001 Per Share)
U.S. PURCHASE AGREEMENT
March 13, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
DAIN BOSWORTH INCORPORATED
as U.S. Representatives of the several U.S. Underwriters
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:
Quality Food Centers, Inc., a Washington corporation (the "Company"),
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and each of the other Underwriters named in Schedule A hereto
(collectively, the "U.S. Underwriters", which term shall also include any
underwriter substituted as hereinafter provided in Section 10 hereof), for whom
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation, Salomon Brothers Inc and Dain Bosworth Incorporated are
acting as representatives (in such capacity, the "U.S. Representatives"), with
respect to the issue and sale by the Company and the purchase by the U.S.
Underwriters, acting severally and not jointly, of the respective numbers of
shares of Common Stock, par value $.001 per share, of the Company ("Common
Stock") set forth in said Schedule A, and with respect to the grant by the
Company to the U.S. Underwriters, acting severally and not jointly, of the
option described in Section 2(b) hereof to purchase all or any part of 540,000
additional shares of Common Stock to cover over-allotments, if any. The
aforesaid 3,600,000 shares of Common Stock (the "Initial U.S. Securities") to be
purchased by the U.S.
<PAGE>
Underwriters and all or any part of the 540,000 shares of Common Stock subject
to the option described in Section 2(b) hereof (the "U.S. Option Securities")
are hereinafter sometimes called, collectively, the "U.S. Securities". This
Agreement is hereinafter sometimes called the "U.S. Purchase Agreement".
It is understood that the Company is concurrently entering into an
International Purchase Agreement dated the date hereof (the "International
Purchase Agreement") providing for the offering by the Company of an aggregate
of 900,000 shares of Common Stock (the "Initial International Securities")
through arrangements with certain underwriters outside of the United States and
Canada (the "International Underwriters") for whom Merrill Lynch International,
Donaldson, Lufkin & Jenrette Securities Corporation, Salomon Brothers
International Limited and Dain Bosworth Incorporated are acting as lead managers
(the "International Representatives"), and the grant by the Company to the
International Underwriters of an option to purchase all or any part of an
additional 135,000 shares of Common Stock (the "International Option
Securities") to cover over-allotments, if any. The Initial International
Securities and the International Option Securities are hereinafter sometimes
called, collectively, the "International Securities."
The U.S. Securities and the International Securities are hereinafter
sometimes called, collectively, the "Securities;" the Initial U.S. Securities
and the Initial International Securities are hereinafter sometimes called,
collectively, the "Initial Securities;" the U.S. Option Securities and the
International Option Securities are hereinafter sometimes called, collectively,
the "Option Securities;" the U.S. Underwriters and the International
Underwriters are hereinafter sometimes called, collectively, the "Underwriters"
and, individually, an "Underwriter;" the U.S Representatives and the
International Representatives are hereinafter sometimes called, collectively,
the "Representatives"; and, individually, a "Representative;" and this Agreement
and the International Purchase Agreement are hereinafter sometimes called,
collectively, the "Purchase Agreements" and, individually, a "Purchase
Agreement".
The Company understands that the U.S. Underwriters and the International
Underwriters will concurrently enter into an Intersyndicate Agreement of even
date herewith (the "Inter-syndicate Agreement") providing for the coordination
of certain transactions among the U.S. Underwriters and the International
Underwriters under the direction of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch").
It is understood that the Company is concurrently entering into a Purchase
Agreement dated the date hereof (the "Debt Agreement") with Donaldson, Lufkin &
Jenrette Securities Corporation, Merrill Lynch and BancAmerica Securities, Inc.,
as the initial purchasers (the "Initial Purchasers"), and Quality Food Holdings,
Inc., a Delaware corporation, (the "Holding Company"), and KU Acquisition
Corporation, a Washington corporation ("KUA") and the surviving corporation in
the merger with Keith Uddenberg, Inc. ("KUI"), which Debt Agreement will also be
entered into by Hughes Markets, Inc., a California corporation ("Hughes") as of
Closing Time (as hereinafter defined), relating to the offering by the Company
of $150,000,000 aggregate principal amount of its 8.70% Senior Subordinated
Notes due 2007 (the "Notes"). The Notes are to be issued pursuant to an
indenture (the "Indenture") among the Company, as issuer of the Notes, the
Holding Company, KUA and Hughes, as guarantors (each, a "Guarantor" and,
collectively, the "Guarantors"), and First
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Trust National Association, as trustee (the "Trustee"). The Guarantors will
jointly and severally guarantee, among other things, the punctual payment of the
principal of, premium, if any, and interest on the Notes and the Company's 8.70%
Senior Subordinated Notes due 2007 (the "Series B Notes") to be offered in
exchange for the Notes (the "Exchange Offer") pursuant to the Indenture and the
Registration Rights Agreement referred to below (each, a "Guarantee" and,
collectively, the "Guarantees"). In connection with the issuance and sale of the
Notes, the Company and the Guarantors will enter into a Registration Rights
Agreement (the "Registration Rights Agreement") with the Initial Purchasers.
Pursuant to the Registration Rights Agreement, the Company and the Guarantors
will agree to use their reasonable best efforts to file with the Commission,
under the circumstances set forth therein and among other things, a registration
statement under the 1933 Act relating to the Exchange Offer.
The Company has also entered into Agreement and Plan of Merger dated as of
November 20, 1996, as amended (the "Hughes Merger Agreement"), with QHI
Acquisition Corporation, a California corporation and wholly-owned subsidiary of
the Company ("QHI"), and Hughes, pursuant to which QHI will merge with and into
Hughes, with Hughes as the surviving corporation and as a result of which Hughes
will become a wholly-owned direct subsidiary of the Company (the "Hughes
Merger").
The Company is currently a party to a Credit Agreement dated as of March
15, 1995 (the "Old Credit Agreement") among the Company, Bank of America
National Trust and Savings Association ("BofA"), as agent, Seattle First
National Bank, as swingline lender, Bank of America Illinois ("BAI"), as issuing
lender, and the other financial institutions party thereto.
In connection with the transactions contemplated herein, the Company,
Quality Food, Inc., a Delaware corporation ("Parent"), and the Holding Company
will enter into an Amended and Restated Credit Agreement (the "New Credit
Agreement") with BofA, as Administrative Agent and Paying Agent, The Chase
Manhattan Bank, as Administrative Agent, and the other lenders party thereto
(collectively, the "Lenders"), amending and restating the Old Credit Agreement,
and, concurrently therewith, the security agreements previously executed with
respect to the Old Credit Agreement (the "Old Security Agreements") will be
terminated. In order to guarantee the Company's obligations under the New Credit
Agreement, the Holding Company, Hughes, and KUA (each, a "Bank Guarantor" and,
collectively, the "Bank Guarantors") will enter into a guaranty (the "Bank
Guaranty") pursuant to the New Credit Agreement. In order to secure their
respective obligations under the New Credit Agreement, the Company will enter
into a Pledge Agreement (the "Company Security Agreement") and the Parent will
enter into a Pledge Agreement (the "Guarantor Security Agreement", the Company
Security Agreement and the Guarantor Security Agreement are hereinafter
sometimes called, collectively, the "Bank Security Agreements" and,
individually, a "Bank Security Agreement") pursuant to which each of them will
pledge the common stock of certain subsidiaries as collateral.
The Purchase Agreements, the Debt Agreement, the Registration Rights
Agreement, the Indenture, the Notes, the Series B Notes, the New Credit
Agreement, the Company Security Agreement and the Hughes Merger Agreement are
hereinafter sometimes called, collectively, the "Company Documents" and,
individually, a "Company Document". The Debt Agreement, the
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Registration Rights Agreement, the Indenture, the New Credit Agreement, the
Guarantor Security Agreement and the Bank Guaranty are hereinafter sometimes
called, collectively, the "Guarantor Documents" and, individually, a "Guarantor
Document".
The sale of the Initial U.S. Securities to the U.S. Underwriters pursuant
to this Agreement and the sale of the Initial International Securities to the
International Underwriters pursuant to the International Purchase Agreement are
each conditioned upon, among other things, (i) the concurrent occurrence of the
other event and the concurrent purchase of the Notes by the Initial Purchasers
pursuant to the Debt Agreement, (ii) the effectiveness of the New Credit
Agreement prior to or concurrently therewith and (iii) the effectiveness of the
Hughes Merger prior to or concurrently therewith.
The Company understands that the U.S. Underwriters propose to make a
public offering of the U.S. Securities as soon as the U.S. Representatives deem
advisable after this Agreement has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-18567) for the
registration of, among other things, the Securities under the Securities Act of
1933, as amended (the "1933 Act"). Such registration statement, including the
exhibits thereto, the schedules thereto, if any, and the documents incorporated
or deemed to be incorporated by reference therein pursuant to Item 12 of Form
S-3 under the 1933 Act, as amended at the time it became effective, is herein
called the "Registration Statement." Any registration statement filed pursuant
to Rule 462(b) of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. Promptly after the
execution of this Agreement, the Company will file with the Commission pursuant
to Rule 424(b) of the 1933 Act Regulations a prospectus supplement relating to
the U.S. Securities (the "U.S. Prospectus Supplement") and a prospectus
supplement relating to the International Securities (the "International
Prospectus Supplement")(1), in each case together with the related prospectus
dated January 27, 1997 (the "Base Prospectus"), and has previously advised you
of all information (financial and other) set forth therein. The U.S. Prospectus
Supplement and the Base Prospectus, including all documents incorporated or
deemed to be incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, in the form first furnished to the U.S. Underwriters for use
in connection with the offering of the U.S. Securities, are hereinafter referred
to, collectively, as the "U.S. Prospectus." The International Prospectus
Supplement and the Base Prospectus, including all documents incorporated or
deemed to be incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, in the form first furnished to the International
Underwriters for use in connection with the offering of the International
Securities, are hereinafter referred to, collectively, as the "International
Prospectus." The U.S. Prospectus and the International Prospectus are
hereinafter sometimes referred to as,
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(1) Two forms of prospectus supplement are to be used in connection with the
offering and sale of the Securities, one relating to the U.S. Securities
and one relating to the International Securities. The International
Prospectus Supplement is identical to the U.S. Prospectus Supplement,
except for the front cover page, back cover page and the section captioned
"Underwriting."
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individually, a "Prospectus" and, collectively, the "Prospectuses." Each
prospectus supplement relating to the U.S. Securities used prior to the date of
this Agreement, together with the related base prospectus and all documents
incorporated or deemed to be incorporated by reference therein pursuant to Item
12 of Form S-3, are hereinafter referred to, collectively, as a "preliminary
U.S. prospectus". Each prospectus supplement relating to the International
Securities used prior to the date of this Agreement, together with the related
base prospectus and all documents incorporated or deemed to be incorporated by
reference therein pursuant to Item 12 of Form S-3, are hereinafter referred to,
collectively, as a "preliminary international prospectus". All preliminary U.S.
prospectuses and preliminary international prospectuses are hereinafter
sometimes referred to as, individually, a "preliminary prospectus" and,
collectively, the "preliminary prospectuses". For purposes of this Agreement,
all references to the Registration Statement, any preliminary prospectus, any
Prospectus or any amendments or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval System ("EDGAR").
It is understood that any representation or warranty of the Company in
Section 1 hereof which relates to Hughes is made to the best of the Company's
knowledge, with due inquiry by the Company.
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or any Prospectus (and all
other references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
or deemed to be incorporated by reference in the Registration Statement, any
preliminary prospectus or any Prospectus, as the case may be; and all references
in this Agreement to amendments or supplements to the Registration Statement,
any preliminary prospectus or any Prospectus shall be deemed to mean and include
the filing of any document under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), which is or is deemed to be incorporated by reference in the
Registration Statement, such preliminary prospectus or such Prospectus, as the
case may be.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company represents
and warrants to each U.S. Underwriter as of the date hereof, as of the Closing
Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if
any) referred to in Section 2(b) hereof, and agrees with each U.S. Underwriter,
as follows:
(i) Compliance with Registration Requirements. The Company meets
the requirements for use of Form S-3 under the 1933 Act. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and any
request on the part of the Commission for additional information has been
complied with.
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At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and did not and will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading. Neither of the Prospectuses nor any amendments or
supplements thereto, at the respective times the Prospectuses or any such
amendments or supplements were issued and at the Closing Time (and, if any
Option Securities are purchased, at the Date of Delivery), included or
will include an untrue statement of a material fact or omitted or will
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. The representations and warranties in this subsection shall
not apply to statements in or omissions from the Registration Statement or
Prospectuses made in reliance upon and in conformity with information
furnished to the Company in writing by any U.S. Underwriter or
International Underwriter through Merrill Lynch expressly for use in the
Registration Statement or Prospectuses or to any Statement of Eligibility
on Form T-1 under the Trust Indenture Act of 1939, as amended, of any
trustee filed as an exhibit to the Registration Statement.
Each preliminary prospectus and each prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when
so filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and each Prospectus delivered to the U.S.
Underwriters or International Underwriters, as the case may be, for use in
connection with the offering of the Securities was identical to the
electronically transmitted copy thereof filed with the Commission pursuant
to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or deemed to
be incorporated by reference in the Registration Statement and the
Prospectuses, 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 Registration Statement and the
Prospectuses, at the time the Registration Statement became effective, at
the time the Prospectuses were issued and at the Closing Time (and if any
Option Securities are purchased, at the Date of Delivery), did not and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(iii) Independent Accountants. The accountants who audited the
financial statements and supporting schedules, if any, included in the
Registration Statement are independent certified public accountants as
required by the 1933 Act and the 1933 Act Regulations.
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(iv) Financial Statements. The financial statements of the Company,
the consolidated financial statements of Hughes and the financial
statements of KUI included in the Registration Statement and the
Prospectuses, in each case together with the related schedules (if any)
and notes, present fairly the financial position of the Company, the
financial position of Hughes and its consolidated subsidiaries, and the
financial position of KUI, respectively, at the dates indicated and the
results of operations, changes in stockholders' equity and cash flows of
the Company, of Hughes and its consolidated subsidiaries, and of KUI,
respectively, for the periods specified; and said financial statements
have been prepared in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved. The supporting schedules, if any, included in the Registration
Statement present fairly in accordance with GAAP the information required
to be stated therein. The selected historical financial data and the
summary historical financial information included in the Prospectuses
present fairly the information shown therein and have been compiled on a
basis consistent with that of the Company's and Hughes', as applicable,
audited financial statements included in the Registration Statement. The
pro forma financial statements and the related notes thereto included in
the Registration Statement and the Prospectuses present fairly the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been 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. The Company's ratios
of earnings to fixed charges (actual and, if any, pro forma) included in
the Prospectuses and as an exhibit to the Registration Statement have been
calculated in compliance with Item 503(d) of Regulation S-K of the
Commission.
(v) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectuses, except as otherwise stated therein, (A) there has been
no material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of (1) the Company
and its subsidiaries considered as one enterprise, whether or not arising
in the ordinary course of business (a "Material Adverse Effect") or (2)
Hughes and its subsidiaries 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 or
Hughes or any of its subsidiaries, in each case other than those in the
ordinary course of business, which are material with respect to the
Company and its subsidiaries considered as one enterprise or Hughes and
its subsidiaries considered as one enterprise, respectively; and (C) there
has been no dividend or distribution of any kind declared, paid or made by
the Company on any class of its capital stock. For purposes of this
Agreement, all references to "subsidiaries" of the Company shall include,
without limitation, in the case of any representation or warranty made or
deemed to have been made as of the Closing Time or at any time thereafter,
Hughes and its subsidiaries.
(vi) Good Standing of the Company. The Company has been duly
incorporated and is validly existing as a corporation authorized to
transact business in the corporate form and is in good standing under the
laws of the State of Washington and has corporate power
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and authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform its
obligations under the Company Documents; and the Company is not required
to qualify as a foreign corporation to transact business in any other
jurisdiction.
(vii) Good Standing of Subsidiaries. The only subsidiaries of Hughes
are Hughes Realty, Inc., Univar San Bernardino, Inc., and MM Foods, Inc.,
each of which is a California corporation. The only subsidiaries of the
Company are KUA, QHI, Second Story, Inc., a Washington corporation,
Parent, the Holding Company and, at the Closing Time, Hughes and its
subsidiaries. Each of KUA, Hughes, Parent and the Holding Company 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 Prospectuses and to enter into
and perform its obligation under the Guarantor Documents to which it is or
will be a party (if any), 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; except as otherwise disclosed in the Registration
Statement, all of the issued and outstanding capital stock of each of KUA,
Parent and the Holding Company 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 (except for liens
created by the Bank Security Agreements in favor of the Lenders); all of
the issued and outstanding capital stock of Hughes has been duly
authorized and validly issued, is fully paid and non-assessable and, at
the Closing Time will be owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity (except for liens created by the Bank
Security Agreements); and none of the outstanding shares of capital stock
of Hughes, KUA, Parent or the Holding Company was issued in violation of
any preemptive or similar rights. For the periods covered by the
historical financial statements of the Company included in the
Prospectuses, the Company did not have any subsidiaries whose financial
statements were required to be consolidated with those of the Company in
accordance with GAAP. As of and for its fiscal year ended in December of
1996, the aggregate sales, operating income, net income and assets of the
Company's subsidiaries (excluding KUA) were less than 1% of the Company's
total sales, operating income, net income and assets. For the seven months
ended September 29, 1996, subsidiaries of Hughes (other than Santee
Dairies, Inc., a California corporation ("Santee")), accounted for less
than 1% of Hughes' consolidated sales, income from operations, net income
and assets (excluding from the computation of the foregoing amounts
attributable to Santee).
(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectuses in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement or pursuant to
employee benefit plans or the exercise of options referred to in the
Prospectuses). The shares of issued and outstanding capital stock of the
Company have been duly authorized
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and validly issued and are fully paid and non-assessable; and none of the
outstanding shares of capital stock of the Company was issued in violation
of the preemptive or other similar rights of any securityholder of the
Company.
(ix) Authorization of Purchase Agreements. Each of the U.S. Purchase
Agreement and the International Purchase Agreement has been duly
authorized, executed and delivered by the Company. The Debt Agreement has
been duly authorized, executed and delivered by the Company and the
Guarantors, other than Hughes; at the Closing Time, the Debt Agreement
will have been duly authorized, executed and delivered by Hughes.
(x) Authorization and Description of Securities. The U.S. Securities
and the International Securities have been duly authorized for issuance
and sale to the U.S. Underwriters and the International Underwriters
pursuant to the U.S. Purchase Agreement and the International Purchase
Agreement, respectively, and, when issued and delivered by the Company
pursuant to the U.S. Purchase Agreement and the International Purchase
Agreement, respectively, against payment of the consideration set forth
therein, will be validly issued, fully paid and non-assessable; the Common
Stock conforms to all statements relating thereto contained in the
Prospectuses and the description of the Common Stock set forth in the
Prospectuses conforms to the rights set forth in the instruments defining
the same; no holder of the Securities will be subject to personal
liability by reason of being such a holder; and the issuance of the
Securities is not subject to the preemptive or other similar rights of any
securityholder of the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company, the
Holding Company, the Parent, Hughes nor KUA is in violation of its charter
or by-laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease
or other agreement or instrument to which it is a party or by which it or
any of them may be bound, or to which any of its property or assets is
subject (collectively, "Agreements and Instruments", which term shall
include, without limitation, the Investor Agreements (as defined below),
the Company Documents and the Guarantor Documents), except for such
defaults under Agreements and Instruments (other than the New Credit
Agreement or the Indenture) that would not result in a Material Adverse
Effect; and the execution, delivery and performance of the Company
Documents and the Guarantor Documents and the consummation of the
transactions contemplated herein and therein and in the Registration
Statement (including, without limitation, (i) the issuance and sale of the
Securities and the Notes and the borrowing of funds under the New Credit
Agreement and the application of the proceeds therefrom as described in
the Prospectuses under the caption "Use of Proceeds" and (ii) the
consummation of the Hughes Merger) and compliance by the Company and the
Guarantors with their respective obligations and agreements under the
Company Documents and the Guarantor Documents 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 Repayment Event (as defined below)
under, or result in the creation or imposition of any lien, charge or
encumbrance (other than liens on the Bank Collateral (as defined below)
created by the Bank Security Agreements
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<PAGE>
in favor of the Lenders) upon any property or assets of the Company, the
Holding Company, Parent, Hughes or KUA pursuant to, any Agreements and
Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances under Agreements and Instruments, other than the
New Credit Agreement, the Indenture and the Investor Agreements, that
would not result in a Material Adverse Effect), nor will such action
result in any violation of the provisions of the charter or by-laws of the
Company, Parent, the Holding Company, Hughes or KUA 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, Parent, the Holding Company, Hughes
or KUA or any of their respective assets, properties or operations. As
used herein, a "Repayment Event" means any event or condition which gives
the holder of any note, debenture or other evidence of indebtedness (or
any person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such
indebtedness by the issuer or obligor. No consents or waivers from any
other person are required for the execution, delivery and performance of
any of the Company Documents or the Guarantor Documents or the
consummation of any of the transactions contemplated hereby and thereby,
other than such consents and waivers as have been obtained (or, in the
case of the Registration Rights Agreement, will be obtained).
As used in this Agreement, the term "Investor Agreements" means (A) the
Standstill Agreement dated as of January 14, 1995 between the Company and
Zell/Chilmark Fund L.P. (the "Zell/Chilmark Standstill Agreement"), (B)
the Standstill Agreement dated as of January 14, 1995 between the Company
and Stuart M. Sloan (the "Sloan Standstill Agreement"), (C) the Investor
Rights Agreement dated as of March 1, 1995 (the "Olson Investor Rights
Agreement") between the Company and Maurice F. Olson, Charles M. Olson and
Maurice S. Olson, (D) the Investor Rights Agreement among the Company,
Charles B. Teel, E. Gerald Teel and the other persons party thereto (the
"Food Giant Investor Rights Agreement") and (E) the Investor Rights
Agreement dated February 14, 1997 among the Company and the other persons
party thereto (the "KUI Investor Rights Agreement;" and the term "Common
Stock Registration Rights Agreements" means the agreements referred to in
clauses (A), (C), (D) and (E) of this sentence.
(xii) Absence of Labor Dispute. There is (i) no unfair labor
practice complaint pending against the Company, Hughes or KUA nor, to the
best knowledge of the Company, threatened against any of them, before the
National Labor Relations Board, any state or local labor relations board
or any foreign labor relations board, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is
pending against the Company, Hughes or KUA or, to the best knowledge of
the Company, threatened against any of them, which, individually or in the
aggregate, may reasonably be expected to result in a Material Adverse
Effect, (ii) no strike, labor dispute, slowdown or stoppage pending
against the Company, Hughes or KUA nor, to the best knowledge of the
Company, threatened against the Company, Hughes or KUA which, individually
or in the aggregate, may reasonably be expected to result in a Material
Adverse Effect, and (iii) to the best knowledge of the Company, no union
representation question existing with respect to the employees of the
Company, Hughes or KUA and no union organizing activities are taking place
with
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respect to any such employees. Neither the Company, Hughes nor KUA has
violated any federal, state or local law or foreign law relating to
discrimination in hiring, promotion or pay of employees, or any applicable
wage or hour laws, or any provision of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the rules and regulations
thereunder, or analogous foreign laws and regulations, which may
reasonably be expected to result in a Material Adverse Effect. The Company
is not aware of any existing or imminent labor disturbance by the
employees of any principal suppliers, manufacturers, customers or
contractors of the Company, Hughes or KUA, which, individually or in the
aggregate, may reasonably be expected to result in a Material Adverse
Effect.
(xiii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company, Parent, the
Holding Company, Hughes or KUA, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which might
reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the
properties or assets thereof or the consummation of the transactions
contemplated in the Company Documents or the Guarantor Documents or the
performance by any of the parties thereto of their respective obligations
or agreements thereunder; and the aggregate of all pending legal or
governmental proceedings to which the Company, Parent, the Holding
Company, Hughes or KUA is a party or of which any of their respective
property or assets is the subject which are not described in the
Registration Statement, including ordinary routine litigation incidental
to the business, could not reasonably be expected to result in a Material
Adverse Effect.
(xiv) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement, the
Prospectuses or the documents incorporated or deemed to be incorporated by
reference therein or to be filed as exhibits thereto which have not been
so described and filed as required.
(xv) 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 for the authorization, execution, delivery or
performance by the Company of any of the Company Documents or by any of
the Guarantors of any of the Guarantor Documents, for the performance by
Hughes of the Hughes Merger Agreement, for the offering, issuance or sale
of the Securities under the Purchase Agreements or of the Notes or the
Guarantees under the Debt Agreement, or for the consummation of the Hughes
Merger or the other transactions contemplated by the Company Documents and
the Guarantor Documents, except (A) such as may have been obtained under
the 1933 Act or the 1933 Act Regulations in connection with the offering
of the Securities, (B) such as may be required under state securities
laws, (C) the filing of the appropriate agreement of merger and officers'
certificates of each of Hughes and QHI relating to the approval of the
Hughes Merger and a tax clearance certificate relating to Hughes'
assumption of QHI's obligations to pay California franchise taxes (all as
provided for in Section 1103 of the California Corporations Code) with the
Secretary of State of the State of California in connection with
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<PAGE>
the Hughes Merger, (D) the filing of financing statements and continuation
statements under the Uniform Commercial Code (the "UCC") of the States of
Washington and California in connection with the Bank Security Agreements,
(E) the filing (if any) of termination statements under the UCC of the
State of Washington and any other appropriate jurisdictions terminating
the security interests created by the Old Security Agreements, and (F)
such as will be required under the 1933 Act, the 1933 Act Regulations and
the Trust Indenture Act of 1939, as amended (the "1939 Act") in connection
with the Registration Rights Agreement.
(xvi) Possession of Licenses and Permits. The Company, Hughes and
KUA 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,
Hughes and KUA are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company, Hughes nor KUA has
received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a Material Adverse Effect.
(xvii) Title to Property. The Company, Hughes and KUA have good and
marketable title to all real property and improvements owned by them 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 Prospectuses or (b) do not, singly or in the aggregate, materially
affect the value of such property and do not materially interfere with the
use made and proposed to be made of such property by them; all of the
leases and subleases under which the Company, Hughes or KUA holds
properties are valid, binding and in full force and effect, and neither
the Company, Hughes or KUA has any notice of any claim of any sort that
has been asserted by anyone adverse to the rights of the Company, Hughes
or KUA under any of the leases or subleases mentioned above, or affecting
or questioning the rights of the Company, Hughes or KUA to the continued
possession of the leased or subleased premises under any such lease or
sublease which, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect; and no default by the
Company, Hughes or KUA has occurred and is continuing under any such lease
or sublease, and no defaults by the landlord or sublessor, as the case may
be, are existing under any such lease or sublease which, individually or
in the aggregate, could reasonably be expected to result in a Material
Adverse Effect.
(xviii) Compliance with Cuba Act. To the extent that the Cuba Act is
applicable, the Company has complied with, and is and will be in
compliance with, the provisions of that certain Florida act relating to
disclosure of doing business with Cuba, codified as Section 517.075 of the
Florida statutes, and the rules and regulations thereunder (collectively,
the "Cuba Act") or is exempt therefrom.
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(xix) Investment Company Act. Neither the Company nor any of its
subsidiaries is and, upon the issuance and sale of the Securities and the
Notes pursuant to the Purchase Agreements and the Debt Agreement,
respectively, and the application of the net proceeds therefrom as
described in the Prospectuses, none of them 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").
(xx) Environmental Laws. Except as described in the Registration
Statement and except as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A) neither the Company, Hughes nor KUA is in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution
or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (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, Hughes and KUA have all permits,
authorizations and approvals required under any applicable Environmental
Laws and are each in compliance with their requirements, (C) there are no
pending or threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental Law
against the Company, Hughes or KUA and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company, Hughes or KUA relating to Hazardous Materials or any
Environmental Laws.
(xxi) Tax Returns. All tax returns required to be filed by the
Company, Hughes or KUA, in all jurisdictions, have been so filed. All
taxes, including withholding taxes, penalties and interest, assessments,
fees and other charges due or claimed to be due from such entities or that
are due and payable have been paid, other than those being contested in
good faith and for which adequate reserves have been provided or those
currently payable without penalty or interest. The Company knows of no
material proposed additional tax assessments against the Company, Hughes
or KUA.
(xxii) No Stabilization, Etc. Neither the Company, Hughes nor KUA
has (i) taken, directly or indirectly, any action designed to, or that
might reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities or (ii) since the date of the earliest
preliminary prospectus (A) sold, bid for, purchased or paid any person any
compensation for soliciting purchases of the Securities or (B) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
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(xxiii) Absence of Registration Rights. There are no persons with
registration rights or other similar rights to have any securities (debt
or equity) (A) registered pursuant to the Registration Statement or any of
the registration statements contemplated by the Registration Rights
Agreement or included in any of the offerings contemplated by the Purchase
Agreements or the Registration Rights Agreement or (B) except for such
rights as are accurately described in the Prospectuses under "Shares
Eligible for Future Sale," otherwise registered by the Company under the
1933 Act (the rights referred to in clauses (A) and (B), collectively, the
"Rights"); and the Company has complied with all of its obligations and
agreements under the Investor Agreements in connection with the
transactions contemplated by the Purchase Agreements. Schedule D contains
a true, complete, and correct listing of all persons with Rights, the
Common Stock Registration Rights Agreement under which such Rights arise
and the number of shares of Common Stock covered by each such Common Stock
Registration Rights Agreement.
(xxiv) New Credit Agreement. At or prior to the Closing Time, the
New Credit Agreement will have been duly authorized by the Company, Parent
and the Holding Company; at or prior to the Closing Time, the New Credit
Agreement will have been duly executed and delivered by, and will be a
valid and binding agreement of, the Company, Parent and the Holding
Company, enforceable in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by general principles of equity, and all conditions
precedent to the effectiveness of the New Credit Agreement, and all
conditions precedent to the right of the Company to make borrowings under
the New Credit Agreement (other than delivery of borrowing requests,
bring-down officer's certificates or other customary documents required as
a condition to each borrowing), will have been satisfied or waived.
(xxv) Bank Guaranty. At or prior to the Closing Time, the Bank
Guaranty will have been duly authorized by the Bank Guarantors; at or
prior to the Closing Time, the Bank Guaranty will have been duly executed
and delivered by, and will be the valid and binding agreements of, the
Bank Guarantors, enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general principles of equity.
(xxvi) Bank Security Agreements. At or prior to the Closing Time,
the Bank Security Agreements will have been duly authorized by the Company
and the Parent, respectively; at or prior to the Closing Time, the Bank
Security Agreements will have been duly executed and delivered by, and
will be the valid and binding agreements of, the Company and the Parent,
enforceable in accordance with their terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or
by general principles of equity.
(xxvii) Description of Documents. The Company Documents and the
Guarantor Documents will conform in all material respects to the
respective statements relating thereto
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contained in the Prospectuses and will be in substantially the respective
forms filed or incorporated by reference as exhibits to the Registration
Statement.
(xxviii) Hughes Merger. The Hughes Merger will become effective upon
the filing of the agreement of merger provided for in the Hughes Merger
Agreement, an officers' certificate of each of Hughes and QHI relating to
the approval of the Hughes Merger and a tax clearance certificate relating
to Hughes' assumption of QHI's obligations to pay California franchise
taxes (all as provided for in Section 1103 of the California Corporations
Code) (collectively, the "Merger Filing") with the Secretary of State of
the State of California. Prior to the Closing Time, the Merger Filing will
have been duly authorized, executed and delivered by the parties thereto,
will comply with all applicable requirements of the laws of the State of
California, and will have been duly filed in the appropriate governmental
offices in the State of California. The Hughes Merger will be effective
prior to or concurrently with the purchase of the Initial U.S. Securities
by the U.S. Underwriters, with Hughes surviving the Hughes Merger as a
wholly-owned direct subsidiary of the Company. The Company believes that
all conditions precedent to the effectiveness of the Hughes Merger and to
the obligations of the parties to the Hughes Merger Agreement which have
not already been satisfied will be satisfied or waived at or prior to the
Closing Time.
(xxix) Authorization of Hughes Merger Agreement. The Hughes Merger
Agreement has been duly authorized, executed and delivered by and is a
valid and binding agreement of each of the Company, QHI and Hughes.
(b) Officer's Certificates. Any certificate signed by any officer of the
Company, Hughes, KUA or any of their respective subsidiaries delivered to the
U.S. Representatives or to counsel for the U.S. Underwriters shall be deemed a
representation and warranty by the Company to each U.S. Underwriter as to the
matters covered thereby.
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each U.S. Underwriter, severally and not jointly, and
each U.S. Underwriter, severally and not jointly, agrees to purchase from the
Company, at the price per share set forth in Schedule B, the number of Initial
U.S. Securities set forth in Schedule A opposite the name of such U.S.
Underwriter, plus any additional number of Initial U.S. Securities which such
U.S. Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the U.S. Underwriters,
severally and not jointly, to purchase up to an additional 540,000 shares of
Common Stock at the price per share set forth in Schedule B, less an amount per
share equal to any dividends or distributions declared by the Company and
payable on the Initial U.S. Securities but not payable on the U.S. Option
Securities. The option hereby granted will expire 30 days after the date hereof
and may be exercised in whole or in part from time to time (but not
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more than three times without the consent of the Company (which consent shall
not be unreasonably withheld)) only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the
Initial U.S. Securities upon notice by the U.S. Representatives to the Company
setting forth the number of U.S. Option Securities as to which the several U.S.
Underwriters are then exercising the option and the time and date of payment and
delivery for such U.S. Option Securities. Any such time and date of delivery (a
"Date of Delivery") shall be determined by the U.S. Representatives, but shall
not be later than seven full business days and not earlier than two full
business days after the exercise of said option unless otherwise agreed upon by
the U.S. Representatives and the Company, nor in any event prior to the Closing
Time, as hereinafter defined. If the option is exercised as to all or any
portion of the U.S. Option Securities, each of the U.S. Underwriters, acting
severally and not jointly, will purchase that proportion of the total number of
U.S. Option Securities then being purchased which the number of Initial U.S.
Securities set forth in Schedule A opposite the name of such U.S. Underwriter
bears to the total number of Initial U.S. Securities, subject in each case to
such adjustments as the U.S. Representatives in their discretion shall make to
eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial U.S. Securities shall be made at the offices of
Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017 or at
such other place as shall be agreed upon by the U.S. Representatives and the
Company, at 9:00 A.M. (New York City time) on the third (fourth, if the pricing
occurs after 4:30 P.M. (New York City time) on any given day) business day after
the date hereof (unless postponed in accordance with the provisions of Section
10), or such other time not later than ten business days after such date as
shall be agreed upon by the U.S. Representatives and the Company (such time and
date of payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the U.S. Option Securities
are purchased by the U.S. Underwriters, payment of the purchase price for, and
delivery of certificates for, such U.S. Option Securities shall be made at the
above-mentioned offices or at the offices of Brown & Wood LLP, One World Trade
Center, New York, New York 10048, or at such other place as shall be agreed upon
by the U.S. Representatives and the Company, on each Date of Delivery as
specified in the notice from the U.S. Representatives to the Company.
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
the U.S. Representatives for the respective accounts of the U.S. Underwriters of
certificates for the U.S. Securities to be purchased by them. It is understood
that each U.S. Underwriter has authorized the U.S. Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial U.S. Securities and the U.S. Option Securities, if any,
which it has agreed to purchase. Merrill Lynch, individually and not as a
representative of the U.S. Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial U.S. Securities or the U.S.
Option Securities, if any, to be purchased by any U.S. Underwriter whose funds
have not been received by the Closing Time or the relevant Date of Delivery, as
the case may be, but such payment shall not relieve such U.S. Underwriter from
its obligations hereunder.
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(d) Denominations; Registration. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
U.S. Securities and the U.S. Option Securities, if any, will be made available
for examination and packaging by the U.S. Representatives in The City of New
York not later than 10:00 A.M. (New York City time) on the business day prior to
the Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each U.S.
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests.
The Company will notify the U.S. Representatives immediately, and confirm
the notice in writing, (i) when any Rule 462(b) Registration Statement and
any post-effective amendment to the Registration Statement or any Rule
462(b) Registration Statement shall become effective or any supplement to
any of the Prospectuses or any amended Prospectus shall have been filed,
(ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to any of the Prospectuses or for
additional information, and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or
of any order preventing or suspending the use of any preliminary
prospectus or Prospectus, or of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the initiation
or threatening of any proceedings for any of such purposes. The Company
will promptly effect the filings necessary pursuant to Rule 424(b) of the
1933 Act Regulations and will take such steps as it deems necessary to
ascertain promptly whether the form of prospectus and/or prospectus
supplement transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will
promptly file such prospectus and/or prospectus supplement, as applicable.
The Company will make every reasonable effort to prevent the issuance of
any stop order and, if any stop order is issued, to obtain the lifting
thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the U.S.
Representatives notice of its intention to file or prepare any further
amendment to the Registration Statement (including any filing under Rule
462(b)) or any amendment, supplement or revision to either the prospectus
included in the Registration Statement at the time it became effective or
to either of the Prospectuses, whether pursuant to the 1933 Act, the 1934
Act or otherwise, will furnish the U.S. Representatives with copies of any
such documents a reasonable amount of time prior to such proposed filing
or use, as the case may be, and will not file or use any such document to
which the U.S. Representatives or counsel for the U.S. Underwriters shall
object.
(c) Delivery of Registration Statements. The Company has furnished
or will deliver to the U.S. Representatives and counsel for the U.S.
Underwriters, without charge, signed copies of the Registration Statement
as originally filed and of each amendment thereto (including exhibits
filed therewith or incorporated by reference therein and documents
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incorporated or deemed to be incorporated by reference therein) and signed
copies of all consents and certificates of experts, and will also deliver
to the U.S. Representatives, without charge, as many conformed copies of
the Registration Statement as originally filed and of each amendment
thereto (without exhibits) as the U.S. Underwriters may reasonably
request. The copies of the Registration Statement and each amendment
thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each U.S.
Underwriter, without charge, as many copies of each preliminary U.S.
prospectus as such U.S. Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the
1933 Act. The Company will furnish to each U.S. Underwriter, without
charge, during the period when the U.S. Prospectus is required to be
delivered under the 1933 Act or the 1934 Act, such number of copies of the
U.S. Prospectus (as amended or supplemented) as such U.S. Underwriter may
reasonably request. The U.S. Prospectus and any amendments or supplements
thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and
the 1934 Act Regulations so as to permit the completion of the
distribution of the Securities as contemplated in the Purchase Agreements
and in the Prospectuses. If at any time when a prospectus is required by
the 1933 Act to be delivered in connection with sales of the Securities
any event shall occur or condition shall exist as a result of which it is
necessary, in the opinion of counsel for the U.S. Underwriters or for the
Company, to amend the Registration Statement or to amend or supplement the
U.S. Prospectus in order that the U.S. Prospectus will not include any
untrue statements of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the
light of the circumstances existing at the time it is delivered to a
purchaser, or if it shall be necessary, in the opinion of such counsel, at
any such time to amend the Registration Statement or amend or supplement
the U.S. Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Company will promptly prepare and
file with the Commission, subject to Section 3(b), such amendment or
supplement as may be necessary to correct such statement or omission or to
make the Registration Statement or the U.S. Prospectus comply with such
requirements (and, if appropriate, will make a corresponding amendment or
supplement to the International Prospectus), and the Company will furnish
to the U.S. Underwriters such number of copies of such amendment or
supplement as the U.S. Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its reasonable
best efforts, in cooperation with the U.S. Underwriters, to qualify the
Securities for offering and sale under the applicable securities laws of
such states and other jurisdictions as the U.S. Representatives may
designate and to maintain such qualifications in effect for a period of
not less than one year from the date of this Agreement; provided, however,
that the Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign
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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. In
each jurisdiction in which the Securities have been so qualified, the
Company will file such statements and reports as may be required by the
laws of such jurisdiction to continue such qualification in effect for a
period of not less than one year from the date of this Agreement.
(g) Rule 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received
by it from the sale of the Securities and the Notes in the manner
specified in the Prospectus Supplements under "Use of Proceeds".
(i) Preparation of Prospectus Supplement. Immediately following the
execution of this Agreement, the Company will prepare the U.S. Prospectus
Supplement and the International Prospectus Supplement, containing the
terms of the Securities, the plan of distribution thereof and such other
information as may be required by the 1933 Act or the 1933 Act Regulations
or as the U.S. Representatives and the Company deem appropriate, and will
file or transmit for filing with the Commission in accordance with Rule
424(b) of the 1933 Act Regulations copies of the Prospectuses (including
such Prospectus Supplements).
(j) Listing. The Securities have been approved for listing on the
New York Stock Exchange (the "NYSE"), subject only to official notice of
issuance.
(k) Restriction on Sale of Securities. Pursuant to Section 2.10 of
the KUI Investor Rights Agreement, the Company has duly notified, in the
manner required by such agreement, all Holders (as defined in such
agreement) that such Holders may not sell, make any short sale of or
otherwise dispose of any Registrable Securities (as defined in such
agreement) without the prior written consent of the Company for the period
of 90 days from the date of this Agreement, and the Company has given the
Holders a further notice specifying the exact date of this Agreement.
During a period of 90 days from the date of this Agreement, the Company
will not, without the prior written consent of Merrill Lynch, directly or
indirectly, (i) waive or modify the agreement of the Holders pursuant to
Section 2.10 of the KUI Investor Rights Agreement not to sell, make any
short sale of or otherwise dispose of any Registrable Securities, (ii)
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 to purchase or otherwise transfer or dispose of any share of
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or file any registration statement under the
1933 Act with respect to any of the foregoing or (iii) enter into any swap
or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause
(ii) or (iii) above is to be settled by delivery
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of Common Stock, other securities, cash or otherwise. Clauses (ii) and
(iii) of the foregoing sentence shall not apply to (A) the Securities to
be sold under the Purchase Agreements, (B) any shares of Common Stock
issued by the Company upon the exercise of any option outstanding on the
date hereof and referred to in the Prospectuses or (C) any shares of
Common Stock issued or options to purchase Common Stock granted pursuant
to existing employee benefit plans of the Company referred to in the
Prospectuses.
(l) Reporting Requirements. The Company, during the period when the
U.S. Prospectus is required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934 Act
and the 1934 Act Regulations.
SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay all
expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the word processing, reproduction and delivery to the
Underwriters of the Purchase Agreements, the Intersyndicate Agreement, the
Agreement Among Managers and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates for
the Securities to the Underwriters, including any stock or other transfer taxes
and any stamp or other duties payable upon the sale, issuance or delivery of the
Securities to the Underwriters and any transfers of Securities between the U.S.
Underwriters and International Underwriters pursuant to the Intersyndicate
Agreement, (iv) the fees and disbursements of the Company's counsel, accountants
and other advisors, (v) the qualification of the Securities under securities
laws in accordance with the provisions of Section 3(f) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the Underwriters
in connection therewith and in connection with the preparation of the Blue Sky
Survey and any Canadian "wrapper," (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus and each Prospectus and
any amendments or supplements thereto, (vii) the preparation, printing and
delivery to the Underwriters of copies of the Blue Sky Survey and any Canadian
"wrapper," (viii) the fees and expenses of any transfer agent or registrar for
the Securities, (ix) the filing fees incident to, and the reasonable fees and
disbursements of counsel to the Underwriters in connection with, the review, if
any, by the National Association of Securities Dealers, Inc. (the "NASD") of the
terms of the sale of the Securities and (x) the fees and expenses incurred in
connection with the listing of the Securities on the NYSE.
(b) Termination of Agreement. If this Agreement is terminated by the U.S.
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) or (v) hereof, the Company shall reimburse the U.S. Underwriters for all
of their out-of-pocket expenses, including the reasonable fees and disbursements
of counsel for the U.S. Underwriters.
SECTION 5. Conditions of U.S. Underwriters' Obligations. The obligations
of the several U.S. Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof and
in certificates of any officer of the Company, Hughes or any of their respective
subsidiaries delivered pursuant to the provisions hereof, to the performance
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by the Company of its covenants and other obligations hereunder, and to the
following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness
of the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of counsel to the
U.S. Underwriters. The Prospectuses shall have been filed or transmitted
for filing with the Commission pursuant to Rule 424(b) of the 1933 Act
Regulations within the prescribed time period, and prior to Closing Time
the Company shall have provided evidence satisfactory to the Underwriters
of such timely filing or transmittal.
(b) Opinion of Bogle & Gates P.L.L.C. At Closing Time, the U.S.
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Bogle & Gates P.L.L.C., counsel for the Company, in form
and substance satisfactory to counsel for the U.S. Underwriters, together
with signed or reproduced copies of such letter for each of the other U.S.
Underwriters, to the effect set forth in Exhibit A hereto and to such
further effect as counsel to the U.S. Underwriters may reasonably request.
In rendering such opinion, such counsel shall state (A) that such
opinion is limited to matters arising under the laws of the State of
Washington, and (B) that, in rendering their opinion pursuant to the
Purchase Agreements, Simpson Thacher & Bartlett and Brown & Wood LLP each
may rely upon such opinion, as if it were addressed to them, as to all
matters arising under the laws of the State of Washington. In rendering
such opinion, Bogle & Gates P.L.L.C. may rely (i) as to matters involving
the application of the laws of any other state upon the opinion of local
counsel satisfactory to the U.S. Representatives (which opinion shall be
dated and furnished to the U.S. Representatives at the Closing Time, shall
be satisfactory in form and substance to counsel for the U.S. Underwriters
and shall expressly state that the U.S. Underwriters may rely on such
opinion as if it were addressed to them), provided that Bogle & Gates
P.L.L.C. shall state in their opinion that they believe that they and the
U.S. Underwriters are justified in relying upon such opinion and (ii) as
to matters of fact (but not as to legal conclusions), to the extent they
deem proper, on certificates of responsible officers of the Company,
Hughes, Santee and KUA and public officials. Such opinion shall not state
that it is to be governed or qualified by, or that it is otherwise subject
to, any treatise, written policy or other document relating to legal
opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
(c) Opinion of Simpson Thacher & Bartlett. At Closing Time, the U.S.
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Simpson Thacher & Bartlett, counsel for the Company, in
form and substance satisfactory to counsel for the U.S. Underwriters,
together with signed or reproduced copies of such letter for each of the
other U.S. Underwriters, to the effect set forth in Exhibit B hereto and
to such further effect as counsel for the U.S. Underwriters may reasonably
request.
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In rendering such opinion, such counsel shall state (A) that such
opinion is limited to matters arising under the laws of the State of New
York, the General Corporation Law of the State of Delaware and the federal
laws of the United States of America, (B) that insofar as such opinion
relates to matters arising under the laws of the States of Washington or
California, such counsel has relied upon the opinion of Bogle & Gates
P.L.L.C. delivered pursuant to Section 5(b) hereof or upon the opinion of
O'Melveny & Myers LLP delivered pursuant to Section 5(d) hereof,
respectively and (C) that insofar as such opinion relates to matters
arising under the laws of the State of California, such counsel has relied
upon the opinion of O'Melveny & Myers LLP delivered pursuant to Section
5(d) hereof. In rendering such opinion, Simpson Thacher & Bartlett may
rely (i) as to matters involving the application of the laws of any other
state upon the opinion of local counsel satisfactory to the U.S.
Representatives (which opinion shall be dated and furnished to the U.S.
Representatives at the Closing Time, shall be satisfactory in form and
substance to counsel for the U.S. Underwriters and shall expressly state
that the U.S. Underwriters may rely on such opinion as if it were
addressed to them), provided that Simpson Thacher & Bartlett shall state
in their opinion that they believe that they and the U.S. Underwriters are
justified in relying upon such opinion and (ii) as to matters of fact (but
not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company, Hughes, Santee and
KUA and public officials. Such opinion shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section
of Business Law (1991).
(d) Opinion of O'Melveny & Myers LLP. At Closing Time, the U.S.
Representatives shall have received the favorable opinion, dated as of
Closing Time, of O'Melveny & Myers LLP, counsel for Hughes, in form and
substance satisfactory to counsel for the U.S. Underwriters, together with
signed or reproduced copies of such letter for each of the other U.S.
Underwriters, to the effect set forth in Exhibit C hereto and to such
further effect as counsel to the U.S. Underwriters may reasonably request.
In rendering such opinion, such counsel shall state (A) that such
opinion is limited to matters arising under the laws of the State of
California and (B) that, in rendering their opinions pursuant to the
Purchase Agreements, Simpson Thacher & Bartlett and Brown & Wood LLP may
rely upon such opinion, as if it were addressed to them, as to all matters
arising under the laws of the State of California. In rendering such
opinion, O'Melveny & Myers LLP may rely (i) as to matters involving the
application of the laws of any other state upon the opinion of local
counsel satisfactory to the U.S. Representatives (which opinion shall be
dated and furnished to the U.S. Representatives at the Closing Time, shall
be satisfactory in form and substance to counsel for the U.S. Underwriters
and shall expressly state that the U.S. Underwriters may rely on such
opinion as if it were addressed to them), provided that O'Melveny & Myers
LLP shall state in their opinion that they believe that they and the U.S.
Underwriters are justified in relying upon such opinion and (ii) as to
matters of fact (but not as to legal conclusions), to the extent they deem
proper, on certificates of responsible officers of the Company, Hughes and
Santee and public officials. Such opinion shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any
treatise, written policy
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or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law
(1991).
(e) Opinion of Rosenberg & Liebentritt, P.C. At Closing Time, the
U.S. Representatives shall have received the favorable opinion, dated as
of Closing Time, of Rosenberg & Liebentritt, P.C., counsel for the
Company, in form and substance satisfactory to counsel for the U.S.
Underwriters, together with signed or reproduced copies of such letter for
each of the other U.S. Underwriters, to the effect set forth in Exhibit D
hereto and to such further effect as counsel to the U.S. Underwriters may
reasonably request.
In rendering such opinion, such counsel shall state that such
opinion is limited to matters arising under the laws of the State of
Illinois and the General Corporation Law of the State of Delaware. In
rendering such opinion, Rosenberg & Liebentritt, P.C. may rely (i) as to
matters involving the application of the laws of any other state upon the
opinion of local counsel satisfactory to the U.S. Representatives (which
opinion shall be dated and furnished to the U.S. Representatives at the
Closing Time, shall be satisfactory in form and substance to counsel for
the U.S. Underwriters and shall expressly state that the U.S. Underwriters
may rely on such opinion as if it were addressed to them), provided that
Rosenberg & Liebentritt, P.C. shall state in their opinion that they
believe that they and the U.S. Underwriters are justified in relying upon
such opinion and (ii) as to matters of fact (but not as to legal
conclusions), to the extent they deem proper, on certificates of
responsible officers of the Company, Hughes and Santee and public
officials. Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written
policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law
(1991).
(f) Opinion of Counsel for U.S. Underwriters. At Closing Time, the
U.S. Representatives shall have received the favorable opinion, dated as
of Closing Time, of Brown & Wood LLP, counsel for the U.S. Underwriters,
with respect to the incorporation and existence of the Company, the
Securities, the Purchase Agreements, the Registration Statement, the
Prospectuses and such other related matters as the U.S. Representatives
may request, together with signed or reproduced copies of such letter for
each of the U.S.
Underwriters.
(g) Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, 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 (including, without limitation, Hughes and
KUA), whether or not arising in the ordinary course of business, and the
U.S. 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, dated as of Closing Time, to the effect
that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) hereof are true and correct
with the same force and effect as though expressly made at and as of
Closing Time, (iii) the Company has complied with all agreements and
satisfied all
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conditions on its part to be performed or satisfied at or prior to Closing
Time, and (iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or are contemplated by the Commission.
(h) Accountants' Comfort Letters. At the time of the execution of
this Agreement, the U.S. Representatives shall have received from each of
Deloitte & Touche LLP and Arthur Andersen LLP a letter or letters dated
such date, in form and substance satisfactory to the U.S. Representatives,
together with signed or reproduced copies of such letter or letters for
each of the other U.S. Underwriters, containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain
financial information of the Company, KUI and Hughes, as applicable,
contained in the Registration Statement and the Prospectuses.
(i) Bring-down Comfort Letters. At Closing Time, the U.S.
Representatives shall have received from each of Deloitte & Touche LLP and
Arthur Andersen LLP a letter or letters, dated as of Closing Time, to the
effect that they reaffirm the statements made in the letter or letters
furnished pursuant to subsection (h) of this Section, except that the
specified date referred to shall be a date not more than three business
days prior to Closing Time.
(j) Approval of Listing. At Closing Time, the Securities shall have
been approved for listing on the NYSE, subject only to official notice of
issuance.
(k) Lock-up Agreements. Prior to the date of this Agreement, the
U.S. Representatives shall have received (A) an agreement substantially in
the form of Exhibit E hereto signed by the persons and entities listed on
Schedule C hereto and (B) an agreement substantially in the form of
Exhibit F signed by Parent.
(l) Consummation of Hughes Merger. At the Closing Time, each
condition to the closing contemplated by the Hughes Merger Agreement shall
have been satisfied or waived. There shall exist at and as of the Closing
Date (after giving effect to the transactions contemplated by the Purchase
Agreements and the Debt Agreement) no conditions that would constitute a
default (or an event that with notice or lapse of time, or both, would
constitute a default) under the Hughes Merger Agreement. Prior to or
concurrently with the purchase of the Initial U.S. Securities by the U.S.
Underwriters, (i) the Company shall have consummated the Hughes Merger
pursuant to the Hughes Merger Agreement and on terms that conform to the
description thereof in the Prospectuses, (ii) the Hughes Merger shall have
become effective pursuant to the laws of the State of California and (iii)
Hughes shall survive the Hughes Merger and shall be a wholly-owned direct
subsidiary of the Company; and the Company shall have delivered to the
U.S. Underwriters evidence, in form and substance satisfactory to the U.S.
Underwriters, that the conditions specified in this paragraph shall have
been satisfied.
(m) Effectiveness of New Credit Agreement. At or prior to the
Closing Time, (1) the New Credit Agreement, the Bank Guaranty and the Bank
Security Agreements and all
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ancillary instruments and agreements shall have been executed and
delivered by the parties thereto and shall be in form and substance
satisfactory to the U.S. Underwriters, and the Company shall have
furnished the U.S. Underwriters with copies thereof; and (2) all
conditions precedent to the effectiveness of the New Credit Agreement, and
(except for the delivery of notices of borrowings, officer's bring-down
certificates and other customary documentation required as a condition to
a borrowing) all conditions precedent to the right of the Company to make
borrowings under the New Credit Agreement, shall have been satisfied or
waived and the New Credit Agreement shall be effective.
(n) Purchase of Notes. Concurrently with the purchase of the Initial
U.S. Securities by the U.S. Underwriters, the Company shall have issued,
and the Initial Purchasers shall have purchased and paid for, the Notes
being sold pursuant to the Debt Agreement.
(o) Purchase of International Securities. Concurrently with the
purchase of the Initial U.S. Securities by the U.S. Underwriters, the
International Underwriters shall have purchased and paid for the Initial
International Securities under the International Purchase Agreement.
(p) Conditions to Purchase of U.S. Option Securities. In the event
that the U.S. Underwriters exercise their option provided in Section 2(b)
hereof to purchase all or any portion of the U.S. Option Securities, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company, Hughes, or KUA
hereunder shall be true and correct as of each Date of Delivery and, at
the relevant Date of Delivery, the U.S. Representatives shall have
received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time
pursuant to Section 5(g) hereof remains true and correct as of such
Date of Delivery.
(ii) Opinions of Counsel for Company. The favorable opinions
of Bogle & Gates P.L.L.C., Simpson Thatcher & Bartlett, O'Melveny &
Myers LLP and Rosenberg & Liebentritt, P.C., each in form and
substance satisfactory to counsel for the U.S. Underwriters, dated
such Date of Delivery (and, if applicable, accompanied by opinions
of local counsel dated such Date of Delivery), relating to the U.S.
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinions required by Sections
5(b), 5(c), 5(d) and 5(e) hereof, respectively.
(iii) Opinion of Counsel for U.S. Underwriters. The favorable
opinion of Brown & Wood LLP, counsel for the U.S. Underwriters,
dated such Date of Delivery, relating to the U.S. Option Securities
to be purchased on such Date of Delivery and otherwise to the same
effect as the opinion required by Section 5(f) hereof.
25
<PAGE>
(iv) Bring-down Comfort Letters. A letter or letters from each
of Deloitte & Touche LLP and Arthur Andersen LLP, in form and
substance satisfactory to the U.S. Representatives and dated such
Date of Delivery, substantially in the same form and substance as
the letters furnished to the U.S. Representatives pursuant to
Section 5(i) hereof, except that the "specified date" in the letter
or letters furnished pursuant to this paragraph shall be a date not
more than five days prior to such Date of Delivery.
(q) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the U.S. Underwriters shall have been furnished with
such documents and opinions as they may reasonably require for the purpose
of enabling them to pass upon the issuance and sale of the Securities as
contemplated in the Purchase Agreements, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment
of any of the conditions, herein contained; and all proceedings taken by
the Company, Hughes or KUA in connection with the issuance and sale of the
Securities as contemplated in the Purchase Agreements and the consummation
of the other transactions contemplated by the other Company Documents and
Guarantor Documents shall be satisfactory in form and substance to the
U.S. Representatives and counsel for the U.S.
Underwriters.
(r) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of U.S. Option Securities, on a Date of Delivery which is after
the Closing Time, the obligations of the several U.S. Underwriters to
purchase the relevant U.S. Option Securities, may be terminated by the
U.S. Representatives by notice to the Company at any time at or prior to
Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 1, 6, 7 and 8
shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of U.S. Underwriters. The Company agrees to indemnify
and hold harmless each U.S. Underwriter and each person, if any, who controls
any U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact included in any
preliminary prospectus or Prospectus (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;
26
<PAGE>
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), or any preliminary prospectus or
Prospectus (or any amendment or supplement thereto); provided, further, that
such indemnity with respect to any preliminary prospectus shall not inure to the
benefit of any U.S. Underwriter (or any persons controlling such U.S.
Underwriter) from whom the person asserting such loss, claim, damage or
liability purchased the U.S. Securities which are the subject thereof if such
person did not receive a copy of the Prospectus (or the Prospectus as amended or
supplemented) at or prior to the confirmation of the sale of such U.S.
Securities to such person in any case where the Company complied with its
obligations under Sections 3(b) and 3(d) hereof (and the Prospectus or any such
amended or supplemented Prospectus, as applicable, shall have been delivered by
the Company to such Underwriter a reasonable amount of time prior to the mailing
or delivery, as applicable, of such confirmation) and any such untrue statement
or omission or alleged untrue statement or omission of a material fact contained
in such preliminary prospectus was corrected in the Prospectus (or the
Prospectus as amended or supplemented).
(b) Indemnification of Company, Directors and Officers. Each U.S.
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), or any preliminary prospectus or
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such U.S.
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or such
Prospectus (or any amendment or supplement thereto).
27
<PAGE>
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party.
Notwithstanding the foregoing, if it so elects within a reasonable time after
receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it and approved by the indemnified parties
defendant in such action (which approval shall not be unreasonably withheld, it
being understood that, in the case of the indemnified parties under Section 6(a)
above, such approval shall be given by Merrill Lynch, Pierce Fenner & Smith
Incorporated), unless such indemnified parties reasonably object to such
assumption on the ground that there may be legal defenses available to them
which are different from or in addition to those available to such indemnifying
party, in which case such indemnifying party shall not be entitled to assume the
defense of such action. If an indemnifying party assumes the defense of such
action, the indemnifying party shall not be liable for any fees and expenses of
counsel for the indemnified parties incurred thereafter in connection with such
action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after 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.
28
<PAGE>
(e) Currency. Any payment made by the Company pursuant to Section 6(a) or
7, or by any U.S. Underwriter pursuant to Section 6(b) or 7, which arises with
respect to any loss, liability, claim, damage or expense incurred in a currency
other than U.S. dollars shall be made by the Company or such U.S. Underwriter,
as the case may be, in such other currency or in such amount of U.S. dollars as
shall be necessary to enable the indemnified party to purchase the amount of
such other currency needed to satisfy such loss, liability, claim, damage or
expense, including any premiums and costs of exchange payable in connection with
conversion of U.S. dollars into the relevant currency.
SECTION 7. Contribution. If the indemnification provided for in Section 6
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the U.S. Underwriters on the other hand from the offering of the U.S.
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 Company on the one hand and of the U.S.
Underwriters on the other hand in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the U.S.
Underwriters on the other hand in connection with the offering of the U.S.
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 U.S.
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the U.S.
Underwriters, in each case as set forth on the cover of the U.S. Prospectus,
bear to the aggregate initial public offering price of the U.S. Securities as
set forth on such cover.
The relative fault of the Company on the one hand and the U.S.
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the U.S. Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the U.S. Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the U.S. Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
29
<PAGE>
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no U.S. Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the U.S. Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such U.S. Underwriter has otherwise been required to pay by reason of any such
untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a U.S.
Underwriter 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 U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial U.S. Securities set forth
opposite their respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company, Hughes, KUA or any of their respective
subsidiaries submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any U.S.
Underwriter or controlling person, or by or on behalf of the Company, and shall
survive delivery of the Securities to the U.S. Underwriters and the
International Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The U.S. Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to 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 Prospectuses, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of (1) the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business or (2) Hughes 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 the U.S. Representatives, impracticable
to market the U.S. Securities or to enforce contracts for the sale of the U.S.
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
30
<PAGE>
generally on the American Stock Exchange, the New York Stock Exchange, the
London Stock Exchange or 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 the
Nasdaq National Market 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,
or (v) if the rating assigned by any nationally recognized statistical rating
organization to the Notes or any other debt securities of the Company shall have
been lowered or if any such rating agency shall have publicly announced that it
has placed the Notes or any other debt securities of the Company on what is
commonly termed a "watch list" for a possible downgrading.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7 and 8 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the U.S. Underwriters. If one or
more of the U.S. Underwriters shall fail at Closing Time or a Date of Delivery
to purchase the U.S. Securities which it or they are obligated to purchase under
this Agreement (the "Defaulted Securities"), the U.S. Representatives shall have
the right, within 24 hours thereafter, to make arrangements for one or more of
the non-defaulting U.S. Underwriters, or any other underwriters, 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, the U.S.
Representatives 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
number of Initial Securities or Option Securities, as the case may be, to
be purchased on such date, each of the non-defaulting U.S. Underwriters
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 U.S.
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of Initial Securities or the Option Securities, as the case may be, to be
purchased on such date, this Agreement or, with respect to any Date of
Delivery which occurs after the Closing Time, the obligation of the U.S.
Underwriters to purchase and of the Company to sell the Option Securities
to be purchased and sold on such Date of Delivery shall terminate without
liability on the part of any non-defaulting U.S. Underwriter or the
Company, except to the extent set forth in Section 4.
No action taken pursuant to this Section shall relieve any defaulting U.S.
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a
31
<PAGE>
termination of the obligation of the U.S. Underwriters to purchase and the
Company to sell the relevant Option Securities, as the case may be, either the
U.S. Representatives or the Company shall have the right to postpone Closing
Time or the relevant Date of Delivery, as the case may be, for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement or Prospectuses or in any other documents or arrangements. As used
herein, the term "U.S. Underwriter" includes any person substituted for a U.S.
Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the U.S.
Underwriters shall be directed to the U.S. Representatives at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Syndicate
Operations; and notices to the Company shall be directed to it at 10112 N.E.
10th Street, Bellevue, Washington 98004, attention of Marc W. Evanger.
SECTION 12. Parties. This Agreement shall each inure to the benefit of and
be binding upon the U.S. Underwriters and the Company 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 U.S.
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the U.S. Underwriters and the Company 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 U.S.
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE. EXCEPT AS OTHERWISE EXPRESSLY
SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME AND
REFERENCES TO BUSINESS DAYS MEAN DAYS WHICH ARE BUSINESS DAYS IN NEW YORK CITY.
SECTION 14. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
32
<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
between the U.S. Underwriters and the Company in accordance with its terms.
Very truly yours,
QUALITY FOOD CENTERS, INC.
By /s/ Marc Evanger
-------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SALOMON BROTHERS INC
DAIN BOSWORTH INCORPORATED
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ Douglas McRae
----------------------------------
Authorized Signatory
For themselves and as U.S. Representatives of the other U.S. Underwriters
named in Schedule A hereto.
33
<PAGE>
SCHEDULE A
Number of
Initial
Name of U.S. Underwriter U.S. Securities
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................ 675,000
Donaldson, Lufkin & Jenrette Securities Corporation........... 675,000
Salomon Brothers Inc.......................................... 675,000
Dain Bosworth Incorporated.................................... 375,000
Dean Witter Reynolds Inc...................................... 200,000
Goldman, Sachs & Co........................................... 200,000
J.P. Morgan Securities Inc.................................... 200,000
Smith Barney Inc.............................................. 200,000
Genesis Merchant Group Securities............................. 100,000
Jensen Securities Co.......................................... 100,000
Piper Jaffray Inc............................................. 100,000
Ragen MacKenzie Incorporated.................................. 100,000
---------
Total......................................................... 3,600,000
=========
Sch A - 1
<PAGE>
SCHEDULE B
1. The initial public offering price per share for the U.S.
Securities shall be $39.00.
2. The purchase price per share for the U.S. Securities to be paid
by the several U.S. Underwriters shall be $37.34, being an amount equal to
the initial public offering price set forth above less $1.66 per share;
provided that the purchase price per share for any U.S. Option Securities
purchased upon the exercise of the over-allotment option described in
Section 2(b) of this Agreement shall be reduced by an amount per share
equal to any dividends or distributions declared by the Company and
payable on the Initial U.S. Securities but not payable on the U.S. Option
Securities.
Sch B - 1
<PAGE>
SCHEDULE C
List of Persons and Entities
Subject to Lock-Up
Executive Officers and Directors of the Company
John W. Creighton, Jr.
Marc W. Evanger
Dan Kourkoumelis
Frederick Meils
Maurice F. Olson
Marc H. Rapaport
Sheli Z. Rosenberg
Christopher A. Sinclair
Stuart M. Sloan
Ronald A. Weinstein
Samuel Zell
Other Persons and Entities
Kimberly T. Feir
Scott E. Feir
The Edwin and Pauline Teel Charitable Remainder Trust
(Trustees: Daryl L. Vander Pol, E. Gerald Teel and Charles B. Teel)
Collin P. Madden
Lois G. Madden
Marilyn J. Madden
Michelle A. Madden
Paul E. Madden
Rodney S. Madden
The 1996 Teel Revocable Trust
(Trustees: Edwin A. Teel and Daryl L. Vander Pol)
Arne S. Oien
Molly S. Oien
Charles B. Teel
E. Gerald Teel
Julie K. Teel
Katharine G. Teel
Claudia J. Vander Pol
Daryl L. Vander Pol
Justin L. Vander Pol
Sonja C. Vander Pol
Zell/Chilmark Fund L.P.
Randall West
Sch C - 1
<PAGE>
SCHEDULE D
Persons and Entities Holding Shares with Registration Rights
Shareholder Number of Shares
Pursuant to the Zell/Chilmark Standstill Agreement: 3,975,000
(1) Zell/Chilmark Fund L.P.
Pursuant to the Olson Investors Rights Agreement: 752,941
(2) Maurice F. Olson
(3) Charles M. Olson
(4) Maurice S. Olson
Pursuant to the Food Giant Investors Rights Agreement: 120,000
(5) The Edwin and Pauline Teel Charitable Remainder Trust
(Trustees: Daryl L. Vander Pol, E. Gerald Teel and
Charles B. Teel)
(6) Charles B. Teel
(7) E. Gerald Teel
(8) Katharine G. Teel
(9) The 1996 Teel Revocable Trust
(Trustees: Edwin A. Teel and Daryl L. Vander Pol)
(10) Paul E. Madden
(11) Lois G. Madden
(12) Daryl L. Vander Pol
(13) Claudia J. Vander Pol
(14) Kimberly T. Feir
(15) Scott E. Feir
(16) Molly S. Oien
(17) Arne S. Oien
(18) Julie K. Teel
(19) Justin L. Vander Pol
(20) Sonja C. Vander Pol
(21) Rodney S. Madden
(22) Marilyn J. Madden
(23) Collin P. Madden
(24) Michelle A. Madden
Pursuant to the KUI Investors Rights Agreement: 904,646
Sch D - 1
<PAGE>
(25) A. Keith Uddenberg
(26) Eugenia M. Uddenberg
(27) Anna Mae Schacht Trust
(Trustee: Lori Dee Schacht)
(28) Mark Schacht
(29) Lori Dee Schacht Trust
(Trustees: Lori Dee Schacht and Ray Graves)
(30) Richard Keith Uddenberg Trust
(Trustees: Greg Dewar, Richard Keith Uddenberg and
Lori Dee Schacht)
(31) Debbie Louise Little Trust
(Trustees: Debbie Louise Little, Lori Dee Schacht
and Ray Graves)
Total 5,752,587
=========
Sch D - 2
<PAGE>
Exhibit A
FORM OF OPINION OF BOGLE & GATES P.L.L.C.
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
[to come]
A-1
<PAGE>
Exhibit B
FORM OF OPINION OF SIMPSON THACHER & BARTLETT
TO BE DELIVERED PURSUANT TO
SECTION 5(c)
[to come]
B-1
<PAGE>
Exhibit C
FORM OF OPINION OF O'MELVENY & MYERS LLP
TO BE DELIVERED PURSUANT TO
SECTION 5(d)
[to come]
C-1
<PAGE>
Exhibit D
FORM OF OPINION OF ROSENBERG & LIEBENTRITT, P.C.
TO BE DELIVERED PURSUANT TO SECTION 5(e)
[to come]
D-1
<PAGE>
Exhibit E
January __, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
DAIN BOSWORTH INCORPORATED
as U.S. Representatives of the several
U.S. Underwriters to be named in the
within-mentioned U.S. Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INTERNATIONAL LIMITED
DAIN BOSWORTH INCORPORATED
as International Representatives of the several
International Underwriters to be named in the
within-mentioned International Purchase Agreement
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Re: Proposed Public Offering by Quality Food Centers, Inc.
Ladies and Gentlemen:
The undersigned, a stockholder and, if applicable, an officer and/or
director of Quality Food Centers, Inc., a Washington corporation (the
"Company"), understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch"), Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), Salomon Brothers Inc and Dain Bosworth Incorporated, as the
U.S. representatives of the several U.S. underwriters (the "U.S. Underwriters")
to be named in the U.S.
E-1
<PAGE>
Purchase Agreement hereinafter referred to, and Merrill Lynch International,
DLJ, Salomon Brothers International Limited and Dain Bosworth Incorporated, as
the international representatives of the several international underwriters (the
"International Underwriters") to be named in the International Purchase
Agreement hereinafter referred to, propose to enter into a U.S. Purchase
Agreement (the "U.S. Purchase Agreement") and an International Purchase
Agreement, respectively, with the Company, providing for the public offering
(the "Stock Offering") of shares of the Company's common stock, par value $.001
per share (the "Common Stock").
In recognition of the benefit that the Stock Offering will confer upon the
undersigned as a stockholder and, if applicable, an officer and/or director of
the Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
U.S. Underwriter and each International Underwriter that, during a period of 90
days from the date of the U.S. Purchase Agreement, the undersigned will not,
without the prior written consent of Merrill Lynch, directly or indirectly, (i)
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 to
purchase, or otherwise dispose of or transfer, any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file or cause to be filed any registration statement under the Securities Act of
1933, as amended, with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of Common
Stock, whether any such swap or other transaction referred to in clause (i) or
(ii) above is to be settled by delivery of Common Stock, other securities, in
cash or otherwise; provided that, notwithstanding the foregoing, the undersigned
may transfer shares of Common Stock to members of the undersigned's immediate
family and to privately-held corporations, partnerships, trusts and other
entities which are "affiliates" (as defined in Rule 405 under the Securities Act
of 1933) of the undersigned, so long as any such transferee delivers to Merrill
Lynch, prior to such transfer, a written agreement in form and substance
satisfactory to Merrill Lynch, signed by the transferee, in which the transferee
agrees to comply with the terms and provisions set forth in this agreement.
This agreement shall lapse and become null and void if the closing date of
the Stock Offering shall not have occurred on or before May 1, 1997.
In the event that the Company is a party to or is involved in any merger,
consolidation, share exchange or other transaction and, in connection therewith,
the Common Stock is converted into or exchanged for common stock or other
securities of any other person or entity, then all references in this Agreement
to Common Stock shall be deemed to mean and refer to such common stock and other
securities of such other person or entity, as applicable, and this agreement
shall be applicable to such common stock and other securities.
E-2
<PAGE>
This agreement shall be governed by and construed in accordance with the
laws of the State of New York.
Very truly yours,
Signature:_______________________________
Print Name:______________________________
E-3
<PAGE>
Exhibit F
March __, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
DAIN BOSWORTH INCORPORATED
as U.S. Representatives of the several
U.S. Underwriters to be named in the
within-mentioned U.S. Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INTERNATIONAL LIMITED
DAIN BOSWORTH INCORPORATED
as International Representatives of the several
International Underwriters to be named in the
within-mentioned International Purchase Agreement
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Re: Proposed Public Offering by Quality Food Centers, Inc.
Ladies and Gentlemen:
The undersigned, Quality Food, Inc., a Delaware corporation ("QFI"),
understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), Salomon Brothers Inc and Dain Bosworth Incorporated, as the
U.S. representatives of the several U.S. underwriters (the "U.S. Underwriters")
to be named in the U.S. Purchase Agreement hereinafter referred to, and Merrill
Lynch International, DLJ, Salomon Brothers International Limited and Dain
Bosworth Incorporated,
F-1
<PAGE>
as the international representatives of the several international underwriters
(the "International Underwriters") to be named in the International Purchase
Agreement hereinafter referred to, propose to enter into a U.S. Purchase
Agreement (the "U.S. Purchase Agreement") and an International Purchase
Agreement, respectively, with Quality Food Centers, Inc., a Washington
corporation (the "Company"), providing for the public offering (the "Stock
Offering") of shares of the Company's common stock, par value $.001 per share
(the "Company Common Stock").
In recognition of the benefit that the Stock Offering will confer upon the
undersigned as a company affiliated with the Company, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each U.S. Underwriter and each
International Underwriter that, if the Reorganization (as defined in the U.S.
Purchase Agreement) occurs at any time during a period of 90 days from the date
of the U.S. Purchase Agreement (such period, the "Lockup Period"), the
undersigned will not, without the prior written consent of Merrill Lynch,
directly or indirectly, for the duration of such Lockup Period (i) 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 to
purchase, or otherwise dispose of or transfer, any shares of the common stock of
QFI (the "QFI Common Stock") or any securities convertible into or exchangeable
or exercisable for QFI Common Stock, or file or cause to be filed any
registration statement under the Securities Act of 1933, as amended, with
respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of QFI Common Stock, whether
any such swap or other transaction referred to in clause (i) or (ii) above is to
be settled by delivery of QFI Common Stock, other securities, in cash or
otherwise. The foregoing sentence shall not apply to (A) any shares of QFI
Common Stock issued upon the exercise of any option which, in connection with
the Reorganization, was issued by QFI to replace an option granted by the
Company and outstanding on the date of the U.S. Purchase Agreement to purchase a
like number of shares of Company Common Stock or (B) any shares of QFI Common
Stock issued or options to purchase QFI Common Stock granted pursuant to
employee benefit plans of QFI which are established in connection with the
Reorganization and replace substantially similar employee benefit plans of the
Company which were existing on the date of the U.S. Purchase Agreement and are
referred to in the prospectus relating to the Stock Offering.
This agreement shall lapse and become null and void if the closing date of
the Stock Offering shall not have occurred on or before May 1, 1997.
F-2
<PAGE>
This agreement shall be governed by and construed in accordance with the
laws of the State of New York.
Very truly yours,
QUALITY FOOD, INC.
By:______________________________________
Name: Christopher A. Sinclair
Title: Chief Executive Officer
F-3
================================================================================
QUALITY FOOD CENTERS, INC.
(a Washington corporation)
4,500,000 Shares of Common Stock
INTERNATIONAL PURCHASE AGREEMENT
Dated: March 13, 1997
================================================================================
<PAGE>
Table of Contents
Page
----
INTERNATIONAL PURCHASE AGREEMENT........................................... 1
SECTION 1. Representations and Warranties........................... 5
(a) Representations and Warranties by the Company....... 5
(b) Officer's Certificates.............................. 15
SECTION 2. Sale and Delivery to International Underwriters; Closing. 15
(a) Initial Securities.................................. 15
(b) Option Securities................................... 16
(c) Payment............................................. 16
(d) Denominations; Registration......................... 17
SECTION 3. Covenants of the Company................................. 17
(a) Compliance with Securities Regulations and Commission
Requests............................................ 17
(b) Filing of Amendments................................ 17
(c) Delivery of Registration Statements................. 18
(d) Delivery of Prospectuses............................ 18
(e) Continued Compliance with Securities Laws........... 18
(f) Blue Sky Qualifications............................. 19
(g) Rule 158............................................ 19
(h) Use of Proceeds..................................... 19
(i) Preparation of Prospectus Supplement................ 19
(j) Listing............................................. 19
(k) Restriction on Sale of Securities................... 19
(l) Reporting Requirements.............................. 20
SECTION 4. Payment of Expenses...................................... 20
(a) Expenses............................................ 20
(b) Termination of Agreement............................ 21
SECTION 5. Conditions of International Underwriters' Obligations.... 21
(a) Effectiveness of Registration Statement............. 21
(b) Opinion of Bogle & Gates P.L.L.C.................... 21
(c) Opinion of Simpson Thacher & Bartlett............... 22
(d) Opinion of O'Melveny & Myers LLP.................... 22
(e) Opinion of Rosenberg & Liebentritt, P.C............. 23
(f) Opinion of Counsel for International Underwriters... 24
(g) Officers' Certificate............................... 24
(h) Accountants' Comfort Letters........................ 24
(i) Bring-down Comfort Letter........................... 24
(j) Approval of Listing................................. 24
(k) Lock-up Agreements.................................. 25
(l) Consummation of Hughes Merger....................... 25
(m) Effectiveness of New Credit Agreement............... 25
(n) Purchase of Notes................................... 25
i
<PAGE>
(o) Purchase of U.S. Securities......................... 25
(p) Conditions to Purchase of International Option
Securities ......................................... 25
(q) Additional Documents................................ 26
(r) Termination of Agreement............................ 27
SECTION 6. Indemnification.......................................... 27
(a) Indemnification of International Underwriters....... 27
(b) Indemnification of Company, Directors and Officers.. 28
(c) Actions against Parties; Notification............... 28
(d) Settlement without Consent if Failure to Reimburse.. 29
SECTION 7. Contribution............................................. 29
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery ................................................ 31
SECTION 9. Termination of Agreement................................. 31
(a) Termination; General................................ 31
(b) Liabilities......................................... 31
SECTION 10. Default by One or More of the International Underwriters. 32
SECTION 11. Notices.................................................. 32
SECTION 12. Parties.................................................. 33
SECTION 13. GOVERNING LAW AND TIME................................... 33
SECTION 14. Effect of Headings....................................... 33
SCHEDULES
Schedule A - List of Underwriters.............................Sch A-1
Schedule B - Pricing Information..............................Sch B-1
Schedule C - List of Persons Subject to Lock-up...............Sch C-1
Schedule D - Persons Holding Shares with Registration Rights..Sch D-1
EXHIBITS
Exhibit A - Form of Lock-up Letter...................................A-1
Exhibit B - Form of Parent Lock-up Letter............................B-1
ii
<PAGE>
QUALITY FOOD CENTERS, INC.
(a Washington corporation)
4,500,000 Shares of Common Stock
(Par Value $.001 Per Share)
INTERNATIONAL PURCHASE AGREEMENT
March 13, 1997
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INTERNATIONAL LIMITED
DAIN BOSWORTH INCORPORATED
as International Representatives of the
several International Underwriters
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Ladies and Gentlemen:
Quality Food Centers, Inc., a Washington corporation (the "Company"),
confirms its agreement with Merrill Lynch International and each of the other
Underwriters named in Schedule A hereto (collectively, the "International
Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom Merrill Lynch
International, Donaldson, Lufkin & Jenrette Securities Corporation, Salomon
Brothers International Limited and Dain Bosworth Incorporated are acting as lead
managers (in such capacity, the "International Representatives"), with respect
to the issue and sale by the Company and the purchase by the International
Underwriters, acting severally and not jointly, of the respective numbers of
shares of Common Stock, par value $.001 per share, of the Company ("Common
Stock") set forth in said Schedule A, and with respect to the grant by the
Company to the International Underwriters, acting severally and not jointly, of
the option described in Section 2(b) hereof to purchase all or any part of
135,000 additional shares of Common Stock to cover over-allotments, if any. The
aforesaid 900,000 shares of Common Stock (the "Initial International
Securities") to be purchased by the International Underwriters and all or any
part of the 135,000 shares of Common Stock subject to the option described in
Section 2(b) hereof (the "International Option Securities") are hereinafter
sometimes
<PAGE>
called, collectively, the "International Securities". This Agreement is
hereinafter sometimes called the "International Purchase Agreement".
It is understood that the Company is concurrently entering into a U.S.
Purchase Agreement dated the date hereof (the "U.S. Purchase Agreement")
providing for the offering by the Company of an aggregate of 3,600,000 shares of
Common Stock (the "Initial U.S. Securities") through arrangements with certain
underwriters in the United States and Canada (the "U.S. Underwriters") for whom
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, Salomon Brothers Inc and
Dain Bosworth Incorporated are acting as representatives managers (the "U.S.
Representatives"), and the grant by the Company to the U.S. Underwriters of an
option to purchase all or any part of an additional 540,000 shares of Common
Stock (the "U.S. Option Securities") to cover over-allotments, if any. The
Initial U.S. Securities and the U.S. Option Securities are hereinafter sometimes
called, collectively, the "U.S. Securities."
The International Securities and the U.S. Securities are hereinafter
sometimes called, collectively, the "Securities;" the Initial International
Securities and the Initial U.S. Securities are hereinafter sometimes called,
collectively, the "Initial Securities;" the International Option Securities and
the U.S. Option Securities are hereinafter sometimes called, collectively, the
"Option Securities;" the International Underwriters and the U.S. Underwriters
are hereinafter sometimes called, collectively, the "Underwriters" and,
individually, an "Underwriter;" the International Representatives and the U.S.
Representatives are hereinafter sometimes called, collectively, the
"Representatives"; and, individually, a "Representative;" and this Agreement and
the U.S. Purchase Agreement are hereinafter sometimes called, collectively, the
"Purchase Agreements" and, individually, a "Purchase Agreement".
The Company understands that the International Underwriters and the U.S.
Underwriters will concurrently enter into an Intersyndicate Agreement of even
date herewith (the "Inter-syndicate Agreement") providing for the coordination
of certain transactions among the International Underwriters and the U.S.
Underwriters under the direction of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch").
It is understood that the Company is concurrently entering into a Purchase
Agreement dated the date hereof (the "Debt Agreement") with Donaldson, Lufkin &
Jenrette Securities Corporation, Merrill Lynch and BancAmerica Securities, Inc.,
as the initial purchasers (the "Initial Purchasers"), and Quality Food Holdings,
Inc., a Delaware corporation (the "Holding Company"), and KU Acquisition
Corporation, a Washington corporation ("KUA") and the surviving corporation in
the merger with Keith Uddenberg, Inc. ("KUI"), which Debt Agreement will also be
entered into by Hughes Markets, Inc., a California corporation ("Hughes") as of
Closing Time (as hereinafter defined), relating to the offering by the Company
of $150,000,000 aggregate principal amount of its 8.70% Senior Subordinated
Notes due 2007 (the "Notes"). The Notes are to be issued pursuant to an
indenture (the "Indenture") among the Company, as issuer of the Notes, the
Holding Company, KUA and Hughes, as guarantors (each, a "Guarantor" and,
collectively, the "Guarantors"), and First Trust National Association, as
trustee (the "Trustee"). The Guarantors will jointly and severally guarantee,
among other things, the punctual payment of the principal of, premium, if any,
and interest on the Notes and the Company's 8.70% Senior Subordinated Notes due
2007 (the "Series B Notes")
2
<PAGE>
to be offered in exchange for the Notes (the "Exchange Offer") pursuant to the
Indenture and the Registration Rights Agreement referred to below (each, a
"Guarantee" and, collectively, the "Guarantees"). In connection with the
issuance and sale of the Notes, the Company and the Guarantors will enter into a
Registration Rights Agreement (the "Registration Rights Agreement") with the
Initial Purchasers. Pursuant to the Registration Rights Agreement, the Company
and the Guarantors will agree to use their reasonable best efforts to file with
the Commission, under the circumstances set forth therein and among other
things, a registration statement under the 1933 Act relating to the Exchange
Offer.
The Company has also entered into Agreement and Plan of Merger dated as of
November 20, 1996, as amended (the "Hughes Merger Agreement"), with QHI
Acquisition Corporation, a California corporation and wholly-owned subsidiary of
the Company ("QHI"), and Hughes, pursuant to which QHI will merge with and into
Hughes, with Hughes as the surviving corporation and as a result of which Hughes
will become a wholly-owned direct subsidiary of the Company (the "Hughes
Merger").
The Company is currently a party to a Credit Agreement dated as of March
15, 1995 (the "Old Credit Agreement") among the Company, Bank of America
National Trust and Savings Association ("BofA"), as agent, Seattle First
National Bank, as swingline lender, Bank of America Illinois ("BAI"), as issuing
lender, and the other financial institutions party thereto.
In connection with the transactions contemplated herein, the Company,
Quality Food, Inc., a Delaware corporation ("Parent"), and the Holding Company
will enter into an Amended and Restated Credit Agreement (the "New Credit
Agreement") with BofA, as Administrative Agent and Paying Agent, The Chase
Manhattan Bank, as Administrative Agent, and the other lenders party thereto
(collectively, the "Lenders"), amending and restating the Old Credit Agreement,
and, concurrently therewith, the security agreements previously executed with
respect to the Old Credit Agreement (the "Old Security Agreements") will be
terminated. In order to guarantee the Company's obligations under the New Credit
Agreement, the Holding Company, Hughes and KUA (each, a "Bank Guarantor" and,
collectively, the "Bank Guarantors") will enter into a guaranty (the "Bank
Guaranty") pursuant to the New Credit Agreement. In order to secure their
respective obligations under the New Credit Agreement, the Company will enter
into a Pledge Agreement (the "Company Security Agreement") and the Parent will
enter into a Pledge Agreement (the "Guarantor Security Agreement;" the Company
Security Agreement and the Guarantor Security Agreement are hereinafter
sometimes called, collectively, the "Bank Security Agreements" and,
individually, a "Bank Security Agreement") pursuant to which each of them will
pledge the common stock of certain subsidiaries as collateral.
The Purchase Agreements, the Debt Agreement, the Registration Rights
Agreement, the Indenture, the Notes, the Series B Notes, the New Credit
Agreement, the Company Security Agreement and the Hughes Merger Agreement are
hereinafter sometimes called, collectively, the "Company Documents" and,
individually, a "Company Document". The Debt Agreement, the Registration Rights
Agreement, the Indenture, the New Credit Agreement, the Guarantor Security
Agreement and the Bank Guaranty are hereinafter sometimes called, collectively,
the "Guarantor Documents" and, individually, a "Guarantor Document".
3
<PAGE>
The sale of the Initial International Securities to the International
Underwriters pursuant to this Agreement and the sale of the Initial U.S.
Securities to the U.S. Underwriters pursuant to the U.S. Purchase Agreement are
each conditioned upon, among other things, (i) the concurrent occurrence of the
other event and the concurrent purchase of the Notes by the Initial Purchasers
pursuant to the Debt Agreement, (ii) the effectiveness of the New Credit
Agreement prior to or concurrently therewith and (iii) the effectiveness of the
Hughes Merger prior to or concurrently therewith.
The Company understands that the International Underwriters propose to
make a public offering of the International Securities as soon as the
International Representatives deem advisable after this Agreement has been
executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-18567) for the
registration of, among other things, the Securities under the Securities Act of
1933, as amended (the "1933 Act"). Such registration statement, including the
exhibits thereto, the schedules thereto, if any, and the documents incorporated
or deemed to be incorporated by reference therein pursuant to Item 12 of Form
S-3 under the 1933 Act, as amended at the time it became effective, is herein
called the "Registration Statement." Any registration statement filed pursuant
to Rule 462(b) of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. Promptly after the
execution of this Agreement, the Company will file with the Commission pursuant
to Rule 424(b) of the 1933 Act Regulations a prospectus supplement relating to
the International Securities (the "International Prospectus Supplement") and a
prospectus supplement relating to the U.S. Securities (the "U.S. Prospectus
Supplement")(1), in each case together with the related prospectus dated January
27, 1997 (the "Base Prospectus"), and has previously advised you of all
information (financial and other) set forth therein. The International
Prospectus Supplement and the Base Prospectus, including all documents
incorporated or deemed to be incorporated by reference therein pursuant to Item
12 of Form S-3 under the 1933 Act, in the form first furnished to the
International Underwriters for use in connection with the offering of the
International Securities, are hereinafter referred to, collectively, as the
"International Prospectus." The U.S. Prospectus Supplement and the Base
Prospectus, including all documents incorporated or deemed to be incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the
form first furnished to the U.S. Underwriters for use in connection with the
offering of the U.S. Securities, are hereinafter referred to, collectively, as
the "U.S. Prospectus." The International Prospectus and the U.S. Prospectus are
hereinafter sometimes referred to as, individually, a "Prospectus" and,
collectively, the "Prospectuses." Each prospectus supplement relating to the
International Securities used prior to the date of this Agreement, together with
the related base prospectus and all documents incorporated or deemed to be
incorporated by reference therein pursuant to Item 12 of Form S-3, are
hereinafter referred to, collectively, as a
- ----------
(1) Two forms of prospectus supplement are to be used in connection with the
offering and sale of the Securities, one relating to the International
Securities and one relating to the U.S. Securities. The International
Prospectus Supplement is identical to the U.S. Prospectus Supplement,
except for the front cover page, back cover page and the section captioned
"Underwriting."
4
<PAGE>
"preliminary international prospectus". Each prospectus supplement relating to
the U.S. Securities used prior to the date of this Agreement, together with the
related base prospectus and all documents incorporated or deemed to be
incorporated by reference therein pursuant to Item 12 of Form S-3, are
hereinafter referred to, collectively, as a "preliminary U.S. prospectus". All
preliminary international prospectuses and preliminary U.S. prospectuses are
hereinafter sometimes referred to as, individually, a "preliminary prospectus"
and, collectively, the "preliminary prospectuses". For purposes of this
Agreement, all references to the Registration Statement, any preliminary
prospectus, any Prospectus or any amendments or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval System ("EDGAR").
It is understood that any representation or warranty of the Company in
Section 1 hereof which relates to Hughes is made to the best of the Company's
knowledge, with due inquiry by the Company.
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or any Prospectus (and all
other references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
or deemed to be incorporated by reference in the Registration Statement, any
preliminary prospectus or any Prospectus, as the case may be; and all references
in this Agreement to amendments or supplements to the Registration Statement,
any preliminary prospectus or any Prospectus shall be deemed to mean and include
the filing of any document under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), which is or is deemed to be incorporated by reference in the
Registration Statement, such preliminary prospectus or such Prospectus, as the
case may be.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company represents
and warrants to each International Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b) hereof, and agrees with each International
Underwriter, as follows:
(i) Compliance with Registration Requirements. The Company meets the
requirements for use of Form S-3 under the 1933 Act. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and any
request on the part of the Commission for additional information has been
complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements
5
<PAGE>
thereto complied and will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and did not and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. Neither of the Prospectuses nor any
amendments or supplements thereto, at the respective times the
Prospectuses or any such amendments or supplements were issued and at the
Closing Time (and, if any Option Securities are purchased, at the Date of
Delivery), included or will include an untrue statement of a material fact
or omitted or will 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. The representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectuses made in reliance upon and in
conformity with information furnished to the Company in writing by any
U.S. Underwriter or International Underwriter through Merrill Lynch
International expressly for use in the Registration Statement or
Prospectuses or to any Statement of Eligibility on Form T-1 under the
Trust Indenture Act of 1939, as amended, of any trustee filed as an
exhibit to the Registration Statement.
Each preliminary prospectus and each prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when
so filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and each Prospectus delivered to the U.S.
Underwriters or International Underwriters, as the case may be, for use in
connection with the offering of the Securities was identical to the
electronically transmitted copy thereof filed with the Commission pursuant
to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or deemed to
be incorporated by reference in the Registration Statement and the
Prospectuses, 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 Registration Statement and the
Prospectuses, at the time the Registration Statement became effective, at
the time the Prospectuses were issued and at the Closing Time (and if any
Option Securities are purchased, at the Date of Delivery), did not and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(iii) Independent Accountants. The accountants who audited the
financial statements and supporting schedules, if any, included in the
Registration Statement are independent certified public accountants as
required by the 1933 Act and the 1933 Act Regulations.
(iv) Financial Statements. The financial statements of the Company,
the consolidated financial statements of Hughes and the financial
statements of KUI included in the Registration Statement and the
Prospectuses, in each case together with the related schedules
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(if any) and notes, present fairly the financial position of the Company,
the financial position of Hughes and its consolidated subsidiaries, and
the financial position of KUI, respectively, at the dates indicated and
the results of operations, changes in stockholders' equity and cash flows
of the Company, of Hughes and its consolidated subsidiaries, and of KUI,
respectively, for the periods specified; and said financial statements
have been prepared in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved. The supporting schedules, if any, included in the Registration
Statement present fairly in accordance with GAAP the information required
to be stated therein. The selected historical financial data and the
summary historical financial information included in the Prospectuses
present fairly the information shown therein and have been compiled on a
basis consistent with that of the Company's and Hughes', as applicable,
audited financial statements included in the Registration Statement. The
pro forma financial statements and the related notes thereto included in
the Registration Statement and the Prospectuses present fairly the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been 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. The Company's ratios
of earnings to fixed charges (actual and, if any, pro forma) included in
the Prospectuses and as an exhibit to the Registration Statement have been
calculated in compliance with Item 503(d) of Regulation S-K of the
Commission.
(v) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectuses, except as otherwise stated therein, (A) there has been
no material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of (1) the Company
and its subsidiaries considered as one enterprise, whether or not arising
in the ordinary course of business (a "Material Adverse Effect") or (2)
Hughes and its subsidiaries 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 or
Hughes or any of its subsidiaries, in each case other than those in the
ordinary course of business, which are material with respect to the
Company and its subsidiaries considered as one enterprise or Hughes and
its subsidiaries considered as one enterprise, respectively; and (C) there
has been no dividend or distribution of any kind declared, paid or made by
the Company on any class of its capital stock. For purposes of this
Agreement, all references to "subsidiaries" of the Company shall include,
without limitation, in the case of any representation or warranty made or
deemed to have been made as of the Closing Time or at any time thereafter,
Hughes and its subsidiaries.
(vi) Good Standing of the Company. The Company has been duly
incorporated and is validly existing as a corporation authorized to
transact business in the corporate form and is in good standing under the
laws of the State of Washington and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its obligations
under the Company
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Documents; and the Company is not required to qualify as a foreign
corporation to transact business in any other jurisdiction.
(vii) Good Standing of Subsidiaries. The only subsidiaries of Hughes
are Hughes Realty, Inc., Univar San Bernardino, Inc., and MM Foods, Inc.,
each of which is a California corporation. The only subsidiaries of the
Company are KUA, QHI, Second Story, Inc., a Washington corporation,
Parent, the Holding Company and, at the Closing Time, Hughes and its
subsidiaries. Each of KUA, Hughes, Parent and the Holding Company 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 Prospectuses and to enter into
and perform its obligation under the Guarantor Documents to which it is or
will be a party (if any), 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; except as otherwise disclosed in the Registration
Statement, all of the issued and outstanding capital stock of each of KUA,
Parent and the Holding Company 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 (except for liens
created by the Bank Security Agreements in favor of the Lenders); all of
the issued and outstanding capital stock of Hughes has been duly
authorized and validly issued, is fully paid and non-assessable and, at
the Closing Time will be owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity (except for liens created by the Bank
Security Agreements); and none of the outstanding shares of capital stock
of Hughes KUA, Parent or the Holding Company was issued in violation of
any preemptive or similar rights. For the periods covered by the
historical financial statements of the Company included in the
Prospectuses, the Company did not have any subsidiaries whose financial
statements were required to be consolidated with those of the Company in
accordance with GAAP. As of and for its fiscal year ended in December of
1996, the aggregate sales, operating income, net income and assets of the
Company's subsidiaries (excluding KUA) were less than 1% of the Company's
total sales, operating income, net income and assets. For the seven months
ended September 29, 1996, subsidiaries of Hughes (other than Santee
Dairies, Inc., a California corporation ("Santee")), accounted for less
than 1% of Hughes' consolidated sales, income from operations, net income
and assets (excluding from the computation of the foregoing amounts
attributable to Santee).
(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectuses in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement or pursuant to
employee benefit plans or the exercise of options referred to in the
Prospectuses). The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully paid
and non-assessable; and none of the outstanding shares
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of capital stock of the Company was issued in violation of the preemptive
or other similar rights of any securityholder of the Company.
(ix) Authorization of Purchase Agreements. Each of the U.S. Purchase
Agreement and the International Purchase Agreement has been duly
authorized, executed and delivered by the Company. The Debt Agreement has
been duly authorized, executed and delivered by the Company and the
Guarantors, other than Hughes; at the Closing Time, the Debt Agreement
will have been duly authorized, executed and delivered by Hughes.
(x) Authorization and Description of Securities. The U.S. Securities
and the International Securities have been duly authorized for issuance
and sale to the U.S. Underwriters and the International Underwriters
pursuant to the U.S. Purchase Agreement and the International Purchase
Agreement, respectively, and, when issued and delivered by the Company
pursuant to the U.S. Purchase Agreement and the International Purchase
Agreement, respectively, against payment of the consideration set forth
therein, will be validly issued, fully paid and non-assessable; the Common
Stock conforms to all statements relating thereto contained in the
Prospectuses and the description of the Common Stock set forth in the
Prospectuses conforms to the rights set forth in the instruments defining
the same; no holder of the Securities will be subject to personal
liability by reason of being such a holder; and the issuance of the
Securities is not subject to the preemptive or other similar rights of any
securityholder of the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company, the
Holding Company, the Parent, Hughes nor KUA is in violation of its charter
or by-laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease
or other agreement or instrument to which it is a party or by which it or
any of them may be bound, or to which any of its property or assets is
subject (collectively, "Agreements and Instruments", which term shall
include, without limitation, the Investor Agreements (as defined below),
the Company Documents and the Guarantor Documents), except for such
defaults under Agreements and Instruments (other than the New Credit
Agreement or the Indenture) that would not result in a Material Adverse
Effect; and the execution, delivery and performance of the Company
Documents and the Guarantor Documents and the consummation of the
transactions contemplated herein and therein and in the Registration
Statement (including, without limitation, (i) the issuance and sale of the
Securities and the Notes and the borrowing of funds under the New Credit
Agreement and the application of the proceeds therefrom as described in
the Prospectuses under the caption "Use of Proceeds" and (ii) the
consummation of the Hughes Merger) and compliance by the Company and the
Guarantors with their respective obligations and agreements under the
Company Documents and the Guarantor Documents 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 Repayment Event (as defined below)
under, or result in the creation or imposition of any lien, charge or
encumbrance (other than liens on the Bank Collateral (as defined below)
created by the Bank Security Agreements in favor of the Lenders) upon any
property or assets of the Company, the Holding Company,
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Parent, Hughes or KUA pursuant to, any Agreements and Instruments (except
for such conflicts, breaches or defaults or liens, charges or encumbrances
under Agreements and Instruments, other than the New Credit Agreement, the
Indenture and the Investor Agreements, that would not result in a Material
Adverse Effect), nor will such action result in any violation of the
provisions of the charter or by-laws of the Company, Parent, the Holding
Company, Hughes or KUA 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, Parent, the Holding Company, Hughes or KUA or any of their
respective assets, properties or operations. As used herein, a "Repayment
Event" means any event or condition which gives the holder of any note,
debenture or other evidence of indebtedness (or any person acting on such
holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the issuer or
obligor. No consents or waivers from any other person are required for the
execution, delivery and performance of any of the Company Documents or the
Guarantor Documents or the consummation of any of the transactions
contemplated hereby and thereby, other than such consents and waivers as
have been obtained (or, in the case of the Registration Rights Agreement,
will be obtained).
As used in this Agreement, the term "Investor Agreements" means (A)
the Standstill Agreement dated as of January 14, 1995 between the Company
and Zell/Chilmark Fund L.P. (the "Zell/Chilmark Standstill Agreement"),
(B) the Standstill Agreement dated as of January 14, 1995 between the
Company and Stuart M. Sloan (the "Sloan Standstill Agreement"), (C) the
Investor Rights Agreement dated as of March 1, 1995 (the "Olson Investor
Rights Agreement") between the Company and Maurice F. Olson, Charles M.
Olson and Maurice S. Olson, (D) the Investor Rights Agreement among the
Company, Charles B. Teel, E. Gerald Teel and the other persons party
thereto (the "Food Giant Investor Rights Agreement") and (E) the Investor
Rights Agreement dated February 14, 1997 among the Company and the other
persons party thereto (the "KUI Investor Rights Agreement;" and the term
"Common Stock Registration Rights Agreements" means the agreements
referred to in clauses (A), (C), (D) and (E) of this sentence.
(xii) Absence of Labor Dispute. There is (i) no unfair labor
practice complaint pending against the Company, Hughes or KUA nor, to the
best knowledge of the Company, threatened against any of them, before the
National Labor Relations Board, any state or local labor relations board
or any foreign labor relations board, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is
pending against the Company, Hughes or KUA or, to the best knowledge of
the Company, threatened against any of them, which, individually or in the
aggregate, may reasonably be expected to result in a Material Adverse
Effect, (ii) no strike, labor dispute, slowdown or stoppage pending
against the Company, Hughes or KUA nor, to the best knowledge of the
Company, threatened against the Company, Hughes or KUA which, individually
or in the aggregate, may reasonably be expected to result in a Material
Adverse Effect, and (iii) to the best knowledge of the Company, no union
representation question existing with respect to the employees of the
Company, Hughes or KUA and no union organizing activities are taking place
with respect to any such employees. Neither the Company, Hughes nor KUA
has violated any
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federal, state or local law or foreign law relating to discrimination in
hiring, promotion or pay of employees, or any applicable wage or hour
laws, or any provision of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the rules and regulations thereunder, or
analogous foreign laws and regulations, which may reasonably be expected
to result in a Material Adverse Effect. The Company is not aware of any
existing or imminent labor disturbance by the employees of any principal
suppliers, manufacturers, customers or contractors of the Company, Hughes
or KUA, which, individually or in the aggregate, may reasonably be
expected to result in a Material Adverse Effect.
(xiii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company, Parent, the
Holding Company, Hughes or KUA, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which might
reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the
properties or assets thereof or the consummation of the transactions
contemplated in the Company Documents or the Guarantor Documents or the
performance by any of the parties thereto of their respective obligations
or agreements thereunder; and the aggregate of all pending legal or
governmental proceedings to which the Company, Parent, the Holding
Company, Hughes or KUA is a party or of which any of their respective
property or assets is the subject which are not described in the
Registration Statement, including ordinary routine litigation incidental
to the business, could not reasonably be expected to result in a Material
Adverse Effect.
(xiv) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement, the
Prospectuses or the documents incorporated or deemed to be incorporated by
reference therein or to be filed as exhibits thereto which have not been
so described and filed as required.
(xv) 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 for the authorization, execution, delivery or
performance by the Company of any of the Company Documents or by any of
the Guarantors of any of the Guarantor Documents, for the performance by
Hughes of the Hughes Merger Agreement, for the offering, issuance or sale
of the Securities under the Purchase Agreements or of the Notes or the
Guarantees under the Debt Agreement, or for the consummation of the Hughes
Merger or the other transactions contemplated by the Company Documents and
the Guarantor Documents, except (A) such as may have been obtained under
the 1933 Act or the 1933 Act Regulations in connection with the offering
of the Securities, (B) such as may be required under state securities
laws, (C) the filing of the appropriate agreement of merger and officers'
certificates of each of Hughes and QHI relating to the approval of the
Hughes Merger and a tax clearance certificate relating to Hughes'
assumption of QHI's obligations to pay California franchise taxes (all as
provided for in Section 1103 of the California Corporations Code) with the
Secretary of State of the State of California in connection with the
Hughes Merger, (D) the filing of financing statements and continuation
statements under
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the Uniform Commercial Code (the "UCC") of the States of Washington and
California in connection with the Bank Security Agreements, (E) the filing
of termination statements (if any) under the UCC of the State of
Washington and any other appropriate jurisdictions terminating the
security interests created by the Old Security Agreements, and (F) such as
will be required under the 1933 Act, the 1933 Act Regulations and the
Trust Indenture Act of 1939, as amended (the "1939 Act") in connection
with the Registration Rights Agreement.
(xvi) Possession of Licenses and Permits. The Company, Hughes and
KUA 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,
Hughes and KUA are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company, Hughes nor KUA has
received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a Material Adverse Effect.
(xvii) Title to Property. The Company, Hughes and KUA have good and
marketable title to all real property and improvements owned by them 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 Prospectuses or (b) do not, singly or in the aggregate, materially
affect the value of such property and do not materially interfere with the
use made and proposed to be made of such property by them; all of the
leases and subleases under which the Company, Hughes or KUA holds
properties are valid, binding and in full force and effect, and neither
the Company, Hughes or KUA has any notice of any claim of any sort that
has been asserted by anyone adverse to the rights of the Company, Hughes
or KUA under any of the leases or subleases mentioned above, or affecting
or questioning the rights of the Company, Hughes or KUA to the continued
possession of the leased or subleased premises under any such lease or
sublease which, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect; and no default by the
Company, Hughes or KUA has occurred and is continuing under any such lease
or sublease, and no defaults by the landlord or sublessor, as the case may
be, are existing under any such lease or sublease which, individually or
in the aggregate, could reasonably be expected to result in a Material
Adverse Effect.
(xviii) Compliance with Cuba Act. To the extent that the Cuba Act is
applicable, the Company has complied with, and is and will be in
compliance with, the provisions of that certain Florida act relating to
disclosure of doing business with Cuba, codified as Section 517.075 of the
Florida statutes, and the rules and regulations thereunder (collectively,
the "Cuba Act") or is exempt therefrom.
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(xix) Investment Company Act. Neither the Company nor any of its
subsidiaries is and, upon the issuance and sale of the Securities and the
Notes pursuant to the Purchase Agreements and the Debt Agreement,
respectively, and the application of the net proceeds therefrom as
described in the Prospectuses, none of them 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").
(xx) Environmental Laws. Except as described in the Registration
Statement and except as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A) neither the Company, Hughes nor KUA is in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution
or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (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, Hughes and KUA have all permits,
authorizations and approvals required under any applicable Environmental
Laws and are each in compliance with their requirements, (C) there are no
pending or threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental Law
against the Company, Hughes or KUA and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company, Hughes or KUA relating to Hazardous Materials or any
Environmental Laws.
(xxi) Tax Returns. All tax returns required to be filed by the
Company, Hughes or KUA, in all jurisdictions, have been so filed. All
taxes, including withholding taxes, penalties and interest, assessments,
fees and other charges due or claimed to be due from such entities or that
are due and payable have been paid, other than those being contested in
good faith and for which adequate reserves have been provided or those
currently payable without penalty or interest. The Company knows of no
material proposed additional tax assessments against the Company, Hughes
or KUA.
(xxii) No Stabilization, Etc. Neither the Company, Hughes nor KUA
has (i) taken, directly or indirectly, any action designed to, or that
might reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities or (ii) since the date of the earliest
preliminary prospectus (A) sold, bid for, purchased or paid any person any
compensation for soliciting purchases of the Securities or (B) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
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(xxiii) Absence of Registration Rights. There are no persons with
registration rights or other similar rights to have any securities (debt
or equity) (A) registered pursuant to the Registration Statement or any of
the registration statements contemplated by the Registration Rights
Agreement or included in any of the offerings contemplated by the Purchase
Agreements or the Registration Rights Agreement or (B) except for such
rights as are accurately described in the Prospectuses under "Shares
Eligible for Future Sale," otherwise registered by the Company under the
1933 Act (the rights referred to in clauses (A) and (B), collectively, the
"Rights"); and the Company has complied with all of its obligations and
agreements under the Investor Agreements in connection with the
transactions contemplated by the Purchase Agreements. Schedule D contains
a true, complete, and correct listing of all persons with Rights, the
Common Stock Registration Rights Agreement under which such Rights arise
and the number of shares of Common Stock covered by each such Common Stock
Registration Rights Agreement.
(xxiv) New Credit Agreement. At or prior to the Closing Time, the
New Credit Agreement will have been duly authorized by the Company, Parent
and the Holding Company; at or prior to the Closing Time, the New Credit
Agreement will have been duly executed and delivered by, and will be a
valid and binding agreement of, the Company, Parent and the Holding
Company, enforceable in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by general principles of equity, and all conditions
precedent to the effectiveness of the New Credit Agreement, and all
conditions precedent to the right of the Company to make borrowings under
the New Credit Agreement (other than delivery of borrowing requests,
bring-down officer's certificates or other customary documents required as
a condition to each borrowing), will have been satisfied or waived.
(xxv) Bank Guaranty. At or prior to the Closing Time, the Bank
Guaranty will have been duly authorized by the Bank Guarantors; at or
prior to the Closing Time, the Bank Guaranty will have been duly executed
and delivered by, and will be the valid and binding agreements of, the
Bank Guarantors, enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general principles of equity.
(xxvi) Bank Security Agreements. At or prior to the Closing Time,
the Bank Security Agreements will have been duly authorized by the Company
and the Parent, respectively; at or prior to the Closing Time, the Bank
Security Agreements will have been duly executed and delivered by, and
will be the valid and binding agreements of, the Company and the Parent,
enforceable in accordance with their terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, mora torium or
other similar laws relating to or affecting creditors' rights generally or
by general principles of equity.
(xxvii) Description of Documents. The Company Documents and the
Guarantor Documents will conform in all material respects to the
respective statements relating thereto
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contained in the Prospectuses and will be in substantially the respective
forms filed or incorporated by reference as exhibits to the Registration
Statement.
(xxviii) Hughes Merger. The Hughes Merger will become effective upon
the filing of the agreement of merger provided for in the Hughes Merger
Agreement, an officers' certificate of each of Hughes and QHI relating to
the approval of the Hughes Merger and a tax clearance certificate relating
to Hughes' assumption of QHI's obligations to pay California franchise
taxes (all as provided for in Section 1103 of the California Corporations
Code) (collectively, the "Merger Filing") with the Secretary of State of
the State of California. Prior to the Closing Time, the Merger Filing will
have been duly authorized, executed and delivered by the parties thereto,
will comply with all applicable requirements of the laws of the State of
California, and will have been duly filed in the appropriate governmental
offices in the State of California. The Hughes Merger will be effective
prior to or concurrently with the purchase of the Initial U.S. Securities
by the U.S. Underwriters, with Hughes surviving the Hughes Merger as a
wholly-owned direct subsidiary of the Company. The Company believes that
all conditions precedent to the effectiveness of the Hughes Merger and to
the obligations of the parties to the Hughes Merger Agreement which have
not already been satisfied will be satisfied or waived at or prior to the
Closing Time.
(xxix) Authorization of Hughes Merger Agreement. The Hughes Merger
Agreement has been duly authorized, executed and delivered by and is a
valid and binding agreement of each of the Company, QHI and Hughes.
(b) Officer's Certificates. Any certificate signed by any officer of the
Company, Hughes, KUA or any of their respective subsidiaries delivered to the
International Representatives or to counsel for the International Underwriters
shall be deemed a representation and warranty by the Company to each
International Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to International Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each International Underwriter, severally and not
jointly, and each International Underwriter, severally and not jointly, agrees
to purchase from the Company, at the price per share set forth in Schedule B,
the number of Initial International Securities set forth in Schedule A opposite
the name of such International Underwriter, plus any additional number of
Initial International Securities which such International Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the International
Underwriters, severally and not jointly, to purchase up to an additional 135,000
shares of Common Stock at the price per share set forth in Schedule B, less an
amount per share equal to any dividends or distributions declared by the Company
and payable on the Initial International Securities but not payable on the
International Option Securities. The option hereby
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granted will expire 30 days after the date hereof and may be exercised in whole
or in part from time to time (but not more than three times without the consent
of the Company (which consent shall not be unreasonably withheld)) only for the
purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Initial International Securities upon notice by
the International Representatives to the Company setting forth the number of
International Option Securities as to which the several International
Underwriters are then exercising the option and the time and date of payment and
delivery for such International Option Securities. Any such time and date of
delivery (a "Date of Delivery") shall be determined by the International
Representatives, but shall not be later than seven full business days and not
earlier than two full business days after the exercise of said option unless
otherwise agreed to by the U.S. Representatives and the Company, nor in any
event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the International Option Securities, each
of the International Underwriters, acting severally and not jointly, will
purchase that proportion of the total number of International Option Securities
then being purchased which the number of Initial International Securities set
forth in Schedule A opposite the name of such International Underwriter bears to
the total number of Initial International Securities, subject in each case to
such adjustments as the International Representatives in their discretion shall
make to eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial International Securities shall be made at the
offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York
10017 or at such other place as shall be agreed upon by the International
Representatives and the Company, at 9:00 A.M. (New York City time) on the third
(fourth, if the pricing occurs after 4:30 P.M. (New York City time) on any given
day) business day after the date hereof (unless postponed in accordance with the
provisions of Section 10), or such other time not later than ten business days
after such date as shall be agreed upon by the International Representatives and
the Company (such time and date of payment and delivery being herein called
"Closing Time").
In addition, in the event that any or all of the International Option
Securities are purchased by the International Underwriters, payment of the
purchase price for, and delivery of certificates for, such International Option
Securities shall be made at the above-mentioned offices or at the offices of
Brown & Wood LLP, One World Trade Center, New York, New York 10048, or at such
other place as shall be agreed upon by the International Representatives and the
Company, on each Date of Delivery as specified in the notice from the
International Representatives to the Company.
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
the International Representatives for the respective accounts of the
International Underwriters of certificates for the International Securities to
be purchased by them. It is understood that each International Underwriter has
authorized the International Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial International Securities and the International Option Securities, if
any, which it has agreed to purchase. Merrill Lynch, individually and not as a
representative of the International Underwriters, may (but shall not be
obligated to) make payment of the purchase price for the Initial International
Securities or the International Option Securities, if any, to be purchased by
any International Underwriter whose funds have not been received by the
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Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such International Underwriter from its obligations
hereunder.
(d) Denominations; Registration. Certificates for the Initial
International Securities and the International Option Securities, if any, shall
be in such denominations and registered in such names as the International
Representatives may request in writing at least one full business day before the
Closing Time or the relevant Date of Delivery, as the case may be. The
certificates for the Initial International Securities and the International
Option Securities, if any, will be made available for examination and packaging
by the International Representatives in The City of New York not later than
10:00 A.M. (New York City time) on the business day prior to the Closing Time or
the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
International Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests.
The Company will notify the International Representatives immediately, and
confirm the notice in writing, (i) when any Rule 462(b) Registration
Statement and any post-effective amendment to the Registration Statement
or any Rule 462(b) Registration Statement shall become effective or any
supplement to any of the Prospectuses or any amended Prospectus shall have
been filed, (ii) of the receipt of any comments from the Commission, (iii)
of any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to any of the Prospectuses or for
additional information, and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or
of any order preventing or suspending the use of any preliminary
prospectus or Prospectus, or of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the initiation
or threatening of any proceedings for any of such purposes. The Company
will promptly effect the filings necessary pursuant to Rule 424(b) of the
1933 Act Regulations and will take such steps as it deems necessary to
ascertain promptly whether the form of prospectus and/or prospectus
supplement transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will
promptly file such prospectus and/or prospectus supplement, as applicable.
The Company will make every reasonable effort to prevent the issuance of
any stop order and, if any stop order is issued, to obtain the lifting
thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the International
Representatives notice of its intention to file or prepare any further
amendment to the Registration Statement (including any filing under Rule
462(b)) or any amendment, supplement or revision to either the prospectus
included in the Registration Statement at the time it became effective or
to either of the Prospectuses, whether pursuant to the 1933 Act, the 1934
Act or otherwise, will furnish the International Representatives with
copies of any such documents a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file or use any
such document to which the International Representatives or counsel for
the International Underwriters shall object.
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(c) Delivery of Registration Statements. The Company has furnished
or will deliver to the International Representatives and counsel for the
International Underwriters, without charge, signed copies of the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein
and documents incorporated or deemed to be incorporated by reference
therein) and signed copies of all consents and certificates of experts,
and will also deliver to the International Representatives, without
charge, as many conformed copies of the Registration Statement as
originally filed and of each amendment thereto (without exhibits) as the
International Underwriters may reasonably request. The copies of the
Registration Statement and each amendment thereto furnished to the
International Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
International Underwriter, without charge, as many copies of each
preliminary international prospectus as such International Underwriter
reasonably requested, and the Company hereby consents to the use of such
copies for purposes permitted by the 1933 Act. The Company will furnish to
each International Underwriter, without charge, during the period when the
International Prospectus is required to be delivered under the 1933 Act or
the 1934 Act, such number of copies of the International Prospectus (as
amended or supplemented) as such International Underwriter may reasonably
request. The International Prospectus and any amendments or supplements
thereto furnished to the International Underwriters will be identical to
the electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and
the 1934 Act Regulations so as to permit the completion of the
distribution of the Securities as contemplated in the Purchase Agreements
and in the Prospectuses. If at any time when a prospectus is required by
the 1933 Act to be delivered in connection with sales of the Securities
any event shall occur or condition shall exist as a result of which it is
necessary, in the opinion of counsel for the International Underwriters or
for the Company, to amend the Registration Statement or to amend or
supplement the International Prospectus in order that the International
Prospectus will not include any untrue statements of a material fact or
omit to state a material fact necessary in order to make the statements
therein not misleading in the light of the circumstances existing at the
time it is delivered to a purchaser, or if it shall be necessary, in the
opinion of such counsel, at any such time to amend the Registration
Statement or amend or supplement the International Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations,
the Company will promptly prepare and file with the Commission, subject to
Section 3(b), such amendment or supplement as may be necessary to correct
such statement or omission or to make the Registration Statement or the
International Prospectus comply with such requirements (and, if
appropriate, will make a corresponding amendment or supplement to the U.S.
Prospectus), and the Company will furnish to the International
Underwriters such number of copies of such amendment or supplement as the
International Underwriters may reasonably request.
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(f) Blue Sky Qualifications. The Company will use its reasonable
best efforts, in cooperation with the International Underwriters, to
qualify the Securities for offering and sale under the applicable
securities laws of such states and other jurisdictions as the
International Representatives may designate and to maintain such
qualifications in effect for a period of not less than one year from the
date of this Agreement; provided, however, that the Company 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. In each jurisdiction in which the Securities have been so
qualified, the Company will file such statements and reports as may be
required by the laws of such jurisdiction to continue such qualification
in effect for a period of not less than one year from the date of this
Agreement.
(g) Rule 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received
by it from the sale of the Securities and the Notes in the manner
specified in the Prospectus Supplements under "Use of Proceeds".
(i) Preparation of Prospectus Supplement. Immediately following the
execution of this Agreement, the Company will prepare the International
Prospectus Supplement and the U.S. Prospectus Supplement, containing the
terms of the Securities, the plan of distribution thereof and such other
information as may be required by the 1933 Act or the 1933 Act Regulations
or as the International Representatives and the Company deem appropriate,
and will file or transmit for filing with the Commission in accordance
with Rule 424(b) of the 1933 Act Regulations copies of the Prospectuses
(including such Prospectus Supplements).
(j) Listing. The Securities have been approved for listing on the
New York Stock Exchange (the "NYSE"), subject only to official notice of
issuance.
(k) Restriction on Sale of Securities. Pursuant to Section 2.10 of
the KUI Investor Rights Agreement, the Company has duly notified, in the
manner required by such agreement, all Holders (as defined in such
agreement) that such Holders may not sell, make any short sale of or
otherwise dispose of any Registrable Securities (as defined in such
agreement) without the prior written consent of the Company for the period
of 90 days from the date of this Agreement, and the Company has given the
Holders a further notice specifying the exact date of this Agreement.
During a period of 90 days from the date of this Agreement, the Company
will not, without the prior written consent of Merrill Lynch, directly or
indirectly, (i) waive or modify the agreement of the Holders pursuant to
Section 2.10 of the KUI Investor Rights Agreement not to sell, make any
short sale of or otherwise dispose of any Registrable Securities, (ii)
offer, pledge, sell, contract to sell, sell any option or
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contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or dispose of
any share of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing or (iii)
enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (ii) or (iii) above is to be settled by
delivery of Common Stock, other securities, cash or otherwise. Clauses
(ii) and (iii) of the foregoing sentence shall not apply to (A) the
Securities to be sold under the Purchase Agreements, (B) any shares of
Common Stock issued by the Company upon the exercise of any option
outstanding on the date hereof and referred to in the Prospectuses or (C)
any shares of Common Stock issued or options to purchase Common Stock
granted pursuant to existing employee benefit plans of the Company
referred to in the Prospectuses.
(l) Reporting Requirements. The Company, during the period when the
International Prospectus is required to be delivered under the 1933 Act or
the 1934 Act, will file all documents required to be filed with the
Commission pursuant to the 1934 Act within the time periods required by
the 1934 Act and the 1934 Act Regulations.
SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay all
expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the word processing, reproduction and delivery to the
Underwriters of the Purchase Agreements, the Intersyndicate Agreement, the
Agreement Among Managers and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates for
the Securities to the Underwriters, including any stock or other transfer taxes
and any stamp or other duties payable upon the sale, issuance or delivery of the
Securities to the Underwriters and any transfers of Securities between the
International Underwriters and U.S. Underwriters pursuant to the Intersyndicate
Agreement, (iv) the fees and disbursements of the Company's counsel, accountants
and other advisors, (v) the qualification of the Securities under securities
laws in accordance with the provisions of Section 3(f) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the Underwriters
in connection therewith and in connection with the preparation of the Blue Sky
Survey and any Canadian "wrapper," (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus and each Prospectus and
any amendments or supplements thereto, (vii) the preparation, printing and
delivery to the Underwriters of copies of the Blue Sky Survey and any Canadian
"wrapper," (viii) the fees and expenses of any transfer agent or registrar for
the Securities, (ix) the filing fees incident to, and the reasonable fees and
disbursements of counsel to the Underwriters in connection with, the review, if
any, by the National Association of Securities Dealers, Inc. (the "NASD") of the
terms of the sale of the Securities and (x) the fees and expenses incurred in
connection with the listing of the Securities on the NYSE.
(b) Termination of Agreement. If this Agreement is terminated by the
International Representatives in accordance with the provisions of Section 5 or
Section 9(a)(i) or (v) hereof, the
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Company shall reimburse the International Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the International Underwriters.
SECTION 5. Conditions of International Underwriters' Obligations. The
obligations of the several International Underwriters hereunder are subject to
the accuracy of the representations and warranties of the Company contained in
Section 1 hereof and in certificates of any officer of the Company, Hughes or
any of their respective subsidiaries delivered pursuant to the provisions
hereof, to the performance by the Company of its covenants and other obligations
hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness
of the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of counsel to the
International Underwriters. The Prospectuses shall have been filed or
transmitted for filing with the Commission pursuant to Rule 424(b) of the
1933 Act Regulations within the prescribed time period, and prior to
Closing Time the Company shall have provided evidence satisfactory to the
Underwriters of such timely filing or transmittal.
(b) Opinion of Bogle & Gates P.L.L.C. At Closing Time, the
International Representatives shall have received the favorable opinion,
dated as of Closing Time, of Bogle & Gates P.L.L.C., counsel for the
Company, in form and substance satisfactory to counsel for the
International Underwriters, together with signed or reproduced copies of
such letter for each of the other International Underwriters, to the
effect set forth in Exhibit A to the U.S. Purchase Agreement and to such
further effect as counsel to the International Underwriters may reasonably
request.
In rendering such opinion, such counsel shall state (A) that such
opinion is limited to matters arising under the laws of the State of
Washington, and (B) that, in rendering their opinion pursuant to the
Purchase Agreements, Simpson Thacher & Bartlett and Brown & Wood LLP each
may rely upon such opinion, as if it were addressed to them, as to all
matters arising under the laws of the State of Washington. In rendering
such opinion, Bogle & Gates P.L.L.C. may rely (i) as to matters involving
the application of the laws of any other state upon the opinion of local
counsel satisfactory to the International Representatives (which opinion
shall be dated and furnished to the International Representatives at the
Closing Time, shall be satisfactory in form and substance to counsel for
the International Underwriters and shall expressly state that the
International Underwriters may rely on such opinion as if it were
addressed to them), provided that Bogle & Gates P.L.L.C. shall state in
their opinion that they believe that they and the International
Underwriters are justified in relying upon such opinion and (ii) as to
matters of fact (but not as to legal conclusions), to the extent they deem
proper, on certificates of responsible officers of the Company, Hughes,
Santee and KUA and public officials. Such opinion shall not state that it
is to be governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal opinions,
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including, without limitation, the Legal Opinion Accord of the ABA Section
of Business Law (1991).
(c) Opinion of Simpson Thacher & Bartlett. At Closing Time, the
International Representatives shall have received the favorable opinion,
dated as of Closing Time, of Simpson Thacher & Bartlett, counsel for the
Company, in form and substance satisfactory to counsel for the
International Underwriters, together with signed or reproduced copies of
such letter for each of the other International Underwriters, to the
effect set forth in Exhibit B to the U.S. Purchase Agreement and to such
further effect as counsel for the International Underwriters may
reasonably request.
In rendering such opinion, such counsel shall state (A) that such
opinion is limited to matters arising under the laws of the State of New
York, the General Corporation Law of the State of Delaware and the federal
laws of the United States of America, (B) that insofar as such opinion
relates to matters arising under the laws of the States of Washington or
California, such counsel has relied upon the opinion of Bogle & Gates
P.L.L.C. delivered pursuant to Section 5(b) hereof or upon the opinion of
O'Melveny & Myers LLP delivered pursuant to Section 5(d) hereof,
respectively and (C) that insofar as such opinion relates to matters
arising under the laws of the State of California, such counsel has relied
upon the opinion of O'Melveny & Myers LLP delivered pursuant to Section
5(d) hereof. In rendering such opinion, Simpson Thacher & Bartlett may
rely (i) as to matters involving the application of the laws of any other
state upon the opinion of local counsel satisfactory to the International
Representatives (which opinion shall be dated and furnished to the
International Representatives at the Closing Time, shall be satisfactory
in form and substance to counsel for the International Underwriters and
shall expressly state that the International Underwriters may rely on such
opinion as if it were addressed to them), provided that Simpson Thacher &
Bartlett shall state in their opinion that they believe that they and the
International Underwriters are justified in relying upon such opinion and
(ii) as to matters of fact (but not as to legal conclusions), to the
extent they deem proper, on certificates of responsible officers of the
Company, Hughes, Santee and KUA and public officials. Such opinion shall
not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991).
(d) Opinion of O'Melveny & Myers LLP. At Closing Time, the
International Representatives shall have received the favorable opinion,
dated as of Closing Time, of O'Melveny & Myers LLP, counsel for Hughes, in
form and substance satisfactory to counsel for the International
Underwriters, together with signed or reproduced copies of such letter for
each of the other International Underwriters, to the effect set forth in
Exhibit C to the U.S. Purchase Agreement and to such further effect as
counsel to the International Underwriters may reasonably request.
In rendering such opinion, such counsel shall state (A) that such
opinion is limited to matters arising under the laws of the State of
California and (B) that, in rendering their opinions pursuant to the
Purchase Agreements, Simpson Thacher & Bartlett and Brown &
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Wood LLP may rely upon such opinion, as if it were addressed to them, as
to all matters arising under the laws of the State of California. In
rendering such opinion, O'Melveny & Myers LLP may rely (i) as to matters
involving the application of the laws of any other state upon the opinion
of local counsel satisfactory to the International Representatives (which
opinion shall be dated and furnished to the International Representatives
at the Closing Time, shall be satisfactory in form and substance to
counsel for the International Underwriters and shall expressly state that
the International Underwriters may rely on such opinion as if it were
addressed to them), provided that O'Melveny & Myers LLP shall state in
their opinion that they believe that they and the International
Underwriters are justified in relying upon such opinion and (ii) as to
matters of fact (but not as to legal conclusions), to the extent they deem
proper, on certificates of responsible officers of the Company, Hughes and
Santee and public officials. Such opinion shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section
of Business Law (1991).
(e) Opinion of Rosenberg & Liebentritt, P.C. At Closing Time, the
International Representatives shall have received the favorable opinion,
dated as of Closing Time, of Rosenberg & Liebentritt, P.C., counsel for
the Company, in form and substance satisfactory to counsel for the
International Underwriters, together with signed or reproduced copies of
such letter for each of the other International Underwriters, to the
effect set forth in Exhibit D to the U.S. Purchase Agreement and to such
further effect as counsel to the International Underwriters may reasonably
request.
In rendering such opinion, such counsel shall state that such
opinion is limited to matters arising under the laws of the State of
Illinois and the General Corporation Law of the State of Delaware. In
rendering such opinion, Rosenberg & Liebentritt, P.C. may rely (i) as to
matters involving the application of the laws of any other state upon the
opinion of local counsel satisfactory to the International Representatives
(which opinion shall be dated and furnished to the International
Representatives at the Closing Time, shall be satisfactory in form and
substance to counsel for the International Underwriters and shall
expressly state that the International Underwriters may rely on such
opinion as if it were addressed to them), provided that Rosenberg &
Liebentritt, P.C. shall state in their opinion that they believe that they
and the International Underwriters are justified in relying upon such
opinion and (ii) as to matters of fact (but not as to legal conclusions),
to the extent they deem proper, on certificates of responsible officers of
the Company, Hughes and Santee and public officials. Such opinion shall
not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991).
(f) Opinion of Counsel for International Underwriters. At Closing
Time, the International Representatives shall have received the favorable
opinion, dated as of Closing Time, of Brown & Wood LLP, counsel for the
International Underwriters, with respect to the incorporation and
existence of the Company, the Securities, the Purchase Agreements, the
Registration Statement, the Prospectuses and such other related matters as
the International
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Representatives may request, together with signed or reproduced copies of
such letter for each of the International Underwriters.
(g) Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, 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 (including, without limitation, Hughes and
KUA), whether or not arising in the ordinary course of business and the
International 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, dated as of Closing Time, to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) hereof are true and correct
with the same force and effect as though expressly made at and as of
Closing Time, (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to Closing Time, and (iv) no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission.
(h) Accountants' Comfort Letters. At the time of the execution of
this Agreement, the International Representatives shall have received from
each of Deloitte & Touche LLP and Arthur Andersen LLP a letter or letters
dated such date, in form and substance satisfactory to the International
Representatives, together with signed or reproduced copies of such letter
or letters for each of the other International Underwriters, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information of the Company, KUI and Hughes, as
applicable, contained in the Registration Statement and the Prospectuses.
(i) Bring-down Comfort Letters. At Closing Time, the International
Representatives shall have received from each of Deloitte & Touche LLP and
Arthur Andersen LLP a letter or letters, dated as of Closing Time, to the
effect that they reaffirm the statements made in the letter or letters
furnished pursuant to subsection (h) of this Section, except that the
specified date referred to shall be a date not more than three business
days prior to Closing Time.
(j) Approval of Listing. At Closing Time, the Securities shall have
been approved for listing on the NYSE, subject only to official notice of
issuance.
(k) Lock-up Agreements. Prior to the date of this Agreement, the
International Representatives shall have received (A) an agreement
substantially in the form of Exhibit A hereto signed by the persons and
entities listed on Schedule C hereto and (B) an agreement in substantially
the form of Exhibit B signed by the Parent.
(l) Consummation of Hughes Merger. At the Closing Time, each
condition to the closing contemplated by the Hughes Merger Agreement shall
have been satisfied or
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waived. There shall exist at and as of the Closing Time (after giving
effect to the transactions contemplated by the Purchase Agreements and the
Debt Agreement) no conditions that would constitute a default (or an event
that with notice or lapse of time, or both, would constitute a default)
under the Hughes Merger Agreement. Prior to or concurrently with the
purchase of the Initial International Securities by the International
Underwriters, (i) the Company shall have consummated the Hughes Merger
pursuant to the Hughes Merger Agreement and on terms that conform to the
description thereof in the Prospectuses, (ii) the Hughes Merger shall have
become effective pursuant to the laws of the State of California and (iii)
Hughes shall survive the Hughes Merger and shall be a wholly-owned direct
subsidiary of the Company; and the Company shall have delivered to the
International Underwriters evidence, in form and substance satisfactory to
the International Underwriters, that the conditions specified in this
paragraph shall have been satisfied.
(m) Effectiveness of New Credit Agreement. At or prior to the
Closing Time, (1) the New Credit Agreement, the Bank Guaranty and the Bank
Security Agreements and all ancillary instruments and agreements shall
have been executed and delivered by the parties thereto and shall be in
form and substance satisfactory to the International Underwriters, and the
Company shall have furnished the International Underwriters with copies
thereof; and (2) all conditions precedent to the effectiveness of the New
Credit Agreement, and (except for the delivery of notices of borrowings,
officer's bring-down certificates and other customary documentation
required as a condition to a borrowing) all conditions precedent to the
right of the Company to make borrowings under the New Credit Agreement,
shall have been satisfied or waived and the New Credit Agreement shall be
effective.
(n) Purchase of Notes. Concurrently with the purchase of the Initial
International Securities by the International Underwriters, the Company
shall have issued, and the Initial Purchasers shall have purchased and
paid for, the Notes being sold pursuant to the Debt Agreement.
(o) Purchase of U.S. Securities. Concurrently with the purchase of
the Initial International Securities by the International Underwriters,
the U.S. Underwriters shall have purchased and paid for the Initial U.S.
Securities under the U.S. Purchase Agreement.
(p) Conditions to Purchase of International Option Securities. In
the event that the International Underwriters exercise their option
provided in Section 2(b) hereof to purchase all or any portion of the
International Option Securities, the representations and warranties of the
Company contained herein and the statements in any certificates furnished
by the Company, Hughes, or KUA hereunder shall be true and correct as of
each Date of Delivery and, at the relevant Date of Delivery, the
International Representatives shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the
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Closing Time pursuant to Section 5(g) hereof remains true and
correct as of such Date of Delivery.
(ii) Opinions of Counsel for Company. The favorable opinions
of Bogle & Gates P.L.L.C., Simpson Thatcher & Bartlett, O'Melveny &
Myers LLP, and Rosenberg & Liebentritt, P.C., each in form and
substance satisfactory to counsel for the International
Underwriters, dated such Date of Delivery (and, if applicable,
accompanied by opinions of local counsel dated such Date of
Delivery), relating to the International Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect
as the opinions required by Sections 5(b), 5(c), 5(d) and 5(e)
hereof, respectively.
(iii) Opinion of Counsel for International Underwriters. The
favorable opinion of Brown & Wood LLP, counsel for the International
Underwriters, dated such Date of Delivery, relating to the
International Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion required by
Section 5(f) hereof.
(iv) Bring-down Comfort Letters. A letter or letters from each
of Deloitte & Touche LLP and Arthur Andersen LLP, in form and
substance satisfactory to the International Representatives and
dated such Date of Delivery, substantially in the same form and
substance as the letters furnished to the International
Representatives pursuant to Section 5(i) hereof, except that the
"specified date" in the letter or letters furnished pursuant to this
paragraph shall be a date not more than five days prior to such Date
of Delivery.
(q) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the International Underwriters shall have been
furnished with such documents and opinions as they may reasonably require
for the purpose of enabling them to pass upon the issuance and sale of the
Securities as contemplated in the Purchase Agreements, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all
proceedings taken by the Company, Hughes or KUA in connection with the
issuance and sale of the Securities as contemplated in the Purchase
Agreements and the consummation of the other transactions contemplated by
the other Company Documents and Guarantor Documents shall be satisfactory
in form and substance to the International Representatives and counsel for
the International Underwriters.
(r) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of International Option Securities, on a Date of Delivery which
is after the Closing Time, the obligations of the several International
Underwriters to purchase the relevant International Option Securities, may
be terminated by the International Representatives by notice to the
Company at any time at or prior to Closing Time or such Date of Delivery,
as the case may be, and such termination shall be without liability of any
26
<PAGE>
party to any other party except as provided in Section 4 and except that
Sections 1, 6, 7 and 8 shall survive any such termination and remain in
full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of International Underwriters. The Company agrees to
indemnify and hold harmless each International Underwriter and each person, if
any, who controls any International Underwriter within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact included in any
preliminary prospectus or Prospectus (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, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), or any preliminary prospectus or
Prospectus (or any amendment or supplement thereto); provided, further, that
such indemnity with respect to any preliminary prospectus shall not inure to the
benefit of any International Underwriter (or any persons controlling such
International Underwriter) from whom the person asserting such loss, claim,
damage or liability purchased the International Securities which are the subject
thereof if such person did not receive a copy of the Prospectus (or the
Prospectus as amended or supplemented) at or prior to the confirmation of the
sale of such International Securities to such person in any case where the
27
<PAGE>
Company complied with its obligations under Sections 3(b) and 3(d) hereof (and
the Prospectus or any such amended or supplemented Prospectus, as applicable,
shall have been delivered by the Company to such Underwriter a reasonable amount
of time prior to the mailing or delivery, as applicable, of such confirmation)
and any such untrue statement or omission or alleged untrue statement or
omission of a material fact contained in such preliminary prospectus was
corrected in the Prospectus (or the Prospectus as amended or supplemented).
(b) Indemnification of Company, Directors and Officers. Each International
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), or any preliminary prospectus or
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such
International Underwriter through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or such Prospectus (or any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party.
Notwithstanding the foregoing, if it so elects within a reasonable time after
receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it and approved by the indemnified parties
defendant in such action (which approval shall not be unreasonably withheld, it
being understood that, in the case of the indemnified parties under Section 6(a)
above, such approval shall be given by Merrill Lynch, Pierce Fenner & Smith
Incorporated), unless such indemnified parties reasonably object to such
assumption on the ground that there may be legal defenses available to them
which are different from or in addition to those available to such indemnifying
party, in which case such indemnifying party shall not be entitled to assume the
defense of such action. If an indemnifying party assumes the defense of such
action, the indemnifying party shall not be liable for any fees and expenses of
counsel for the indemnified parties incurred thereafter in connection with such
action. 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
28
<PAGE>
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after 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.
(e) Currency. Any payment made by the Company pursuant to Section 6(a) or
7, or by any International Underwriter pursuant to Section 6(b) or 7, which
arises with respect to any loss, liability, claim, damage or expense incurred in
a currency other than U.S. dollars shall be made by the Company or such
International Underwriter, as the case may be, in such other currency or in such
amount of U.S. dollars as shall be necessary to enable the indemnified party to
purchase the amount of such other currency needed to satisfy such loss,
liability, claim, damage or expense, including any premiums and costs of
exchange payable in connection with conversion of U.S. dollars into the relevant
currency.
SECTION 7. Contribution. If the indemnification provided for in Section 6
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the International Underwriters on the other hand from the offering of
the International 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 Company on the one
hand and of the International Underwriters on the other hand in connection with
the statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
International Underwriters on the other hand in connection with the offering of
the International 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 International Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the total underwriting discount received
by the
29
<PAGE>
International Underwriters, in each case as set forth on the cover of the
International Prospectus, bear to the aggregate initial public offering price of
the International Securities as set forth on such cover.
The relative fault of the Company on the one hand and the International
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the International Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the International Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the International Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no International
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the International Securities underwritten by
it and distributed to the public were offered to the public exceeds the amount
of any damages which such International Underwriter has otherwise been required
to pay by reason of any such untrue or alleged untrue statement or omission or
alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
International Underwriter 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
International Underwriter, and each director of the Company, each officer of the
Company who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company.
The International Underwriters' respective obligations to contribute pursuant to
this Section 7 are several in proportion to the number of Initial International
Securities set forth opposite their respective names in Schedule A hereto and
not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company, Hughes, KUA or any of their respective
subsidiaries submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of
30
<PAGE>
any International Underwriter or controlling person, or by or on behalf of the
Company, and shall survive delivery of the Securities to the International
Underwriters and the U.S. Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The International Representatives may terminate
this Agreement, by notice to the Company, at any time at or prior to 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 Prospectuses,
any material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of (1) the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business or (2) Hughes 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 the International Representatives,
impracticable to market the International Securities or to enforce contracts for
the sale of the International 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,
the New York Stock Exchange, the London Stock Exchange or 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 the Nasdaq National Market 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, or (v) if the rating assigned by any
nationally recognized statistical rating organization to the Notes or any other
debt securities of the Company shall have been lowered or if any such rating
agency shall have publicly announced that it has placed the Notes or any other
debt securities of the Company on what is commonly termed a "watch list" for a
possible downgrading.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7 and 8 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the International Underwriters. If
one or more of the International Underwriters shall fail at Closing Time or a
Date of Delivery to purchase the International Securities which it or they are
obligated to purchase under this Agreement (the "Defaulted Securities"), the
International Representatives shall have the right, within 24 hours thereafter,
to make arrangements for one or more of the non-defaulting International
Underwriters, or any other underwriters, 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, the International Representatives shall not
have completed such arrangements within such 24-hour period, then:
31
<PAGE>
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Initial Securities or Option Securities, as the case may be, to
be purchased on such date, each of the non-defaulting International
Underwriters 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 International Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of Initial Securities or Option Securities, as the case may be, to be
purchased on such date, this Agreement or, with respect to any Date of
Delivery which occurs after the Closing Time, the obligation of the
International Underwriters to purchase and of the Company to sell the
Option Securities to be purchased and sold on such Date of Delivery shall
terminate without liability on the part of any non-defaulting
International Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
International Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
International Underwriters to purchase and the Company to sell the relevant
Option Securities, as the case may be, either the International Representatives
or the Company shall have the right to postpone Closing Time or the relevant
Date of Delivery, as the case may be, for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or
Prospectuses or in any other documents or arrangements. As used herein, the term
"International Underwriter" includes any person substituted for a International
Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
International Underwriters shall be directed to the International
Representatives at Ropemaker Place, 25 Ropemaker Street, London EC2Y 9LY
England, attention of Syndicate Operations; and notices to the Company shall be
directed to it at 10112 N.E. 10th Street, Bellevue, Washington 98004, attention
of Marc W. Evanger.
SECTION 12. Parties. This Agreement shall each inure to the benefit of and
be binding upon the International Underwriters and the Company 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 International Underwriters and the Company and their respective
successors and the controlling persons and officers and directors referred to in
Sections 6 and 7 and their heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. This Agreement and all conditions and provisions
hereof are intended to be for the sole and exclusive benefit of the
International Underwriters and the Company 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,
32
<PAGE>
firm or corporation. No purchaser of Securities from any International
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE. EXCEPT AS OTHERWISE EXPRESSLY
SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME AND
REFERENCES TO BUSINESS DAYS MEAN DAYS WHICH ARE BUSINESS DAYS IN NEW YORK CITY.
SECTION 14. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
33
<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
between the International Underwriters and the Company in accordance with its
terms.
Very truly yours,
QUALITY FOOD CENTERS, INC.
By /s/ Marc Evanger
----------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SALOMON BROTHERS INTERNATIONAL LIMITED
DAIN BOSWORTH INCORPORATED
By: MERRILL LYNCH INTERNATIONAL
By /s/ Marilyn Pagliose
--------------------------------
Authorized Signatory
For themselves and as International Representatives of the other International
Underwriters named in Schedule A hereto.
34
<PAGE>
SCHEDULE A
Number of
Initial
International
Name of International Underwriter Securities
-------------
Merrill Lynch International................................... 250,000
Donaldson, Lufkin & Jenrette Securities Corporation........... 250,000
Salomon Brothers International Limited........................ 250,000
Dain Bosworth Incorporated.................................... 50,000
Banque Paribas................................................ 25,000
Credit Lyonnais Securities.................................... 25,000
Kleinwort Benson Limited...................................... 25,000
UBS Limited................................................... 25,000
-------
Total....................................................... 900,000
=======
Sch A - 1
<PAGE>
SCHEDULE B
1. The initial public offering price per share for the International
Securities shall be $39.00.
2. The purchase price per share for the International Securities to
be paid by the several International Underwriters shall be $37.34, being
an amount equal to the initial public offering price set forth above less
$1.66 per share; provided that the purchase price per share for any
International Option Securities purchased upon the exercise of the
over-allotment option described in Section 2(b) of this Agreement shall be
reduced by an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial International
Securities but not payable on the International Option Securities.
Sch B - 1
<PAGE>
SCHEDULE C
List of Persons and Entities
Subject to Lock-Up
Executive Officers and Directors of the Company
John W. Creighton, Jr.
Marc W. Evanger
Dan Kourkoumelis
Frederick Meils
Maurice F. Olson
Marc H. Rapaport
Sheli Z. Rosenberg
Christopher A. Sinclair
Stuart M. Sloan
Ronald A. Weinstein
Samuel Zell
Other Persons and Entities
Kimberly T. Feir
Scott E. Feir
The Edwin and Pauline Teel Charitable Remainder Trust
(Trustees: Daryl L. Vander Pol, E. Gerald Teel and Charles B. Teel)
Collin P. Madden
Lois G. Madden
Marilyn J. Madden
Michelle A. Madden
Paul E. Madden
Rodney S. Madden
The 1996 Teel Revocable Trust
(Trustees: Edwin A. Teel and Daryl L. Vander Pol)
Arne S. Oien
Molly S. Oien
Charles B. Teel
E. Gerald Teel
Julie K. Teel
Katharine G. Teel
Claudia J. Vander Pol
Daryl L. Vander Pol
Justin L. Vander Pol
Sonja C. Vander Pol
Zell/Chilmark Fund L.P.
Randall West
Sch C - 1
<PAGE>
SCHEDULE D
Persons and Entities Holding Shares with Registration Rights
Shareholder Number of Shares
----------- ----------------
Pursuant to the Zell/Chilmark Standstill Agreement: 3,975,000
(1) Zell/Chilmark Fund L.P
Pursuant to the Olson Investors Rights Agreement: 752,941
(2) Maurice F. Olson
(3) Charles M. Olson
(4) Maurice S. Olson
Pursuant to the Food Giant Investors Rights Agreement: 120,000
(5) The Edwin and Pauline Teel Charitable Remainder Trust
(Trustees: Daryl L. Vander Pol, E. Gerald Teel and Charles B. Teel)
(6) Charles B. Teel
(7) E. Gerald Teel
(8) Katharine G. Teel
(9) The 1996 Teel Revocable Trust
(Trustees: Edwin A. Teel and Daryl L. Vander Pol)
(10) Paul E. Madden
(11) Lois G. Madden
(12) Daryl L. Vander Pol
(13) Claudia J. Vander Pol
(14) Kimberly T. Feir
(15) Scott E. Feir
(16) Molly S. Oien
(17) Arne S. Oien
(18) Julie K. Teel
(19) Justin L. Vander Pol
(20) Sonja C. Vander Pol
(21) Rodney S. Madden
(22) Marilyn J. Madden
(23) Collin P. Madden
(24) Michelle A. Madden
Sch D - 1
<PAGE>
Pursuant to the KUI Investors Rights Agreement: 904,646
(25) A. Keith Uddenberg
(26) Eugenia M. Uddenberg
(27) Anna Mae Schacht Trust
(Trustee: Lori Dee Schacht)
(28) Mark Schacht
(29) Lori Dee Schacht Trust
(Trustees: Lori Dee Schacht and Ray Graves)
(30) Richard Keith Uddenberg Trust
(Trustees: Greg Dewar, Richard Keith Uddenberg and Lori Dee Schacht)
(31) Debbie Louise Little Trust
(Trustees: Debbie Louise Little, Lori Dee Schacht and Ray Graves)
Total 5,752,587
=========
Sch D - 2
<PAGE>
Exhibit A
January __, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
DAIN BOSWORTH INCORPORATED
as U.S. Representatives of the several
U.S. Underwriters to be named in the
within-mentioned U.S. Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INTERNATIONAL LIMITED
DAIN BOSWORTH INCORPORATED
as International Representatives of the several
International Underwriters to be named in the
within-mentioned International Purchase Agreement
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Re: Proposed Public Offering by Quality Food Centers, Inc.
Ladies and Gentlemen:
The undersigned, a stockholder and, if applicable, an officer and/or
director of Quality Food Centers, Inc., a Washington corporation (the
"Company"), understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch"), Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), Salomon Brothers Inc and Dain Bosworth Incorporated, as the
U.S. representatives of the several U.S. underwriters (the "U.S. Underwriters")
to be named in the U.S.
A-1
<PAGE>
Purchase Agreement hereinafter referred to, and Merrill Lynch International,
DLJ, Salomon Brothers International Limited and Dain Bosworth Incorporated, as
the international representatives of the several international underwriters (the
"International Underwriters") to be named in the International Purchase
Agreement hereinafter referred to, propose to enter into a U.S. Purchase
Agreement (the "U.S. Purchase Agreement") and an International Purchase
Agreement, respectively, with the Company, providing for the public offering
(the "Stock Offering") of shares of the Company's common stock, par value $.001
per share (the "Common Stock").
In recognition of the benefit that the Stock Offering will confer upon the
undersigned as a stockholder and, if applicable, an officer and/or director of
the Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
U.S. Underwriter and each International Underwriter that, during a period of 90
days from the date of the U.S. Purchase Agreement, the undersigned will not,
without the prior written consent of Merrill Lynch, directly or indirectly, (i)
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 to
purchase, or otherwise dispose of or transfer, any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file or cause to be filed any registration statement under the Securities Act of
1933, as amended, with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of Common
Stock, whether any such swap or other transaction referred to in clause (i) or
(ii) above is to be settled by delivery of Common Stock, other securities, in
cash or otherwise; provided that, notwithstanding the foregoing, the undersigned
may transfer shares of Common Stock to members of the undersigned's immediate
family and to privately-held corporations, partnerships, trusts and other
entities which are "affiliates" (as defined in Rule 405 under the Securities Act
of 1933) of the undersigned, so long as any such transferee delivers to Merrill
Lynch, prior to such transfer, a written agreement in form and substance
satisfactory to Merrill Lynch, signed by the transferee, in which the transferee
agrees to comply with the terms and provisions set forth in this agreement.
This agreement shall lapse and become null and void if the closing date of
the Stock Offering shall not have occurred on or before May 1, 1997.
In the event that the Company is a party to or is involved in any merger,
consolidation, share exchange or other transaction and, in connection therewith,
the Common Stock is converted into or exchanged for common stock or other
securities of any other person or entity, then all references in this Agreement
to Common Stock shall be deemed to mean and refer to such common stock and other
securities of such other person or entity, as applicable, and this agreement
shall be applicable to such common stock and other securities.
A-2
<PAGE>
This agreement shall be governed by and construed in accordance with the
laws of the State of New York.
Very truly yours,
Signature:_______________________________
Print Name:______________________________
A-3
<PAGE>
Exhibit B
March __, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
DAIN BOSWORTH INCORPORATED
as U.S. Representatives of the several
U.S. Underwriters to be named in the
within-mentioned U.S. Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INTERNATIONAL LIMITED
DAIN BOSWORTH INCORPORATED
as International Representatives of the several
International Underwriters to be named in the
within-mentioned International Purchase Agreement
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Re: Proposed Public Offering by Quality Food Centers, Inc.
Ladies and Gentlemen:
The undersigned, Quality Food, Inc., a Delaware corporation ("QFI"),
understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), Salomon Brothers Inc and Dain Bosworth Incorporated, as the
U.S. representatives of the several U.S. underwriters (the "U.S. Underwriters")
to be named in the U.S. Purchase Agreement hereinafter referred to, and Merrill
Lynch International, DLJ, Salomon Brothers International Limited and Dain
Bosworth Incorporated,
B-1
<PAGE>
as the international representatives of the several international underwriters
(the "International Underwriters") to be named in the International Purchase
Agreement hereinafter referred to, propose to enter into a U.S. Purchase
Agreement (the "U.S. Purchase Agreement") and an International Purchase
Agreement, respectively, with Quality Food Centers, Inc., a Washington
corporation (the "Company"), providing for the public offering (the "Stock
Offering") of shares of the Company's common stock, par value $.001 per share
(the "Company Common Stock").
In recognition of the benefit that the Stock Offering will confer upon the
undersigned as a company affiliated with the Company, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each U.S. Underwriter and each
International Underwriter that, if the Reorganization (as defined in the U.S.
Purchase Agreement) occurs at any time during a period of 90 days from the date
of the U.S. Purchase Agreement (such period, the "Lockup Period"), the
undersigned will not, without the prior written consent of Merrill Lynch,
directly or indirectly, for the duration of such Lockup Period (i) 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 to
purchase, or otherwise dispose of or transfer, any shares of the common stock of
QFI (the "QFI Common Stock") or any securities convertible into or exchangeable
or exercisable for QFI Common Stock, or file or cause to be filed any
registration statement under the Securities Act of 1933, as amended, with
respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of QFI Common Stock, whether
any such swap or other transaction referred to in clause (i) or (ii) above is to
be settled by delivery of QFI Common Stock, other securities, in cash or
otherwise. The foregoing sentence shall not apply to (A) any shares of QFI
Common Stock issued upon the exercise of any option which, in connection with
the Reorganization, was issued by QFI to replace an option granted by the
Company and outstanding on the date of the U.S. Purchase Agreement to purchase a
like number of shares of Company Common Stock or (B) any shares of QFI Common
Stock issued or options to purchase QFI Common Stock granted pursuant to
employee benefit plans of QFI which are established in connection with the
Reorganization and replace substantially similar employee benefit plans of the
Company which were existing on the date of the U.S. Purchase Agreement and are
referred to in the prospectus relating to the Stock Offering.
This agreement shall lapse and become null and void if the closing date of
the Stock Offering shall not have occurred on or before May 1, 1997.
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<PAGE>
This agreement shall be governed by and construed in accordance with the
laws of the State of New York.
Very truly yours,
QUALITY FOOD, INC.
By:_________________________________
Name: Christopher A. Sinclair
Title: Chief Executive Officer
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<PAGE>
4,500,000 Shares
QUALITY FOOD CENTERS, INC.
(a Washington corporation)
Common Stock
(Par Value $.001 Per Share)
INTERSYNDICATE AGREEMENT
Agreement dated March 13, 1997 between (A) Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill (NY)"), Donaldson, Lufkin &
Jenrette Securities Corporation, Salomon Brothers Inc and Dain Bosworth
Incorporated, as representatives (the "U.S. Representatives") of the
underwriters (the "U.S. Underwriters") listed in Schedule A to the U.S. Purchase
Agreement (the "U.S. Purchase Agreement") of even date herewith with Quality
Food Centers, Inc. (the "Company"), (B) Merrill Lynch International ("MLI")
Donaldson, Lufkin & Jenrette Securities Corporation, Salomon Brothers
International Limited and Dain Bosworth Incorporated (the "Lead Managers") for
the underwriters (the "Managers") listed in Schedule A to the International
Purchase Agreement (the "International Purchase Agreement") of even date
herewith with the Company. The U.S. Purchase Agreement and the International
Purchase Agreement are together referred to herein as the "Purchase Agreements".
Terms not defined herein are used as defined in the Purchase Agreements referred
to above.
The U.S. Underwriters, pursuant to the U.S. Purchase Agreement, have
agreed to purchase the Initial U.S. Securities and have been granted an option
by the Company to purchase the U.S. Option Securities to cover over-allotments,
and the Managers, pursuant to the International Purchase Agreement, have agreed
to purchase the Initial International Securities and have been granted an option
by the Company to purchase the International Option Securities to cover
over-allotments. In connection with the foregoing, the U.S. Underwriters and the
Managers deem it necessary and advisable that certain of the activities of the
U.S. Underwriters and the Managers be coordinated pursuant to this Agreement.
Section 1. The U.S. Underwriters, acting through Merrill (NY), and the
Managers, acting through MLI, agree that they will consult each other as to the
availability of the sale of the Common Stock purchased from the Company pursuant
to the U.S. Purchase Agreement and the International Purchase Agreement from
time to time until the termination of the selling restrictions applicable to the
respective offerings by Merrill (NY) and MLI. Based upon information received
from the Managers and the U.S. Underwriters, respectively, MLI agrees to advise
Merrill (NY) and Merrill (NY) agrees to advise MLI, from time to time upon
request during the consultation period contemplated above, of the respective
number of International Securities purchased pursuant to the International
Purchase Agreement and U.S. Securities purchased pursuant to the U.S. Purchase
Agreement remaining unsold. From time to time as mutually agreed upon between
MLI and Merrill (NY), (a) MLI will sell for the account of one or more Managers
to Merrill (NY), for the account of one or more U.S. Underwriters, such number
of International Securities purchased pursuant to the International Purchase
Agreement and remaining unsold; and (b) Merrill (NY) will sell for the account
of one or more U.S. Underwriters to MLI, for the account of one or more
Managers, such number of U.S. Securities purchased pursuant to the U.S. Purchase
Agreement and remaining unsold.
Unless otherwise determined by mutual agreement of Merrill (NY) and MLI,
the price of any Common Stock so purchased or sold shall be the initial public
offering price less the selling concession in each case as set forth in the U.S.
Prospectus. Settlement between Merrill (NY) and MLI with respect to any Common
Stock transferred hereunder at least three business days prior to the Closing
Time shall be made at Closing Time and, in the case of purchases and sales made
thereafter, as promptly as practicable but in no event later than three business
days after the transfer date. Certificates representing the Common Stock so
purchased shall be delivered on or about the respective settlement dates. The
liability for payment to the Company of the purchase price of the Common Stock
being purchased by the U.S.
<PAGE>
Underwriters and the Managers under the Purchase Agreements shall not be
affected by the provisions of this Agreement.
Each U.S. Underwriter, acting through the U.S. Representatives, agrees
that, except for purchases and sales pursuant to this Agreement and
stabilization transactions contemplated hereunder conducted through Merrill
(NY), it has offered or sold and will offer, sell or deliver Common Stock,
directly or indirectly, only to persons whom it believes to be United States
Persons or Canadian Persons (as such terms are defined below) and persons whom
it believes intend to reoffer, resell or deliver the same, directly or
indirectly, to United States Persons or Canadian Persons, and any bank, broker
or dealer to whom such U.S. Underwriter may sell Common Stock will agree that it
will only offer, resell or deliver Common Stock directly or indirectly to
persons whom such bank, broker or dealer believes to be United States Persons or
Canadian Persons or at a reallowance only to other banks, brokers or dealers who
so agree.
Each Manager, acting through MLI, agrees that, except for purchases and
sales pursuant to this Agreement and stabilization transactions contemplated
hereunder conducted through Merrill (NY), it has not offered or sold and will
not offer, sell or deliver Common Stock, directly or indirectly, to any person
whom it believes to be a United States Person or a Canadian Person or any person
whom it believes intends to reoffer, resell or deliver the same, directly or
indirectly, to any United States Person or Canadian Person, and any bank, broker
or dealer to whom such Manager may sell Common Stock will agree that it will not
offer, resell or deliver any Common Stock directly or indirectly to any person
whom such bank, broker or dealer believes to be a United States Person or
Canadian Person nor at a reallowance to other banks, brokers or dealers who do
not so agree.
For purposes of this Agreement, "United States Person" shall mean any
individual who is resident in the United States, or any corporation, pension,
profit-sharing or other trust or other entity organized under or governed by the
laws of the United States or any political subdivision thereof (other than the
foreign branch or office of any United States Person), and shall include any
United States branch or office of a person other than a United States Person.
"United States" shall mean the United States of America, its territories, its
possessions and all areas subject to its jurisdiction. "Canadian Person" shall
mean any individual who is resident in Canada, or any corporation, pension,
profit-sharing or other trust or other entity organized under or governed by the
laws of Canada or any political subdivision thereof (other than the foreign
branch or office of any Canadian Person), and shall include any Canadian branch
or office of a person other than a Canadian Person. "Canada" shall mean Canada,
the provinces of Canada, its territories, its possessions and all areas subject
to its jurisdiction.
Section 2. All stabilization transactions shall be conducted at the
direction and subject to the control of Merrill (NY) as hereinafter provided, so
that stabilization activities worldwide shall be coordinated and conducted in
compliance with any applicable laws and regulations. From time to time upon the
request of MLI, Merrill (NY) will inform MLI of stabilization transactions
effected pursuant to this Section.
(a) The Lead Managers undertake, and agree to cause all Managers to
undertake, that in connection with the distribution of Common Stock they
will comply with the applicable rules and regulations of the United States
National Association of Securities Dealers, Inc.; with the prohibitions
against trading by persons interested in a distribution; and with the
requirements for the filing of all notices and reports relating thereto
set forth in Regulation M and 17a-2 under the United States Securities
Exchange Act of 1934 and the Agreement Among Managers (the "AAM") entered
into by the Managers. The Lead Managers will cause each bank, broker or
dealer which has agreed to participate or is participating in the
distribution to give a similar undertaking.
(b) Merrill (NY) shall have sole responsibility with respect to any
action which it may take to make over-allotments in arranging for sales of
U.S. Option Securities and International Option Securities and shall have
direction and control of any action taken for stabilizing the market price
of the Common Stock, whether in the United States or on European stock
exchanges or otherwise. All stabilization transactions by Merrill (NY)
shall be for the respective accounts of the several U.S. Underwriters and
Managers in the proportions set forth in Section 4 hereof. The net
commitment for long or short accounts of the U.S. Underwriters or the
Managers pursuant to such over-allotment and stabilization transactions
shall not exceed 15% of the number of U.S. Securities or International
Securities, as the case may be, to be purchased by the U.S. Underwriters
or the Managers, respectively, as set forth in the U.S. Purchase Agreement
and International
<PAGE>
Purchase Agreement, respectively. The exercise by the U.S. Underwriters
and the Managers of their respective options to purchase U.S. Option
Securities and International Option Securities shall be at the direction
of Merrill (NY).
Section 3. Merrill (NY) and MLI shall consult with each other as to the
reservations for sale of the Common Stock made under the AAM, and upon reaching
agreement with respect thereto, MLI shall reserve for sale and sell to the U.S.
Underwriters, dealers, banks, brokers and others indicated by Merrill (NY), for
the account of the respective Managers, International Securities to be purchased
by such Managers, in the manner and at the price contemplated by Section 1
hereof.
Section 4. Merrill (NY) and MLI shall agree as to the expenses which will
constitute expenses of the underwriting and distribution of the Common Stock
common to the U.S. Underwriters and the Managers, which expenses, as well as any
stabilizing profits or losses, shall be allocated among the U.S. Underwriters
and the Managers in the same proportion as the number of U.S. Securities
purchased under the U.S. Purchase Agreement and the number of International
Securities purchased under the International Purchase Agreement, bear to the
aggregate number of shares of Common Stock purchased under the Purchase
Agreements. Except with respect to such common expenses, the Managers will pay
the aggregate expenses incurred in connection with the purchase, carrying or
sale of the International Securities purchased by the Managers from the Company,
and the U.S. Underwriters will pay the aggregate expenses incurred in connection
with the purchase, carrying or sale of the U.S. Securities purchased by the U.S.
Underwriters from the Company.
Section 5. The U.S. Representatives and the Lead Managers agree that:
(a) if the Closing Time is not on the day provided in the Purchase
Agreements, Merrill (NY) and MLI will mutually agree on a postponed date
within the time permitted by the Purchase Agreements and the settlement
dates herein provided shall be adjusted accordingly;
(b) changes in the public offering price or in the concession and
reallowance to banks, brokers or dealers will be made only after
consultation, but in accordance with the direction of Merrill (NY), during
the consultation period specified in the first sentence of Section 1
hereof;
(c) Merrill (NY) and MLI will each keep the other fully informed of
the progress of the offering and distribution of the Common Stock;
(d) MLI agrees that it will cause the termination of the AAM at such
time as Merrill (NY) shall determine; and
(e) advertising with respect to the offering shall be as mutually
agreed upon by Merrill (NY) and MLI.
Section 6. This Agreement may be amended prior to the Closing Time by
mutual written consent.
Section 7. This Agreement may be signed in various counterparts, which
together shall constitute one and the same instrument. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed in such State.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
Acting on behalf of themselves and the other
U.S. Underwriters:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
SALOMON BROTHERS INC
DAIN BOSWORTH INCORPORATED
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: ______________________________________________
Authorized Signatory
Acting on behalf of themselves and the
other Managers:
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
SALOMON BROTHERS INTERNATIONAL LIMITED
DAIN BOSWORTH INCORPORATED
By: MERRILL LYNCH INTERNATIONAL
By: ______________________________________________
Attorney-in-fact
Quality Food Centers, Inc.
8.70% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
March 13, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BANCAMERICA SECURITIES, INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
140 Broadway
New York, New York 10005
Ladies & Gentlemen:
Each of Quality Food Centers, Inc., a Washington corporation (the
"Company"), Quality Food Holdings, Inc., a Delaware corporation (the "Holding
Company"), Hughes Markets, Inc. ("Hughes"), a California corporation (effective
as of the Closing Date referred to herein), and KU Acquisition Corporation, a
Washington corporation ("KUA") and the surviving corporation in the merger with
Keith Uddenberg, Inc. ("KUI") (the Holding Company, Hughes and KUA are
hereinafter sometimes referred to as, collectively, the "Guarantors" and,
individually, a "Guarantor"), agrees with you as follows:
1. Issuance of Notes. The Company proposes to issue and sell to Donaldson,
Lufkin & Jenrette Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and BancAmerica Securities, Inc. (each, a "Purchaser", and
collectively, the "Purchasers"), an aggregate of $150,000,000 principal amount
of the Company's 8.70% Senior Subordinated Notes due 2007 (the "Notes"). The
Notes are to be issued pursuant to an indenture (the "Indenture") to be dated as
of March 19, 1997 among the Company, the Guarantors and First Trust National
Association, as trustee (the "Trustee"). The Notes and the Series B Notes (as
defined below) to be issued in exchange therefor will be guaranteed
(collectively, the "Guarantees") on a senior subordinated basis by each of the
Guarantors.
<PAGE>
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Indenture. The term "Notes" and "Series B Notes", as
used herein, shall include the Guarantees whenever the context permits. This
Purchase Agreement is hereinafter sometimes referred to as this "Agreement" or
the "Debt Agreement".
The Notes will be offered and sold to you pursuant to an exemption from
the registration requirements under the Securities Act of 1933, as amended (the
"1993 Act"). The Company and the Guarantors have prepared a preliminary offering
memorandum, dated February 18, 1997 (the "Preliminary Offering Memorandum"), and
a final offering memorandum, dated March 13, 1997 (the "Offering Memorandum"),
relating to the Company and the Guarantors and the Notes.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the 1933 Act, the Notes
(and all securities issued in exchange therefor or in substitution thereof)
shall bear a legend to the effect set forth in the Offering Memorandum under the
caption "Notice to Investors".
You have advised the Company that you will make offers (the "Exempt
Resales") of the Notes purchased hereunder on the terms set forth in the
Offering Memorandum, as amended or supplemented, solely to persons whom you
reasonably believe to be "qualified institutional buyers," as defined in Rule
144A under the 1933 Act ("QIBs"), and to a limited number of institutional
"accredited investors" referred to in Rule 501(a)(1), (2), (3) or (7) under the
1933 Act (each, an "Accredited Investor"). The QIBs and the Accredited Investors
are referred to herein as the "Eligible Purchasers." You will offer the Notes to
such Eligible Purchasers initially at a price equal to the percentage of the
principal amount thereof set forth in the table on the front cover of the
Offering Memorandum. Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Notes will have the
registration rights set forth in the registration rights agreement relating
thereto (the "Registration Rights Agreement"), to be dated the Closing Date, in
substantially the form of Exhibit A hereto, for so long as such Notes constitute
"Transfer Restricted Securities" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company and the
Guarantors will agree to use their reasonable best efforts to file with the
Securities and Exchange Commission (the "Commission"), under the circumstances
set forth therein, (i) a registration statement under the 1933 Act (the
"Exchange Offer Registration Statement") relating to the Company's 8.70% Senior
Subordinated Notes due 2007 (the "Series B Notes") to be offered in exchange for
the Notes (the "Exchange Offer"), and (ii) a shelf registration statement
pursuant to Rule 415 under the 1933 Act (the "Shelf Registration Statement")
relating to the resale by certain holders of the Notes, and to use their
reasonable best efforts to cause such Registration Statements to be declared
effective. The Notes and the Series B Notes are sometimes hereinafter referred
to, collectively, as the "Debt Securities".
It is understood that the Company is concurrently entering into a U.S.
Purchase Agreement dated the date hereof (the "U.S. Purchase Agreement")
providing for the offering by the Company of an aggregate of 3,600,000 shares of
Common Stock, par value $.001 per share (the "Common Stock"), of the Company
(the "Initial U.S. Securities") through arrangements with certain
2
<PAGE>
underwriters in the United States and Canada (the "U.S. Underwriters") for whom
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation, Salomon Brothers Inc and Dain Bosworth Incorporated are
acting as representatives (the "U.S. Representatives"), and the grant by the
Company to the U.S. Underwriters of an option to purchase all or any part of an
additional 540,000 shares of Common Stock (the "U.S. Option Securities") to
cover over-allotments, if any. The Initial U.S. Securities and the U.S. Option
Securities are hereinafter sometimes called, collectively, the "U.S.
Securities".
It is understood that the Company is also concurrently entering into an
International Purchase Agreement dated the date hereof (the "International
Purchase Agreement") providing for the offering by the Company of an aggregate
of 900,000 shares of Common Stock (the "Initial International Securities")
though arrangements with certain underwriters outside of the United States and
Canada (the "International Underwriters") for whom Merrill Lynch International,
Donaldson, Lufkin & Jenrette Securities Corporation, Salomon Brothers
International Limited and Dain Bosworth Incorporated are acting as lead managers
(the "International Representatives"), and the grant by the Company to the
International Underwriters of an option to purchase all or any part of an
additional 135,000 shares of Common Stock (the "International Option
Securities") to cover over-allotments, if any. The Initial International
Securities and the International Option Securities are hereinafter sometimes
called, collectively, the "International Securities."
The U.S. Securities and the International Securities are hereinafter
sometimes called, collectively, the "Securities;" the Initial U.S. Securities
and the Initial International Securities are hereinafter sometimes called,
collectively, the "Initial Securities"; the U.S. Option Securities and the
International Option Securities are hereinafter sometimes called, collectively,
the "Option Securities;" the U.S. Underwriters and the International
Underwriters are hereinafter sometimes called, collectively, the "Underwriters"
and, individually, an "Underwriter;" the U.S Representatives and the
International Representatives are hereinafter sometimes called, collectively,
the "Representatives" and, individually, a "Representative;" and the U.S.
Purchase Agreement and the International Purchase Agreement are hereinafter
sometimes called, collectively, the "Purchase Agreements" and, individually, a
"Purchase Agreement".
The Company has also entered into Agreement and Plan of Merger dated as of
November 20, 1996, as amended (the "Hughes Merger Agreement"), with QHI
Acquisition Corporation, a California corporation and wholly-owned subsidiary of
the Company ("QHI"), and Hughes, pursuant to which QHI will merge with and into
Hughes, with Hughes as the surviving corporation and as a result of which Hughes
will become a wholly-owned direct subsidiary of the Company (the "Hughes
Merger").
The Company is currently a party to a Credit Agreement dated as of March
15, 1995 (the "Old Credit Agreement") among the Company, Bank of America
National Trust and Savings Association ("BofA"), as agent, Seattle First
National Bank, as swingline lender, Bank of America Illinois ("BAI"), as issuing
lender, and the other financial institutions party thereto.
3
<PAGE>
In connection with the transactions contemplated herein, the Company,
Quality Food, Inc., a Delaware corporation ("Parent"), and the Holding Company
will enter into an Amended and Restated Credit Agreement (the "New Credit
Agreement") with BofA, as Administrative Agent and Paying Agent, The Chase
Manhattan Bank, as Administrative Agent, and the other lenders party thereto
(collectively, the "Lenders"), amending and restating the Old Credit Agreement,
and, concurrently therewith, the security agreements previously executed with
respect to the Old Credit Agreement (the "Old Security Agreements") will be
terminated. In order to guarantee the Company's obligations under the New Credit
Agreement, the Holding Company, Hughes and KUA (each, a "Bank Guarantor" and,
collectively, the "Bank Guarantors") will enter into a guaranty (the "Bank
Guaranty") pursuant to the New Credit Agreement. In order to secure their
respective obligations under the New Credit Agreement, the Company will enter
into a Pledge Agreement (the "Company Security Agreement") and the Parent will
enter into a Pledge Agreement (the "Guarantor Security Agreement"; the Company
Security Agreement and the Guarantor Security Agreement are hereinafter
sometimes called, collectively, the "Bank Security Agreements" and,
individually, a "Bank Security Agreement") pursuant to which each of them will
pledge the common stock of certain subsidiaries as collateral.
The Purchase Agreements, the Debt Agreement, the Registration Rights
Agreement, the Indenture, the Notes, the Series B Notes, the New Credit
Agreement, the Company Security Agreement and the Hughes Merger Agreement are
hereinafter sometimes called, collectively, the "Company Documents" and,
individually, a "Company Document". The Debt Agreement, the Registration Rights
Agreement, the Indenture, the New Credit Agreement, the Guarantor Security
Agreements and the Bank Guaranty are hereinafter sometimes called, collectively,
the "Guarantor Documents" and, individually, a "Guarantor Document".
The sale of the Notes to you pursuant to this Agreement is conditioned
upon, among other things, (i) the concurrent purchase of the Initial U.S.
Securities and the Initial International Securities by the U.S. Underwriters and
the International Underwriters, respectively, (ii) the effectiveness of the New
Credit Agreement prior to or concurrently therewith, (iii) the concurrent
termination of the Old Credit Agreement and (iv) the effectiveness of the Hughes
Merger prior to or concurrently therewith.
It is understood that any representation or warranty of the Company and
the Guarantors in Section 5 hereof which relates to Hughes is made to the best
of the Company's and the Guarantors' knowledge, with due inquiry by the Company
and the Guarantors.
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Preliminary Offering Memorandum or the Offering Memorandum (and all other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
or deemed to be incorporated by reference in the Preliminary Offering Memorandum
or the Offering Memorandum, as the case may be; and all references in this
Agreement to amendments or supplements to the Preliminary Offering Memorandum or
the Offering Memorandum shall be deemed to mean and include the filing of any
document under the Securities Exchange Act of 1934, as amended (the "1934
4
<PAGE>
Act"), which is or is deemed to be incorporated by reference in the Preliminary
Offering Memorandum or the Offering Memorandum, as the case may be.
2. Agreements to Sell and Purchase. On the basis of the representations
and warranties contained in this Agreement, and subject to its terms and
conditions, the Company agrees to issue and sell to you, and each of the
Purchasers, severally but not jointly, agrees to purchase from the Company,
Notes in the respective principal amount set forth opposite its name on Schedule
I hereto. The purchase price for the Notes shall be 97.5% of their principal
amount.
3. Delivery and Payment. Delivery to the Purchasers of and payment for the
Notes shall be made at 9:00 a.m., New York City time, on March 19, 1997 (the
"Closing Date") at the offices of Simpson Thacher & Bartlett, 425 Lexington
Avenue, New York, New York 10017, or such other time or place as you and the
Company shall designate.
One or more Notes in definitive form, registered in the name of Cede &
Co., as nominee of The Depository Trust Company ("DTC"), having an aggregate
principal amount corresponding to the aggregate principal amount of the Notes
sold pursuant to Exempt Resales to QIBs (collectively, the "Master Note"), and
one or more Notes in definitive form registered in such other names as you may
request upon at least two business days' notice to the Company (the "Definitive
Notes"), having an aggregate principal amount corresponding to the aggregate
principal amount of the Notes sold pursuant to Exempt Resales to Accredited
Investors, shall be delivered by the Company to you (or as you direct), against
payment by you of the purchase price therefor by wire transfer of immediately
available funds to an account specified by the Company. The Master Note and
Definitive Notes shall be made available to you for inspection not later than
9:30 a.m., New York City time, on the business day immediately preceding the
Closing Date.
4. Agreements of the Company and the Guarantors. The Company and each of
the Guarantors, jointly and severally, agrees with each of you as follows:
(a) To advise you promptly and, if requested by any of the
Purchasers, confirm such advice in writing, (i) of the issuance by any
state securities commission of any stop order suspending the qualification
or exemption from qualification of any of the Notes for offering or sale
in any jurisdiction, or the initiation of any proceeding for such purpose
by any state securities commission or other regulatory authority, and (ii)
of the happening of any event that makes any statement of a material fact
made in the Offering Memorandum untrue or that requires the making of any
additions to or changes in the Offering Memorandum in order to make the
statements therein, in the light of the circumstances under which they are
made, not misleading. The Company and the Guarantors shall use their
reasonable best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any of the Notes under any
state securities or Blue Sky laws, and if at any time any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption of any of the Notes under any state
securities or Blue Sky laws, the Company and the Guarantors shall use
their best efforts to obtain the withdrawal or lifting of such order at
the earliest possible time.
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(b) To furnish you, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as you may reasonably request. The
Company and the Guarantors consent to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto, by you in connection with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering Memorandum
or the Offering Memorandum prior to the Closing Date unless you shall
previously have been advised thereof and shall not have objected thereto
after being furnished a copy thereof. The Company and the Guarantors shall
promptly prepare, upon your request, any amendment or supplement to the
Preliminary Offering Memorandum or the Offering Memorandum that may be
necessary or advisable in connection with Exempt Resales.
(d) If, after the date hereof and prior to consummation of any
Exempt Resales, any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of your counsel, it
becomes necessary to amend or supplement the Offering Memorandum in order
to made the statements therein, in the light of the circumstances when the
Offering Memorandum is delivered to an Eligible Purchaser which is a
prospective purchaser, not misleading, or if it is necessary to amend or
supplement the Offering Memorandum to comply with applicable law,
forthwith to prepare an appropriate amendment or supplement to the
Offering Memorandum so that statements therein as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Offering Memorandum will comply
with applicable law.
(e) To cooperate with you and your counsel in connection with the
qualification of the Notes under the securities or Blue Sky laws of such
jurisdictions as you may reasonably request and to continue such
qualification in effect so long as required for the Exempt Resales;
provided, however, that neither the Company nor any of the Guarantors
shall be required in connection therewith to register or qualify as a
foreign corporation where it is not now so qualified or to take any action
that would subject it to the service of process in suits or taxation,
other than as to matters and transactions relating to the Exempt Resales,
in any jurisdiction where it is not now so subject.
(f) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated, to
pay all costs, expenses, fees and taxes incident to and in connection
with: (i) the preparation, printing, filing and distribution of the
Preliminary Offering Memorandum and the Offering Memorandum (including,
without limitation, financial statements and exhibits) and all amendments
and supplements thereto, (ii) the preparation (including, without
limitation, word processing and duplication costs) and delivery of this
Agreement and the other Company Documents and Guarantor Documents and all
preliminary and final Blue Sky memoranda and all other agreements,
memoranda, correspondence and other documents prepared and delivered in
connection herewith and with the Exempt Resales, (iii) the issuance and
delivery by the Company and the Guarantors of the Debt Securities, (iv)
the registration, qualification or
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exemption of the Debt Securities for offer and sale under the securities
or Blue Sky laws of the several states (including, without limitation, the
reasonable fees and disbursements of your counsel relating to such
registration, qualification or exemption), (v) furnishing such copies of
the Preliminary Offering Memorandum and the Offering Memorandum, and all
amendments and supplements thereto, as may be reasonably requested for use
in connection with Exempt Resales, (vi) the preparation of certificates
for the Debt Securities (including, without limitation, printing and
engraving thereof), (vii) the fees, disbursements and expenses of the
Company's and the Guarantors' counsel and accountants, (viii) all expenses
and listing fees in connection with the application for quotation of the
Notes in the National Association of Securities Dealers, Inc. ("NASD")
Automated Quotation System PORTAL ("PORTAL"), (ix) all fees and expenses
(including fees and expenses of counsel) of the Company and the Guarantors
in connection with approval of the Debt Securities by DTC for "book-entry"
transfer and (x) the performance by the Company and the Guarantors of
their other obligations under this Agreement and the other Company
Documents and Guarantor Documents.
(g) To use the proceeds from the sale of the Notes in the manner
described in the Offering Memorandum under the caption "Use of Proceeds."
(h) Not to voluntarily claim, and to resist actively any attempts to
claim, the benefit of any usury or similar laws against the holders of any
Debt Securities.
(i) To do and perform all things required to be done and performed
under this Agreement by them prior to or after the Closing Date and to
satisfy all conditions precedent on their part to the delivery of the
Notes.
(j) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the 1933
Act) that would be integrated with the sale of the Notes in a manner that
would require the registration under the 1933 Act of the sale to you or
Eligible Purchasers of the Notes.
(k) For so long as any of the Notes remains outstanding, to make
available to any QIB or beneficial owner of Notes in connection with any
sale thereof and any prospective purchaser of such Notes from such QIB or
beneficial owner, the information required by Rule 144A(d)(4) under the
1933 Act, unless (i) the Company and the Guarantors are subject to the
reporting requirements of Section 13 or 15(d) of the 1934 Act and (ii) as
a result, the requirements of Rule 144A(d)(4) under the 1933 Act are not
applicable with respect to sales or transfers of the Notes.
(l) To use reasonable best efforts to cause the Exchange Offer to be
made in the appropriate form to permit registration of the Series B Notes
to be offered in exchange for the Notes and to comply with all applicable
federal and state securities laws in connection with the Exchange Offer.
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<PAGE>
(m) To comply with all of its agreements set forth in the
Registration Rights Agreement, and all agreements set forth in the
representation letter with DTC relating to the approval of the Debt
Securities by DTC for "book-entry" transfer.
(n) To use their reasonable best efforts to effect the inclusion of
the Notes in PORTAL.
(o) During a period of three years following the date of this
Agreement, to deliver to each of you promptly upon their becoming
available, copies of all current, regular and periodic reports filed by
the Company, the Guarantors and, if the Reorganization occurs, the Parent
with the Commission or any securities exchange or with any governmental
authority succeeding to any of the Commission's functions.
(p) For the period from the date of this Agreement through the
Closing Date, neither the Company nor any of the Guarantors will, without
the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation, directly or indirectly, (i) 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 to purchase or
otherwise transfer or dispose of any debt securities or guarantees of the
Company, any Guarantor or any of their respective subsidiaries or any
securities convertible into or exercisable or exchangeable for any such
debt securities or guarantees or file any registration statement under the
1933 Act with respect to any of the foregoing or (ii) enter into any swap
or other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequences of ownership of any such
debt securities or guarantees, whether any such transaction described in
(i) or (ii) above is to be settled by delivery of such debt securities or
guarantees, other securities, cash or otherwise. The foregoing sentence
shall not apply to bank borrowings or guarantees thereof made in the
ordinary course of business.
5. Representations and Warranties. (a) The Company and each of the
Guarantors, jointly and severally, represent and warrant to, and covenant and
agree with, each of you that:
(i) Offering Memorandum. The Preliminary Offering Memorandum and the
Offering Memorandum have been prepared in connection with the Exempt
Resales. The Preliminary Offering Memorandum and the Offering Memorandum
do not, and any supplement or amendment to any of them will not, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (i) shall not
apply to statements in or omissions from the Preliminary Offering
Memorandum and the Offering Memorandum (or any supplement or amendment
thereto) made in reliance upon and in conformity with information relating
to you furnished to the Company in writing by you expressly for use
therein. No stop order preventing the use of the Preliminary Offering
Memorandum or the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions contemplated
by this Agreement are subject to the registration
8
<PAGE>
requirements of the 1933 Act, has been issued. Each of the Preliminary
Offering Memorandum and the Offering Memorandum and each amendment or
supplement thereto contains and will contain all the information specified
in, and meets and will meet the requirements of, Rule 144A(d)(4) under the
1933 Act.
(ii) Other Classes of Debt Securities. When the Notes are issued and
delivered pursuant to this Agreement, none of the Notes will be of the
same class (within the meaning of Rule 144A under the 1933 Act) as
securities of the Company or the Guarantors that are listed on a national
securities exchange registered under Section 6 of the 1933 Act or that are
quoted in a United States automated inter-dealer quotation system.
(iii) Officer's Certificates. Each certificate signed by an officer
of the Company or any of the Guarantors and delivered to any of the
Purchasers or counsel for the Purchasers shall be deemed to be a joint and
several representation and warranty by the Company and the Guarantors to
each Purchaser as to matters covered thereby.
(iv) No Registration Required. No registration under the 1933 Act of
the Notes or the Guarantees is required for the sale of the Notes to the
Purchasers as contemplated hereby or for the Exempt Resales assuming (i)
that the purchasers who buy the Notes in the Exempt Resales are either
QIBs or Accredited Investors and (ii) the accuracy of the Purchasers'
representations regarding the absence of general solicitation in
connection with the sale of Notes to the Purchasers and the Exempt Resales
contained herein. No form of general solicitation or general advertising
was used by the Company, the Guarantors or any of their respective
representatives in connection with the offer and sale of any of the Notes
or in connection with Exempt Resales, including, but not limited to,
articles, notices or other communications published in any newspaper,
magazine, or similar medium or broadcast over television or radio, or any
seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. No securities of the same class as
the Notes or the Guarantees have or will be issued and sold by the Company
or any of the Guarantors within the six-month period immediately prior to
and following the date hereof (other than the Series B Notes to be issued
in the Exchange Offer).
(v) ERISA Matters. The execution and delivery of the Company
Documents and the Guarantor Documents and the issuance and sale of the
Notes to be purchased by the Eligible Purchasers will not involve any
prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Internal Revenue Code of 1986. The representation made
by the Company and the Guarantors in the preceding sentence is made in
reliance upon and subject to the accuracy of, and compliance with, the
representations and covenants made or deemed made by the Eligible
Purchasers as set forth in the Offering Memorandum under the Section
entitled "Notice to Investors."
(vi) No Material Adverse Change in Business. Since the date as of
which information is given in the Offering Memorandum, except as otherwise
stated therein, (A) there has been no material adverse change in the
condition, financial or otherwise, or in the
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<PAGE>
earnings, business affairs or business prospects of (1) the Company and
its subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business (a "Material Adverse Effect") or (2)
Hughes and its subsidiaries 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 or
Hughes or any of its subsidiaries, in each case other than those in the
ordinary course of business, which are material with respect to the
Company and its subsidiaries considered as one enterprise or Hughes and
its subsidiaries considered as one enterprise, respectively; and (C) there
has been no dividend or distribution of any kind declared, paid or made by
the Company on any class of its capital stock. For purposes of this
Agreement, all references to "subsidiaries" of the Company shall include,
without limitation, in the case of any representation or warranty made or
deemed to have been made as of the Closing Date or at any time thereafter,
Hughes and its subsidiaries.
(vii) Regulations G, T, U and X. Neither the Company, the Guarantors
nor any agent thereof acting on the behalf of any of them has taken, and
none of them will take, any action that might cause this Agreement or the
issuance or sale of the Notes to violate Regulation G (12 C.F.R. Part
207), Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221)
or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the
Federal Reserve System or analogous foreign laws and regulations.
(viii) Independent Accountants. The accountants who audited the
financial statements and supporting schedules, if any, included in the
Offering Memorandum are independent certified public accountants as
required by the 1933 Act and the 1933 Act Regulations.
(ix) Financial Statements. The financial statements of the Company,
the consolidated financial statements of Hughes and the financial
statements of KUI included in the Offering Memorandum, in each case
together with the related schedules (if any) and notes, present fairly the
financial position of the Company, the financial position of Hughes and
its consolidated subsidiaries, and the financial position of KUI,
respectively, at the dates indicated and the results of operations,
changes in stockholders' equity and cash flows of the Company, of Hughes
and its consolidated subsidiaries, and of KUI, respectively, for the
periods specified; and said financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP") applied
on a consistent basis throughout the periods involved. 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 historical financial data and the summary historical 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 Company's and Hughes', as applicable, audited financial
statements included in the Offering Memorandum. The pro forma financial
statements and the related notes thereto included in the Offering
Memorandum present fairly the information shown therein, have been
prepared in accordance with the Commission's rules and guidelines
with respect to pro forma financial statements and have been properly
compiled on the bases described therein, and the assumptions used in the
preparation thereof
10
<PAGE>
are reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein.
(x) Good Standing of the Company. The Company has been duly
incorporated and is validly existing as a corporation authorized to
transact business in the corporate form and is in good standing under the
laws of the State of Washington 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 Company Documents; and the Company is not required
to qualify as a foreign corporation to transact business in any other
jurisdiction.
(xi) Good Standing of Subsidiaries. The only subsidiaries of Hughes
are Hughes Realty, Inc., Univar San Bernardino, Inc., and MM Foods, Inc.,
each of which is a California corporation. The only subsidiaries of the
Company are KUA, QHI, Second Story, Inc., a Washington corporation,
Parent, the Holding Company and, at the Closing Date, Hughes and its
subsidiaries. Each of KUA, Hughes, Parent and the Holding Company 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 to
enter into and perform its obligation under the Guarantor Documents to
which it is or will be a party (if any), 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; except as otherwise disclosed in the
Offering Memorandum, all of the issued and outstanding capital stock of
each of KUA, Parent and the Holding Company 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 (except for
liens created by the Bank Security Agreements); all of the issued and
outstanding capital stock of Hughes has been duly authorized and validly
issued, is fully paid and non-assessable and, on the Closing Date will be
owned by the Company, directly or through subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity (except for liens created by the Bank Security Agreements); and
none of the outstanding shares of capital stock of KUA, Hughes, Parent or
the Holding Company was issued in violation of any preemptive or similar
rights. For the periods covered by the historical financial statements of
the Company included in the Offering Memorandum, the Company did not have
any subsidiaries whose financial statements were required to be
consolidated with those of the Company in accordance with GAAP. As of and
for its fiscal year ended in December of 1996, the aggregate sales,
operating income, net income and assets of the Company's subsidiaries
(excluding KUA) were less than 1% of the Company's total sales, operating
income, net income and assets. For the seven months ended September 29,
1996, subsidiaries of Hughes (other than Santee Dairies, Inc., a
California corporation ("Santee")) accounted for less than 1% of Hughes'
consolidated sales, income from
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<PAGE>
operations, net income and assets (excluding from the computation of the
foregoing amounts attributable to Santee).
(xii) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Offering Memorandum in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to the Purchase Agreements or
pursuant to employee 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 non-assessable; and none of the outstanding shares of
capital stock of the Company was issued in violation of the preemptive or
other similar rights of any securityholder of the Company.
(xiii) Authorization of Purchase Agreements. Each of the U.S.
Purchase Agreement and the International Purchase Agreement has been duly
authorized, executed and delivered by the Company. The Debt Agreement has
been duly authorized, executed and delivered by the Company and the
Guarantors, other than Hughes; at the Closing Date, the Debt Agreement
will have been duly authorized, executed and delivered by Hughes.
(xiv) Absence of Defaults and Conflicts. Neither the Company,
Parent, the Holding Company, Hughes nor KUA is in violation of its charter
or by-laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease
or other agreement or instrument to which it is a party or by which it or
any of them may be bound, or to which any of its property or assets is
subject (collectively, "Agreements and Instruments", which term shall
include, without limitation, the Investor Agreements (as defined below),
the Company Documents and the Guarantor Documents), except for such
defaults under Agreements and Instruments (other than the New Credit
Agreement or the Indenture) that would not result in a Material Adverse
Effect; and the execution, delivery and performance of the Company
Documents and the Guarantor Documents and the consummation of the
transactions contemplated herein and therein and in the Offering
Memorandum (including, without limitation, (i) the issuance and sale of
the Securities and the Notes and the borrowing of funds under the New
Credit Agreement and the application of the proceeds therefrom as
described in the Offering Memorandum under the caption "Use of Proceeds"
and (ii) the consummation of the Hughes Merger) and compliance by the
Company and the Guarantors with their respective obligations and
agreements under the Company Documents and the Guarantor Documents 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 Repayment
Event (as defined below) under, or result in the creation or imposition of
any lien, charge or encumbrance (other than liens on the Bank Collateral
(as defined below) created by the Bank Security Agreements in favor of the
Lenders) upon any property or assets of the Company, the Holding Company,
Parent, Hughes or KUA pursuant to, any Agreements and Instruments (except
for such conflicts, breaches or defaults or liens, charges or encumbrances
under Agreements and Instruments, other than the New Credit Agreement, the
Indenture and the
12
<PAGE>
Investor Agreements, that would not result in a Material Adverse Effect),
nor will such action result in any violation of the provisions of the
charter or by-laws of the Company, Parent, the Holding Company, Hughes or
KUA 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, Parent, the
Holding Company, Hughes or KUA or any of their respective assets,
properties or operations. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder's behalf)
the right to require the repurchase, redemption or repayment of all or a
portion of such indebtedness by the issuer or obligor. No consents or
waivers from any other person are required for the execution, delivery and
performance of any of the Company Documents or the Guarantor Documents or
the consummation of any of the transactions contemplated hereby and
thereby, other than such consents and waivers as have been obtained (or,
in the case of the Registration Rights Agreement, will be obtained).
As used in this Agreement, the term "Investor Agreements" means (A)
the Standstill Agreement dated as of January 14, 1995 between the Company
and Zell/Chilmark Fund L.P. (the "Zell/Chilmark Standstill Agreement"),
(B) the Standstill Agreement dated as of January 14, 1995 between the
Company and Stuart M. Sloan (the "Sloan Standstill Agreement"), (C) the
Investor Rights Agreement dated as of March 1, 1995 (the "Olson Investor
Rights Agreement") between the Company and Maurice F. Olson, Charles M.
Olson and Maurice S. Olson, (D) the Investor Rights Agreement among the
Company, Charles B. Teel, E. Gerald Teel and the other persons party
thereto (the "Food Giant Investor Rights Agreement") and (E) the Investor
Rights Agreement dated February 14, 1997 among the Company and the other
persons party thereto (the "KUI Investor Rights Agreement;" and the term
"Common Stock Registration Rights Agreements" means the agreements
referred to in clauses (A), (C), (D) and (E) of this sentence.
(xv) Absence of Labor Dispute. There is (i) no unfair labor practice
complaint pending against the Company, Hughes or KUA nor, to the best
knowledge of the Company, threatened against any of them, before the
National Labor Relations Board, any state or local labor relations board
or any foreign labor relations board, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is
pending against the Company, Hughes or KUA or, to the best knowledge of
the Company, threatened against any of them, which, individually or in the
aggregate, may reasonably be expected to result in a Material Adverse
Effect, (ii) no strike, labor dispute, slowdown or stoppage pending
against the Company, Hughes or KUA nor, to the best knowledge of the
Company, threatened against the Company, Hughes or KUA which, individually
or in the aggregate, may reasonably be expected to result in a Material
Adverse Effect, and (iii) to the best knowledge of the Company, no union
representation question existing with respect to the employees of the
Company, Hughes or KUA and no union organizing activities are taking place
with respect to any such employees. Neither the Company, Hughes nor KUA
has violated any federal, state or local law or foreign law relating to
discrimination in hiring, promotion or pay of employees, or any applicable
wage or hour laws, or any provision of the Employee
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Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules
and regulations thereunder, or analogous foreign laws and regulations,
which may reasonably be expected to result in a Material Adverse Effect.
The Company is not aware of any existing or imminent labor disturbance by
the employees of any principal suppliers, manufacturers, customers or
contractors of the Company, Hughes or KUA, which, individually or in the
aggregate, may reasonably be expected to result in a Material Adverse
Effect.
(xvi) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company, Parent, the
Holding Company, Hughes or KUA, which, if the Offering Memorandum were a
prospectus subject to the 1933 Act, would be required to be disclosed in
the Offering Memorandum (other than as disclosed therein), or which might
reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the
properties or assets thereof or the consummation of the transactions
contemplated in the Company Documents or the Guarantor Documents or the
performance by any of the parties thereto of their respective obligations
or agreements thereunder; and the aggregate of all pending legal or
governmental proceedings to which the Company, Parent, the Holding
Company, Hughes or KUA is a party or of which any of their respective
property or assets is the subject which are not described in the Offering
Memorandum, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material Adverse
Effect.
(xvii) 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 for the authorization, execution, delivery or
performance by the Company of any of the Company Documents or by any of
the Guarantors of any of the Guarantor Documents, for the performance by
Hughes of the Hughes Merger Agreement, for the offering, issuance or sale
of the Securities under the Purchase Agreements or of the Notes or the
Guarantees under the Debt Agreement, or for the consummation of the Hughes
Merger or the other transactions contemplated by the Company Documents and
the Guarantor Documents, except (A) such as may have been obtained under
the 1933 Act or the 1933 Act Regulations in connection with the offering
of the Securities, (B) such as may be required under state securities
laws, (C) the filing of the appropriate agreement of merger and officers'
certificates of each of Hughes and QHI relating to the approval of the
Hughes Merger and a tax clearance certificate relating to Hughes'
assumption of QHI's obligations to pay California franchise taxes (all as
provided for in Section 1103 of the California Corporations Code) with the
Secretary of State of the State of California in connection with the
Hughes Merger, (D) the filing of financing statements and continuation
statements under the Uniform Commercial Code (the "UCC") of the States of
Washington and California in connection with the Bank Security Agreements,
(E) the filing of termination statements (if any) under the UCC of the
State of Washington and other appropriate jurisdictions terminating the
security interests created by the Old Security Agreements, and (F) such as
will
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<PAGE>
be required under the 1933 Act, the 1933 Act Regulations and the Trust
Indenture Act of 1939, as amended (the "1939 Act") in connection with the
Registration Rights Agreement.
(xviii) Possession of Licenses and Permits. The Company, Hughes and
KUA 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,
Hughes and KUA are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company, Hughes nor KUA has
received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a Material Adverse Effect.
(xix) Title to Property. The Company, Hughes and KUA have good and
marketable title to all real property and improvements owned by them and
good title to all other properties owned by them, in each case, free and
clear of all mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind except such as (a) are described
in the Offering Memorandum or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by
them; all of the leases and subleases under which the Company, Hughes or
KUA holds properties are valid, binding and in full force and effect, and
neither the Company, Hughes or KUA has any notice of any claim of any sort
that has been asserted by anyone adverse to the rights of the Company,
Hughes or KUA under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company, Hughes or KUA to the
continued possession of the leased or subleased premises under any such
lease or sublease which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect; and no
default by the Company, Hughes or KUA has occurred and is continuing under
any such lease or sublease, and no material defaults by the landlord or
sublessor, as the case may be, are existing under any such lease or
sublease which, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.
(xx) Compliance with Cuba Act. To the extent that the Cuba Act is
applicable, the Company has complied with, and is and will be in
compliance with, the provisions of that certain Florida act relating to
disclosure of doing business with Cuba, codified as Section 517.075 of the
Florida statutes, and the rules and regulations thereunder (collectively,
the "Cuba Act") or is exempt therefrom.
(xxi) Investment Company Act. Neither the Company nor any of its
subsidiaries is and, upon the issuance and sale of the Securities and the
Notes pursuant to the Purchase
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Agreements and the Debt Agreement, respectively, and the application of
the net proceeds therefrom as described in the Offering Memorandum, none
of them 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").
(xxii) Environmental Laws. Except as described in the Offering
Memorandum and except as would not, singly or in the aggregate, result in
a Material Adverse Effect, (A) neither the Company, Hughes nor KUA is in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution
or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (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, Hughes and KUA have all permits,
authorizations and approvals required under any applicable Environmental
Laws and are each in compliance with their requirements, (C) there are no
pending or threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental Law
against the Company, Hughes or KUA and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company, Hughes or KUA relating to Hazardous Materials or any
Environmental Laws.
(xxiii) Tax Returns. All tax returns required to be filed by the
Company, Hughes or KUA, in all jurisdictions, have been so filed. All
taxes, including withholding taxes, penalties and interest, assessments,
fees and other charges due or claimed to be due from such entities or that
are due and payable have been paid, other than those being contested in
good faith and for which adequate reserves have been provided or those
currently payable without penalty or interest. The Company knows of no
material proposed additional tax assessments against the Company, Hughes
or KUA.
(xxiv) Absence of Registration Rights. There are no persons with
registration rights or other similar rights to have any securities (debt
or equity) (A) registered pursuant to the registration statement
registering the Securities under the 1933 Act or any of the registration
statements contemplated by the Registration Rights Agreement or included
in any of the offerings contemplated by the Purchase Agreements or the
Registration Rights Agreement or (B) except for such rights as are
accurately described in the prospectuses relating to the offering of the
Securities under "Shares Eligible for Future Sale," otherwise registered
by the Company under the 1933 Act (the rights referred to in clauses (A)
and (B), collectively, the "Rights"); and the Company has complied with
all of its obligations and agreements under the
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Investor Agreements in connection with the transactions contemplated by
the Purchase Agreements. Schedule D to the Purchase Agreements contains a
true, complete, and correct listing of all persons with Rights, the Common
Stock Registration Rights Agreement under which such Rights arise and the
number of shares of Common Stock covered by each such Common Stock
Registration Rights Agreement.
(xxv) New Credit Agreement. At or prior to the Closing Date, the New
Credit Agreement will have been duly authorized by the Company, Parent and
the Holding Company; at or prior to the Closing Date, the New Credit
Agreement will have been duly executed and delivered by, and will be a
valid and binding agreement of, the Company, Parent and the Holding
Company, enforceable in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by general principles of equity, and all conditions
precedent to the effectiveness of the New Credit Agreement, and all
conditions precedent to the right of the Company to make borrowings under
the New Credit Agreement (other than delivery of borrowing requests,
bring-down officer's certificates or other customary documents required as
a condition to each borrowing), will have been satisfied or waived.
(xxvi) Bank Guaranty. At or prior to the Closing Date, the Bank
Guaranty will have been duly authorized by the Bank Guarantors; at or
prior to the Closing Date, the Bank Guaranty will have been duly executed
and delivered by, and will be the valid and binding agreements of, the
Bank Guarantors, enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general principles of equity.
(xxvii) Bank Security Agreements. At or prior to the Closing Date,
the Bank Security Agreements will have been duly authorized by the Company
and the Parent, respectively; at or prior to the Closing Date, the Bank
Security Agreements will have been duly executed and delivered by, and
will be the valid and binding agreements of, the Company and the Parent,
enforceable in accordance with their terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or
by general principles of equity.
(xxviii) Hughes Merger. The Hughes Merger will become effective upon
the filing of the agreement of merger provided for in the Hughes Merger
Agreement, an officers' certificate of each of Hughes and QHI relating to
the approval of the Hughes Merger and a tax clearance certificate relating
to Hughes' assumption of QHI's obligations to pay California franchise
taxes (all as provided for in Section 1103 of the California Corporations
Code) (collectively, the "Merger Filing") with the Secretary of State of
the State of California. Prior to the Closing Date, the Merger Filing will
have been duly authorized, executed and delivered by the parties thereto,
will comply with all applicable requirements of the laws of the State of
California, and will have been duly filed in the appropriate governmental
offices in the State
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of California. The Hughes Merger will be effective prior to or
concurrently with the purchase of the Initial U.S. Securities by the U.S.
Underwriters, with Hughes surviving the Hughes Merger as a wholly-owned
direct subsidiary of the Company. The Company believes that all conditions
precedent to the effectiveness of the Hughes Merger and to the obligations
of the parties to the Hughes Merger Agreement which have not already been
satisfied will be satisfied or waived at or prior to the Closing Date.
(xxix) Authorization of Hughes Merger Agreement. The Hughes Merger
Agreement has been duly authorized, executed and delivered by and is a
valid and binding agreement of each of the Company, QHI and Hughes.
(xxx) Incorporated Documents. 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 Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission thereunder and, when read together with the other information
in the Offering Memorandum, at the time the Offering Memorandum was issued
and at the Closing Date, did not and will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(xxxi) Description of Documents. The Company Documents and the
Guarantor Documents will conform in all material respects to the
respective statements relating thereto contained in the Offering
Memorandum.
(xxxii) Usury. The payment by the Company and the Guarantors of any
and all amounts which become due and payable under the Indenture, the
Notes, the Series B Notes, the Guarantees or the Registration Rights
Agreement, and their respective obligations to pay such amounts, do not
and will not violate any usury or similar law or regulation.
(xxxiii) Value of Assets, Etc. The present fair saleable value of
the assets of the Company and each of the Guarantors exceeds the amount
that will be required to be paid on or in respect of the existing debts
and other liabilities (including contingent liabilities) of each such
person as they become absolute and matured. The assets of the Company and
each of the Guarantors do not constitute unreasonably small capital to
carry out their businesses as conducted or as proposed to be conducted.
The Company does not, and no Guarantor intends to, nor do the Company or
any Guarantor believe that it will, incur debts beyond its ability to pay
such debts as they mature. Upon the issuance of the Notes and the
Guarantees, after giving effect to the other borrowings (and guarantees
thereof) to be made to finance the Hughes Merger and to retire the
borrowings under the Old Credit Agreement, the present fair saleable value
of the assets of the Company and each of the Guarantors will exceed the
amount that will be required to be paid on or in respect of the existing
debts and other liabilities (including contingent liabilities) of such
person as they become absolute and matured. The assets of the Company and
each of the Guarantors, upon the issuance of the
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Notes and the Guarantees and after giving effect to the other borrowings
(and guarantees thereof) to be made to finance the Hughes Merger and to
retire the borrowings under the Old Credit Agreement, will not constitute
unreasonably small capital to carry out their businesses as not conducted,
including the capital needs of the Company and each of the Guarantors,
taking into account the projected capital requirements and capital
availability of the Company and each of the Guarantors.
(xxxiv) Indenture. The Indenture has been duly authorized by the
Company and each of the Guarantors, other than Hughes; at the Closing
Date, the Indenture will have been duly authorized by Hughes and duly
executed and delivered by, and will be a valid and binding agreement of,
the Company and each of the Guarantors, enforceable in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
or affecting creditors' rights generally, or by general principles of
equity.
(xxxv) Notes. The Notes have been duly authorized by the Company; on
the Closing Date, the Notes will have been duly executed by the Company
and authenticated by the Trustee and, when delivered pursuant to the Debt
Agreement against payment of the consideration set forth therein, will be
valid and binding obligations of the Company, enforceable in accordance
with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general
principles of equity, and will be entitled to the benefits of the
Indenture.
(xxxvi) Registration Rights Agreement. The Registration Rights
Agreement has been duly authorized by the Company and each of the
Guarantors other than Hughes; at the Closing Date, the Registration Rights
Agreement will have been duly authorized by Hughes and duly executed and
delivered by, and will be a valid and binding agreement of, the Company
and each of the Guarantors, enforceable in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditor's rights generally or by general principles of equity.
(xxxvii) Series B Notes. The Series B Notes have been duly
authorized by the Company and, when delivered in exchange for Notes in
accordance with the terms of the Indenture, the Registration Rights
Agreement and the Exchange Offer, will be valid and binding obligations of
the Company, enforceable in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general principles of equity, and will
be entitled to the benefits of the Indenture.
The Company and the Guarantors acknowledge that the Purchasers and, for
purposes of the opinions to be delivered to the Purchasers pursuant to Section 7
hereof, counsel to the Company and
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the Guarantors and counsel to the Purchasers will rely upon the accuracy and
truth of the foregoing representations and hereby consent to such reliance.
(b) Each Purchaser represents and warrants, severally and not jointly, to
the Company, the Guarantors and the other Purchasers and agrees, severally and
not jointly, that:
(i) Such Purchaser is a QIB, with such knowledge and experience in
financial and business matters as are necessary in order to evaluate the
merits and risks of an investment in the Notes.
(ii) Such Purchaser (A) is not acquiring the Notes with a view to
any distribution thereof that would violate the 1933 Act or the securities
laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Notes only to
QIBs in reliance on the exemption from the registration requirements of
the 1933 Act provided by Rule 144A and to Accredited Investors in a
private placement exempt from the registration requirements of the 1933
Act.
(iii) No form of general solicitation or general advertising has
been or will be used by such Purchaser or any of its representatives in
connection with the offer and sale of any of the Notes, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
(iv) It has solicited and will solicit offers for the Notes only
from, and has offered, sold and delivered and will offer, sell and deliver
the Notes as part of its initial offering only to, (A) persons whom it
reasonably believes to be QIBs purchasing for their own account or, if
such person is purchasing for one or more institutional accounts for which
it is acting as fiduciary or agent, only if such Purchaser reasonably
believes that each such account is a QIB over which such person exercises
sole investment discretion and to which notice has been given that such
sale or delivery is being made in reliance on Rule 144A, in each case in a
transaction complying with Rule 144A, and (B) a limited number of
Accredited Investors and, if any such Accredited Investor is buying for
one or more institutional accounts ("investor accounts") for which it is
acting as fiduciary or agent, each such investor account is an Accredited
Investor on a like basis and such Accredited Investor and each such
investor account, as the case may be, is purchasing Notes in an aggregate
principal amount of at least $100,000, and each such Accredited Investor
shall execute a letter in the form of Annex A attached to the Offering
Memorandum; and such Purchaser further acknowledges and agrees that the
Notes have not been registered under the 1933 Act or any other applicable
securities laws and, unless so registered, may be offered, sold, assigned,
transferred, pledged, encumbered or otherwise disposed of only (i) to the
Company, (ii) pursuant to a registration statement which has been declared
effective under the 1933 Act, (iii) to a person it reasonably believes is
a QIB that purchases for its own account or for the account of a QIB to
whom notice is given that the transfer is being made in reliance on Rule
144A, in each case in a
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<PAGE>
transaction meeting the requirements of Rule 144A, (iv) pursuant to offers
and sales to non-U.S. persons that occur outside the United States within
the meaning of Regulation S under the 1933 Act ("Regulation S") in
transactions which comply with Regulation S, (v) to an Accredited Investor
that is acquiring the Notes for its own account or for the account of such
an Accredited Investor, for investment purposes and not with a view to, or
for offer or sale in connection with, any distribution and violation of
the 1933 Act, or (vi) in a transaction meeting the requirements of Rule
144 or pursuant to any other available exemption from the registration
requirements under the 1933 Act and, in each case, in accordance with any
applicable securities laws of any state of the United States or any other
applicable jurisdiction; and such Purchaser will, and each subsequent
holder is required to, notify any purchaser from it of any Notes of the
resale restrictions set forth in clauses (i) through (vi) above.
(v) Such Purchaser also understands that the Company, the Guarantors
and, for purposes of the opinions to be delivered to you pursuant to
Section 7 hereof, counsel to the Company and the Guarantors and counsel to
the Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
6. Indemnification.
(a) The Company and the Guarantors, jointly and severally, agree to indemnify
and hold harmless (i) each of the Purchasers, (ii) each person, if any, who
controls (within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act) any of the Purchasers (any of the persons referred to in this clause
(ii) being hereinafter sometimes referred to as a "controlling person"), and
(iii) the respective officers, directors, partners, employees, representatives
and agents of any of the Purchasers or any controlling person (any person
referred to in clause (i), (ii) or (iii) being hereinafter sometimes referred to
as an "Indemnified Person") from and against any and all losses, claims,
damages, liabilities, judgments, actions and expenses (including without
limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, settling, pursuing or defending any claim or action,
or any investigation or proceeding by any governmental agency or body, commenced
or threatened, including the reasonable fees and expenses of counsel to any
Indemnified Person) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering Memorandum or
the Offering Memorandum (or any amendment or supplement thereto), or any
omission or alleged omission to state therein a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by an untrue statement or omission or alleged
untrue statement or omission that is made in reliance upon and in conformity
with information relating to such Purchaser furnished in writing to the Company
by such Purchaser expressly for use therein, and except that such indemnity with
respect to the Preliminary Offering Memorandum shall not inure to the benefit of
any Purchaser (or any person controlling such Purchaser) from whom the person
asserting such loss, claim, damage or liability purchased the Notes which are
the subject thereof if such person did not receive a copy of the Offering
Memorandum (or the Offering Memorandum as amended or supplemented) at or prior
to the confirmation of the sale of such Notes
21
<PAGE>
to such person in any case where the Company complied with its obligations under
Sections 4(b) and 4(c) hereof (and any such amended or supplemented Offering
Memorandum, as applicable, shall have been delivered by the Company to such
Purchaser a reasonable amount of time prior to the mailing or delivery, as
applicable, of such confirmation) and any such untrue statement or omission or
alleged untrue statement or omission of a material fact contained in the
Preliminary Offering Memorandum was corrected in the Offering Memorandum (or the
Offering Memorandum as amended or supplemented). The Company and the Guarantors
shall notify you promptly of the institution, threat or assertion of any claim,
proceeding (including any governmental investigation) or litigation in
connection with the matters addressed by this Agreement which involves the
Company or any of the Guarantors or an Indemnified Person.
(b) In case any action or proceeding (including any governmental
investigation) shall be brought or asserted against any of the Indemnified
Persons with respect to which indemnity may be sought against the Company
or the Guarantors, such Indemnified Person shall promptly notify the
Company and the Guarantors in writing (provided, that the failure to give
such notice shall not relieve the Company or the Guarantors of any of
their respective obligations pursuant to this Agreement to the extent the
Company or the Guarantors are not materially prejudiced as a result
thereof and in any event shall not relieve the Company or the Guarantors
from any liability which any of them may have otherwise than on account of
this indemnity agreement). Such Indemnified Person shall have the right to
employ their own counsel in any such action and the fees and expenses of
such counsel shall be paid, as incurred, by the Company and the Guarantors
(regardless of whether it is ultimately determined that an Indemnified
Person is not entitled to indemnification hereunder). Notwithstanding the
foregoing, if they so elect within a reasonable time after receipt of
notice referred to above, the Company and the Guarantors, jointly with any
other indemnifying parties receiving such notice, may assume the defense
of such action with counsel chosen by the Company and approved by the
Indemnified Persons defendant in such action (which approval shall not be
unreasonably withheld, it being understood that in the case of the
Indemnified Persons under Section 6(a) above, such approval shall be given
by Donaldson, Lufkin & Jenrette Securities Corporation), unless such
Indemnified Persons reasonably object to such assumption on the ground
that there may be legal defenses available to them which are different
from or in addition to those available to the Company and the Guarantors,
in which case the Company and the Guarantors shall not be entitled to
assume the defense of such action. If the Company and the Guarantors
assume the defense of such action, the Company and the Guarantors shall
not be liable for any fees and expenses of counsel for the Indemnified
Persons incurred thereafter in connection with such action. The Company
and the Guarantors shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any
local counsel) at any time for the Indemnified Persons, which firm
(together with any such local counsel) shall be designated by Donaldson,
Lufkin & Jenrette Securities Corporation. The Company and the Guarantors
shall be liable for any settlement of any such action or proceeding
effected with the Company's prior written consent, which consent will not
be unreasonably withheld, and
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the Company and the Guarantors agree to indemnify and hold harmless any
Indemnified Person from and against any loss, claim, damage, liability or
expense by reason of any settlement of any action effected with the
written consent of the Company. Notwithstanding the immediately preceding
sentence, if at any time an Indemnified Person shall have requested an
indemnifying party to reimburse the Indemnified Person for fees and
expenses of counsel as contemplated by the second sentence of this
paragraph, each indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent or the
written consent of any other indemnifying party 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 the Indemnified Person in accordance with such request
prior to the date of such settlement. The Company and the Guarantors shall
not, without the prior written consent of an Indemnified Person, settle or
compromise or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, claim, litigation or
proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not any Indemnified Person is a party
thereto), unless such settlement, compromise, consent or termination
includes an unconditional release of such Indemnified Person from all
liability arising out of such action, claim, litigation or proceeding.
(c) Each of the Purchasers agrees, severally and not jointly, to
indemnify and hold harmless the Company and the Guarantors and any person
controlling (within the meaning of Section 15 of the 1933 Act or Section
20 of the Exchange 1933 Act) the Company or the Guarantors, and the
respective officers, directors, partners, employees, representatives and
agents of each such person, to the same extent as the foregoing indemnity
from the Company and the Guarantors to each of the Indemnified Persons,
but only with respect to claims and actions based on an untrue statement
or omission or alleged untrue statement or omission that is made in
reliance upon and in conformity with information relating to such
Purchaser furnished in writing by such Purchaser to the Company expressly
for use in the Preliminary Offering Memorandum or the Offering Memorandum
or any amendment or supplement thereto.
The paragraph on page (ii) regarding stabilization, the statements
to the effect that the Purchasers have informed the Company that they each
currently intend to make a market in the Notes and, if issued, the Series
B Notes, set forth under "Summary--The Notes Offering--Absence of Market
for the Notes" and in the first paragraph under "Risk Factors--Lack of
Public Market; Restrictions on Transferability", and the information in
the first four sentences of the fourth paragraph and the sixth paragraph
under "Plan of Distribution" constitute the only information furnished to
the Company or any of the Guarantors in writing by any Purchaser expressly
for use in the Preliminary Offering Memorandum or the Offering Memorandum,
or any amendment or supplement thereto.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or expenses referred to
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herein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities
and expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand and
the indemnified party on the other hand from the offering of the Notes or
(ii) if the allocation provided by clause (i) above 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 indemnifying party and the indemnified party, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Guarantors, on the one hand, and the
Purchasers, on the other hand, shall be deemed to be in the same
proportion as the total proceeds from the offering of the Notes (net of
discounts and commissions but before deducting expenses) received by the
Company and the total discounts and commissions received by the Purchasers
bear to the total price to investors of the Notes, in each case as set
forth in the table on the cover page of the Offering Memorandum. The
relative fault of the Company and the Guarantors, on the one hand, and of
the Purchasers, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
related to information supplied by the Company or any Guarantor, on the
one hand, or the Purchasers, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The indemnity and contribution
provisions set forth herein shall be in addition to any liability or
obligation the Company and the Guarantors may otherwise have to any
Indemnified Person.
The Company, the Guarantors and the Purchasers agree that it would
not be just and equitable if contribution pursuant to this Section 6(d)
were determined by pro rata allocation (even if the 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 in the immediately preceding paragraph. The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 6, none of the
Purchasers shall be required to contribute any amount in excess of the
amount by which the total discounts and commissions received by such
Purchaser with respect to the Notes exceeds the amount of any damages
which such 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. The
Purchasers' obligations to contribute pursuant to this Section 6(d) are
several in proportion to the respective principal amount of Notes
purchased by each of the Purchasers hereunder and not joint.
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7. Conditions of Purchasers' Obligations. The several obligations of the
Purchasers under this Agreement are subject to the satisfaction of each of the
following conditions:
(a) All of the representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct on the
date hereof and on the Closing Date with the same force and effect as if
made on and as of the date hereof and the Closing Date, respectively. The
Company and the Guarantors shall have performed or complied with all of
the agreements herein contained and required to be performed or complied
with by them at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Purchasers not later than 10:00 a.m., New York City
time, on the date following the date of this Agreement or at such later
date and time as to which you may agree, and no stop order suspending the
qualification or exemption from qualification of any of the Notes or
Guarantees in any jurisdiction referred to in Section 4(e) shall have been
issued and no proceeding for that purpose shall have been commenced or
shall be pending or threatened.
(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency which would, as of the Closing Date, prevent the issuance of any of
the Notes; no action, suit or proceeding shall be pending against or
affecting or, to the knowledge of the Company or any Guarantor, threatened
against, the Company, any Guarantor or any of their respective
subsidiaries before any court or arbitrator or any governmental body,
agency or official that, if adversely determined, would prohibit,
interfere with or adversely affect the issuance of the Notes or would have
a Material Adverse Effect; and no stop order preventing the use of the
Offering Memorandum, or any amendment or supplement thereto, or any order
asserting that any of the transactions contemplated by this Agreement are
subject to the registration requirements of the 1933 Act shall have been
issued.
(d) At the Closing Date, (A) there have been no transactions entered
into by the Company and its subsidiaries (including, without limitation,
Hughes, KUA and Santee) in each case other than those in the ordinary
course of business, which are material with respect to the Company and its
subsidiaries (including, without limitation, Hughes, KUA and Santee)
considered as one enterprise; and (B) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock.
(e) You shall have received a certificate, dated the Closing Date,
signed by the President or any Vice President and the principal financial
or accounting officer of the Company confirming, as of the Closing Date,
the matters set forth in paragraphs (a), (b), (c) and (d) of this Section
7.
(f) On the Closing Date, the Purchasers shall have received the
favorable opinion, dated as of Closing Date, of Bogle & Gates P.L.L.C.,
counsel for the Company, in form and
25
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substance satisfactory to counsel for the Purchasers, to the effect set
forth in Exhibit B hereto and to such further effect as counsel to the
Purchasers may reasonably request.
In rendering such opinion, such counsel shall state (A) that such
opinion is limited to matters arising under the laws of the State of
Washington, and (B) that, in rendering their opinions pursuant to this
Agreement, Simpson Thacher & Bartlett and Brown & Wood LLP each may rely
upon such opinion, as if it were addressed to them, as to all matters
arising under the laws of the State of Washington. In rendering such
opinion, Bogle & Gates P.L.L.C. may rely (i) as to matters involving the
application of the laws of any other state upon the opinion of local
counsel satisfactory to the Purchasers (which opinion shall be dated and
furnished to the Purchasers at the Closing Date, shall be satisfactory in
form and substance to counsel for the Purchasers and shall expressly state
that the Purchasers may rely on such opinion as if it were addressed to
them), provided that Bogle & Gates P.L.L.C. shall state in their opinion
that they believe that they and the Purchasers are justified in relying
upon such opinion and (ii) as to matters of fact (but not as to legal
conclusions), to the extent they deem proper, on certificates of
responsible officers of the Company, Hughes, Santee and KUA and public
officials. Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written
policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law
(1991).
(g) On the Closing Date, the Purchasers shall have received the
favorable opinion, dated as of Closing Date, of Simpson Thacher &
Bartlett, counsel for the Company, in form and substance satisfactory to
counsel for the Purchasers, to the effect set forth in Exhibit C hereto
and to such further effect as counsel for the Purchasers may reasonably
request.
In rendering such opinion, such counsel shall state (A) that such
opinion is limited to matters arising under the laws of the State of New
York, the General Corporation Law of the State of Delaware and the federal
laws of the United States of America and (B) that insofar as such opinion
relates to matters arising under the laws of the States of Washington or
California, such counsel has relied upon the opinion of Bogle & Gates
P.L.L.C. delivered pursuant to Section 7(f) hereof or upon the opinion of
O'Melveny & Myers LLP delivered pursuant to Section 7(h) hereof,
respectively. In rendering such opinion, Simpson Thacher & Bartlett may
rely (i) as to matters involving the application of the laws of any other
state upon the opinion of local counsel satisfactory to the Purchasers
(which opinion shall be dated and furnished to the Purchasers on the
Closing Date, shall be satisfactory in form and substance to counsel for
the Purchasers and shall expressly state that the Purchasers may rely on
such opinion as if it were addressed to them), provided that Simpson
Thacher & Bartlett shall state in their opinion that they believe that
they and the Purchasers are justified in relying upon such opinion and
(ii) as to matters of fact (but not as to legal conclusions), to the
extent they deem proper, on certificates of responsible officers of the
Company, Hughes, Santee and KUA and public officials. Such opinion shall
not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document
relating to legal
26
<PAGE>
opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
(h) On the Closing Date, the Purchasers shall have received the
favorable opinion, dated as of Closing Date, of O'Melveny & Myers LLP,
counsel for Hughes, in form and substance satisfactory to counsel for the
Purchasers, to the effect set forth in Exhibit D hereto and to such
further effect as counsel to the Purchasers may reasonably request.
In rendering such opinion, such counsel shall state (A) that such
opinion is limited to matters arising under the laws of the State of
California and (B) that, in rendering their opinions pursuant to this
Agreement, Simpson Thacher & Bartlett and Brown & Wood LLP may rely upon
such opinion, as if it were addressed to them, as to all matters arising
under the laws of the State of California. In rendering such opinion,
O'Melveny & Myers LLP may rely (i) as to matters involving the application
of the laws of any other state upon the opinion of local counsel
satisfactory to the Purchasers (which opinion shall be dated and furnished
to the Purchasers on the Closing Date, shall be satisfactory in form and
substance to counsel for the Purchasers and shall expressly state that the
Purchasers may rely on such opinion as if it were addressed to them),
provided that O'Melveny & Myers LLP shall state in their opinion that they
believe that they and the Purchasers are justified in relying upon such
opinion and (ii) as to matters of fact (but not as to legal conclusions),
to the extent they deem proper, on certificates of responsible officers of
the Company, Hughes and Santee and public officials. Such opinion shall
not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991).
(i) On the Closing Date, the Purchasers shall have received the
favorable opinion, dated as of Closing Date, of Rosenberg & Liebentritt,
P.C., counsel for the Company, in form and substance satisfactory to
counsel for the Purchasers, to the effect set forth in Exhibit E hereto
and to such further effect as counsel to the Purchasers may reasonably
request.
In rendering such opinion, such counsel shall state that such
opinion is limited to matters arising under the laws of the State of
Illinois and the General Corporation Law of the State of Delaware. In
rendering such opinion, Rosenberg & Liebentritt, P.C. may rely (i) as to
matters involving the application of the laws of any other state upon the
opinion of local counsel satisfactory to the Purchasers (which opinion
shall be dated and furnished to the Purchasers at the Closing Date, shall
be satisfactory in form and substance to counsel for the Purchasers and
shall expressly state that the Purchasers may rely on such opinion as if
it were addressed to them), provided that Rosenberg & Liebentritt, P.C.
shall state in their opinion that they believe that they and the U.S.
Underwriters are justified in relying upon such opinion and (ii) as to
matters of fact (but not as to legal conclusions), to the extent they deem
proper, on certificates of responsible officers of the Company, Hughes and
Santee and public officials. Such opinion shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section
of Business Law (1991).
27
<PAGE>
(j) You shall have received an opinion, dated the Closing Date, of
Brown & Wood LLP, your counsel, in form and substance reasonable
satisfactory to you, covering such matters as are customarily covered in
such opinions.
(k) Brown & Wood LLP shall have been furnished with such documents
and opinions, in addition to those set forth above, as they may reasonable
require for the purpose of enabling them to review or pass upon the
matters referred to in this Section 7 and in order to evidence the
accuracy, completeness or satisfaction in all material respects of any of
the representations, warranties or conditions herein contained.
(l) At the time of the execution of this Agreement, the Purchasers
shall have received from each of Deloitte & Touche LLP and Arthur Andersen
LLP a letter or letters dated such date, in form and substance
satisfactory to the Purchasers, containing statements and information of
the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain
financial information of the Company, KUI and Hughes, as applicable,
contained in the Offering Memorandum.
(m) On the Closing Date, the Purchasers shall have received from
each of Deloitte & Touche LLP and Arthur Andersen LLP a letter or letters,
dated as of the Closing Date, to the effect that they reaffirm the
statements made in the letter or letters furnished pursuant to subsection
(l) of this Section, except that the specified date referred to shall be a
date not more than three business days prior to the Closing Date.
(n) On the Closing Date, each condition to the closing contemplated
by the Hughes Merger Agreement shall have been satisfied or waived. There
shall exist at and as of the Closing Date (after giving effect to the
transactions contemplated by the Purchase Agreements and the Debt
Agreement) no conditions that would constitute a default (or an event that
with notice or lapse of time, or both, would constitute a default) under
the Hughes Merger Agreement. Prior to or concurrently with the purchase of
the Notes by the Purchasers, (i) the Company shall have consummated the
Hughes Merger pursuant to the Hughes Merger Agreement and on terms that
conform to the description thereof in the Offering Memorandum, (ii) the
Hughes Merger shall have become effective pursuant to the laws of the
State of California; (iii) Hughes shall survive the Hughes Merger and
shall be a wholly-owned direct subsidiary of the Company and (iv) Hughes
shall have executed a copy of and become a party to this Agreement and the
Company shall have delivered to the Purchasers evidence, in form and
substance satisfactory to the Purchasers that the conditions specified in
this paragraph shall have been satisfied.
(o) At or prior to the Closing Date, (i) the New Credit Agreement,
the Bank Guaranty and the Bank Security Agreements and all ancillary
instruments and agreements shall have been executed and delivered by the
parties thereto and shall be in form and substance satisfactory to the
Purchasers, and the Company shall have furnished the Purchasers with
copies thereof; and (ii) all conditions precedent to the effectiveness of
the New Credit Agreement, and (except for the delivery of notices of
borrowings, officer's bring-down
28
<PAGE>
certificates and other customary documentation required as a condition to
a borrowing) all conditions precedent to the right of the Company to make
borrowings under the New Credit Agreement, shall have been satisfied or
waived and the New Credit Agreement shall be effective.
(p) Concurrently with the purchase of the Notes by the Purchasers,
the Underwriters shall have purchased and paid for the Initial Securities
under the Purchase Agreements.
All opinions, certificates, letters and other documents required by this
Section 7 to be delivered to you will be in compliance with the provisions
hereof only if they are reasonably satisfactory in form and substance to you.
The Company and the Guarantors will furnish the Purchasers with such conformed
copies or photocopies of such opinions, certificates, letters and other
documents as they shall reasonably request.
8. Defaults. If, on the Closing Date, any one or more of the Purchasers
shall fail or refuse to purchase the Notes that it or they have agreed to
purchase hereunder on the Closing Date, and the aggregate principal amount of
Notes that such defaulting Purchaser or Purchasers, as the case may be, agreed
but failed or refused to purchase does not exceed 10% of the total principal
amount of the Notes that all of the Purchasers are obligated to purchase on the
Closing Date, each non-defaulting Purchaser shall be obligated, severally and
not jointly, in the proportion which the principal amount of Notes set forth
opposite its name in Schedule I hereto bears to the aggregate principal amount
of Notes which all the non-defaulting Purchasers have agreed to purchase, or in
such other proportion as you may specify, to purchase the aggregate principal
amount of Notes that such defaulting Purchaser or Purchasers, as the case may
be, agreed but failed or refused to purchase. If, on the Closing Date, any one
or more of the Purchasers shall fail or refuse to purchase Notes in an aggregate
principal amount that exceeds 10% of such total principal amount and
arrangements satisfactory to the non-defaulting Purchaser or Purchasers, as the
case may be, and the Company for the purchase of such Notes are not made within
24 hours after such default, this Agreement shall terminate without liability on
the part of any non-defaulting Purchaser or the Company and the Guarantors,
except as otherwise provided in Section 9. In any such case that does not result
in termination of this Agreement, the Purchasers or the Company may postpone the
Closing Date for not longer than seven days, in order that the required changes,
if any, in the Offering Memorandum or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve a defaulting
Purchaser from liability in respect of any default by such Purchaser under this
Agreement.
9. Effective Date of Agreement and Termination. This Agreement shall
become effective upon the execution hereof.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by notice to the Company if any of the following has occurred: (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
29
<PAGE>
earnings, business affairs or business prospects of (1) the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business or (2) Hughes 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 the Purchasers, impracticable to market
the Notes or to enforce contracts for the sale of the Notes, 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, the New York Stock Exchange, the London Stock Exchange
or 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 the Nasdaq National
Market 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, or (v)
if the rating assigned by any nationally recognized statistical rating
organization to the Notes or any other debt securities of the Company shall have
been lowered or if any such rating agency shall have publicly announced that it
has placed the Notes or any other debt securities of the Company on what is
commonly termed a "watch list" for a possible downgrading.
The indemnities and contribution provisions and the other agreements,
representations and warranties of the Company and the Guarantors, their
respective officers and directors and of the Purchasers set forth in or made
pursuant to this Agreement shall remain operative and in full force and effect,
and will survive delivery of and payment for the Notes, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
any of the Purchasers or by or on behalf of the Company or any of the
Guarantors, the officers or directors of the Company or any of the Guarantors or
controlling person of the Company or any of the Guarantors, (ii) acceptance of
the Notes and payment for them hereunder and (iii) termination of this
Agreement.
If this Agreement shall be terminated by the Purchasers pursuant to
clauses (i) or (v) of the second paragraph of this Section 9 or because of the
failure or refusal on the part of the Company or any Guarantor to comply with
the terms or to fulfill any of the conditions of this Agreement, the Company and
the Guarantors agree, jointly and severally, to reimburse you for all
out-of-pocket expenses (including the fees and disbursements of counsel)
incurred by you. Notwithstanding any termination of this Agreement, the Company
and the Guarantors shall be liable, jointly and severally, for all expenses
which they have agreed to pay pursuant to Section 4(f) hereof.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Guarantors, the
Purchasers, any Indemnified Person referred to herein and their respective
successors and assigns and, in the case of natural persons, their heirs and
legal representatives, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The terms "successors
30
<PAGE>
and assigns" shall not include a purchaser of any of the Notes from any of the
Purchasers merely because of such purchase.
10. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company or any Guarantor,
to it at 10112 N.E. 10th Street, Suite 201, Bellevue, Washington 98004,
Attention: Marc W. Evanger, with a copy to John B. Tehan, Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York 10017 and (b) if to the
Purchasers, c/o Donaldson, Lufkin & Jenrette Securities Corporation, 140
Broadway, New York, New York 10005, Attention: Ivy Dodes, with a copy to Ken
Moelis, Donaldson, Lufkin & Jenrette Securities Corporation, 140 Broadway, New
York, New York 10005 and with a copy to Robert Donatucci, Brown & Wood LLP, One
World Trade Center, New York, New York 10048, or in any case to such other
address as the person to be notified may have requested in writing.
Anything herein to the contrary notwithstanding, the representations,
warranties, covenants and agreements of the Company and the Guarantors set forth
herein are joint and several.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
IN SUCH STATE.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
31
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Guarantors and the Purchasers.
Very truly yours,
QUALITY FOOD CENTERS, INC.
By: /s/ Marc Evanger
-----------------------------
Name:
Title:
QUALITY FOOD HOLDINGS, INC.
By: /s/ Marc Evanger
-----------------------------
Name:
Title:
HUGHES MARKETS, INC.
(Effective on and as of the Closing
Date referred to herein.)
By: /s/ Marc Evanger
-----------------------------
Name:
Title:
KU ACQUISITION CORPORATION
By: /s/ Marc Evanger
-----------------------------
Name:
Title:
32
<PAGE>
Accepted and agreed to as of
the date first above written:
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BANCAMERICA SECURITIES, INC.
By: DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
By: /s/ Donald S. Kinsey
------------------------------
Authorized Signatory
33
<PAGE>
SCHEDULE I
Principal Amount
----------------
Donaldson, Lufkin & Jenrette Securities
Corporation................................ $75,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................... 60,000,000
BancAmerica Securities, Inc.................... 15,000,000
------------
Total $150,000,000
============
Sch I-1
<PAGE>
EXHIBIT A
Form of Registration Rights Agreements
Sch I-2
<PAGE>
EXHIBIT B
Form of Bogle & Gates Opinion
<PAGE>
EXHIBIT C
Form of Simpson Thacher Opinion
<PAGE>
EXHIBIT D
Form of O'Melveny & Myers Opinion
<PAGE>
EXHIBIT E
Form of Rosenberg & Liebentritt Opinion
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of March 19, 1997
by and among
QUALITY FOOD CENTERS, INC.,
as Issuer,
the Guarantors named on the signature pages hereof,
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
and
BANCAMERICA SECURITIES, INC.,
as Purchasers
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of March 19, 1997 among Quality Food Centers, Inc., a Washington
corporation (the "Issuer"), the Guarantors named on the signature pages hereof,
and Donaldson, Lufkin & Jenrette Securities Corporation, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and BancAmerica Securities, Inc. (collectively, the
"Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated March 13,
1997 among the Issuer, the Guarantors named on the signatures pages hereof and
the Purchasers (the "Purchase Agreement"), which provides for the sale by the
Issuer to the Purchasers of $150,000,000 aggregate principal amount of the
Issuer's 8.70% Senior Subordinated Notes due 2007 (the "Securities"). In order
to induce the Purchasers to enter into the Purchase Agreement, the Issuer and
the Guarantors named on the signature pages hereof have agreed to provide to the
Purchasers and their respective direct and indirect transferees, among other
things, the registration rights for the Securities set forth in this Agreement.
The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Purchase Agreement.
NOW THEREFORE, in consideration of the mutual agreements set forth herein
and in the Purchase Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
SECTION 1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings (and, unless otherwise indicated, capitalized terms used herein without
definition shall have the meanings ascribed to them by the Purchase Agreement):
Advice: See Section 5 hereof.
Applicable Period: See Section 2 hereof.
beneficial owner: In the case of Securities held by The Depository Trust
Company or another similar depositary, a beneficial owner of such Securities.
Blackout Period: See Section 5 hereof.
Business Combination Blackout Period: See Section 5 hereof.
Effectiveness Period: See Section 3 hereof.
Effectiveness Target Date: See Section 4 hereof.
<PAGE>
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2 hereof.
Exchange Offer Registration Statement: See Section 2 hereof.
Exchange Securities: See Section 2 hereof.
Guarantors: The Guarantors, as defined in the Indenture, and including,
without limitation, the Guarantors named on the signature pages hereof.
Holder: Any registered holder of Transfer Restricted Securities.
Indenture: The Indenture dated as of March 19, 1997 among the Issuer, the
Guarantors and First Trust National Association, as trustee, pursuant to which
the Securities are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
Inspectors: See Section 5 hereof.
Issue Date: The date of first issuance of Securities under the Indenture.
Issuer: Quality Food Centers, Inc., a Washington corporation, until a
successor replaces it as the "Company" as defined in, and in accordance with the
provisions, of the Indenture, and thereafter means such successor.
Liquidated Damages: See Section 4 hereof.
Material Business Combination: See Section 5 hereof.
Parent: Such term shall have the meaning set forth in the Indenture.
Participating Broker-Dealer: See Section 2 hereof.
Person or person: An individual, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
business association, firm or other legal entity.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and any
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act) with respect to the offering of any
portion of the Exchange Securities and/or the Transfer Restricted Securities (as
applicable) covered by such Registration Statement, and all amendments and
supplements to such prospectus (including, without limitation, by the filing of
post-effective
2
<PAGE>
amendments to any such Registration Statement), and all material incorporated or
deemed to be incorporated by reference in such prospectus.
Purchase Agreement: See the introductory paragraph to this Agreement.
Purchasers: See the introductory paragraph to this Agreement.
Registration Default: See Section 4 hereof.
Registration Statement: Any registration statement of the Issuer and the
persons who at the time are the Guarantors, including, but not limited to, the
Exchange Offer Registration Statement and the Shelf Registration (if any), or
that otherwise covers any of the Transfer Restricted Securities or Exchange
Securities pursuant to the provisions of this Agreement, including the
Prospectus, all information (if any) deemed to be part of such registration
statement pursuant to Rule 430A promulgated under the Securities Act, all
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
Rule 144: Rule 144 promulgated pursuant to the Securities Act, as
currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
Rule 144A: Rule 144A promulgated pursuant to the Securities Act, as
currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated pursuant to the Securities Act, as
currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities: See the introductory paragraphs to this Agreement.
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
Shelf Date: See Section 2 hereof.
Shelf Notice: See Section 2 hereof.
Shelf Registration: See Section 3 hereof.
TIA: The Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
3
<PAGE>
Transfer Restricted Securities: The Securities upon original issuance
thereof and at all times subsequent thereto, until in the case of any such
Securities, the earliest of (i) the time at which a Registration Statement
covering such Securities has been declared effective by the SEC and such
Securities have been disposed of in accordance with and pursuant to such
effective Registration Statements, (ii) the time at which such Securities are
sold or distributed in compliance with Rule 144, or (iii) the time at which such
Securities cease to be outstanding (including, without limitation, upon an
exchange of such Securities for Exchange Securities in the Exchange Offer).
Trustee: The trustee under the Indenture and, if applicable, the trustee
under the indenture governing the Exchange Securities.
underwritten registration or underwritten offering: A registration in
which securities of the Issuer or a Guarantor are sold to an underwriter for
reoffering to the public.
For purposes of this agreement, all references to information which is
"included" or "contained" in a Registration Statement, Prospectus or preliminary
Prospectus, and all references of like import, shall be deemed to mean and
include the information incorporated or deemed to be incorporated by reference
therein, and all references to any amendment or supplement to a Registration
Statement, the Prospectus or any preliminary Prospectus, and all references of
like import, shall be deemed to mean and include the filing of any document
under the Exchange Act which is incorporated or deemed to be incorporated by
reference therein.
SECTION 2. Exchange Offer.
(a) The Issuer and the Guarantors agree to use their reasonable best
efforts to file with the SEC within 90 days after the Issue Date a registration
statement related to an offer to exchange (the "Exchange Offer") any and all of
the Transfer Restricted Securities for a like aggregate principal amount of
notes of the Issuer guaranteed on a like basis by the Guarantors (such notes and
guarantees, collectively the "Exchange Securities") which Exchange Securities
will be (i) substantially identical to (and will carry the same rights to
accrued and unpaid interest as) the Securities, except that such Exchange
Securities will not contain terms with respect to transfer restrictions and the
identity of the Guarantors may be different from the Guarantors that initially
guaranteed the Securities pursuant to the Indenture so long as the Securities
are at all times guaranteed in compliance with the Indenture, (ii) entitled to
the benefits of the Indenture or a trust indenture which is substantially
identical to the Indenture (other than such changes to the Indenture or any such
identical trust indenture as are necessary to comply with any requirements of
the SEC to effect or maintain the qualification thereof under the TIA and except
that any provisions with respect to transfer restrictions may be appropriately
changed or removed) and which, in either case, has been qualified under the TIA,
and (iii) registered pursuant to an effective Registration Statement in
compliance with the Securities Act. The Exchange Offer will be registered
pursuant to the Securities Act on an appropriate form of Registration Statement
(the "Exchange Offer Registration Statement") and will comply with all
applicable tender offer rules and regulations promulgated pursuant to the
Exchange Act and shall be duly registered or qualified pursuant to all
applicable state
4
<PAGE>
securities or Blue Sky laws ; provided that the Issuer and Guarantor shall not
be required to (A) qualify generally to do business in any jurisdiction where
they are not then so qualified or (B) subject themselves to general taxation in
any jurisdiction where they are not then so subject to taxation. The Exchange
Offer shall not be subject to any condition, other than that the Exchange Offer
does not violate any applicable law or interpretation of the staff of the SEC.
No securities shall be included in the Exchange Offer Registration Statement
other than the Transfer Restricted Securities and the Exchange Securities. The
Issuer and the Guarantors agree to (x) use their reasonable best efforts to
cause the Exchange Offer Registration Statement to become effective pursuant to
the Securities Act within 180 days after the Issue Date; (y) keep the Exchange
Offer open for not less than 30 days (or such longer period required by
applicable law) after the date that the notice of the Exchange Offer referred to
below is mailed to Holders; and (z) use their reasonable best efforts to
consummate the Exchange Offer within 45 days after the Effectiveness Target
Date. Each Holder who participates in the Exchange Offer will be required to
represent that any Exchange Securities received by it will be acquired in the
ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
person to participate in the distribution of the Exchange Securities, and that
such Holder is not an "affiliate" of the Issuer or the Guarantors within the
meaning of Rule 405 of the Securities Act (or that if it is such an affiliate,
it will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable). Each Holder that is not a
Participating Broker-Dealer will be required to represent that it is not engaged
in, and does not intend to engage in, the distribution of the Exchange
Securities. Each Holder that (i) is a Participating Broker Dealer and (ii) will
receive Exchange Securities for its own account in exchange for the Transfer
Restricted Securities that it acquired as the result of market-making or other
trading activities will be required to acknowledge that it will deliver a
prospectus as required by law in connection with any resale of such Exchange
Securities. Upon consummation of the Exchange Offer in accordance with this
Agreement, the Issuer and the Guarantors shall have no further obligation to
register Transfer Restricted Securities pursuant to Section 3 of this Agreement.
(b) The Issuer and the Guarantors shall include within the Prospectus
contained in the Exchange Offer Registration Statement a section entitled "Plan
of Distribution," reasonably acceptable to the Purchasers, which shall contain a
summary statement of the positions taken or policies made by the staff of the
SEC with respect to the potential "underwriter" status of any broker-dealer that
is the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
Exchange Securities received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"). Such "Plan of Distribution" section shall also
allow the use of the Prospectus by all persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Securities.
The Issuer and the Guarantors shall use their reasonable best efforts to
keep the Exchange Offer Registration Statement effective and to amend and
supplement the Prospectus contained therein in order to permit such Prospectus
to be lawfully delivered by all persons subject to the prospectus delivery
requirements of the Securities Act for a period commencing
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on the date on which Exchange Offer Registration Statement is declared effective
and ending on the earlier of (i) 180 days after the date on which the Exchange
Offer is consummated (or such longer period if extended pursuant to the last
paragraph of Section 5 hereof) and (ii) the date on which all Participating
Broker-Dealers have sold their Exchange Securities (the "Applicable Period").
In connection with the Exchange Offer, the Issuer shall:
(a) mail as promptly as practicable to each Holder a copy of the
Prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related documents;
(b) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York; and
(c) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on which
the Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer, the Issuer
and the Guarantors shall:
(i) accept for exchange all Securities validly tendered and not
withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of Securities so accepted for exchange, Exchange Securities equal
in principal amount to the Securities of such Holder so accepted for
exchange.
(c) If (1) prior to the consummation of the Exchange Offer, applicable
interpretations of the staff of the SEC do not permit the Issuer and the
Guarantors to effect the Exchange Offer, or (2) if for any other reason the
Exchange Offer is not consummated by the date (the "Shelf Date") that is the
earlier of (x) 60 days after the effective date of the Exchange Offer
Registration Statement and (y) 240 days after the Issue Date, then the Issuer
shall promptly deliver to the Holders and the Trustee written notice thereof
(the "Shelf Notice") and the Issuer and the Guarantors shall use their
reasonable best efforts to file a Registration Statement pursuant to Section 3
hereof. Following the delivery of a Shelf Notice to the Holders of Transfer
Restricted Securities, the Issuer and the Guarantors shall not have any further
obligation to conduct the Exchange Offer pursuant to this Section 2 provided
that the Issuer and the Guarantors shall have the right, at their option, to
proceed to consummate the Exchange Offer so long as they shall also comply with
their obligations under Section 3 and, to the extent that they shall consummate
the Exchange Offer, their obligation to consummate a Shelf Registration shall
terminate.
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SECTION 3. Shelf Registration.
If the Issuer is required to deliver a Shelf Notice as contemplated by
Section 2(c) hereof, then:
(a) Shelf Registration. The Issuer and the Guarantors shall prepare and
use their reasonable best efforts to file with the SEC, within 45 days after the
Shelf Date, a Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Transfer Restricted Securities
(the "Shelf Registration"). The Shelf Registration shall be on Form S-3 or
another appropriate form permitting registration of the Transfer Restricted
Securities for resale by the Holders in the manner or manners designated by them
(including, without limitation, one or more underwritten offerings). The Issuer
and the Guarantors shall not permit any securities other than the Transfer
Restricted Securities to be included in the Shelf Registration. The Issuer and
the Guarantors shall use their reasonable best efforts, as described in Section
5(b) hereof, to cause the Shelf Registration to be declared effective pursuant
to the Securities Act on or prior to the 135th day after the Shelf Date and to
keep the Shelf Registration continuously effective under the Securities Act
until the date which is 36 months (or, if the holding period under Rule 144(k)
under the Securities Act is reduced to two years, 24 months) after the Issue
Date (or such longer period if extended pursuant to the last paragraph of
Section 5 hereof or the last sentence of the first paragraph of Section 9(b)
hereof) or such shorter period ending when either (1) all Transfer Restricted
Securities covered by the Shelf Registration have been sold in the manner set
forth and as contemplated in the Shelf Registration or (2) there cease to be
outstanding any Transfer Restricted Securities (the "Effectiveness Period").
(b) Supplements and Amendments. The Issuer and the Guarantors shall
promptly supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act or the SEC, or if
reasonably requested by the Holders of a majority in aggregate principal amount
of the Transfer Restricted Securities covered by such Registration Statement or
by any managing underwriter of such Transfer Restricted Securities.
(c) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
pursuant to this Agreement unless and until such Holder furnishes to the Issuer,
but only to the extent requested in writing by the Issuer, such information
specified in Item 507 or 508, as applicable, of Regulation S-K under the
Securities Act relating to such Holder which is required to be included in any
Shelf Registration or related Prospectus or preliminary Prospectus. Each Holder
of any Transfer Restricted Securities registered pursuant to any Shelf
Registration agrees to furnish promptly to the Issuer all information required
to be disclosed in order to make the information previously furnished to the
Issuer by such Holder not materially misleading.
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SECTION 4. Liquidated Damages.
(a) The Issuer, the Guarantors and the Purchasers agree that the Holders
of Transfer Restricted Securities will suffer damages if the Issuer or the
Guarantors fail to fulfill their obligations pursuant to Section 2 or Section 3
hereof and that it would not be possible to ascertain the extent of such
damages. Accordingly, in the event of such failure by the Issuer or the
Guarantors to fulfill such obligations, the Issuer and the Guarantors hereby
agree to pay liquidated damages ("Liquidated Damages") to each Holder of
Transfer Restricted Securities under the circumstances and to the extent set
forth below:
(i) if neither the Exchange Offer Registration Statement nor the
Shelf Registration has been filed with the SEC on or prior to the date
specified for such filing; or
(ii) if neither the Exchange Offer Registration Statement nor the
Shelf Registration is declared effective by the SEC on or prior to the
date specified herein for such effectiveness (the "Effectiveness Target
Date"); or
(iii) if an Exchange Offer Registration Statement is declared
effective by the SEC and, on or prior to 45 days following the earlier of
(i) the effectiveness thereof and (ii) the Effectiveness Target Date, the
Issuer and the Guarantors have not exchanged Exchange Securities for all
Securities validly tendered and not withdrawn in accordance with the terms
of the Exchange Offer; or
(iv) the Shelf Registration has been declared effective by the SEC
and such Shelf Registration ceases to be effective or such Shelf
Registration Statement or the related Prospectus ceases to be usable in
connection with the resale of Transfer Restricted Securities at any time
during the Effectiveness Period (other than because of a Business
Combination Blackout Period); or
(v) the Prospectus which is a part of the Exchange Offer
Registration Statement ceases to be usable during the Applicable Period
(other than because of a Business Combination Blackout Period) in
connection with the resale of Exchange Securities by Participating
Broker-Dealers; or
(vi) there shall have occurred a Business Combination Blackout
Period in the 60-day period preceding the end of the Effectiveness Period
or the aggregate number of days in all Business Combination Blackout
Periods during any 12-month period shall have exceeded 45 days;
(any of the foregoing, a "Registration Default") then, with respect to the first
90-day period or portion thereof following such Registration Default, the Issuer
and the Guarantors shall pay to each Holder of Transfer Restricted Securities
(or, in the case of Registration Defaults referred to in clause (v) above, to
Participating Broker-Dealers holding Transfer Restricted Securities) Liquidated
Damages in an amount equal to $.05 per week per $1,000 principal amount of
Transfer Restricted Securities held by such Holder or such Participating
Broker-Dealer, as
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applicable, for each week or portion thereof that the Registration Default
continues. The amount of such Liquidated Damages will increase by an additional
$.05 per week per $1,000 principal amount of Transfer Restricted Securities with
respect to each subsequent 90-day period or portion thereof until all
Registration Defaults have been cured; provided, however, that Liquidated
Damages shall not at any time exceed $.25 per week per $1,000 principal amount
of Transfer Restricted Securities (regardless of whether one or more than one
Registration Default is outstanding). Following the cure of all Registration
Defaults relating to any Transfer Restricted Securities, the accrual of
Liquidated Damages with respect to such Transfer Restricted Securities will
cease, provided that Liquidated Damages may thereafter again begin to accrue
upon the occurrence of any further Registration Default. A Registration Default
under clause (i) above shall be cured on the date that either the Exchange Offer
Registration Statement or the Shelf Registration is filed with the SEC; a
Registration Default under clause (ii) above shall be cured on the date that
either the Exchange Offer Registration Statement or the Shelf Registration is
declared effective by the SEC; a Registration Default under clause (iii) above
shall be cured on the earlier of the date (A) the Exchange Offer is consummated
or (B) the Issuer delivers a Shelf Notice to the Holders of Transfer Restricted
Securities; a Registration Default under clause (iv) above shall be cured on the
earlier of the date (A) the Shelf Registration again become effective, the Shelf
Registration Statement and the related Prospectus are useable in connection with
the resale of Transfer Restricted Securities and the Issuer shall have notified
Holders that use of such Prospectus may be resumed and shall have delivered to
Holders any required amendments or supplements thereto or (B) the Effectiveness
Period expires; a Registration Default under clause (v) above shall be cured on
the date the Prospectus which is part of the Exchange Offer Registration
Statement is useable in connection with the resale of Exchange Securities by
Participating Broker- Dealers and the Issuer shall have notified Participating
Broker-Dealers that use of such Prospectus may be resumed and shall have
delivered to them any required amendments or supplements thereto; and a
Registration Default under clause (vi) above resulting from the occurrence of a
Business Combination Blackout Period in the 6-month period preceding the end of
the Effectiveness Period, or resulting from the aggregate number of days in all
Business Combination Blackout Periods in any 12-month period exceeding 45 days,
shall be deemed to have been cured when such Business Combination Blackout
Period or the then most recent Business Combination Blackout Period, as the case
may be, shall have terminated.
(b) The Issuer shall notify the Trustee within one business day after each
and every date on which a Registration Default occurs. Liquidated Damages shall
be paid by the Issuer and the Guarantors to the Holders on the semi-annual
interest payment dates provided in the Indenture to the Holders on the related
interest payment record dates or by wire transfer of immediately available funds
to the accounts specified by them or by mailing checks to their registered
addresses if no such accounts have been specified on or before the fifth
business day preceding the semi-annual interest payment date provided in the
Indenture (whether or not any interest is then payable on the Securities);
provided that, in the case of Securities held in global book-entry form, the
payment of Liquidated Damages shall be made in accordance with the Depositary's
customary procedures; and provided, further, that if any Security is redeemed by
the Issuer or purchased by the Issuer pursuant to an Asset Sale Offer or Change
of Control Offer (as such terms are defined in the Indenture), then Liquidated
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Damages payable in respect of the Securities (or portions thereof) to be so
redeemed or purchased shall be paid to the person entitled to receive the
accrued and unpaid interest on such Securities (or portions thereof) on the
relevant redemption date or purchase date; and provided, further, that if the
principal of the Securities is declared or becomes due and payable prior to its
Stated Maturity (as defined in the Indenture) pursuant to the Indenture, then
all accrued and unpaid Liquidated Damages shall also be and become due and
payable immediately and, in the event that any such acceleration of the
Securities is rescinded or annulled in accordance with the provisions of the
Indenture, the acceleration of such Liquidated Damages shall likewise be
rescinded and annulled. Liquidated Damages shall accrue from and including the
date of the applicable Registration Default to but excluding the date when all
Registration Defaults have been cured.
SECTION 5. Registration Procedures.
In connection with the registration of any Exchange Securities or Transfer
Restricted Securities pursuant to Section 2 or 3 hereof, the Issuer and the
Guarantors shall effect such registration to permit the sale of such Exchange
Securities or Transfer Restricted Securities (as applicable) in accordance with
the intended method or methods of disposition thereof, and pursuant thereto the
Issuer and the Guarantors shall:
(a) Prepare and use their reasonable best efforts to file with the SEC, a
Registration Statement or Registration Statements as prescribed by Section 2 or
Section 3 hereof, and use their reasonable best efforts to cause such
Registration Statement to become effective and remain effective as provided
herein; provided that if (1) such filing is pursuant to Section 3 hereof or (2)
a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, before filing any Registration Statement or
Prospectus or any amendments or supplements thereto, the Issuer shall furnish to
the Holders and afford the Holders (and, if applicable, the beneficial owners)
of the Transfer Restricted Securities and each such Participating Broker-Dealer,
as the case may be, covered by such Registration Statement, their counsel and
the managing underwriters, if any, a reasonable opportunity to review copies of
all such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (at least 7
business days prior to such filing, or such later date as is reasonable under
the circumstances). The Issuer and the Guarantors shall not file any
Registration Statement or Prospectus or any amendments or supplements thereto
(including, without limitation, any documents which would, upon filing thereof,
be incorporated by reference therein) in respect of which the Holders, pursuant
to this Agreement, must be afforded an opportunity to review prior to the filing
of such document, if the Holders of a majority in aggregate principal amount of
the Transfer Restricted Securities covered by such Registration Statement, or
any such Participating Broker-Dealer, as the case may be, their counsel, or the
managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration and Exchange Offer Registration Statement,
as the case may be, as may be necessary to keep such Registration Statement
continuously effective for the
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Effectiveness Period or the Applicable Period, as the case may be (or, if
earlier, until such time as no Transfer Restricted Securities are outstanding);
use their reasonable best efforts to cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to them with respect to the disposition of all securities covered by
such Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any Securities being
sold by a Participating Broker-Dealer covered by any such Prospectus; the Issuer
and the Guarantors shall be deemed not to have used their reasonable best
efforts to keep a Registration Statement effective during the Effectiveness
Period or the Applicable Period, as applicable, if they voluntarily take any
action that would result in selling Holders of the Transfer Restricted
Securities covered thereby or Participating Broker-Dealers seeking to sell
Exchange Securities not being able to sell such Transfer Restricted Securities
or such Exchange Securities during that period, unless (i) such action is
required by applicable law or (ii) such action is taken by them in good faith
and for valid business reasons (not including avoidance of their obligations
hereunder), including, without limitation, the acquisition or divestiture of
assets (it being understood and agreed that the provisions of this sentence
shall not affect the Issuer's and the Guarantors' joint and several obligations
to pay Liquidated Damages in the event that a Registration Statement or
Prospectus is not effective or useable in connection with the resale of Transfer
Restricted Securities or Exchange Securities, as applicable, under the
circumstances set forth in Section 4 of this Agreement).
(c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, notify the selling Holders of Transfer Restricted
Securities, or each known Participating Broker-Dealer, as the case may be, their
counsel (to the extent previously identified to the Issuer) and the managing
underwriters, if any, promptly (but in any event within two business days) and
confirm such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective (including in such notice a written statement that any Holder may,
upon request, obtain from the Issuer, without charge, one conformed copy of such
Registration Statement or post-effective amendment including financial
statements and schedules, document incorporated or deemed to be incorporated by
reference and exhibits), (ii) of the issuance of any stop order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of any preliminary Prospectus or Prospectus or the initiation
of any proceedings for that purpose, (iii) if at any time when a Prospectus is
required by the Securities Act to be delivered in connection with sales of the
Transfer Restricted Securities the representations and warranties of the Issuer
or any Guarantor contained in any agreement (including any underwriting
agreement) contemplated by Section 5(m) hereof cease to be true and correct,
(iv) of the receipt by the Issuer or any Guarantor of any notification with
respect to the suspension of the qualification or exemption from qualification
of a Registration Statement or any of the Transfer Restricted Securities or
Exchange Securities to be sold by any Participating Broker-Dealer for offer or
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sale in any jurisdiction, or initiation of any proceeding for such purpose, (v)
of the happening of any event or any information becoming known that makes any
statement made in a Registration Statement, any preliminary Prospectus or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in a Registration Statement, any preliminary Prospectus or Prospectus or
any such documents so that, in the case of the Registration Statement, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading or so that, in the case of a preliminary Prospectus or
Prospectus, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Issuer's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, use their best efforts to prevent the issuance of
any order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Transfer
Restricted Securities or the Exchange Securities (as applicable) to be sold by
any Participating Broker-Dealer for sale in any jurisdiction, and, if any such
order is issued, to use their best efforts to obtain the withdrawal of any such
order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 hereof and if
requested by the managing underwriters, if any, or the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities being sold in
connection with an underwritten offering, (i) use their reasonable best efforts
to promptly incorporate in a Prospectus supplement or post-effective amendment
such information as the managing underwriters, if any, or such Holders or their
respective counsel reasonably request to be included therein, (ii) use their
reasonable best efforts to make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the Issuer
has received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment, and use their reasonable best efforts to
(iii) supplement or make amendments to such Registration Statement with such
information as the managing underwriters, if any, or such Holders or counsel
reasonably requests to be included therein.
(f) if (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, furnish to each selling Holder of Transfer
Restricted Securities and to each such Participating Broker-Dealer who so
requests, to counsel identified by any Holder or Participating Broker-Dealer,
and to each managing underwriter, if any, without charge, one conformed copy of
the Registration
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Statement or Registration Statements and each post-effective amendment thereto,
including financial statements, schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, deliver to each selling Holder and, if applicable,
beneficial owner of Transfer Restricted Securities, or each such Participating
Broker-Dealer, as the case may be, and to their respective counsel and to the
underwriters, if any, and their counsel without charge, as many copies of the
Prospectus or Prospectuses (including each form of preliminary Prospectus) and
each amendment or supplement thereto and any documents incorporated by reference
therein as such persons may reasonably request; and, subject to the last
paragraph of this Section 5 hereof, the Issuer and the Guarantors hereby consent
to the use of such Prospectus and each amendment or supplement thereto by each
of the selling Holders and beneficial owners of Transfer Restricted Securities
and each such Participating Broker-Dealer, as the case may be, and the
underwriters or agents, if any, and dealers (if any), in connection with the
offering and sale of the Transfer Restricted Securities covered by or the sale
by Participating Broker-Dealers of the Exchange Securities pursuant to such
Prospectus and any amendment or supplement thereto.
(h) If an Exchange Offer Registration Statement is filed pursuant to
Section 2 hereof, furnish to the Trustee, an opinion, dated the date of
consummation of the Exchange Offer, of counsel to the Issuer, to the effect that
the Exchange Securities have been duly authorized by the Issuer and, when
authenticated and delivered in exchange for the Securities, will be valid and
binding obligations of the Issuer, enforceable in accordance with their terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, fraudulent transfer or other
similar laws relating to or affecting creditors' rights generally or by general
principles of equity, and will be entitled to the benefits of the Indenture and
to the further effect that such opinion may be relied upon by each Holder of
Exchange Securities.
(i) Prior to any public offering of Transfer Restricted Securities or any
delivery of a Prospectus contained in the Exchange Offer Registration Statement
by any Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period, to use their reasonable best efforts to register or
qualify, and to cooperate with the selling Holders of Transfer Restricted
Securities or each such Participating Broker-Dealer, as the case may be, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Transfer Restricted Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions as any selling Holder, any
selling beneficial owner, any Participating Broker-Dealer, or the managing
underwriters reasonably request, provided that where Exchange Securities held by
Participating Broker-Dealers or Transfer Restricted Securities are offered other
than through an underwritten offering, the Issuer and the Guarantors agree to
cause their counsel to perform Blue Sky investigations and file registrations
and qualifications required to be filed
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pursuant to this Section 5(i) as so requested by the selling Holders (or, if
applicable, beneficial owners) or Participating Broker-Dealers; keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Securities held by
Participating Broker-Dealers or the Transfer Restricted Securities covered by
the applicable Registration Statement; provided that the Issuer and the
Guarantors shall not be required to (A) qualify generally to do business in any
jurisdiction where they are not then so qualified or (B) subject themselves to
general taxation in any such jurisdiction where they are not then so subject to
taxation.
(j) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Transfer Restricted Securities and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Transfer Restricted Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company, and enable such Transfer
Restricted Securities to be in such denominations and registered in such names
as the managing underwriters, if any, or Holders may reasonably request.
(k) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) above, as promptly as practicable prepare and use
their reasonable best efforts to (subject to Section 5(a) hereof) file with the
SEC, at the expense of the Issuer and the Guarantors, a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Transfer Restricted Securities being sold
thereunder or to the purchasers of the Exchange Securities to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, the Issuer and the Guarantors
shall not be required to comply with this Section 5(k) if, and only for so long
as (A) either (I) the Subject Entity (as defined in the Indenture) or any of its
subsidiaries shall be engaged in a material acquisition or disposition (a
"Material Business Combination") and (II) (aa) such Material Business
Combination is required to be disclosed in a Registration Statement, the related
Prospectus, or any amendment or supplement thereto, or failure by the Issuer to
disclose such transaction in such Registration Statement, the related
Prospectus, or any amendment or supplement thereto, as then amended or
supplemented, would cause such Registration Statement to contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, or
would cause such related Prospectus to contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not
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misleading, (bb) information regarding the existence of such Material Business
Combination has not been made publicly disclosed by or on behalf of the Issuer
and the Guarantors and (cc) a majority of the members of the Board of Directors
of the Subject Entity determines in the exercise of their good faith judgment
that disclosure of such Material Business Combination would not be in the best
interest of the Issuer and its subsidiaries or would have a material adverse
effect on the consummation of such Material Business Combination and (B) the
Issuer notifies the Holders to suspend use of the relevant Prospectus within two
business days after such Board of Directors makes the relevant determination set
forth in clause (A); provided, however, that in each such case each of the
Applicable Period and the Effectiveness Period shall be extended by the number
of days during which the use of the applicable Prospectus in connection with the
resale of Transfer Restricted Securities or Exchange Securities, as applicable,
was suspended pursuant to the foregoing.
(l) Prior to the effective date of the first Registration Statement
relating to the Transfer Restricted Securities, (i) provide the Trustee with
certificates for the Transfer Restricted Securities in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP number for
the Transfer Restricted Securities.
(m) In connection with an underwritten offering of Transfer Restricted
Securities pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings and take all such other
actions as are reasonably requested by the managing underwriters in order to
expedite or facilitate the registration or the disposition of such Transfer
Restricted Securities, and in such connection, (i) make such representations and
warranties to the underwriters, with respect to the business of the Issuer, the
Guarantors and their respective subsidiaries and the Registration Statement, any
preliminary Prospectus, the Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, as are customarily
made by issuers to underwriters in underwritten offerings, and confirm the same
if and when requested; (ii) obtain opinions of counsel to the Issuer and
Guarantors and, if applicable, to the Parent and to such other persons or
businesses which have been or are to be acquired by the Issuer, any Guarantor,
Parent or any of their respective subsidiaries and updates thereof in form and
substance reasonably satisfactory to the managing underwriters, addressed to the
underwriters covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
underwriters; (iii) obtain "cold comfort" letters and updates thereof in form
and substance reasonably satisfactory to the managing underwriters from the
independent certified public accountants of the Issuer and the Guarantors (and,
if necessary, any other independent certified public accountants of Parent, or
any subsidiary of the Issuer, Parent or any of the Guarantors or of any person
or business acquired or to be acquired by any of them for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to each of the underwriters, such letters to
be in customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings and such other
matters as are reasonably requested by underwriters as permitted by Statement on
Auditing Standards No. 72; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification and contribution provisions and
procedures no less favorable than those set forth in Section 7 hereof (or such
other provisions and procedures acceptable to Holders of a majority in
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aggregate principal amount of Transfer Restricted Securities covered by such
Registration Statement and the managing underwriters or agents) with respect to
all parties to be indemnified pursuant to said Section. The above shall be done
at each closing under such underwriting agreement, or as and to the extent
required thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, make available for inspection by each selling
Holder and each beneficial owner of such Transfer Restricted Securities being
sold, or each such Participating Broker-Dealer, as the case may be, any
underwriter participating in any such disposition of Transfer Restricted
Securities, if any, and any attorney, accountant or other agent retained by any
such selling Holder or beneficial owner or any such Participating Broker-Dealer,
as the case may be, or underwriter (collectively, the "Inspectors"), at the
offices where normally kept, during reasonable business hours, all financial and
other records, pertinent corporate documents and properties of the Issuer, the
Guarantors, Parent and their subsidiaries (collectively, the "Records") as shall
be reasonably necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of the Issuer,
the Guarantors and Parent and their respective subsidiaries (and, if applicable,
of any person or business acquired or to be acquired by any of them) and their
respective counsel and independent accountants to supply all information, and to
make themselves available for customary due diligence discussions, in each case
as reasonably requested by any such Inspector in connection with such
Registration Statement. If requested by the Issuer, each of the Inspectors will
agree with the Issuer that Records which the Issuer determines, in good faith to
be confidential and which the Issuer notifies the Inspectors in writing are
confidential shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
such Registration Statement or the Prospectus, (ii) the disclosure of such
Records is required pursuant to any applicable law or regulation, (iii) the
disclosure of such Records is made pursuant to a subpoena or other order of, or
request (whether formal or informal) from, any governmental or regulatory body
or official or any court or tribunal in connection with any legal, governmental
or regulatory proceeding or investigation or the preparation therefor, or (iv)
the information in such Records has been made available to the public.
(o) Provide an indenture trustee for the Transfer Restricted Securities or
the Exchange Securities, as the case may be, and cause the indenture for such
Securities to be qualified under the TIA not later than the effective date of
the Exchange Offer or the first Registration Statement relating to the Transfer
Restricted Securities; and in connection therewith, cooperate with the trustee
under any such indenture and the Holders of the Transfer Restricted Securities,
to effect such changes to such indenture as may be required for such indenture
to be so qualified in accordance with the terms of the TIA; and execute, and use
its reasonable best efforts to cause such trustee to execute, all documents as
may be required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable such indenture to be so qualified in
a timely manner.
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(p) Comply with all applicable rules and regulations of the SEC and, as
soon as reasonably practicable, make generally available to its securityholders
consolidated earnings statements of the Issuer (including a condensed
consolidating footnote if required under SEC rules) and, if required by the SEC,
earnings statements for the Guarantors, Parent or any of their respective
subsidiaries (which need not be certified by an independent public accountant)
that satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.
(q) If an Exchange Offer is to be consummated, upon delivery of the
Transfer Restricted Securities by Holders to the Issuer (or to such other Person
as directed by the Issuer) in exchange for the Exchange Securities, the Issuer
and the Guarantors shall mark, or cause to be marked, on such Transfer
Restricted Securities that such Transfer Restricted Securities are being
cancelled in exchange for the Exchange Securities; in no event shall such
Transfer Restricted Securities be marked as paid or otherwise satisfied.
(r) Cooperate with each seller of Transfer Restricted Securities covered
by any Registration Statement and each underwriter, if any, participating in the
disposition of such Transfer Restricted Securities and their respective counsel
in connection with any filings required to be made with the National Association
of Securities Dealers, Inc. (the "NASD").
(s) Use their reasonable best efforts to take all other steps necessary to
effect the registration of the Transfer Restricted Securities covered by a
Registration Statement contemplated hereby.
(t) Use their reasonable best efforts to cause the Transfer Restricted
Securities or the Exchange Securities, as applicable, covered by an effective
registration statement required by Section 2 or Section 3 hereof to be rated
with appropriate rating agencies, if so requested by the Holders of a majority
in aggregate principal amount of Transfer Restricted Securities relating to such
registration statement or the managing underwriters in connection therewith, if
any.
The Issuer may require each seller of Transfer Restricted Securities or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuer such information regarding such seller or Participating
Broker-Dealer and the distribution of such Transfer Restricted Securities or
Exchange Securities to be sold by such Participating Broker- Dealer, as the case
may be, as the Issuer may, from time to time, reasonably request. The Issuer may
exclude from such registration the Transfer Restricted Securities or Exchange
Securities of any seller or Participating Broker-Dealer, as the case may be, who
fails to furnish such information within a reasonable time after receiving such
request.
The Issuer may, by notice to Holders, require the Holders to suspend use
of the Prospectus which is part of the Shelf Registration Statement (and, in the
case of Participating Broker-Dealers, to suspend use of the Prospectus which is
part of the Exchange Offer Registration Statement) (i) for any number of periods
not to exceed 45 days in the aggregate in any 12-month period (other than the
60-day period preceding the end of the Effectiveness Period) if the Subject
Entity or any of its subsidiaries shall be engaged in a Material Business
Combination and the condition set forth in the last sentence of Section 5(k)
shall have been
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satisfied or (ii) if any event of the kind described in Section 5(c)(ii),
5(c)(iv), 5(c)(v) or 5(c)(vi) hereof shall have occurred (in each case other
than as a result of a Material Business Combination or matters relating thereto)
(any period during which the use of such Prospectus is suspended as provided in
clause (i) or (ii) above being hereinafter called a "Blackout Period," and any
period during which the use of such Prospectus is suspended as provided in
clause (i) being hereinafter called a "Business Combination Blackout Period").
Each Holder of Transfer Restricted Securities and each Participating
Broker-Dealer agrees by acquisition of such Transfer Restricted Securities or
Exchange Securities to be sold by such Participating Broker-Dealer, as the case
may be, that, upon receipt of any notice from the Issuer to suspend the use of
the relevant Prospectus because an event or circumstance described in clause (i)
or (ii) of the preceding sentence has occurred, such Holder shall forthwith
discontinue disposition of such Transfer Restricted Securities covered by such
Prospectus or Exchange Securities to be sold by such Participating Broker-Dealer
covered by such Prospectus, as the case may be, until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
5(k) hereof, or until it is advised in writing (the "Advice") by the Issuer that
the use of the applicable Prospectus may be resumed, and has received copies of
any amendments or supplements thereto. In the event the Issuer shall give any
such notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during periods from and including the date of the
giving of such notice to and including the date when each seller of Transfer
Restricted Securities covered by such Registration Statement or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) or (y) the Advice.
SECTION 6. Registration Expenses.
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuer and the Guarantors shall be borne by the
Issuer and the Guarantors, whether or not the Exchange Offer or a Shelf
Registration is filed or becomes effective, including, without limitation, (i)
all registration and filing fees (including, without limitation, (A) fees with
respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Transfer Restricted Securities or Exchange Securities and determination of the
eligibility of the Transfer Restricted Securities or Exchange Securities for
investment under the laws of such jurisdictions (x) where the Holders or
beneficial owners of Transfer Restricted Securities are located, in the case of
the Exchange Securities, or (y) as provided in Section 5(i) hereof, in the case
of Transfer Restricted Securities or Exchange Securities to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Transfer Restricted Securities or Exchange Securities in a form eligible for
deposit with The Depository Trust Company and of printing Prospectuses if the
printing of Prospectuses is requested by the managing underwriters, if any, or,
in respect of Transfer Restricted Securities or Exchange Securities to be sold
by any Participating Broker-Dealer during the Applicable Period, by the Holders
of a majority in aggregate principal amount of the Transfer Restricted
Securities included in any Registration Statement or of such Exchange
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Securities, as the case may be), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Issuer, the Guarantors
and their subsidiaries and affiliates and, if applicable, Parent and its
subsidiaries and, if applicable, counsel for any person or business acquired or
to be acquired by the Issuer, any of the Guarantors, Parent or any of their
respective subsidiaries, (v) fees and disbursements of all independent certified
public accountants referred to in Section 5(m)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) the fees and expenses of any
"qualified independent underwriter" or other independent appraiser participating
in an offering pursuant to Section 3 as contemplated by Rule 2720 of the Conduct
Rules of the NASD, (vii) rating agency fees, (viii) Securities Act liability
insurance, if the Issuer and the Guarantors desire such insurance, (ix) fees and
expenses of all other Persons retained by the Issuer, any of the Guarantors or,
if applicable, Parent, (x) internal expenses of the Issuer, the Guarantors and,
if applicable, Parent (including, without limitation, all salaries and expenses
or officers and employees of the Issuer and the Guarantors performing legal or
accounting duties), (xi) the expense of any audit, (xii) the fees and expenses
incurred in connection with the listing of the securities to be registered on
any securities exchange and (xiii) the expenses relating to printing, word
processing and distributing all Registration Statements, Prospectuses,
preliminary Prospectuses, amendments or supplements to any of the foregoing,
underwriting agreements, securities sales agreements and indentures. Nothing
contained in this Section 6 shall require the Issuer or any Guarantor to pay or
reimburse any Holder for any underwriting discounts or commissions attributable
to the sale of any Transfer Restricted Securities of such Holder in an
underwritten offering pursuant to a Registration Statement filed pursuant to
Section 3 of this Agreement.
(b) In connection with any Shelf Registration hereunder, the Issuer and
the Guarantors shall reimburse the Holders and beneficial owners of the Transfer
Restricted Securities being registered in such registration for the reasonable
fees and disbursements of not more than one counsel chosen by the Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities to
be included in such Registration Statement and other reasonable out-of-pocket
expenses of the Holders and beneficial owners of Transfer Restricted Securities
reasonably incurred in connection with the registration of the Transfer
Restricted Securities.
SECTION 7. Indemnification.
The Issuer and the Guarantors agree to indemnify and hold harmless (i)
each of the Purchasers, each Holder of Transfer Restricted Securities, each
beneficial owner of Transfer Restricted Securities, each Holder of Exchange
Securities, each beneficial owner of Exchange Securities and each Participating
Broker-Dealer, (ii) each person, if any, who controls (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) any Person
referred to in clause (i) (any of the Persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person"), and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any of such Person referred to in clause (i) or any controlling person (any
Person referred to in clause (i), (ii) or (iii) may hereinafter be referred to
as an "Indemnified Person") to the fullest extent lawful, from and against any
and all losses, claims damages, liabilities, judgments, actions and expenses
(including, without
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limitation, and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Person) directly or indirectly caused by, related to, based upon, or
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary Prospectus or Prospectus (in each case as amended or supplemented if
the Issuer shall have furnished any amendments or supplements thereto), or
caused by, related to, based upon, or arising out of or in connection with any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Indemnified Person furnished to the
Issuer in writing by such Indemnified Person expressly for use therein. The
Issuer and the Guarantors shall notify the Holders promptly upon becoming aware
thereof of the institution, threat or assertion of any claim, proceeding
(including any governmental investigation) or litigation of which any of them
shall have become aware relating to this Agreement which involves the Issuer,
any Guarantor, the Parent or an Indemnified Person.
In connection with any Registration Statement in which a Holder of
Transfer Restricted Securities is participating, such Holder of Transfer
Restricted Securities agrees, severally and not jointly, to indemnify and hold
harmless the Issuer and each Guarantor, their respective directors, their
respective officers who signed such Registration Statement and each person who
controls the Issuer or any Guarantor within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Issuer and the Guarantor to each Indemnified
Person, but only with reference to information relating to such Indemnified
Person furnished to the Issuer in writing by such Indemnified Person expressly
for use in any Registration Statement, preliminary Prospectus or Prospectus, (in
each case including any amendment or supplement thereto). The liability of any
Indemnified Person pursuant to this paragraph shall in no event exceed the net
proceeds received by such Indemnified Person from sales of Transfer Restricted
Securities giving rise to such obligations.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the "indemnifying
person") in writing, and the indemnifying person shall be entitled to retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying person may reasonably
designate in such proceeding and shall pay the reasonable fees and expenses
actually incurred by such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party, unless (i) the indemnifying person and the indemnified
party shall have mutually agreed in writing to the contrary, (ii) the
indemnifying person failed promptly to
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assume the defense and employ counsel reasonably satisfactory to the indemnified
party or (iii) the named parties to any such action (including any impleaded
parties) include both such indemnified party and the indemnifying person, or any
affiliate of the indemnifying person, and such indemnified party shall have been
advised by counsel that either (x) there may be one or more legal defenses
available to it which are different from or additional to those available to the
indemnifying person or such affiliate of the indemnifying person or (y) a
conflict may exist between such indemnified party and the indemnifying person or
such affiliate of the indemnifying person (in which case the indemnifying person
shall not have the right to assume the defense of such action on behalf of such
indemnified party, it being understood, however, that the indemnifying person
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all such indemnified parties, which firm (together with any such local counsel)
shall be designated in writing by those indemnified parties who sold a majority
in aggregate principal amount of Transfer Restricted Securities sold by all such
indemnified parties, and any such separate firm for the Issuer and the
Guarantors, their directors, their officers who signed the Registration
Statement and such control persons of the Issuer and the Guarantors shall be
designated in writing by the Issuer. The indemnifying person shall not be liable
for any settlement of any proceeding effected without its prior written consent,
but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying person agrees to indemnify each indemnified party
from and against any and all loss or liability by reason of such settlement or
judgment. No indemnifying person shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs of
this Section 7 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or expenses referred to therein (other than by
reason of the exceptions provided therein), then each indemnifying person under
such paragraphs, in lieu of indemnifying such indemnified party thereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities, or expenses, as incurred,
(i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnified party on the one hand and the indemnifying person(s)
on the other in connection with the statements or omissions that resulted in
such losses, claims, damages, liabilities, or expenses or (ii) if the allocation
provided by clause (i) above 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 indemnifying person(s)
and the indemnified party, as well as any other relevant equitable
considerations. The relative fault of the Issuer and the Guarantors on the one
hand and any Indemnified Persons on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuer and the Guarantors or by such
Indemnified Person and the parties' relative
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intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The parties agree that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by pro rata allocation (even if such
indemnified parties were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include any reasonable legal or other expenses actually incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall an
Indemnified Person be required to contribute any amount in excess of the amount
by which net proceeds received by such Indemnified Person from sales of Transfer
Restricted Securities or Exchange Securities exceeds the amount of any damages
that such Indemnified Person has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 7 will
be in addition to any liability which the indemnifying parties may otherwise
have to the indemnified parties referred to above. The Indemnified Persons'
obligations to contribute pursuant to this Section 7 are several in proportion
to the respective principal amount of Securities sold by each Indemnified
Persons hereunder and not joint.
SECTION 8. Rules 144 and 144A
The Issuer and the Guarantors covenant that they will file the annual,
quarterly and other reports and information required to be filed by the Issuer
and the Guarantors pursuant to the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder in a timely manner and, upon
the request of any Holder or beneficial owner of Transfer Restricted Securities,
they will make available to such Holder or beneficial owner of Transfer
Restricted Securities in connection with any sale thereof and to any prospective
purchaser of such Transfer Restricted Securities from such Holder or beneficial
owner, all such other information (if any), including, without limitation,
information with respect to the Parent, required by Rule 144 and Rule 144A under
the Securities Act in order to permit sales of such Transfer Restricted
Securities pursuant to Rule 144 and Rule 144A.
The Issuer and the Guarantors further covenant that they will file the
annual, quarterly and other reports and information, including, without
limitation, information with respect to the Parent, necessary to satisfy the
requirements of Rule 144(d) or any successor provision thereto.
The Issuer and the Guarantors further covenant that they will take such
further action as any Holder or beneficial owner of Transfer Restricted
Securities may reasonably request
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from time (including, without limitation, providing such information, if any,
including, without limitation, information with respect to the Parent, as may be
required pursuant to Rule 144A(d)(iv) in order to permit resales of Transfer
Restricted Securities pursuant to Rule 144A) to time to enable such Holder or
beneficial owner, as applicable, to sell Transfer Restricted Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 and Rule 144A under the Securities Act, as such rules
may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC.
SECTION 9. Underwritten Registrations.
(a) If any of the Transfer Restricted Securities covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Transfer Restricted Securities included in such offering and reasonably
acceptable to the Issuer.
No Holder or beneficial owner of Transfer Restricted Securities may
participate in any underwritten registration hereunder, unless such Holder or
beneficial owner (a) agrees to sell its Transfer Restricted Securities on the
basis provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
SECTION 10. Miscellaneous.
(a) Remedies. In the event of a breach by the Issuer or any Guarantor of
any of its obligations under this Agreement, each Holder or beneficial owner of
Transfer Restricted Securities, in addition to being entitled to exercise all
rights provided herein, in the Indenture or, in the case of the Purchasers, in
the Purchase Agreement, or granted by law, including recovery of damages, will
be entitled to specific performance of its rights under this Agreement. The
Issuer and the Guarantors agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by any of them of any
of the provisions of this Agreement and hereby further agree that, in the event
of any action for specific performance in respect of such breach, they shall
waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Issuer and the Guarantors have not, as
of the date hereof, and they shall not, after the date of this Agreement, enter
into any agreement with respect to any of their respective securities that is
inconsistent with or conflicts with the rights granted to the Holders of
Transfer Restricted Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Issuer and the Guarantors have not entered, and will not
enter, into any agreement with respect to any of their respective securities
which grants or will grant to any Person piggyback registration rights with
respect to a Registration Statement, except for agreements entered into on or
prior to the date of this Agreement under which such piggy-back registration
rights have been waived in writing by all of the holders thereof.
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(c) Amendments and Waivers. Except as provided in Section 10(d) below, the
provisions of this Agreement, including the provisions of this sentence, may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given, unless the Issuer has obtained the
written consent of Holders of at least a majority of the then outstanding
aggregate principal amount of Transfer Restricted Securities. Notwithstanding
the foregoing, a waiver or consent to depart from the provisions with respect to
a matter that relates exclusively to the rights of Holders of Transfer
Restricted Securities whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect, impair, limit or
compromise the rights of other Holders of Transfer Restricted Securities may be
given by Holders of at least a majority in aggregate principal amount of the
Transfer Restricted Securities being sold by such Holders pursuant to such
Registration Statement; provided that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(d) Amendments Without Consent of Holders. The Issuer shall not enter into
any transaction pursuant to Section 5.1 of the Indenture as a result of which
another corporation would succeed to and be substituted for the Issuer under the
Indenture unless such successor corporation and the Guarantors shall have
delivered a written instrument to the Purchasers to the effect that such
successor corporation agrees to be bound by and comply with all of the covenants
and agreements of, and to make all of the representations and warranties of, the
Issuer in this Agreement, and to the further effect that the Guarantors confirm
that their respective covenants, agreements, representations and warranties
under this Agreement remain in full force and effect. Concurrently with the
addition of any person as a Guarantor under the Indenture, such person shall
enter into and deliver to the other parties hereto a written instrument whereby
such person shall agree to comply with the covenants and agreements of, and to
make the representations and warranties of, and otherwise to become, a Guarantor
under this Agreement. Upon the release of any Guarantor from its obligations
under the Indenture in accordance with the provisions of the Indenture, such
Guarantor shall be released from all of its obligations under this Agreement.
Any amendments or modifications to this Agreement entered into to reflect any of
the transactions referred to in this Section 10(d) may be entered into without
the consent of any Holders.
(e) Notices. All notices and other communications (including, without
limitation, any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Transfer Restricted Securities, at the most
current address given by the Trustee to the Issuer; and
(ii) if to the Issuer or the Guarantors, Quality Food Centers, Inc.,
10112 N.E. 10th Street, Suite 201, Bellevue, Washington 98004, Attention:
Marc W. Evanger.
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All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier, if made by next-day air
courier; and when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto,
including, without limitation and without the need for an express assignment,
subsequent Holders and beneficial owners of Transfer Restricted Securities. The
Issuer and the Guarantors agree that the Holders and beneficial owners of the
Securities shall be third party creditor beneficiaries of the agreements made
hereunder by the Purchasers, the Issuer and the Guarantors, and each Holder and
beneficial owner shall have the right to enforce such agreements directly to the
extent it deems such enforcement necessary or advisable to protect its rights
hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Government Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES, TO THE EXTENT PERMITTED BY
LAW, TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(j) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties hereto that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
25
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(k) Entire Agreement. This Agreement, together with the Purchase
Agreement, is intended by the parties hereto as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(l) Securities Held by the Issuer, the Guarantors or their Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Transfer Restricted Securities is required hereunder, Transfer Restricted
Securities held by the Issuer, the Guarantors, Parent or any of their respective
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(m) Joint and Several Obligations of the Issuer and Guarantors. Anything
herein to the contrary notwithstanding, the obligations of the Issuer and the
Guarantors hereunder are joint and several.
26
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Issuer:
QUALITY FOOD CENTERS, INC.
By: /s/ Marc Evanger
-----------------------------
Name:
Title:
Guarantors:
QUALITY FOOD HOLDINGS, INC.
By: /s/ Marc Evanger
-----------------------------
Name:
Title:
HUGHES MARKETS, INC.
By: /s/ Marc Evanger
-----------------------------
Name:
Title:
KU ACQUISITION CORPORATION
By: /s/ Marc Evanger
-----------------------------
Name:
Title:
27
<PAGE>
The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
By: /s/ Donald S. Kinsey
-----------------------------
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Douglas McRae
-----------------------------
Name:
Title:
BANCAMERICA SECURITIES, INC.
By: /s/ Mark Dawley
-----------------------------
Name:
Title:
28
QUALITY FOOD CENTERS, INC.
Issuer,
and
THE GUARANTORS NAMED HEREIN
and
FIRST TRUST NATIONAL ASSOCIATION
Trustee
-------------------------------
INDENTURE
Dated as of March 19, 1997
-------------------------------
$150,000,000
8.70% Senior Subordinated Notes due 2007
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.............................................. 1
SECTION 1.2. Incorporation by Reference of TIA........................ 29
SECTION 1.3. Rules of Construction.................................... 29
ARTICLE II
THE SECURITIES
SECTION 2.1. Form and Dating.......................................... 30
SECTION 2.2. Execution and Authentication............................. 30
SECTION 2.3. Registrar and Paying Agent............................... 31
SECTION 2.4. Paying Agent to Hold Assets in Trust..................... 32
SECTION 2.5. Securityholder Lists..................................... 32
SECTION 2.6. Transfer and Exchange.................................... 32
SECTION 2.7. Replacement Securities................................... 38
SECTION 2.8. Outstanding Securities................................... 39
SECTION 2.9. Treasury Securities...................................... 39
SECTION 2.10. Temporary Securities.................................... 39
SECTION 2.11. Cancellation............................................ 40
SECTION 2.12. Defaulted Interest...................................... 40
ARTICLE III
REDEMPTION
SECTION 3.1. Right of Redemption...................................... 41
SECTION 3.2. Notices to Trustee....................................... 41
SECTION 3.3. Selection of Securities to Be Redeemed................... 42
SECTION 3.4. Notice of Redemption..................................... 42
SECTION 3.5. Effect of Notice of Redemption........................... 43
SECTION 3.6. Deposit of Redemption Price.............................. 43
SECTION 3.7. Securities Redeemed in Part.............................. 44
ARTICLE IV
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Page
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COVENANTS
SECTION 4.1. Payment of Securities.................................... 44
SECTION 4.2. Maintenance of Office or Agency.......................... 44
SECTION 4.3. Limitation on Restricted Payments........................ 45
SECTION 4.4. Corporate Existence...................................... 46
SECTION 4.5. Payment of Taxes and Other Claims........................ 47
SECTION 4.6. Compliance Certificate, Notice of Default................ 47
SECTION 4.7. Reports.................................................. 47
SECTION 4.8. [Reserved]............................................... 48
SECTION 4.9. Limitation on Transactions with Affiliates............... 48
SECTION 4.10. Limitation on Additional Indebtedness and Disqualified
Capital Stock ........................................... 50
SECTION 4.11. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries................................... 50
SECTION 4.12. Limitation on Liens...................................... 51
SECTION 4.13. Limitation on Sale of Assets and Subsidiary Stock........ 52
SECTION 4.14. Limitation on Layering Indebtedness...................... 56
SECTION 4.15. Limitation on Lines of Business.......................... 56
SECTION 4.16. Waiver of Stay, Extension or Usury Laws.................. 56
SECTION 4.17. Reorganization as a Holding Company...................... 56
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. Limitation on Merger, Sale or Consolidation.............. 58
SECTION 5.2. Successor Corporation Substituted........................ 59
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Events of Default........................................ 59
SECTION 6.2. Acceleration of Maturity Date, Rescission and Annulment.. 61
SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by
Trustee ................................................. 62
SECTION 6.4. Trustee May File Proofs of Claim......................... 63
SECTION 6.5. Trustee May Enforce Claims Without Possession of
Securities .............................................. 64
SECTION 6.6. Priorities............................................... 64
SECTION 6.7. Limitation on Suits...................................... 64
SECTION 6.8. Unconditional Right of Holders to Receive Principal,
Premium and Interest .................................... 65
SECTION 6.9. Rights and Remedies Cumulative........................... 65
SECTION 6.10. Delay or Omission Not Waiver............................. 65
SECTION 6.11. Control by Holders....................................... 66
SECTION 6.12. Waiver of Past Default................................... 66
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Page
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SECTION 6.13. Undertaking for Costs.................................... 67
SECTION 6.14. Restoration of Rights and Remedies...................... 67
ARTICLE VII
TRUSTEE
SECTION 7.1. Duties of Trustee........................................ 67
SECTION 7.2. Rights of Trustee........................................ 68
SECTION 7.3. Individual Rights of Trustee............................. 69
SECTION 7.4. Trustee's Disclaimer..................................... 70
SECTION 7.5. Notice of Default........................................ 70
SECTION 7.6. Reports by Trustee to Holders............................ 70
SECTION 7.7. Compensation and Indemnity............................... 70
SECTION 7.8. Replacement of Trustee................................... 71
SECTION 7.9. Successor Trustee by Merger, Etc......................... 72
SECTION 7.10. Eligibility: Disqualification............................ 72
SECTION 7.11. Preferential Collection of Claims Against Company........ 72
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. Option to Effect Legal Defeasance or Covenant Defeasance. 73
SECTION 8.2. Legal Defeasance and Discharge........................... 73
SECTION 8.3. Covenant Defeasance...................................... 73
SECTION 8.4. Conditions to Legal or Covenant Defeasance............... 74
SECTION 8.5. Deposited Cash and U.S. Government Obligations to be
Held in Trust, Other Miscellaneous Provisions............ 75
SECTION 8.6. Repayment to the Company................................. 76
SECTION 8.7. Reinstatement............................................ 76
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. Supplemental Indentures Without Consent of Holders....... 77
SECTION 9.2. Amendments, Supplemental Indentures and Waivers with
Consent of Holders....................................... 78
SECTION 9.3. Compliance with TIA...................................... 79
SECTION 9.4. Revocation and Effect of Consents........................ 80
SECTION 9.5. Notation on or Exchange of Securities.................... 80
SECTION 9.6. Trustee to Sign Amendments, Etc.......................... 80
iii
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Page
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ARTICLE X
RIGHT TO REQUIRE REPURCHASE
SECTION 10.1. Repurchase of Securities at Option of the Holder
Upon a Change of Control................................ 81
ARTICLE XI
GUARANTEE
SECTION 11.1. Guarantee............................................... 83
SECTION 11.2. Execution and Delivery of Guarantee..................... 85
SECTION 11.3. Additional Guarantors................................... 85
SECTION 11.4. Guarantor May Consolidate, Etc., on Certain Terms;
Release of Guarantors................................... 86
SECTION 11.5. Waiver of Subrogation................................... 87
SECTION 11.6. Certain Bankruptcy Events............................... 88
ARTICLE XII
SUBORDINATION
SECTION 12.1. Securities Subordinated to Senior Debt.................. 88
SECTION 12.2. No Payment on Securities in Certain Circumstances....... 88
SECTION 12.3. Securities Subordinated to Prior Payment of All Senior
Debt on Dissolution, Liquidation or Reorganization...... 89
SECTION 12.4. Securityholders to Be Subrogated to Rights of Holders
of Senior Debt ......................................... 90
SECTION 12.5. Obligations of the Company and the Guarantors
Unconditional .......................................... 91
SECTION 12.6. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice....................................... 91
SECTION 12.7. Application by Trustee of Assets Deposited with It...... 91
SECTION 12.8. Subordination Rights Not Impaired by Acts or Omissions
of the Company, the Guarantors or Holders of Senior Debt 92
SECTION 12.9. Securityholders Authorize Trustee to Effectuate
Subordination of Securities............................. 92
SECTION 12.10. Right of Trustee to Hold Senior Debt................... 93
SECTION 12.11. Article XII Not to Prevent Events of Default........... 93
SECTION 12.12. No Fiduciary Duty of Trustee to Holders of Senior Debt. 93
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. TIA Controls............................................ 93
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Page
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SECTION 13.2. Notices................................................. 93
SECTION 13.3. Communications by Holders with Other Holders............ 95
SECTION 13.4. Certificate and Opinion as to Conditions Precedent...... 95
SECTION 13.5. Statements Required in Certificate or Opinion........... 95
SECTION 13.6. Rules by Trustee, Paying Agent, Registrar............... 96
SECTION 13.7. Non-Business Days....................................... 96
SECTION 13.8. Governing Law........................................... 96
SECTION 13.9. No Adverse Interpretation of Other Agreements........... 96
SECTION 13.10. No Recourse against Others.............................. 97
SECTION 13.11. Successors.............................................. 97
SECTION 13.12. Duplicate Originals..................................... 97
SECTION 13.13. Severability............................................ 97
SECTION 13.14. Table of Contents, Headings, Etc........................ 97
SIGNATURES............................................................. 98
Exhibit A..............................................................A-1
v
<PAGE>
INDENTURE, dated as of March 19, 1997, by and among Quality Food Centers,
Inc., a Washington corporation (the "Company"), the Guarantors referred to below
and First Trust National Association, as Trustee.
In consideration of $1.00 in hand paid and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
each party hereto agrees as follows for the benefit of each other party and for
the equal and ratable benefit of the Holders of the Company's 8.70% Senior
Subordinated Notes due 2007:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Acceleration Notice" shall have the meaning specified in Section 6.2.
"Acquired Indebtedness" means Indebtedness or Disqualified Capital Stock
of any person existing at the time such person becomes a Subsidiary of the
Subject Entity or is merged or consolidated into or with the Subject Entity or
any of its Subsidiaries.
"Acquisition" means the purchase or other acquisition of (i) any person,
(ii) all or substantially all of the assets of any person or (iii) all or
substantially all of any division or line of business of any person, in each
case by any other person, whether by purchase, stock purchase, merger,
consolidation or other transfer, and whether or not for consideration.
"Affiliate" means with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For purposes of this definition, the
term "control" means the power to direct the management and policies of a
person, directly or through one or more intermediaries, whether through the
ownership of voting securities, by contract, or otherwise, provided, that, a
Beneficial Owner of 10% or more of the total voting power normally entitled to
vote in the election of directors, managers or trustees, as applicable, of a
person shall for such purposes be deemed to have control of such person.
"Affiliate Transaction" shall have the meaning specified in Section 4.9.
"Agent" means any authenticating agent, Registrar, Paying Agent or
transfer agent.
"Asset Sale" shall have the meaning specified in Section 4.13.
"Asset Sale Offer" shall have the meaning specified in Section 4.13.
"Asset Sale Offer Period" shall have the meaning specified in Section
4.13.
"Asset Sale Offer Price" shall have the meaning specified in Section 4.13.
<PAGE>
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of (a) the
products of the number of years (or fractions thereof) from such date of
determination to the date or dates of each successive scheduled principal (or
redemption) payment of such security or instrument and (b) the amount of each
such respective principal (or redemption) payment by (ii) the sum of all such
principal (or redemption) payments.
"Bankruptcy Law" means Title 11, of the United States Code and any similar
applicable foreign, state or federal law for the relief of debtors generally.
"Beneficial Owner" has the meaning attributed to it in Rules 13d-3 and
13d-5 under the Exchange Act (as in effect on the Issue Date), except that a
person shall be deemed to have "beneficial ownership" of all shares or other
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time.
"board of directors" means, with respect to any person, the board of
directors of such person.
"Board of Directors" or "Board" means, with respect to any person, the
board of directors of such person or any committee of the board of directors of
such person authorized, with respect to any particular matter, to exercise the
power of the board of directors of such person.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any person, any and all shares,
interests (including, without limitation, limited and general partnership
interests and joint venture interests), participations, rights or other
equivalents (however designated) in the equity of such person, and any rights
(other than debt securities convertible into or exchangeable for an equity
interest), warrants or options exchangeable for or convertible into an equity
interest in such person.
"Capitalized Lease Obligation" means, with respect to any person, any
obligation of such person under a lease of (or other agreement conveying the
right to use) any property (whether real, personal or mixed, tangible or
intangible) that is required to be classified and accounted for as a capital
lease obligation under GAAP, and the amount of such obligation at any date shall
be the capitalized amount thereof at such date, determined in accordance with
GAAP.
"Cash" or "cash" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Cash Equivalents" means (a) securities 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) having maturities of not more
than one year from the date of acquisition; (b) certificates of deposit, time
deposits, eurodollar time deposits, overnight bank deposits or bankers'
acceptances having maturities of not more than one year from the date of
acquisition
2
<PAGE>
thereof of any domestic commercial bank that is a member of the Federal Reserve
System, the long-term debt of which is rated at the time of acquisition thereof
at least A or the equivalent thereof by Standard & Poor's, a division of The
McGraw Hill Companies, Inc. ("Standard & Poor's"), or at least A or the
equivalent thereof by Moody's Investors Service, Inc. ("Moody's") and having
capital and surplus and undivided profits in excess of $500,000,000; (c)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or issued by any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof), in each case maturing within 180 days of the date of acquisition, (d)
commercial paper rated at the time of acquisition thereof at least A-1 or the
equivalent thereof by Standard & Poor's or P-1 or the equivalent thereof by
Moody's, maturing within 270 days after the date of acquisition thereof, and (e)
shares of any money market mutual fund that (i) has at least 95% of its assets
invested continuously in the types of investments referred to in clauses (a)
through (d) above, (ii) has net assets of not less than $500 million and (iii)
has the highest rating obtainable from either Standard & Poor's or Moody's.
"Change of Control" means (i) any merger or consolidation of the Company
or, from and after the date of the Reorganization, of the Company, the Holding
Company or the Parent with or into any person, or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
assets of the Company or, from and after the date of the Reorganization, of the
Company, the Holding Company or the Parent, in one transaction or a series of
related transactions, if, immediately after giving effect to such transaction or
series of transactions, any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable), other than any Excluded Person, is or becomes the Beneficial Owner,
directly or indirectly, of more than 50% of the total voting power in the
aggregate of all classes of Capital Stock of the Company or, from and after the
date of the Reorganization, of the Company, the Holding Company or the Parent
then outstanding normally entitled to vote in the election of directors,
managers or trustees, as applicable, of the transferee or surviving entity, (ii)
any "person" or "group," other than any Excluded Person, is or becomes the
Beneficial Owner, directly or indirectly, of more than 50% of the total voting
power in the aggregate of all classes of Capital Stock of the Company then
outstanding normally entitled to vote in elections of directors, (iii) from and
after the date of the Reorganization, any "person" or "group", other than any
Excluded Person, is or becomes the Beneficial Owner, directly or indirectly, of
more than 50% of the total voting power in the aggregate of all classes of
Capital Stock of the Holding Company or the Parent then outstanding normally
entitled to vote in the election of directors, managers or trustees, as
applicable, or (iv) at any time during any period of 12 consecutive months,
individuals who at the beginning of any such 12-month period constituted the
board of directors of the Company or, from and after the date of the
Reorganization, the board of directors of the Parent (together, in each case,
with any new directors whose election by such board or whose nomination for
election by the shareholders was approved by a vote of a majority 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 the board of
directors of the Company or the Parent, as applicable, then in office.
"Change of Control Offer" shall have the meaning specified in Section
10.1.
"Change of Control Offer Period" shall have the meaning specified in
Section 10.1.
"Change of Control Purchase Date" shall have the meaning specified in
Section 10.1.
"Change of Control Purchase Price" shall have the meaning specified in
Section 10.1.
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"Change of Control Put Date" shall have the meaning specified in Section
10.1.
"Commission" means the Securities Exchange Commission or any successor
thereto.
"Common Stock Offering" means the underwritten public offering by the
Company of 4,500,000 shares of its common stock (plus up to an additional
675,000 shares of its common stock issuable upon exercise of the underwriters'
over-allotment options) being made concurrently with the private placement of
the Securities.
"Company" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture, and
thereafter means such successor.
"Consolidated Depreciation and Amortization Expense" means, with respect
to any person for any period, the depreciation and amortization expense of such
person and its Subsidiaries for such period (including amortization of debt
discount and deferred financing costs in connection with any Indebtedness of
such person and its Subsidiaries), determined on a consolidated basis in
accordance with GAAP.
"Consolidated EBITDA" means, with respect to any person for any period,
the Consolidated Net Income of such person for such period adjusted to add
thereto or subtract therefrom, as applicable (to the extent deducted or
included, as applicable in determining such Consolidated Net Income), without
duplication, the sum of (i) Consolidated Income Tax Expense of such person for
such period, (ii) Consolidated Depreciation and Amortization Expense of such
person for such period, (iii) Consolidated Interest Expense of such person for
such period, (iv) Consolidated LIFO Charges (Credits) of such person for such
period, and (v) all other consolidated non-cash items of such person and its
Subsidiaries for such period, and further adjusted to subtract therefrom all
cash payments made by such person or any of its Subsidiaries during such period
to the extent such payments relate to non-cash charges that were added back in
determining Consolidated EBITDA for such period or any prior period, all
determined on a consolidated basis in accordance with GAAP; provided that any
amounts referred to in any one or more of clauses (i) through (v) of this
sentence which are to be added to Consolidated Net Income and which are
attributable to a Subsidiary of such person which is not a Wholly-Owned
Subsidiary shall be added to Consolidated Net Income only to the extent (and in
the same proportion) that the net income of such Subsidiary was included in
calculating the Consolidated Net Income of such person and then only to the
extent that the amount of such expense or charge, as applicable, attributable to
such Subsidiary would be permitted at the time of determination to be dividended
to such person in cash by such Subsidiary.
"Consolidated Interest Coverage Ratio" means, with respect to any person
on any date of determination (the "Transaction Date"), the ratio, on a pro forma
basis, of (a) Consolidated EBITDA of such person (exclusive of amounts
attributable to operations and businesses permanently discontinued or disposed
of) for the Reference Period to (b) Consolidated Interest Expense of such person
(exclusive of amounts attributable to operations and businesses permanently
discontinued or disposed of, but only to the extent that the obligations giving
rise to such Consolidated Interest Expense would no longer be obligations
contributing to such person's Consolidated Interest Expense subsequent to the
Transaction Date) for the Reference Period; provided, that for purposes of
calculating Consolidated EBITDA and Consolidated Interest Expense for this
definition, (i) Acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date shall
be assumed to have occurred on the first day of the Reference Period, (ii)
transactions giving rise to the need to calculate the Consolidated Interest
Coverage Ratio shall be assumed to have occurred on the first day of the
Reference Period, and (iii) the Incurrence of any
4
<PAGE>
Indebtedness or issuance of any Disqualified Capital Stock during the Reference
Period or subsequent to the Reference Period and on or prior to the Transaction
Date (and the application of the proceeds therefrom to the extent used to
Refinance or retire other Indebtedness or Disqualified Capital Stock permitted
by this Indenture) shall be assumed to have occurred on the first day of such
Reference Period and the interest rate on any such Indebtedness or the dividend
rate on any such Disqualified Capital Stock which bears interest or accrues
dividends at a floating rate shall be computed on a pro forma basis as if the
average rate in effect from the beginning of the Reference Period to the
Transaction Date had been the applicable rate for the entire period, unless such
person or any of its Subsidiaries is party to an Interest Swap or Hedging
Obligation (which shall remain in effect for the 12-month period immediately
following the Transaction Date) which has the effect of fixing the interest rate
or dividend rate on the date of computation, in which case such rate (whether
higher or lower) shall be used. If such person or any of its Subsidiaries
directly or indirectly guarantees Indebtedness or dividends or other
distributions on Disqualified Capital Stock of a third person, the foregoing
definition shall give effect to the Incurrence of such guaranteed Indebtedness
or the issuance of any such guaranteed Disqualified Capital Stock as if it had
been Incurred or issued, as the case may be, by such person or such Subsidiary.
"Consolidated Income Tax Expense" means, with respect to any person for
any period, the provision for federal, state, local and foreign income taxes of
such person and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, (i) the sum of (A) the aggregate amount of cash and
non-cash interest expense (including capitalized interest but excluding
amortization of deferred financing costs) of such person and its Subsidiaries
for such period (including, without limitation, (v) any amortization of debt
discount, (w) net costs associated with Interest Swap and Hedging Obligations
(including any amortization of discounts), (x) the interest portion of any
deferred payment obligation, (y) all accrued interest and capitalized interest,
and (z) all commissions, discounts and other fees and charges owed with respect
to letters of credit, bankers' acceptances, Interest Swap and Hedging
Obligations or similar facilities) paid or accrued, or scheduled to be paid or
accrued, during such period; (B) the aggregate amount of cash and non-cash
dividends and other distributions paid or accrued, or scheduled to be paid or
accrued, during such period in respect of Disqualified Capital Stock of such
person and its Subsidiaries; (C) the portion of any rental obligation of such
person or its Subsidiaries for such period in respect of any Capitalized Lease
Obligation allocable to interest expense (based upon the rate of interest
implicit in such Capitalized Lease Obligations as reasonably determined by the
Subject Entity) in accordance with GAAP; and (D) to the extent that any
Indebtedness of any other person is guaranteed, or any dividends or
distributions on Disqualified Capital Stock of any other person are guaranteed,
by such person or any of its Subsidiaries, the aggregate amount of interest,
dividends and distributions paid or accrued or scheduled to be paid or accrued
by such other person during such period attributable to any such Indebtedness or
Disqualified Capital Stock, as applicable, all determined on a consolidated
basis in accordance with GAAP.
"Consolidated LIFO Charges (Credits)" means, with respect to any person
for any period, the consolidated LIFO charges (credits) of such person and its
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP.
"Consolidated Net Income" means, with respect to any person for any
period, an amount equal to (A) the net income (or loss) of such person and its
Subsidiaries for such period (adjusted as provided in the next succeeding
sentence) minus (B) to the extent not deducted in the computation of the amount
of
5
<PAGE>
consolidated net income (loss) referred to in clause (A), the aggregate amount
of Permitted Payments paid or accrued, or scheduled to be paid or accrued, by
such person and its Subsidiaries during such period, all determined on a
consolidated basis in accordance with GAAP; provided that, solely for purposes
of clause (3)(a) and the proviso to clause (3)(d) of the first paragraph of
Section 4.3, Consolidated Net Income shall mean the net income (or loss) of such
person and its Subsidiaries for such period (adjusted as provided in the next
succeeding sentence), determined on a consolidated basis in accordance with
GAAP. The amount referred to in clause (A) of and in the proviso to the
preceding sentence shall be adjusted to exclude (to the extent included in
computing such net income (or loss) and without duplication): (a) all gains and
losses which are extraordinary (as determined in accordance with GAAP) or which
are unusual or non-recurring, (b) the net income or loss of any other person
(other than a Subsidiary of such person) in which such person or any of its
Subsidiaries has an interest, except that any such net income shall be included
only to the extent of the amount of any dividends or distributions actually paid
in cash to such person or a Subsidiary of such person during such period but in
any case not in excess of such person's or Subsidiary's, as the case may be, pro
rata share of such net income for such period, and any such net loss shall be
included only to the extent of such person's or Subsidiary's, as the case may
be, pro rata share of such net loss for such period, (c) the net income or loss
of any person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition, (d) the net income, if positive, of any
Subsidiary of such person to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted, directly or indirectly, by the terms of its charter, bylaws,
partnership agreement or other organizational documents or any other agreement,
instrument, judgment, decree, order, law, rule or governmental regulation
applicable to such Subsidiary, (e) gains and losses in respect of any Asset
Sales or other sale or disposition of assets outside the ordinary course of
business or from the issuance or sale of any Capital Stock by such person or any
of its Subsidiaries, (f) any gain or income or losses, net of taxes,
attributable to refunds or credits in respect of any employee benefit plan, (g)
any non-cash compensation expense in connection with the issuance of any
employee stock options, (h) the effects of changes in accounting principles, and
(i) all deferred financing costs written off in connection with the early
extinguishment of any Indebtedness Incurred by the Subject Entity or any of its
Subsidiaries in connection with the Hughes Acquisition or the KUI Acquisition.
"Covenant Defeasance" shall have the meaning specified in Section 8.3.
"Credit Agreement" means the one or more credit agreements (including,
without limitation, the New Credit Agreement) entered into by and among the
Company and/or the Holding Company and/or any of their respective Subsidiaries
and certain financial institutions which provide for in the aggregate one or
more term loans, letter of credit facilities and/or revolving credit facilities,
including any related notes, guarantees, letters of credit, collateral
documents, instruments and agreements executed in connection therewith, as such
credit agreement and/or related documents may be amended, restated,
supplemented, renewed, refinanced, replaced or otherwise modified from time to
time whether or not with the same agent, trustee, representative, lenders or
holders, and, subject to the next succeeding sentence, irrespective of any
changes in the terms and conditions thereof. Without limiting the generality of
the foregoing, the term "Credit Agreement" shall include any amendment,
amendment and restatement, renewal, extension, restructuring, supplement or
modification to any such credit agreement not prohibited by this Indenture and
all refundings, refinancings and replacements of any such credit agreement not
prohibited by this Indenture, including any agreement (i) extending the maturity
of any Indebtedness Incurred thereunder or contemplated thereby, (ii) adding or
deleting borrowers or guarantors thereunder, so long as borrowers and issuers
include one or more of the Subject Entity and its Subsidiaries, (iii) increasing
the amount of Indebtedness Incurred thereunder or available to be borrowed
thereunder, provided that on the date such Indebtedness is Incurred it would not
be prohibited by the covenant
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described in Section 4.10 or (iv) otherwise altering the terms and conditions
thereof in a manner not prohibited by the terms of this Indenture.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Debt Incurrence Ratio" shall have the meaning specified in Section 4.10.
"Default" means any event or condition that is, or after notice or passage
of time or both would be, an Event of Default.
"Defaulted Interest" shall have the meaning specified in Section 2.12.
"Definitive Securities" means Securities that are in the form of the
Security attached hereto as Exhibit A that do not include the information called
for by footnotes 1 and 3 thereof.
"Depositary" means, with respect to the Securities issuable or issued in
whole or in part in global form, the person specified in Section 2.3 as the
Depositary with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Designated Senior Debt" means, with respect to the Company (i) all Senior
Debt of the Company under any Credit Agreement; and (ii) any other Senior Debt
of the Company which (a) at the time of determination exceeds $25,000,000 in
aggregate principal amount outstanding and (b) is specifically designated in the
instrument or agreement creating or evidencing such Senior Debt or pursuant to
which such Senior Debt was issued as "Designated Senior Debt." "Designated
Senior Debt" means, with respect to any Guarantor, (i) all Senior Debt of such
Guarantor under any Credit Agreement; and (ii) any other Senior Debt of such
Guarantor which (a) at the time of determination exceeds $25,000,000 in
aggregate principal amount outstanding and (b) is specifically designated in the
instrument or agreement creating or evidencing such Senior Debt or pursuant to
which such Senior Debt was issued as "Designated Senior Debt."
"Disqualified Capital Stock" means, (a) except as set forth in clauses (b)
and (c) of this paragraph, with respect to any person, Capital Stock of such
person (excluding warrants, rights and options) that, by its terms or by the
terms of any security into which it is then convertible, exercisable or
exchangeable, is or, upon the happening of an event or the passage of time or
both would be, required to be redeemed or repurchased (including at the option
of the holder thereof) by such person or any of its Subsidiaries, in whole or in
part, on or prior to the Final Maturity Date, or is convertible into or
exchangeable for debt securities at any time on or prior to the Final Maturity
Date, (b) with respect to any Subsidiary of such person (excluding, with respect
to the Subject Entity, any of its Subsidiaries which is a Guarantor and, from
and after the Reorganization, the Company), any Capital Stock (excluding
warrants, rights and options) other than common stock with no preferences or
redemption or repayment provisions, and (c) with respect to any Guarantor and,
from and after the Reorganization, the Company, any of its Capital Stock
(excluding warrants, rights and options) that (1) by its terms or by the terms
of any security into which it is convertible, exercisable or exchangeable, is
or, upon the happening of an event or the passage of time or both would be,
required to be redeemed or repurchased (including at the option of the holder
thereof) by the Subject Entity or any of its Subsidiaries, in whole or in part,
on or prior to the Final Maturity Date, or is convertible into or exchangeable
for debt securities at any time on or prior to the Final Maturity Date, or (2)
provides for any increase in the dividend
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or distribution rate or other monetary penalty, or provides for the holders
thereof to be granted any additional rights, upon the failure to pay dividends
or distributions thereon (including, without limitation, the right to appoint or
elect one or more directors, trustees or similar persons).
"Domestic Subsidiary" means, with respect to any person, any Subsidiary of
such person other than a Foreign Subsidiary of such person.
"DTC" shall have the meaning specified in Section 2.3.
"Equity Offering" means an underwritten public offering of common stock
of, prior to the Reorganization, the Company or, following the Reorganization,
the Parent, in each case pursuant to a registration statement filed with the
Commission.
"Event of Default" shall have the meaning specified in Section 6.1.
"Event of Loss" means, with respect to any property or asset, any (i)
loss, destruction or damage of such property or asset, and (ii) any actual
condemnation, seizure or taking, by exercise of the power of eminent domain or
otherwise, of such property or asset, or confiscation or requisition of the use
of such property or asset.
"Excess Proceeds" shall have the meaning specified in Section 4.13.
"Excess Proceeds Date" shall have the meaning specified in Section 4.13.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor thereto, in each case including, the rules and regulations
promulgated by the Commission thereunder.
"Exchange Securities" means the 8.70% Senior Subordinated Notes due 2007
to be issued pursuant to this Indenture in connection with the offer to exchange
Securities for the Initial Securities that may be made by the Company and the
Guarantors pursuant to the Registration Rights Agreement.
"Excluded Person" means (i) Zell/Chilmark Fund L.P., a Delaware limited
partnership ("Zell/Chilmark"), and any person who, by virtue of their position
with the general partner, or with the persons that directly or indirectly
control the general partner, of Zell/Chilmark may be deemed the Beneficial Owner
of securities owned by Zell/Chilmark and (ii) from and after the date of the
Reorganization, the Holding Company, the Parent, any Subsidiary of the Holding
Company through which the Holding Company holds an interest in the Capital Stock
of the Company and any Subsidiary of the Parent through which Parent holds an
interest in the Capital Stock of the Company or the Holding Company.
"Existing Indebtedness" means Indebtedness of the Company or a Subsidiary
of the Company (including, without limitation, Hughes and KUA) in existence on
the Issue Date, other than Indebtedness under the Old Credit Agreements, the Old
Security Agreements, any Credit Agreement, and any other Indebtedness of Hughes
or any of its Subsidiaries which is to be repaid in connection with the Hughes
Acquisition.
"Fair Market Value" or "fair market value" means, with respect to any
assets or properties, the amount at which such assets or properties would change
hands between a willing buyer and a willing seller,
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within a commercially reasonable time, each having reasonable knowledge of the
relevant facts, neither being under a compulsion to sell or buy.
"Final Maturity Date" means March 15, 2007
"Foreign Subsidiary" means, with respect to any person, any Subsidiary of
such person which is incorporated or otherwise organized under the laws of any
jurisdiction other than the United States of America, any state thereof or the
District of Columbia and substantially all of whose consolidated assets are
located outside of the United States of America.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession, as in effect on the Issue Date.
"Global Security" means a Security that contains the paragraph referred to
in footnote 1 and the additional schedule referred to in footnote 3 to the form
of Security attached hereto as Exhibit A.
"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 or reimbursement of amounts drawn down under letters of credit; provided
that none of the following shall constitute a "guarantee" for purposes of this
Indenture: (A) Hughes' guarantee of Santee's obligations under the Trademark
License Agreement between Kraft, Inc. and Santee, as in effect on the Issue
Date, and any amendments, renewals or modifications thereof so long as the
obligations guaranteed in any such amended, modified or renewed agreement do not
include indebtedness for borrowed money or Capitalized Lease Obligations or
evidenced by bonds, notes, debentures or similar instruments, (B) guarantees by
the Subject Entity or any of its Subsidiaries of Indebtedness of Santee,
provided that the aggregate principal amount of such Indebtedness outstanding at
any time shall not exceed $30 million and, to the extent that the aggregate
principal amount of such Indebtedness outstanding at any time after the 60th day
following the Issue Date exceeds $10 million, then the amount of such
outstanding Indebtedness in excess of $10 million shall be deemed an Investment
in Santee but shall not constitute Indebtedness, and (C) agreements to purchase
milk or other products from Santee. The terms "guarantee" (when used as a verb)
and "guaranteed" have meanings correlative to the foregoing.
"Guarantee" shall have the meaning provided in Section 11.1.
"Guarantors" means (i) the Initial Guarantors and (ii) any person which
becomes a Guarantor after the Issue Date in accordance with the provisions
described in this Indenture, until such time as, in the case of any Guarantor, a
successor replaces it in accordance with the provisions of this Indenture, in
which case the term Guarantor shall thereafter include such successor, but
excluding in each case any persons whose Guarantees have been released pursuant
to the terms of this Indenture and any Unrestricted Subsidiaries and
Non-Guarantor Foreign Subsidiaries of the Subject Entity.
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"Guarantor Foreign Subsidiary" means any Foreign Subsidiary of the Subject
Entity which is a Guarantor.
"Holder" or "Securityholder" means the Person in whose name a Security is
registered on the Registrar's books.
"Holding Company" means Quality Food Holdings, Inc., a Delaware
corporation until a successor replaces it as a Guarantor in accordance with the
provisions of this Indenture, and thereafter means such successor.
"Hughes" means Hughes Markets, Inc., a California corporation, and its
successors.
"Hughes Acquisition" means the Company's acquisition of Hughes pursuant to
the Hughes Merger Agreement.
"Hughes Merger Agreement" means the Agreement and Plan of Merger dated as
of November 20, 1996, as amended, among the Company, QHI Acquisition Corporation
and Hughes.
"Incur" or "Incurrence" shall have the respective meanings specified in
Section 4.10.
"Incurrence Date" shall have the meaning specified in Section 4.10.
"Indebtedness" means, with respect to any person, without duplication, (a)
all liabilities and obligations, contingent or otherwise, of such person for
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such person or only to a portion thereof) or for the deferred purchase
price of property or services, excluding any trade payables incurred 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, banker's acceptances or other similar credit transactions, (b) all
liabilities and obligations of such person, contingent or otherwise, evidenced
by bonds, notes, debentures or other similar instruments, (c) 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
accounts payable arising in the ordinary course of business, (d) all Capitalized
Lease Obligations of such person, (e) all Indebtedness of other persons of the
types referred to in the preceding clauses of this sentence, 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 any
property or assets owned by such person, even though such person has not assumed
or become liable for the payment of such Indebtedness (the amount of such
obligation being deemed to be the lesser of the Fair Market Value (as determined
in good faith by the Board of Directors of the Subject Entity and evidenced by a
resolution delivered to the Trustee) of such property or assets or the amount of
the obligation so secured), other than Indebtedness of Santee secured by the
Liens on the Capital Stock of Santee owned by the Subject Entity or any of its
Subsidiaries, (f) all Disqualified Capital Stock of such person valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued dividends, (g) all net payment obligations under or in respect of
Interest Swap and Hedging Obligations of such person, (h) all Indebtedness of
others of the types referred to in the preceding clauses of this sentence which
is guaranteed by such person, and (i) any amendment, supplement, modification,
deferral, renewal, extension or refunding of any liability of the types referred
to in clauses (a) through (h) above. For purposes hereof, the "maximum fixed
repurchase price" of any Disqualified
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Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified 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 Disqualified
Capital Stock, such Fair Market Value shall be determined in good faith by the
Board of Directors of the Company and evidenced by a resolution delivered to the
Trustee.
"Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof.
"Initial Guarantors" means (i) Hughes, (ii) KUA, and (iii) the Holding
Company.
"Initial Parent" means Quality Food, Inc., a Delaware corporation.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities
Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and BancAmerica
Securities, Inc.
"Initial Securities" means the 8.70% Senior Subordinated Notes due 2007
issued under this Indenture on the Issue Date.
"Initial Unrestricted Subsidiaries" means Second Story, Inc., a Washington
corporation, Hughes Realty, Inc., a California corporation, Univar San
Bernardino, Inc., a California corporation, and MM Foods, Inc., a California
corporation..
"Interest Payment Date" means the stated due date of an installment of
interest on the Securities.
"Interest Swap and Hedging Obligation" means, with respect to any person,
any monetary obligation of such person pursuant to any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate exchange agreement, currency exchange agreement or any other agreement or
arrangement designed to protect against fluctuations in interest rates or
currency values, including, without limitation, any arrangement whereby,
directly or indirectly, such person is entitled to receive from time to time
periodic payments calculated by applying either a fixed or floating rate of
interest to a stated notional amount in exchange for periodic payments made by
such person calculated by applying a fixed or floating rate of interest to the
same notional amount.
"Investment" by any person in any other person means (without duplication)
(a) the acquisition (whether by purchase, merger, consolidation or otherwise) by
such person (whether for cash, property, services, securities or otherwise) of
Capital Stock, bonds, notes, debentures or other securities, including any
options or warrants, of such other person or any agreement to make any such
acquisition; (b) the making by such person of any deposit with, or advance, loan
or other extension of credit to, such other person or any commitment to make any
such advance, loan or extension (but excluding accounts receivable or deposits
arising in the ordinary course of business); (c) the entering into by such
person of any guarantee of, or other credit support or contingent obligation
with respect to, Indebtedness or other liabilities of such other person; (d) the
making of any capital contribution by such person to such other person
(including by means of any transfer of cash or other property or any payment for
property or services for the account or use of such other person); (e) the
designation by the Board of Directors of the Subject Entity of any person to be
an Unrestricted Subsidiary of the Subject Entity; (f) the establishment or
acquisition by the Subject Entity of a
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Non-Guarantor Foreign Subsidiary; and (g) a Subsidiary of the Subject Entity
ceasing for any reason to be a Subsidiary of the Subject Entity (other than as a
result of its merger or consolidation with or into the Subject Entity or any of
its Domestic Subsidiaries or Guarantor Foreign Subsidiaries in a transaction not
prohibited by this Indenture or as a result of its designation as an
Unrestricted Subsidiary) but only if the Subject Entity or any of its other
Subsidiaries retains an equity interest in such former Subsidiary. The Subject
Entity shall be deemed to make an Investment in an amount equal to the portion
(proportionate to the Subject Entity's equity interest in the relevant
Subsidiary) of the Fair Market Value (as determined in good faith by the Board
of Directors of the Subject Entity and evidenced by a resolution delivered to
the Trustee) of any Subsidiary (or, if neither the Subject Entity nor any of its
Subsidiaries has theretofore made an Investment in such Subsidiary, in an amount
equal to the Fair Market Value (determined as aforesaid) of the Investment being
made) at the time that such Subsidiary is designated as an Unrestricted
Subsidiary. The Subject Entity shall be deemed to make an Investment in an
amount equal to the Fair Market Value (determined as aforesaid) of the
Investment being made at the time the Subject Entity acquires or establishes a
Non-Guarantor Foreign Subsidiary. In addition, if any Subsidiary of the Subject
Entity shall cease for any reason to be a Subsidiary of the Subject Entity
(other than as a result of its merger or consolidation with or into the Subject
Entity or any of its Domestic Subsidiaries or Guarantor Foreign Subsidiaries in
a transaction not prohibited by this Indenture or as a result of its designation
as an Unrestricted Subsidiary), then the Subject Entity shall be deemed to make
an Investment in an amount equal to the portion (proportionate to the Subject
Entity's remaining equity interest in such former Subsidiary immediately after
it ceases to be a Subsidiary) of the Fair Market Value (as determined in good
faith by the Board of Directors of the Subject Entity and evidenced by a
resolution delivered to the Trustee) of such former Subsidiary at such time. Any
property transferred between an Unrestricted Subsidiary and the Subject Entity
or a Subsidiary of the Subject Entity, or between any Non-Guarantor Foreign
Subsidiary and the Subject Entity or a Guarantor Foreign Subsidiary or Domestic
Subsidiary of the Subject Entity, shall in each case be valued at its Fair
Market Value (determined as aforesaid) at the time of such transfer. The amount
of any such Investment shall be reduced by any liabilities or obligations of the
Subject Entity or any of its Subsidiaries to be assumed or discharged in
connection with such Investment by an entity other than the Subject Entity or
any of its Subsidiaries or Unrestricted Subsidiaries; provided that, in the case
of any Investment in a Non-Guarantor Foreign Subsidiary, such Investment shall
be reduced only to the extent of any liabilities or obligations of the Subject
Entity or any of its Guarantor Foreign Subsidiaries or Domestic Subsidiaries
which are so assumed or discharged.
"Issue Date" means March 19, 1997.
"Junior Security" means securities of the Company or any Guarantor that
are equity securities or are subordinated in right of payment to all Senior Debt
of the Company or of such Guarantor, as the case may be, at least to the same
extent that the Security or the Guarantees, as applicable, are subordinated to
the payment of all Senior Debt of the Company or such Guarantor, as applicable,
then outstanding.
"KUA" means KU Acquisition Corporation, a Washington corporation and its
successors.
"KUI" means Keith Uddenberg, Inc., a Washington corporation.
"KUI Acquisition" means the Company's acquisition of KUI pursuant to the
KUI Merger Agreement.
"KUI Merger Agreement" means the Agreement and Plan of Merger dated
December 18, 1996, as amended, among the Company, KUA and KUI.
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"Legal Defeasance" shall have the meaning specified in Section 8.2.
"Lien" means any mortgage, lien, pledge, charge, security interest or
other encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give a security interest).
"Liquidated Damages" shall have the meaning set forth in the Registration
Rights Agreement.
"Merger Subsidiary" shall have the meaning set forth in Section 4.17.
"Net Cash Proceeds" means the aggregate amount of Cash or Cash Equivalents
received after the Issue Date by the Subject Entity in the case of a sale of its
Qualified Capital Stock and by the Subject Entity or any of its Subsidiaries in
respect of an Asset Sale or an Event of Loss plus, in the case of an issuance of
Qualified Capital Stock of the Subject Entity upon any exercise, exchange or
conversion of securities (including options, warrants, rights and convertible or
exchangeable debt) of the Subject Entity that were issued for cash after the
Issue Date, the amount of cash originally received by the Subject Entity upon
the issuance of such securities (including any such options, warrants, rights
and convertible or exchangeable debt) less, in each case, the sum of all
out-of-pocket payments, fees, commissions and expenses (including, without
limitation, the fees and expenses of legal counsel and investment banking fees
and expenses) reasonably incurred in connection with such Asset Sale, Event of
Loss or sale of Qualified Capital Stock, as applicable, and, in the case of an
Asset Sale or Event of Loss only, less (i) the amount (estimated reasonably and
in good faith by the Subject Entity) of income, franchise, sales and other
applicable taxes required to be paid by the Subject Entity or any of its
Subsidiaries in connection with such Asset Sale or Event of Loss, as applicable,
(ii) the amounts of any repayments of Indebtedness of the Subject Entity or any
of its Subsidiaries secured, directly or indirectly, by Liens on the assets
which are the subject of such Asset Sale or Event of Loss, as applicable, or
Indebtedness of the Subject Entity or any of its Subsidiaries associated with
such assets which is due by reason of such Asset Sale or Event of Loss, as
applicable, (i.e., such disposition is permitted by the terms of the instruments
evidencing or applicable to such Indebtedness, or by the terms of a consent
granted thereunder, on the condition that the proceeds of such disposition (or
portion thereof) be applied to such Indebtedness), provided that (A) the
repayment of such Indebtedness is permitted by this Indenture, and (B) to the
extent that any such Indebtedness so repaid is Senior Debt, the amount of such
repayment shall permanently reduce the amount of such Senior Debt outstanding
(and, in the case of Senior Debt outstanding under a revolving credit facility
or similar arrangement that makes credit available, the commitment thereunder is
also permanently reduced by such amount); (iii) all amounts deemed appropriate
by the Subject Entity (as evidenced by an Officers' Certificate of the Subject
Entity delivered to the Trustee) to be provided as a reserve, in accordance with
GAAP, against any liabilities associated with such assets which are the subject
of such Asset Sale or Event of Loss, as applicable; and (iv) with respect to
Asset Sales or Event of Loss by Subsidiaries of the Subject Entity, the portion
of such cash payments attributable to persons holding a minority interest in
such Subsidiary.
"New Credit Agreement" means the Amended and Restated Credit Agreement
dated as of March 14, 1997 among the Company, the Holding Company, the Initial
Parent, the various financial institutions party thereto from time to time, and
Bank of America National Trust and Savings Association, as administrative agent
and paying agent, and The Chase Manhattan Bank, as administrative agent.
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"Non-Cash Net Proceeds" means the aggregate Fair Market Value (as
determined in good faith by the Board of Directors of the Subject Entity and
evidenced by a resolution delivered to the Trustee) of property (other than Cash
or Cash Equivalents) received after the Issue Date by the Subject Entity from
the issuance and sale of its Qualified Capital Stock plus, in the case of an
issuance of Qualified Capital Stock of the Subject Entity upon any exercise,
exchange or conversion of securities (including options, warrants, rights and
convertible or exchangeable debt) of the Subject Entity that were issued for
property (other than Cash or Cash Equivalents) after the Issue Date, the
aggregate Fair Market Value (determined as aforesaid) of the property (other
than Cash and Cash Equivalents) originally received by the Subject Entity upon
the issuance of such securities (including any such options, warrants, rights
and convertible or exchangeable debt) less, in each case, the sum of all
out-of-pocket payments, fees, commissions and expenses (including, without
limitation, the fees and expenses of legal counsel and investment banking fees
and expenses) reasonably incurred in connection with the sale of such Qualified
Capital Stock.
"Non-Guarantor Foreign Subsidiary" means any Foreign Subsidiary of the
Subject Entity which is not a Guarantor.
"Notice of Default" shall have the meaning specified in Section 6.2.
"Officer" means, with respect to the Company or a Guarantor, the Chairman,
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, the Controller, or the Secretary of the
Company or such Guarantor, as applicable; provided that, in the case of any
Guarantor which is not a corporation, the term "Officer" shall mean any other
natural person who is authorized to execute the certificate, instrument or other
document on behalf of such Guarantor.
"Officers' Certificate" means, with respect to any person, a certificate
signed by two Officers or by an Officer and an Assistant Secretary of such
person and otherwise complying with the requirements of Sections 13.4 and 13.5,
and delivered to the Trustee or an Agent, as applicable.
"Old Credit Agreements" means the Credit Agreement dated as of March 15,
1995 among the Company, Bank of America National Trust and Savings Association,
as Agent, Seattle First National Bank, as Swingline Lender, Bank of America
Illinois, as Issuing Lender, and the other financial institutions party thereto
and the Loan Agreement dated as of October 31, 1995 among Hughes and Union Bank,
in each case including any related notes and guarantees executed in connection
therewith.
"Old Security Agreements" means any security agreement, trademark security
agreement, pledge agreement, mortgage, deed of trust or other similar instrument
or agreement entered into by the Company or Hughes or any of their respective
Subsidiaries in connection with or pursuant to any of the Old Credit Agreements.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee (which may include, unless otherwise
provided herein, counsel to the Trustee or the Company including an employee of
the Company) or an Agent, as applicable, complying with the requirements of
Sections 13.4 and 13.5, and delivered to the Trustee or an Agent, as applicable.
"Parent" means, at any date from and after the date of the Reorganization,
the person which, directly or through one or more of its Subsidiaries, owns at
least a majority of the outstanding Voting Stock of the Holding Company on such
date and is the ultimate parent of the Holding Company on such date.
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"Pari Passu Indebtedness" means Indebtedness of the Company or any
Guarantor which ranks pari passu in right of payment with the Securities or with
the Guarantee of such Guarantor, as the case may be.
"Paying Agent" shall have the meaning specified in Section 2.3.
"Payment Blockage Period" shall have the meaning specified in Section
12.2.
"Payment Default" shall have the meaning specified in Section 12.2.
"Payment Notice" shall have the meaning specified in Section 12.2.
"Permitted Indebtedness" means, without duplication:
(a) Indebtedness evidenced by the Securities or the Guarantees or arising
under this Indenture;
(b) Indebtedness of the Subject Entity or any of its Subsidiaries under
the Credit Agreements up to an aggregate principal amount outstanding at any
time not to exceed (i) $600 million minus (ii) the aggregate principal amount of
any such Indebtedness (x) repaid with Net Cash Proceeds from any Asset Sale or
Event of Loss or by application of amounts referred to in clause (ii)(B) of the
definition of "Net Cash Proceeds" or (y) assumed by a transferee in any Asset
Sale;
(c) Indebtedness owed by the Subject Entity to any Subsidiary of the
Subject Entity and Indebtedness owed by any Subsidiary of the Subject Entity to
the Subject Entity or any other Subsidiary of the Subject Entity; provided that
any such Indebtedness owed by the Company shall be unsecured and subordinated in
right of payment to the Company's obligations pursuant to the Securities; and
provided, further, that any such Indebtedness owed by any Non-Guarantor Foreign
Subsidiary of the Subject Entity shall be permitted under Section 4.3 and shall
not be otherwise prohibited by this Indenture;
(d) Indebtedness Incurred by the Subject Entity or any of its Subsidiaries
in connection with the purchase, construction or improvement of property (real
or personal) or equipment or other capital expenditures in the ordinary course
of business (including for the purchase of assets or stock of any retail grocery
store or business, whether by merger of otherwise) or consisting of Capitalized
Lease Obligations, provided that (i) at the time of the Incurrence thereof, such
Indebtedness, together with any other Indebtedness Incurred during the then most
recently completed four fiscal quarter period in reliance upon this clause (d),
does not exceed, in the aggregate, 3% of net sales of the Subject Entity and its
Subsidiaries during such four fiscal quarter period on a consolidated basis in
accordance with GAAP (calculated on a pro forma basis if the date of Incurrence
is prior to the end of the fourth fiscal quarter following the Hughes
Acquisition), (ii) at the time of Incurrence thereof, such Indebtedness,
together with all then outstanding Indebtedness Incurred in reliance upon this
clause (d), does not exceed, in the aggregate, 3% of the net sales of the
Subject Entity and its Subsidiaries during the most recently completed twelve
fiscal quarter period on a consolidated basis in accordance with GAAP
(calculated on a pro forma basis if the date of Incurrence is prior to the end
of the twelfth fiscal quarter following the Hughes Acquisition), and (iii) such
Indebtedness is Incurred concurrently with, or within 180 days of, such
acquisition or purchase or the completion of such construction or improvement or
the inception of such lease, as the case may be, and, if secured, is secured
only by the property so purchased, constructed, improved or leased (and proceeds
and products therefrom);
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(e) Indebtedness arising from tender, bid, performance or government
contract bonds, surety bonds or completion guarantees or other obligations of
like nature, or warranty or contractual service obligations, in any case
Incurred by the Subject Entity any of its Subsidiaries in the ordinary course of
business;
(f) Interest Swap and Hedging Obligations that are Incurred by the Subject
Entity or any of its Subsidiaries for the purpose of fixing or hedging interest
rates or currency rates with respect to any fixed or floating rate Indebtedness
that is permitted by this Indenture to be outstanding or any receivable or
liability the payment of which is determined by reference to a foreign currency;
provided, that the notional amount of any such Interest Swap and Hedging
Obligation does not exceed the principal amount of such Indebtedness or the
amount of such receivable or liability to which such Interest Swap and Hedging
Obligation relates, as applicable, at the time such Indebtedness, receivable or
liability is first incurred or, if later, the time such Interest Swap and
Hedging Obligation is first entered into (so long as any subsequent reduction in
the amount of such Indebtedness, receivable or liability without a corresponding
reduction in such notional amount is for a valid business purpose and not for
speculation and such notional amount at no time exceeds the principal amount of
such Indebtedness or the amount of such receivable or liability, as applicable,
by more than 20% or, in the event that such notional amount shall at any time
exceed the principal amount of such Indebtedness or the amount of such
receivable or liability by more than 20%, such Interest Swap and Hedging
Obligation is promptly terminated); and provided, further, that notwithstanding
the preceding proviso, the Subject Entity or any of its Subsidiaries may enter
into an Interest Swap and Hedging Obligation which would otherwise be permitted
under this clause (f) up to 90 days in advance of the date on which the related
Indebtedness, receivable or other liability is expected to be incurred so long
as (x) such Interest Swap and Hedging Obligation is entered into for a valid
business purpose and not for speculation and the notional amount thereof does
not exceed the amount of the Indebtedness, receivable or liability, as
applicable, which the Subject Entity reasonably anticipates will be incurred,
(y) such Indebtedness, receivable or liability, as applicable, is incurred
within such 90-day period or, if not incurred within such period, such Interest
Swap and Hedging Obligation is promptly terminated, and (z) the notional amount
of such Interest Swap and Hedging Obligation does not exceed the principal
amount of such Indebtedness or the amount of such receivable or liability, as
applicable, when such Indebtedness, receivable or liability is first incurred or
at any time thereafter by more than 20% or, in the event that such notional
amount shall at any time exceed the principal amount of such Indebtedness or the
amount of such receivable or liability by more than 20%, such Interest Swap and
Hedging Obligation is promptly terminated;
(g) Indebtedness of the Subject Entity or any of its Subsidiaries
represented by letters of credit for the account of the Subject Entity or such
Subsidiary in order to provide security for workers' compensation claims,
payment obligations in respect of self-insurance arrangements or similar
arrangements entered into in the ordinary course of business, or other
Indebtedness (so long as such Indebtedness is not for borrowed money or
Capitalized Lease Obligations or evidenced by bonds, notes, debentures or
similar instruments) with respect to reimbursement type obligations regarding
workers' compensation claims in the ordinary course of business or represented
by letters of credit for the account of the Subject Entity or any of its
Subsidiaries in connection with the purchase of goods or services in the
ordinary course of business;
(h) Existing Indebtedness of the Subject Entity or any of its Subsidiaries
(after giving effect to the Hughes Acquisition);
(i) other Indebtedness of the Subject Entity or any of its Subsidiaries in
an aggregate principal amount not to exceed $25 million at any time outstanding;
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(j) guarantees incurred in the ordinary course of business by the Subject
Entity or any Subsidiary of the Subject Entity of Indebtedness of any other
person in an aggregate principal amount not to exceed $15 million outstanding at
any time;
(k) Indebtedness arising from agreements of the Subject Entity or any of
its Subsidiaries providing for indemnification, adjustment of purchase price or
similar obligations, in each case Incurred in connection with the disposition of
any business, assets or Subsidiary of the Subject Entity, other than guarantees
of Indebtedness Incurred or assumed by any person acquiring all or any portion
of such business, assets or Subsidiary for the purpose of financing such
acquisition; provided that the maximum aggregate liability of all such
Indebtedness shall at no time exceed the gross proceeds actually received by the
Subject Entity and its Subsidiaries in connection with such disposition;
(l) guarantees by the Subject Entity or any of its Subsidiaries of
Indebtedness or other liabilities of Santee to the extent that such guarantees
are permitted under clause (viii) or (ix) of the definition of Restricted
Investment; and
(m) Indebtedness or Disqualified Capital Stock of the Subject Entity or
any of its Subsidiaries ("Refinancing Indebtedness") (1) issued in exchange for,
or the proceeds from the issuance and sale of which are used substantially
concurrently to repay, redeem, defease, refund, refinance, discharge or
otherwise retire for value, in whole or in part or (2) constituting an
amendment, modification or supplement to, or a deferral or renewal of ((1) and
(2) above are, collectively, a "Refinancing" and the term "Refinance" shall have
a correlative meaning) any Indebtedness or Disqualified Capital Stock of the
Subject Entity or any of its Subsidiaries which was Incurred in compliance with
the Debt Incurrence Ratio described in the second paragraph in Section 4.10 or
pursuant to above clause (a) or (h) (provided that the amount of such
Indebtedness so Refinanced is permanently reduced and, if any such Indebtedness
so Refinanced was Incurred under a revolving credit facility or similar
arrangement, the commitment thereunder is also permanently reduced by an amount
equal to the amount of such Indebtedness so Refinanced) or this clause (m);
provided, however, that (u) the aggregate principal amount of Indebtedness or
the aggregate liquidation preference of the Disqualified Capital Stock, as the
case may be, Incurred pursuant to this clause (m) (or, if such Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof, the original
issue price of such Indebtedness) shall not exceed the aggregate principal
amount of the Indebtedness or the aggregate liquidation preference of the
Disqualified Capital Stock, as the case may be, so Refinanced (or, if the
Indebtedness so Refinanced provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of the maturity
thereof, the amount that would be payable upon such an acceleration on the date
of such Refinancing), plus the amount of any premium required to be paid in
connection with such Refinancing pursuant to the terms of such Indebtedness or
Disqualified Capital Stock, as applicable, or the amount of any premium
reasonably determined by the Board of Directors of the Subject Entity as
necessary to accomplish such Refinancing by means of a tender offer or privately
negotiated purchase plus the amount of reasonable and customary out-of-pocket
fees and expenses payable in connection therewith; (v) Refinancing Indebtedness
Incurred by the Subject Entity or any of its Guarantor Foreign Subsidiaries or
Domestic Subsidiaries shall not be used to Refinance outstanding Indebtedness or
Disqualified Capital Stock of a Non-Guarantor Foreign Subsidiary of the Subject
Entity, unless such Incurrence complies with Section 4.3; (w) Refinancing
Indebtedness shall not have an Average Life shorter than the Average Life of the
Indebtedness or Disqualified Capital Stock, as applicable, to be Refinanced at
the time of such Refinancing (unless the Average Life of the Indebtedness or
Disqualified Capital Stock to be Refinanced is, at the time of such Refinancing,
longer than the Average Life of the Securities at such time, in which case such
Refinancing
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Indebtedness must have an Average Life longer than the Average Life of the
Securities at such time), and Refinancing Indebtedness shall have a final
maturity date which is on or after the earlier of (1) two Business Days after
the Final Maturity Date and (2) the final maturity date of the Indebtedness or
Disqualified Capital Stock, as applicable, to be Refinanced; (x) to the extent
that the Indebtedness or Disqualified Capital Stock to be so Refinanced requires
the scheduled payment of installments of principal or liquidation amount or
scheduled sinking fund payments on or prior to the Final Maturity Date, the
Refinancing Indebtedness may also require scheduled payments of installments of
principal or liquidation amount or sinking fund payments, as applicable, on or
prior to the Final Maturity Date so long as the dates of any such scheduled
payments falling on any date which is both (1) on or prior to the final maturity
date of the Indebtedness or Disqualified Capital Stock, as applicable, to be
Refinanced and (2) on or prior to the Final Maturity Date are no earlier than,
and the amounts of such payments are no greater than, was the case with respect
to the Indebtedness to be so Refinanced; (y) in the case of Refinancing
Indebtedness Incurred to Refinance Subordinated Indebtedness or Disqualified
Capital Stock, such Refinancing Indebtedness is expressly subordinated, by the
terms of the instrument or agreement evidencing such Refinancing Indebtedness or
pursuant to which it is issued, in right of payment to the Securities or the
Guarantees, as applicable, at least to the same extent as the Indebtedness or
Disqualified Stock to be so Refinanced; and (z) if the Indebtedness to be
Refinanced is Pari Passu Indebtedness, such Refinancing Indebtedness constitutes
Pari Passu Indebtedness or Subordinated Indebtedness.
"Permitted Lien" means any of the following: (a) Liens existing on the
Issue Date; (b) Liens imposed by governmental authorities for taxes, assessments
or other charges not yet subject to penalty or which are being contested in good
faith and by appropriate proceedings, if adequate reserves with respect thereto
are maintained on the books of the Subject Entity and its Subsidiaries in
accordance with GAAP; (c) statutory liens of carriers, warehousemen, mechanics,
materialmen, suppliers, landlords, repairmen or other like Liens arising by
operation of law in the ordinary course of business provided that the underlying
obligations are not overdue or such Liens are being contested in good faith and
by appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of the Subject Entity and its Subsidiaries in accordance
with GAAP; (d) Liens securing the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business; (e) easements, rights-of-way, zoning and similar
restrictions and other similar encumbrances or title defects which do not
materially interfere with the ordinary conduct of the business of the Subject
Entity and its Subsidiaries; (f) Liens arising by operation of law in connection
with judgments, but only to the extent, for an amount and for a period not
resulting in an Event of Default; (g) pledges or deposits made and Liens
incurred in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security
legislation; (h) any Liens securing the Securities or the Guarantees or created
by this Indenture; (i) Liens on any assets or property of any person existing at
the time such person becomes a Subsidiary of the Subject Entity or is merged
into or consolidated with the Subject Entity or another Subsidiary of the
Subject Entity, or Liens on assets or property existing at the time of
acquisition thereof by the Subject Entity or a Subsidiary of the Subject Entity,
provided in each case that such Liens were in existence prior to the date of
such acquisition, merger or consolidation, were not incurred in anticipation
thereof, and do not extend to any other assets or property; (j) Liens securing
Indebtedness permitted to be Incurred by the Subject Entity or any of its
Subsidiaries under clause (d) of the definition of Permitted Indebtedness or
securing other Purchase Money Indebtedness of the Subject Entity or any of its
Subsidiaries which is not prohibited by this Indenture, provided such Liens (i)
relate to (and only to) the property and assets (and proceeds and products
thereof) which were acquired (including property acquired under a capitalized
lease), improved or constructed with such Indebtedness, and (ii) the Liens
securing such Indebtedness shall be created not later than 180 days after such
acquisition or the completion of
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such improvement or construction or the inception of any such capitalized lease;
(k) Liens securing Refinancing Indebtedness Incurred to Refinance any
Indebtedness that was previously so secured in a manner no more adverse to the
Holders of the Securities and the Guarantees than the terms of the Liens
securing such refinanced Indebtedness and which Liens do not extend to any
additional property or assets; (l) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of nondelinquent
customs duties in connection with the importation of goods; (m) leases or
subleases granted in the ordinary course of business to others which do not
materially interfere with the business of the Subject Entity and its
Subsidiaries; (n) Liens encumbering customary initial deposits and margin
deposits, and other Liens incurred in the ordinary course of business that are
within the general parameters customary in the industry, in each case securing
Senior Debt of the Company and its Subsidiaries under Interest Swap and Hedging
Obligations and under forward contracts, option futures contracts, futures
options or similar agreements or arrangements designed to protect the Subject
Entity or any of its Subsidiaries from fluctuations in the price of commodities;
(o) Liens encumbering deposits made in the ordinary course of business to secure
nondelinquent obligations arising from statutory, regulatory, contractual or
warranty requirements of the Subject Entity or any of its Subsidiaries for which
a reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made; (p) Liens arising out of consignment or similar
arrangements for the sale of goods entered into by the Subject Entity or any of
its Subsidiaries in the ordinary course of business; (q) any interest or title
of a lessor in the property subject to any lease, whether characterized as a
capitalized or operating lease, other than any such interest or title resulting
from or arising out of a default by the Subject Entity or any of its
Subsidiaries of its obligations under such lease; (r) Liens arising from filing
UCC financing statements for precautionary purposes in connection with true
leases of personal property that are otherwise permitted under this Indenture
and under which the Subject Entity or any of its Subsidiaries is lessee; (s)
Liens securing reimbursement obligations with respect to letters of credit which
encumber documents and other property relating to such letters of credit and the
products and proceeds thereof and which letters of credit are issued in
connection with the purchase of goods or services in the ordinary course of
business and not in respect of Indebtedness for borrowed money or Capitalized
Lease Obligations or represented by bonds, notes, debentures or similar
instruments; and (t) Liens on the Capital Stock or other assets of Santee.
"Permitted Payments" means payments made to Parent after the date of the
Reorganization in an aggregate amount not to exceed the sum of (without
duplication):
(i) the Pro Rata Portion of customary salary, bonus and other
benefits payable to officers and employees of Parent, except any such
officers and employees whose responsibilities relate primarily, in the
good faith judgment of the Subject Entity's Board of Directors, to
Subsidiaries and Affiliates of the Parent other than the Subject Entity
and its Subsidiaries and Unrestricted Subsidiaries;
(ii) the Pro Rata Portion of customary fees and expenses payable to
members of the Parent's Board of Directors;
(iii) an amount equal to the sum (without duplication) of (A) 100%
of the Parent's general corporate overhead expense (collectively "Parent
Expenses") directly attributable, in the good faith judgment of the
Subject Entity's Board of Directors, to the Subject Entity and its
Subsidiaries and Unrestricted Subsidiaries plus (B) the Pro Rata Portion
of those Parent Expenses which are not directly attributable, in the good
faith judgment of the Subject Entity's Board of Directors, to either the
Subject Entity or any of its Subsidiaries or Unrestricted Subsidiaries or
to any other Subsidiaries or Affiliates of the Parent;
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(iv) the amount of foreign, federal, state or local tax liabilities
payable by Parent, not to exceed the amount of any tax liabilities that
would otherwise be payable by the Subject Entity and its Subsidiaries and
Unrestricted Subsidiaries to the appropriate taxing authorities if they
filed a separate consolidated tax return and then only to the extent that
(A) the Parent has an obligation to pay such tax liabilities relating to
the Subject Entity and its Subsidiaries and Unrestricted Subsidiaries and
(B) such tax liabilities are not otherwise paid by Subject Entity or its
Subsidiaries or Unrestricted Subsidiaries (provided that if any such
payment shall not be used by the Parent to pay such tax liabilities within
45 days of the Parent's receipt of such payment, then the Subject Entity
shall cause such payment to be refunded to the Subject Entity);
(v) an amount not to exceed the sum (without duplication) of (A)
amounts payable by Parent to repurchase Parent's common stock, stock
options, stock appreciation rights or similar rights under employee
benefit plans held by departing, retiring or deceased directors, officers
or employees of the Subject Entity or any Subsidiary or Unrestricted
Subsidiary of the Subject Entity and (B) the Pro Rata Portion of amounts
payable by Parent after the date of the Reorganization to repurchase
Parent's common stock, stock options, stock appreciation rights or similar
rights under employee benefit plans held by departing, retiring or
deceased officers or employees of Parent whose responsibilities did not
relate primarily, in the good faith judgment of the Subject Entity's Board
of Directors, to Subsidiaries and Affiliates of Parent other than the
Subject Entity and its Subsidiaries and Unrestricted Subsidiaries or held
by departing or deceased directors of Parent (provided that the aggregate
amount paid by Subject Entity pursuant to this clause (v) shall not exceed
$1 million in any fiscal year); and
(vi) cash payments in an aggregate amount not to exceed $500,000 in
any fiscal year, with any portion of such amount which is not expended in
any fiscal year being carried forward;
provided that there shall be excluded from the expenses and other amounts
payable by Parent referred to above (other than amounts referred to in clauses
(iv) and (v)(A) above) all expenses and other amounts which relate to periods
prior to the date of the Reorganization.
"Person" or "person" means any person, corporation, individual,
partnership, limited liability company, trust, unincorporated association, or a
government or any agency or political subdivision thereof.
"Preferred Stock" means, with respect to any person, any Capital Stock of
such person of any class or series (however designated) that ranks prior, as to
payment of dividends or distributions or as to distributions upon voluntary of
involuntary liquidation, dissolution or winding up, to shares of Capital Stock
of any other class or series of such person. For purposes of this definition,
the term "Capital Stock" shall not include rights, warrants or options.
"Pro Rata Portion" means, at any date, 100% or, if the consolidated
revenues of the Parent and its consolidated subsidiaries shall, for the then
most recent period (the "Subject Period") of four full fiscal quarters ended
prior to the date of determination, exceed the consolidated revenues of the
Subject Entity and its consolidated subsidiaries for the Subject Period, then
the Pro Rata Portion shall be equal to a fraction (i) the numerator of which is
the consolidated revenues of the Subject Entity and its consolidated
subsidiaries for the Subject Period and (ii) the denominator of which is the
consolidated revenues of the Parent and its consolidated subsidiaries for the
Subject Period, provided that if the date of such determination is less than
four full fiscal quarters after the date of the Reorganization, then the term
Subject Period shall instead mean
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the period from and including the date of the Reorganization through and
including the last day of the then most recently ended period for which the
internal financial statements necessary to make such calculation are available.
All computations of consolidated revenues pursuant to this definition shall be
made in accordance with GAAP.
"Property" or "property" means any right or interest in or to property or
assets of any kind whatsoever, whether real, personal or mixed and whether
tangible or intangible.
"Purchase Date" shall have the meaning specified in Section 4.13.
"Purchase Money Indebtedness" means, with respect to any person, any
Indebtedness of such person to any seller or other person Incurred to finance
the acquisition, improvement or construction (including in the case of a
Capitalized Lease Obligation, the lease) of any business or real or personal
property (or, in each case, any interest therein) acquired, improved or
constructed after the Issue Date which, in the reasonable judgment of the Board
of Directors of such person, is related to a Related Business and which is
Incurred concurrently with, or within 180 days of, such acquisition or the
completion of such improvement or construction and, if secured, is secured only
by the business or property so acquired, improved or constructed (and the
proceeds and products therefrom).
"Qualified Capital Stock" means, with respect to any person, any Capital
Stock of such person that is not Disqualified Capital Stock.
"Qualified Exchange" means (i) any legal defeasance, redemption,
retirement, repurchase or other acquisition of Capital Stock of the Subject
Entity or Indebtedness of the Subject Entity with the Net Cash Proceeds received
by the Subject Entity from the substantially concurrent sale of its Qualified
Capital Stock or a substantially concurrent capital contribution to the Subject
Entity, or (ii) any exchange of Qualified Capital Stock of the Subject Entity
for any outstanding Capital Stock of the Subject Entity or outstanding
Indebtedness of the Subject Entity.
"Record Date" means a Record Date specified in the form of Security
attached hereto as Exhibit A, whether or not such Record Date is a Business Day.
"Redemption Date," when used with respect to any Security to be redeemed,
means the date fixed for such redemption pursuant to Article III of this
Indenture and Paragraph 5 in the form of Security attached hereto as Exhibit A.
"Redemption Price," when used with respect to any Security to be redeemed,
means the redemption price for such redemption pursuant to Paragraph 5 in the
form of Security attached hereto as Exhibit A, which shall include, without
duplication, in each case, accrued and unpaid interest to the Redemption Date
(subject to the provisions of Section 3.5).
"Reference Period" with regard to any person means the most recent period
of four full fiscal quarters (or such lesser period during which such person has
been in existence) ended immediately preceding any date upon which any
determination is to be made pursuant to the terms of the Securities or this
Indenture.
"Refinance" and "Refinancing Indebtedness" have the meanings set forth in
the definition of Permitted Indebtedness.
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"Registrar" shall have the meaning specified in Section 2.3.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Issue Date by and between the Company and the Guarantors on the
one hand, and the Initial Purchasers, on the other hand, providing for certain
registration rights for the Securities.
"Regulation S" means Regulation S under the Securities Act or any
successor thereto, in each case as the same may be amended or modified from time
to time.
"Related Business" means the business conducted by the Subject Entity and
its Subsidiaries as of the Issue Date and any and all businesses that in the
good faith judgment of the Board of Directors of the Subject Entity are related
businesses, including related extensions thereof.
"Reorganization" shall have the meaning specified in Section 4.17.
"Restricted Investment" means any Investment other than (i) Investments in
the Company or any Guarantor (including any person that pursuant to such
Investment becomes a Guarantor) or any person that is merged or consolidated
with or into, or transfers or conveys all or substantially all of its assets to,
the Company or any Guarantor at the time such Investment is made; (ii)
Investments in Cash Equivalents; (iii) Investments in deposits with respect to
leases or utilities provided to third parties in the ordinary course of
business; (iv) investments in the Securities; (v) Investments in Interest Swap
and Hedging Obligations entered into by the Subject Entity or any of its
Subsidiaries for bona fide business purposes and not for speculation and which
Interest Swap and Hedging Obligations are not otherwise prohibited by this
Indenture; (vi) loans or advances to officers, employees or consultants of the
Subject Entity and its Subsidiaries for bona fide business purposes of the
Subject Entity and its Subsidiaries (including travel and moving expenses) not
in excess of $5 million in the aggregate at any one time outstanding; (vii)
Investments in evidences of Indebtedness, securities or other property received
from another person by the Subject Entity or any of its Subsidiaries in
connection with any bankruptcy proceeding of such person or by reason of a
composition or readjustment of debt or a reorganization of such person or as a
result of foreclosure or enforcement of any Lien on the assets or property of
such person held by the Subject Entity or any of its Subsidiaries, or taken in
settlement of or other resolution of claims or disputes with such person, and,
in each case, extensions, modifications and renewals thereof (but not increases
thereof, other than as a result of the accrual or accretion of interest or
original issue discount pursuant to the terms of such Investments);
(viii) Investments in Santee made prior to the second anniversary of the Issue
Date in an aggregate amount not to exceed $50 million (it being understood that
amounts temporarily advanced to Santee as a prepayment for the purchase of milk
or other products from Santee shall not be deemed an Investment for purposes of
this clause or otherwise, except to the extent of any such advances which (A)
are outstanding in an aggregate amount in excess of $10 million on any date from
the Issue Date through the 90th day after the Issue Date or (B) are outstanding
on any date after such 90th day), provided that the proceeds of such Investments
are used to pay the costs of constructing and equipping Santee's new dairy which
was under construction on the Issue Date and costs reasonably related thereto;
(ix) Investments in Santee in an aggregate amount at any time outstanding not to
exceed $30 million, provided that, to the extent that the aggregate amount of
outstanding Investments made pursuant to clause (viii) above and this clause
(ix) shall at any time exceed $40 million, then the amount of such Investments
in excess of $40 million will be deducted in the calculation of the aggregate
amount of Restricted Payments available to be made referred to in clause (3) of
the first paragraph of Section 4.3; (x) Investments in Unrestricted Subsidiaries
in an aggregate amount not to exceed $15 million at any one time outstanding;
(xi) additional Investments in Related Businesses in an aggregate amount not to
exceed $25
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million at any time outstanding; (xii) Investments of the Company and its
Subsidiaries existing as of the Issue Date and any extension, modification or
renewal of such Investments (but not increases thereof, other than as a result
of the accrual or accretion of interest or original issue discount pursuant to
the terms of such Investments); (xiii) Investments in persons (other than
Affiliates of the Subject Entity) received as consideration from Asset Sales to
the extent not prohibited by Section 4.13 and extensions, modifications and
renewals thereof (but not increases thereof, other than as a result of the
accrual or accretion of interest or original issue discount pursuant to the
terms of such Investments); and (xiv) Investments made by Non-Guarantor Foreign
Subsidiaries in other Non-Guarantor Foreign Subsidiaries. If any Investment made
pursuant to clause (viii) or (ix) of the preceding sentence is, pursuant to the
proviso to such clause (ix), deducted in the calculation of the aggregate amount
of Restricted Payments available to be made referred to in clause (3) of the
first paragraph of Section 4.3, there shall be added back to the aggregate
amount of Restricted Payments available to be made referred to in such clause
(3) any net reduction in such Investment resulting from repurchases or
redemptions of such Investment by Santee, proceeds realized upon the sale of
such Investment to any person (other than to the Subject Entity or any of its
Subsidiaries), and repayments of loans or advances or other transfers of
property (valued at Fair Market Value as determined in good faith by the Board
of Directors of the Subject Entity and evidenced by a resolution delivered to
the Trustee) by Santee to the Subject Entity or any of its Subsidiaries
(provided that such net reduction shall occur only to the extent that the monies
or property giving rise to such reduction are received by the Subject Entity or
a Domestic Subsidiary or Guarantor Foreign Subsidiary of the Subject Entity) or
the termination of guarantees of, or other credit support with respect to, any
Indebtedness or other liabilities of Santee provided by the Subject Entity or
any of its Domestic Subsidiaries or Guarantor Foreign Subsidiaries, not to
exceed the amount of Investments previously made by the Subject Entity and its
Subsidiaries in Santee pursuant to such clause (viii) or (ix), as applicable,
which were, pursuant to the proviso to such clause (ix), applied to reduce the
aggregate amount of Restricted Payments available to be made pursuant to such
clause (3) (provided, however, that no amount added back pursuant to this
sentence shall be included in Consolidated Net Income for purposes of clause
(3)(a), or shall be added back pursuant to clause (3)(d), of the first paragraph
set of Section 4.3).
"Restricted Payment" means, with respect to any person, (a) the
declaration or payment of any dividend or other distribution in respect of
Capital Stock of such person, (b) any payment on account of the purchase,
redemption or other acquisition or retirement for value of Capital Stock of such
person, (c) any purchase, redemption, or other acquisition or retirement for
value of, any payment in respect of any amendment of the terms of or any
defeasance of, any Subordinated Indebtedness, directly or indirectly, by such
person prior to the scheduled maturity, any scheduled repayment of principal, or
scheduled sinking fund payment, as the case may be, of such Subordinated
Indebtedness and (d) any Restricted Investment by such person; provided,
however, that the term "Restricted Payment" does not include (i) any dividend,
distribution or other payment on or with respect to Capital Stock of the Subject
Entity to the extent payable in shares of Qualified Capital Stock of the Subject
Entity; (ii) any dividend, distribution or other payment (A) to the Subject
Entity, (B) to any Domestic Subsidiary or Guarantor Foreign Subsidiary of the
Subject Entity by the Subject Entity or any of its other Subsidiaries, or (C) to
any Non-Guarantor Foreign Subsidiary of the Subject Entity by any of its other
Non-Guarantor Foreign Subsidiaries; or (iii) the declaration or payment of
dividends or distributions by any Subsidiary of the Subject Entity on any class
or series of its Capital Stock (other than rights, warrants or options),
provided such dividends or distributions are made on a pro rata basis (and in
like form) to all holders of Capital Stock of such class or series and except to
the extent of any such dividends or distributions paid by any Domestic
Subsidiary or Guarantor Foreign Subsidiary of the Subject Entity to any
Non-Guarantor Foreign Subsidiary of the Subject Entity.
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"Rule 144" means Rule 144 under the Securities Act or any successor
thereto, in each case as the same may be amended or modified from time to time.
"Rule 144A" means Rule 144A under the Securities Act or any successor
thereto, in each case as the same may be amended or modified from time to time.
"Sale and Leaseback Transaction" means, with respect to any person, any
transaction by which such person, directly or indirectly, becomes liable as a
lessee or as a guarantor or other surety with respect to any lease of any
property (whether owned at the date of this Indenture or thereafter acquired)
that such person has sold or transferred or is to sell or transfer to any other
person in a substantially concurrent transaction with such assumption of
liability.
"Santee" means Santee Dairies, Inc., a California corporation, and its
successors.
"SEC" means the Securities and Exchange Commission, or any successor
thereto.
"Securities" means, collectively, the Initial Securities and, when and if
issued as provided in the Registration Rights Agreement, the Exchange
Securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor thereto, in each case including the rules and regulations of the
Commission promulgated thereunder.
"Securities Custodian" means the Registrar, as custodian with respect to
the Securities in global form, or any successor entity thereto.
"Securityholder" or "Holder" means the Person in whose name a Security is
registered on the Registrar's books.
"Senior Bank Representative" means, at any time and with respect to any
Credit Agreement, the then-acting agent or agents under such Credit Agreement,
which, in the case of the New Credit Agreement, shall initially be Bank of
America National Trust and Savings Association and The Chase Manhattan Bank.
"Senior Debt" means, with respect to the Company or any Guarantor, (i) any
Indebtedness and other obligations of the Company or such Guarantor, as the case
may be, under any Credit Agreement (including, without limitation, obligations
to pay principal, premium, if any, interest, penalties, fees (including
commitment fees, facility fees and letter of credit fees and commissions),
expenses, indemnities, funding losses and increased costs (including capital
adequacy charges)) and (ii) any other Indebtedness of the Company or such
Guarantor, as the case may be (including, without limitation, obligations to pay
principal, premium, if any, and interest), in each case referred to in clauses
(i) and (ii) of this sentence whether outstanding on the Issue Date or
thereafter created, Incurred or assumed and including, in the case of Designated
Senior Debt, interest accruing after the commencement of any bankruptcy case or
proceeding at the rate specified in the applicable Designated Senior Debt
whether or not such interest is allowed as a claim in such case or proceeding,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Securities or the Guarantee of such Guarantor, as applicable, or that such
Indebtedness shall rank pari passu with or subordinate in right of payment to
the Securities or such Guarantee, as applicable, or that such Indebtedness shall
rank subordinate in right of payment to any other
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Indebtedness of the Company or such Guarantor, as applicable. Notwithstanding
the foregoing, "Senior Debt" shall not include (a) Indebtedness evidenced by the
Securities or the Guarantees, (b) Indebtedness to trade creditors, (c) any
liability for federal, state, local or other taxes, (d) Indebtedness owed to the
Company, the Holding Company or the Parent or any of their respective
Subsidiaries or Unrestricted Subsidiaries, (e) Indebtedness owed to any officer,
employee or director of the Company, the Holding Company or the Parent or any of
their respective Subsidiaries or Unrestricted Subsidiaries, (f) Disqualified
Capital Stock, (g) that portion of any Indebtedness which is Incurred in
violation of this Indenture or (h) Indebtedness of the type referred to in
clause (e) of the definition of the term "Indebtedness" included herein.
"Senior Debt Representative" means the indenture trustee or other trustee,
agent or representative for any Senior Debt.
"Significant Subsidiary" means a "significant subsidiary" as defined in
Rule 1-02 of Regulation S-X promulgated pursuant to the Securities Act, as such
Regulation S-X was in effect on January 1, 1996.
"Special Record Date" for payment of any Defaulted Interest means a date
fixed by the Trustee pursuant to Section 2.12.
"Standstill Agreements" means the Standstill Agreement dated as of January
14, 1995 between the Company and Zell/Chilmark Fund L.P., a Delaware limited
partnership, and the Standstill Agreement dated as of January 14, 1995 between
the Company and Stuart M. Sloan.
"Stated Maturity" means, when used with respect to any Security or any
installment of interest thereon, the date specified in such Security or in this
Indenture as the fixed date on which the principal of such Security 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 or
evidencing such Indebtedness as the fixed date on which the principal of such
Indebtedness or any installment of interest thereon is due and payable.
"Subject Entity" means (i) prior to the Reorganization, the Company and
(ii) from and after the Reorganization, the Holding Company.
"Subordinated Indebtedness" means, with respect to the Company or any
Guarantor, Indebtedness of the Company or such Guarantor, as the case may be,
that is subordinated in right of payment to the Securities or to the Guarantee
of such Guarantor, as applicable.
"Subsidiary," with respect to any person, means (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary circumstances
to elect directors, is at the time, directly or indirectly, owned by such
person, by such person and one or more Subsidiaries of such person, or by one or
more Subsidiaries of such person, and (ii) any other person (other than a
corporation) in which such person, one or more Subsidiaries of such person, or
such person and one or more Subsidiaries of such person, directly or indirectly,
at the date of determination thereof has at least majority equity ownership
interest. Notwithstanding the foregoing, an Unrestricted Subsidiary shall be
deemed not to be a Subsidiary of the Subject Entity or any of its Subsidiaries,
and Santee shall not be deemed a Subsidiary of the Subject Entity or any of its
Subsidiaries for any purpose under this Indenture.
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"Subsidiary Guarantors" means, prior to the Reorganization, the Guarantors
and, from and after the Reorganization, the Guarantors other than the Holding
Company.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S. Code
ss.ss. 77aaa-77bbbb), as in effect on the date of the Issue Date; except as
otherwise provided in Section 9.3.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.6 hereof.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture, and
thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
administration division (or any successor group) of the Trustee or any other
officer of the Trustee customarily performing functions similar to those
performed by the Persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer of
the Trustee to whom such trust matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"U.S. Government Obligations" means direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
"Unrestricted Subsidiary" means a Subsidiary of the Subject Entity (i)
whose properties and assets, to the extent that they secure Indebtedness, secure
only Non-Recourse Indebtedness, (ii) which has no Indebtedness other than
Non-Recourse Indebtedness, (iii) which does not, directly or indirectly, own any
Capital Stock of, and which does not hold any Lien on any property or assets of,
the Subject Entity or any other Subsidiary of the Subject Entity other than an
Unrestricted Subsidiary or a Subsidiary which is concurrently being designated
as an Unrestricted Subsidiary, (iv) as to which neither the Subject Entity nor
any of its Subsidiaries has any direct or indirect obligation to subscribe for
additional Capital Stock or to maintain or preserve such Subsidiary's financial
condition or to cause such Subsidiary to achieve any specified levels of
operating results, (v) which either is designated by the Board of Directors of
the Subject Entity as an Unrestricted Subsidiary pursuant to a Board Resolution
(provided that (A) immediately prior to and immediately after giving pro forma
effect to such designation, no Default or Event of Default shall have occurred
and shall be continuing and (B) immediately after giving pro forma effect to
such designation, the Subject Entity could Incur at least $1.00 of additional
Indebtedness pursuant to the Debt Incurrence Ratio in the second paragraph of
Section 4.10), or which is an Initial Unrestricted Subsidiary; provided that the
Company may not be designated as an Unrestricted Subsidiary and, prior to the
Reorganization, neither the Parent nor the Holding Company may be designated as
an Unrestricted Subsidiary. For purposes of this Indenture, including the
proviso to the immediately preceding sentence, the Subject Entity shall be
deemed to have made an Investment in an Unrestricted Subsidiary at the time it
is designated as such. If, at any time, any Unrestricted Subsidiary would fail
to meet the requirements set forth in clauses (i) through (iv) of the second
preceding sentence, it shall thereafter cease to be an Unrestricted Subsidiary
for purposes of this Indenture and any Indebtedness of such Subsidiary shall be
deemed to be Incurred by such Subsidiary as of such time. The Board of Directors
of the Subject Entity may at any time designate any Unrestricted Subsidiary to
be a Subsidiary of the Subject Entity; provided that such designation shall be
deemed to be an Incurrence by a Subsidiary of the Subject Entity of any
outstanding Indebtedness of such Unrestricted Subsidiary at such time and such
designation shall only be permitted if (i) the Incurrence of such Indebtedness
is not prohibited by
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this Indenture, (ii) immediately prior to and immediately after giving pro forma
effect to such designation, no Default or Event of Default shall have occurred
and shall be continuing, and (iii) immediately after giving pro forma effect to
such designation, the Subject Entity could incur at least $1.00 of additional
Indebtedness pursuant to the Debt Incurrence Ratio in the second paragraph of
Section 4.10. Any such designation of a Subsidiary as an Unrestricted
Subsidiary, or of an Unrestricted Subsidiary as a Subsidiary, shall be evidenced
by the filing with the Trustee of the Board Resolution of the Subject Entity
effecting such designation, together with an Officers' Certificate of the
Subject Entity certifying that such designation complied with the foregoing
conditions. As used above, "Non-Recourse Indebtedness" means Indebtedness as to
which (i) neither the Subject Entity nor any of its Subsidiaries (other than the
relevant Unrestricted Subsidiary or another Unrestricted Subsidiary) (1)
provides credit support (including any undertaking, agreement or instrument
which would constitute Indebtedness), (2) guarantees or is otherwise directly or
indirectly liable or (3) constitutes the lender (in each case, other than
pursuant to and in compliance with Section 4.3) and (ii) no default with respect
to such Indebtedness (including any rights which the holders thereof may have to
take enforcement action against the relevant Unrestricted Subsidiary or its
assets) would permit (upon notice, lapse of time or both) any holder of any
other Indebtedness of the Subject Entity or its Subsidiaries (other than
Unrestricted Subsidiaries) to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or to become payable prior to its
Stated Maturity.
"Voting Stock" means, with respect to any person, any class or classes or
series or series of Capital Stock of such person 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 such person
(irrespective of whether or not, at the time, Capital Stock of any other class
or classes or series or series shall have, or might have, voting power by reason
of the happening of any contingency).
"Wholly-Owned Subsidiary" means, with respect to any person, any
Subsidiary of such person of which 100% of the outstanding Capital Stock is
owned by such person, by one or more Wholly-Owned Subsidiaries of such person or
by such person and one or more Wholly-Owned Subsidiaries of such person. For
purposes of this definition, any directors' qualifying shares shall be
disregarded in determining the ownership of a Subsidiary.
SECTION 1.2. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture securityholder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture Trustee" or "institutional Trustee" means the Trustee.
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"obligor" on the indenture securities means the Company, each Guarantor
and any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.3. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or other
subdivision; and
(7) references to Sections or Articles means reference to such
Section or Article in this Indenture, unless stated otherwise.
ARTICLE II
THE SECURITIES
SECTION 2.1. Form and Dating.
The Securities and the Trustee's certificate of authentication, in respect
thereof, shall be substantially in the form of Exhibit A hereto, which Exhibit
is part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage or the terms hereof.
The Company shall approve the form of the Securities and any notation, legend or
endorsement on them. Any such notations, legends or endorsements not contained
in the form of Security attached as Exhibit A hereto shall be delivered in
writing to the Trustee. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the form of Securities attached
hereto as Exhibit A shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Company, 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.
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SECTION 2.2. Execution and Authentication.
Two Officers shall sign, or one Officer shall sign and one Officer shall
attest to, the Securities for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security was an Officer at the time
of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless and the
Company shall nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security but such
signature shall be conclusive evidence that the Security has been authenticated
pursuant to the terms of this Indenture.
The Trustee shall authenticate or cause to be authenticated the
Initial Securities for original issue in the aggregate principal amount of
$150,000,000 and shall authenticate Exchange Securities for original issue in
the aggregate principal amount of up to $150,000,000, in each case upon a
written order of the Company in the form of an Officers' Certificate provided
that such Exchange Securities shall be issuable only upon the valid surrender
for cancellation of Initial Securities of a like aggregate principal amount. The
Officers' Certificate shall specify the amount of Securities to be authenticated
and the date on which the Securities are to be authenticated. The aggregate
principal amount of Securities outstanding at any time may not exceed
$150,000,000, except as provided in Section 2.7. Upon the written order of the
Company in the form of an Officers' Certificate, the Trustee shall authenticate
Securities in substitution of Securities originally issued to reflect any name
change of the Company.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities. Unless otherwise provided in the appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company, any Affiliate of the Company, or any of their
respective Subsidiaries.
Securities shall be issuable only in fully registered form, without
coupons, in denominations of $1,000 and integral multiples thereof.
SECTION 2.3. Registrar and Paying Agent.
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where Securities may be presented for
registration of transfer or exchange ("Registrar") and an office or agency of
the Company where Securities may be presented for payment ("Paying Agent") and
where notices and demands to or upon the Company in respect of the Securities
may be served. The Company may act as Registrar or Paying Agent, except that for
the purposes of Articles III, VIII, X and Section 4.13 and as otherwise
specified in this Indenture, neither the Company nor any Affiliate of the
Company shall act as Paying Agent. The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may have one or more
co-Registrars and one or more additional Paying Agents. The term "Registrar"
includes any co-Registrar and the term "Paying Agent" includes any additional
Paying Agent. The Company hereby initially appoints the Trustee as Registrar and
Paying Agent, and by its signature
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hereto, the Trustee hereby agrees so to act. The Company may at any time change
any Paying Agent or Registrar without notice to any Holder.
The Company shall enter into an appropriate written agency agreement with
any Agent (including the Paying Agent) not a party to this Indenture, which
agreement shall implement the provisions of this Indenture that relate to such
Agent, and shall furnish a copy of each such agreement to the Trustee. The
Company shall promptly notify the Trustee in writing of the name and address of
any such Agent. If the Company fails to maintain a Registrar or Paying Agent,
the Trustee shall act as such.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Securities.
The Company initially appoints the Registrar to act as Securities
Custodian with respect to the Global Securities.
Upon the occurrence of an Event of Default described in Section
6.1(g) or (h), the Trustee shall, or upon the occurrence of any other Event of
Default by notice to the Company, the Registrar and the Paying Agent, the
Trustee may, assume the duties and obligations of the Registrar and the Paying
Agent hereunder.
The Trustee is authorized to enter into a letter of representation with
DTC in the form provided to the Trustee by the Company and to act in accordance
with such letter.
SECTION 2.4. Paying Agent to Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, premium, if any, or interest on, the Securities (whether such
assets have been distributed to it by the Company or any other obligor on the
Securities), and shall notify the Trustee in writing of any default in making
any such payment. If either of the Company or an Affiliate of the Company acts
as Paying Agent, it shall segregate such assets and hold them as a separate
trust fund for the benefit of the Holders or the Trustee. The Company at any
time may require a Paying Agent to distribute all assets held by it to the
Trustee and account for any assets disbursed and the Trustee may at any time
during the continuance of any Payment Default or any Event of Default, upon
written request to a Paying Agent, require such Paying Agent to distribute all
assets held by it to the Trustee and to account for any assets distributed. Upon
distribution to the Trustee of all assets that shall have been delivered by the
Company or any Guarantor to the Paying Agent, the Paying Agent (if other than
the Company) shall have no further liability for such assets.
SECTION 2.5. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not
the Registrar, the Company shall furnish to the Trustee on or before the third
Business Day preceding each Interest Payment Date and at such other times as the
Trustee or any Paying Agent may request in writing a list in such form and as of
such date as the Trustee reasonably may require of the names and addresses of
Holders and the Company shall otherwise comply with TIA ss. 312(a).
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SECTION 2.6. Transfer and Exchange.
(a) Transfer and Exchange of Definitive Securities. When Definitive
Securities are presented to the Registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as
requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for
registration of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the
Company and the Registrar duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(ii) in the case of Definitive Securities that are
Transfer Restricted Securities, such request shall be accompanied by
the following additional information and documents, as applicable:
(A) if such Transfer Restricted Securities are being
delivered to the Registrar by a Holder for registration in the
name of such Holder, without transfer, a certification from
such Holder to that effect (in substantially the form set
forth on the reverse of the Security); or
(B) if such Transfer Restricted Security is being
transferred to a person the beneficial owner reasonably
believes is a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) in accordance with Rule
144A under the Securities Act, a certification to that effect
(in substantially the form set forth on the reverse of the
Security); or
(C) if such Transfer Restricted Security is being
transferred (i) pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S under the Securities
Act or (ii) pursuant to an effective registration statement
under the Securities Act, or (iii) to an institutional
"accredited investor" within the meaning of Rule 501(A)(1),
(2), (3) or (7) under the Securities Act that is acquiring the
Security for its own account, or for the account of such an
institutional accredited investor, in each case in a minimum
principal amount of the Securities of $100,000, not with a
view to or for offer or sale in connection with any
distribution in violation of the Securities Act, or (iv) in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to that
effect (in substantially the form set forth on the reverse of
the Security) and in the case of (i), (iii) and (iv) above, if
the Company or the Registrar so request, a customary opinion
of counsel, certificates and other information reasonably
acceptable to the Company
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and to the Registrar to the effect that such transfer is in
compliance with the Securities Act.
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Registrar
of a Definitive Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Registrar, together with:
(i) if such Definitive Security is a Transfer Restricted
Security, certification, substantially in the form set forth on the
reverse of the Security, that such Definitive Security is being
transferred to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in accordance with Rule 144A under
the Securities Act; and
(ii) whether or not such Definitive Security is a
Transfer Restricted Security, written instructions of the Holder
directing the Registrar to make, or to direct the Securities
Custodian to make, an endorsement on the Global Security to reflect
an increase in the aggregate principal amount of the Securities
represented by the Global Security,
then the Registrar shall cancel such Definitive Security and cause, or
direct the Securities Custodian to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Securities Custodian, the aggregate principal amount of Securities
represented by the Global Security to be increased accordingly. If no
Global Securities are then outstanding, the Company shall issue and the
Trustee shall authenticate a new Global Security in the appropriate
principal amount.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Depositary therefor which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Security for a
Definitive Security.
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial interest for a
Definitive Security. Upon receipt by the Registrar of written
instructions or such other form of instructions as is customary for
the Depositary from the Depositary or its nominee on behalf of any
Person having a beneficial interest in a Global Security and, in the
case of a beneficial interest in a Transfer Restricted Security,
upon receipt by the Registrar of the following information and
documents in such form as is customary for the Depositary from the
Depositary or its nominee on behalf of any Person having a
beneficial interest in such Transfer Restricted Security (all of
which may be submitted by facsimile or electronically):
(A) if such beneficial interest in a Transfer Restricted
Security is being transferred to the Person designated by the
Depositary as being the beneficial
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owner, a certification to that effect (in substantially the
form set forth on the reverse of the Security); or
(B) if such beneficial interest in a Transfer Restricted
Security is being transferred to a person the beneficial owner
reasonably believes is a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) in accordance
with Rule 144A under the Securities Act, a certification to
that effect (in substantially the form set forth on the
reverse of the Security); or
(C) if such beneficial interest in a Transfer Restricted
Security is being transferred (i) pursuant to an exemption
from registration in accordance with Rule 144 or Regulation S
under the Securities Act or (ii) pursuant to an effective
registration statement under the Securities Act, or (iii) to
an institutional "accredited investor" within the meaning of
Rule 501 (A)(1), (2), (3) or (7) under the Securities Act that
is acquiring the Security for its own account, or for the
account of such an institutional accredited investor, in each
case in a minimum principal amount of the Securities of
$100,000, not with a view to or for offer or sale in
connection with any distribution in violation of the
Securities Act, or (iv) in reliance on another exemption from
the registration requirements of the Securities Act, a
certification to that effect (in substantially the form set
forth on the reverse of the Security) and in the case of (i),
(iii) and (iv) above, if the Company or the Registrar so
requests, a customary opinion of counsel, certificates and
other information reasonably acceptable to the Company and to
the Registrar to the effect that such transfer is in
compliance with the Securities Act;
then the Registrar or the Securities Custodian, at the direction of the
Trustee, will cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian,
the aggregate principal amount of the Global Security to be reduced and,
following such reduction, the Company will execute and the Trustee or the
Trustee's authenticating agent will authenticate and deliver to the
transferee a Definitive Security.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.6(d) shall
be registered in such names and in such authorized denominations as
the Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Registrar. The
Registrar shall deliver such Definitive Securities to the Persons in
whose names such Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.6), a Global Security
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Securities in Absence of
Depository. If at any time:
(i) the Depositary for the Securities notifies the Company
that the Depositary is unwilling or unable to continue as Depositary
for the Global Securities or if the Depositary
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ceases to be a clearing agency registered as such under the Exchange
Act at any time when the Depositary is required to be so registered
in order to act as depositary for the Global Securities and a
successor Depositary for the Global Securities is not appointed by
the Company within 90 days after the Company receives such notice or
learns of such ineligibility; or
(ii) the Company, in its sole discretion, determines that the
Securities shall no longer be represented by Global Securities and
executes and delivers to the Trustee and the Registrar an Officers'
Certificate to such effect; or
(iii) an Event of Default with respect to the Securities shall
have occurred and be continuing,
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Securities
(which the Company agrees that it will deliver), will, or its authenticating
agent will, authenticate and deliver Definitive Securities, in an aggregate
principal amount equal to the principal amount of the Global Securities, in
exchange for such Global Securities. Such Definitive Securities shall be
registered in such name or names as the Depositary shall instruct the Trustee.
(g) Cancellation and/or Adjustment of Global Security. At such time
as all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, redeemed, repurchased or cancelled, such Global Security
shall be returned to or retained and cancelled by the Trustee. At any time prior
to such cancellation, if any beneficial interest in a Global Security is
exchanged for Definitive Securities, redeemed, repurchased or cancelled, the
principal amount of Securities represented by such Global Security shall be
reduced and an endorsement shall be made on such Global Security, by the Trustee
or the Securities Custodian, at the direction of the Trustee, to reflect such
reduction.
(h) Legends.
(i) Except as permitted by the following paragraph (ii), each
Security certificate evidencing the Global Securities and the Definitive
Securities (and all Securities issued in exchange therefor or substitution
thereof except Exchange Securities which have been registered under the
Securities Act and which are issued in exchange for Initial Securities
pursuant to an exchange offer as contemplated by the Registration Rights
Agreement) shall bear a legend in substantially the following form:
THIS SECURITY AND THE GUARANTEES HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE
(THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS
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(OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE
144(K) (OR ANY SUCCESSOR THERETO) UNDER THE SECURITIES ACT AS
PERMITTING THE RESALE BY NON-AFFILIATES OF RESTRICTED SECURITIES
WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY GUARANTOR (AS
DEFINED) OR ANY "AFFILIATE" (AS DEFINED IN RULE 144 (OR ANY
SUCCESSOR THERETO) UNDER THE SECURITIES ACT) OF THE COMPANY OR ANY
GUARANTOR WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS
SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A)(1),(2),(3) OR (7) OF RULE 501 UNDER THE SECURITIES
ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON 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.
THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A
REGISTRATION RIGHTS AGREEMENT (AS SUCH TERM IS DEFINED IN THE
INDENTURE REFERRED TO BELOW) AND, BY ITS ACCEPTANCE HEREOF, AGREES
TO BE BOUND BY AND TO COMPLY WITH THE PROVISIONS OF SUCH
REGISTRATION RIGHTS AGREEMENT.
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a
Global Security) pursuant to Rule 144 under the Securities Act or an
effective registration statement under the Securities Act:
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(A) in the case of any Transfer Restricted Security that is a
Definitive Security, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legend set forth
above and shall rescind any restriction on the transfer of
such Transfer Restricted Security, provided that, in the case
of a sale or transfer pursuant to Rule 144 under the
Securities Act, the Holder thereof shall certify in writing
(to be accompanied by a customary opinion of counsel) to the
Registrar that such Security is being transferred pursuant to
an exemption from registration pursuant to Rule 144 (such
certification to be substantially in the form set forth on the
reverse of the Security); and
(B) any such Transfer Restricted Security represented by a Global
Security shall bear the legend set forth in (i) above but not
be subject to the provisions set forth in (i) above (such
sales or transfers being subject only to the provi- sions of
Section 2.6(c) hereof); provided, however, that with respect
to any request for an exchange of a Transfer Restricted
Security that is represented by a Global Security for a
Definitive Security that does not bear a legend, which request
is made in reliance upon Rule 144 under the Securities Act,
the Holder thereof shall certify in writing (to be accompanied
by a customary opinion of counsel) to the Registrar that such
Security is being transferred pursuant to an exemption from
registration pursuant to Rule 144 under the Securities Act
(such certification to be substantially in the form set forth
on the reverse of the Security).
(i) Obligations with respect to Transfers and Exchanges of
Definitive Securities.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee or any authenticating agent of the
Trustee shall authenticate Definitive Securities and Global Securities at
the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable
in connection therewith (other than any such taxes or other governmental
charge payable upon exchanges or transfers pursuant to Section 2.2 (fourth
paragraph), 2.6(f), 2.10, 3.7, 4.13(8), 9.5, or 10. 1 (final paragraph)).
(iii) The Registrar shall not be required to register the
transfer of or exchange (a) any Definitive Security selected for
redemption in whole or in part pursuant to Article III, except the
unredeemed portion of any Definitive Security being redeemed in part, or
(b) any Security for a period beginning 15 Business Days before the
mailing of a notice of redemption pursuant to Article III hereof and
ending at the close of business on the day of such mailing.
(iv) Prior to due presentment for registration or transfer of
any Security, the Trustee, any Agent and the Company may deem and treat
the Person in whose name the Security is registered as the absolute owner
of such Security, and none of the Trustee, Agent or the Company shall be
affected by notice to the contrary.
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SECTION 2.7. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder of
a Security claims and submits an affidavit or other evidence, satisfactory to
the Trustee, to the effect that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee or any authenticating
agent of the Trustee shall authenticate a replacement Security if the Trustee's
requirements are met. If required by the Trustee or the Company, such Holder
must provide an indemnity bond or other indemnity, sufficient in the judgment of
both the Company and the Trustee, to protect the Company, the Trustee or any
Agent from any loss which any of them may suffer if a Security is replaced. The
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation to the issuance of any new
Security and charge such Holder for its reasonable, out-of-pocket expenses in
replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.8. Outstanding Securities.
Securities outstanding at any time are all the Securities that have been
authenticated by the Trustee (including any Security represented by a Global
Security) except those cancelled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Security effected by the Trustee
hereunder and those described in this Section 2.8 as not outstanding. A Security
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Security, except as provided in Section 2.9.
If a Security is replaced pursuant to Section 2.7 (other than a mutilated
Security surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Security is held by
a bona fide purchaser. A mutilated Security ceases to be outstanding upon
surrender of such Security and replacement thereof pursuant to Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent (other than
the Company or an Affiliate of the Company) holds Cash or U.S. Government
Obligations sufficient to pay all of the principal and interest and premium, if
any, due on the Securities payable on that date and payment of the Securities
called for redemption is not otherwise prohibited or prevented (including,
without limitation, pursuant to Article XII hereof), then on and after that date
such Securities cease to be outstanding and interest on them ceases to accrue.
SECTION 2.9. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Company or Affiliates of the Company shall be
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, amendment, supplement,
waiver or consent, only Securities that a Trust Officer of the Trustee knows are
so owned shall be disregarded.
SECTION 2.10. Temporary Securities.
Until Definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of Definitive Securities but may
have variations that the Company reasonably and in good faith considers
appropriate for
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temporary Securities. Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate Definitive Securities in exchange for temporary
Securities. Until so exchanged, the temporary Securities shall in all respects
be entitled to the same benefits under this Indenture as permanent Securities
authenticated and delivered hereunder.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to it or them (as applicable) for registration of
transfer, exchange or payment. The Trustee or, at the direction of the Trustee,
the Registrar or the Paying Agent (other than the Company or an Affiliate of the
Company), and no one else shall cancel and, at the written direction of the
Company, shall dispose of all Securities surrendered for transfer, exchange,
payment or cancellation. Subject to Section 2.7, the Company may not issue new
Securities to replace Securities that have been paid or delivered to the Trustee
for cancellation. No Securities shall be authenticated in lieu of or in exchange
for any Securities cancelled as provided in this Section 2.11, except as
expressly permitted in the form of Securities and as permitted by this
Indenture.
SECTION 2.12. Defaulted Interest.
Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date plus, to the extent lawful,
any interest payable on the defaulted interest (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered Holder on the
relevant Record Date, and such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the persons in whose names the Securities (or their respective
predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of Cash 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 Cash when
deposited to be held in trust for the benefit of the persons entitled to
such Defaulted Interest as provided in this clause (1). 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 of such Special Record Date and,
in the name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder at his
address as it appears in the Security register not less than 10 days prior
to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been mailed
as aforesaid, such Defaulted Interest shall be paid to the persons in
whose names the Securities (or their respective predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
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(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
ARTICLE III
REDEMPTION
SECTION 3.1. Right of Redemption.
Redemption of Securities, as permitted by any provision of this Indenture,
shall be made in accordance with such provision and this Article III. The
Company will not have the right to redeem any Securities prior to March 15,
2002, except as provided in the immediately following paragraph. On or after
March 15, 2002, the Company will have the right to redeem all or any part of the
Securities at the Redemption Prices specified in the form of Security attached
as Exhibit A set forth therein in Paragraph 5 thereof, including accrued and
unpaid interest to the Redemption Date (subject to the right of Holders of
record at the close of business on a Record Date to receive interest due on an
Interest Payment Date that is on or prior to such Redemption Date, and subject
to the provisions set forth in Section 3.5).
Notwithstanding the foregoing, prior to March 15, 2000, the Company may
redeem up to 20% of the aggregate principal amount of the Securities originally
issued at a redemption price of 108% of the principal amount thereof, plus
accrued and unpaid interest thereon to the Redemption Date, with the net cash
proceeds of one or more public Equity Offerings of common stock, prior to the
Reorganization, of the Company or, after the Reorganization, of the Parent;
provided that at least 80% of the aggregate principal amount of the Securities
originally issued remains outstanding immediately after the occurrence of such
redemption; and provided, further, that if Securities are redeemed with the net
proceeds from the sale of common stock of Parent, the Subject Entity shall have
received cash from the Parent, as a capital contribution or as the net proceeds
from the issuance and sale to the Parent of common stock of the Subject Entity,
in an amount at least equal to the aggregate principal amount of the Securities
so redeemed; and provided, further, that such notice of redemption shall be sent
within 30 days after the date of closing of any such Equity Offering, and such
redemption shall occur within 60 days after the date such notice is sent.
SECTION 3.2. Notices to Trustee.
If the Company elects to redeem Securities pursuant to Paragraph 5 of the
Securities, it shall notify the Trustee in writing of the Redemption Date and
the principal amount of Securities to be redeemed and whether it wants the
Trustee to give notice of redemption to the Holders.
If the Company elects to reduce the principal amount of Securities to be
redeemed pursuant to Paragraph 5 of the Securities by crediting against any such
redemption Securities it has not previously
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delivered to the Trustee for cancellation, it shall so notify the Trustee of the
amount of the reduction and deliver such Securities with such notice.
The Company shall give each notice to the Trustee provided for in this
Section 3.2 at least 45 days before the Redemption Date (unless a shorter notice
shall be satisfactory to the Trustee). Any such notice may be cancelled at any
time prior to notice of such redemption being mailed to any Holder and shall
thereby be void and of no effect.
SECTION 3.3. Selection of Securities to Be Redeemed.
If less than all of the Securities are to be redeemed pursuant to
Paragraph 5 thereof, the Trustee shall select the Securities or portions thereof
for redemption on a pro rata basis, by lot or by such other method as the
Trustee shall determine to be fair and appropriate.
The Trustee shall make the selection from the Securities outstanding and
not previously called for redemption and shall promptly notify the Company in
writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 may be redeemed only in whole.
The Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Securities that have denominations larger
than $1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
SECTION 3.4. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date, the
Company shall mail a notice of redemption by first class mail, postage prepaid,
to the Trustee and each Holder whose Securities are to be redeemed to such
Holder's last address as then shown on the registry books of the Registrar. At
the Company's request, the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense. Each notice for redemption shall
identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price, including the amount of accrued and unpaid
interest to be paid upon such redemption;
(3) the name, address and telephone number of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent at the address specified in such notice to collect the Redemption
Price;
(5) that, unless the Company defaults in its obligation to deposit
Cash with the Paying Agent in accordance with Section 3.6 hereof or such
redemption payment is otherwise prohibited, interest on Securities called for
redemption ceases to accrue on and after the Redemption Date and the only
remaining right of the Holders of such Securities is to receive payment of the
Redemption Price, including accrued and unpaid interest to the Redemption Date,
upon surrender to the Paying Agent of the Securities called for redemption and
to be redeemed;
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(6) if any Security is being redeemed in part, the portion of the
principal amount, equal to $1,000 or any integral multiple thereof, of such
Security to be redeemed and that, on or after the Redemption Date, and upon
surrender of such Security, a new Security or Securities in aggregate principal
amount equal to the unredeemed portion thereof will be issued;
(7) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portions thereof) to be
redeemed, as well as the aggregate principal amount of such Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption;
(8) the CUSIP number of the Securities to be redeemed; and
(9) that the notice is being sent pursuant to this Section 3.4 and
pursuant to the optional redemption provisions of Paragraph 5 of the Securities.
SECTION 3.5. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.4,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price, including accrued and unpaid interest to the
Redemption Date. Upon surrender to the Trustee or, if the Trustee is no longer
the paying agent, to the Paying Agent, such Securities called for redemption
shall be paid at the Redemption Price, including interest, if any, accrued and
unpaid to the Redemption Date; provided that if the Redemption Date is on or
after a regular Record Date and on or prior to the Interest Payment Date to
which such Record Date relates, the accrued interest shall be payable to the
Holder of the redeemed Securities registered at the close of business on the
relevant Record Date and no additional interest will be payable to Holders of
the redeemed Securities on the Redemption Date, and provided, further, that if a
Redemption Date is a non-Business Day, payment shall be made on the next
succeeding Business Day and no interest shall accrue for the period from such
Redemption Date to such succeeding Business Day.
SECTION 3.6. Deposit of Redemption Price.
On or prior to the Redemption Date, the Company shall deposit with the
Paying Agent (other than the Company or an Affiliate of the Company) Cash
sufficient to pay the Redemption Price of, and accrued and unpaid interest on,
all Securities to be redeemed on such Redemption Date (other than Securities or
portions thereof called for redemption on that date that have been delivered by
the Company to the Trustee for cancellation). The Paying Agent shall promptly
return to the Company any Cash so deposited which is not required for that
purpose upon the written request of the Company.
If the Company complies with the preceding paragraph and the other
provisions of this Article III and payment of the Securities called for
redemption is not otherwise prohibited or prevented (including, without
limitation, pursuant to Article XII hereof), interest on the Securities to be
redeemed will cease to accrue on the applicable Redemption Date, whether or not
such Securities are presented for payment. Notwithstanding anything herein to
the contrary, if any Security surrendered for redemption in the manner provided
in the Securities shall not be so paid upon surrender for redemption because of
the failure of the Company to comply with the preceding paragraph or because
payment of the Securities called for redemption is otherwise prohibited or
prevented (including, without limitation, pursuant to Article XII hereof),
interest shall continue to accrue and be paid from the Redemption Date until
such payment is made on the unpaid principal, and, to
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the extent lawful, premium, if any, and interest not paid on such unpaid
principal, in each case at the rate and in the manner provided in Section 4.1
hereof and the Security.
SECTION 3.7. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part, the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder,
without service charge to the Holder, a new Security or Securities equal in
principal amount to the unredeemed portion of the Security surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1. Payment of Securities.
The Company will pay the principal of, premium, if any, and interest on
the Securities on the dates and in the manner provided herein and in the
Securities. An installment of principal of, premium, if any, or interest on the
Securities shall be considered paid on the date it is due if the Trustee or
Paying Agent (other than the Company, a Subsidiary of the Company or an
Affiliate of the Company) holds for the benefit of the Holders, on or before
10:00 a.m. New York City time on that date, Cash deposited and designated for
and sufficient to pay the installment, so long as payment of such principal,
premium, if any, or interest, as applicable, to the Holder or Holders entitled
thereto is not otherwise prohibited or prevented (including, without limitation,
pursuant to Article XII hereof).
The Company will pay interest on overdue principal and, to the extent
lawful, overdue premium, if any, and overdue installments of interest at the
rate specified in the Securities compounded semi-annually.
SECTION 4.2. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and any change in the location,
of 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 address of the Trustee specified in or pursuant to Section
13.2. The Company hereby initially designates the Trustee's corporate trust
agency currently located at First Trust of New York, National Association, 100
Wall Street, New York, New York 10005 as such office.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; 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 Borough of
Manhattan, The City of New York, for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
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SECTION 4.3. Limitation on Restricted Payments.
The Subject Entity will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, make any Restricted Payment if, after
giving effect to such Restricted Payment on a pro forma basis, (1) a Default or
an Event of Default shall have occurred and be continuing, (2) the Subject
Entity is not permitted to Incur at least $1.00 of additional Indebtedness
pursuant to the Debt Incurrence Ratio set forth in the second paragraph of the
covenant described in Section 4.10, or (3) the aggregate amount of all
Restricted Payments made by the Subject Entity and its Subsidiaries, including
after giving effect to such proposed Restricted Payment, from and after the
Issue Date would exceed the sum (without duplication) of (a) 50% of the
aggregate Consolidated Net Income of the Subject Entity for the period (taken as
one accounting period) commencing on the first day after the Issue Date through
and including the last day of the fiscal quarter ended immediately prior to the
date of each such calculation (or, in the event Consolidated Net Income for such
period is a deficit, then minus 100% of such deficit), plus (b) the aggregate
Net Cash Proceeds and the aggregate Non- -Cash Net Proceeds received by the
Subject Entity from the issuance and sale of its Qualified Capital Stock after
the Issue Date (other than (i) from or to a Subsidiary of the Subject Entity,
(ii) to the extent applied in connection with a Qualified Exchange, (iii)
Qualified Capital Stock paid as a dividend on any Capital Stock or as interest
on any Indebtedness, (iv) any Net Cash Proceeds or Non-Cash Net Proceeds from
issuances and sales financed directly or indirectly using funds borrowed from
the Subject Entity or any of its Subsidiaries until and to the extent such
borrowing is repaid and (v) any Net Cash Proceeds from the issuance of any
shares of the Company's common stock issued upon the exercise of the
underwriters' over-allotment options in the Common Stock Offering), plus (c) the
aggregate net cash proceeds and the aggregate Fair Market Value (as determined
in good faith by the Board of Directors of the Subject Entity and evidenced by a
resolution delivered to the Trustee) of all other property received by the
Subject Entity as a capital contribution after the Issue Date (other than to the
extent applied in connection with a Qualified Exchange), plus (d) the amount
equal to the net reduction in Restricted Investments made by the Subject Entity
or any of its Subsidiaries in any person resulting from (i) repurchases or
redemptions of such Restricted Investments by such person, proceeds realized
upon the sale of such Restricted Investments to any person (other than the
Subject Entity or any of its Subsidiaries), and repayments of loans or advances
or other transfers of property (valued at its Fair Market Value as determined in
good faith by the Board of Directors of the Subject Entity and evidenced by a
resolution delivered to the Trustee) by such person to the Subject Entity or any
of its Subsidiaries (provided that such net reduction shall occur only to the
extent that the monies or property giving rise to such reduction are received by
the Subject Entity or a Domestic Subsidiary or Guarantor Foreign Subsidiary of
the Subject Entity), or the termination of any guarantee of or other credit
support or contingent obligation with respect to any Indebtedness or other
liabilities of such person provided by the Subject Entity or any of its Domestic
Subsidiaries or Guarantor Foreign Subsidiaries or (ii) the redesignation of
Unrestricted Subsidiaries as Subsidiaries, so long as such Subsidiaries are
Domestic Subsidiaries or Guarantor Foreign Subsidiaries (valued in each case as
provided in the definition of "Investment"), not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Restricted Investments previously made by
the Subject Entity and its Subsidiaries in such Unrestricted Subsidiary, which
amount was included in the calculation of the amount of Restricted Payments or
(iii) a Non-Guarantor Foreign Subsidiary becoming a Guarantor Foreign Subsidiary
(valued in each case as provided in the definition of "Investment"), not to
exceed, in the case of any Non-Guarantor Foreign Subsidiary, the amount of
Restricted Investments previously made by the Subject Entity and its Guarantor
Foreign Subsidiaries and Domestic Subsidiaries in such Non-Guarantor Foreign
Subsidiary, but only to the extent that, in each case described in this clause
(d), such amount was previously included in the calculation of the amount of
Restricted Payments (provided, however, that no amount shall be included under
this clause (d) to the extent it is already included in Consolidated Net
Income); plus (e) $25 million.
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The foregoing provisions will not prohibit or be violated by (A) a
Qualified Exchange; (B) the payment or making of any Restricted Payment within
60 days after the date of declaration thereof or the making of any binding
commitment in respect thereof if, at said date of declaration or commitment,
such Restricted Payment would have complied with the provisions contained in
clauses (1), (2) and (3) of the first paragraph hereof, (C) the payment or
making of Permitted Payments; (D) the repurchase, redemption or other repayment
of any Subordinated Indebtedness in exchange for or solely out of the proceeds
of the substantially concurrent sale (other than to the Subject Entity or one of
its Subsidiaries or Unrestricted Subsidiaries) of Subordinated Indebtedness of
the Subject Entity or any of its Subsidiaries with (x) an Average Life equal to
or greater than the then remaining Average Life of the Subordinated Indebtedness
repurchased, redeemed or repaid (unless the Average Life of the Subordinated
Indebtedness repurchased, redeemed or repaid is, at the time, longer than the
Average Life of the Securities at such time, in which case such new Subordinated
Indebtedness must have an Average Life longer than the Average Life of the
Securities at such time), and (y) a final maturity date on or after the earlier
of (1) two Business Days after the Final Maturity Date and (2) the final
maturity date of the Subordinated Indebtedness repurchased, redeemed or repaid
(provided that, in the case of Subordinated Indebtedness of a Non-Guarantor
Foreign Subsidiary, such Subordinated Indebtedness is repurchased, redeemed or
repaid with the proceeds of Subordinated Indebtedness of another Non-Guarantor
Foreign Subsidiary); or (E) Investments in Non-Guarantor Foreign Subsidiaries of
the Subject Entity if, after giving effect to such Investment, the aggregate
amount of then outstanding Investments made by the Subject Entity and its
Guarantor Foreign Subsidiaries and Domestic Subsidiaries in Non-Guarantor
Foreign Subsidiaries of the Subject Entity would not exceed 15% of the assets of
the Subject Entity and its Subsidiaries at such time, computed on a consolidated
basis in accordance with GAAP. The full amount of any Restricted Payments made
pursuant to clauses (B) and (C) of the immediately preceding sentence, however,
will be deducted in the calculation of the aggregate amount of Restricted
Payments available to be made referred to in clause (3) of the immediately
preceding paragraph.
SECTION 4.4. Corporate Existence.
Except as otherwise provided or permitted in Article V or XI or elsewhere
in this Indenture, the Company and the Guarantors will do or cause to be done
all things necessary to preserve and keep in full force and effect their
respective existence (corporate or other, as applicable) in accordance with the
respective organizational documents of each of them (as the same may be amended
from time to time) and the rights (charter and statutory) and franchises
(corporate or other, as applicable) of the Company and the Guarantors; provided,
however, nothing in this Section will prohibit the Company or any Guarantor from
engaging in any transaction permitted under Section 11.4 hereof and provided,
further, that neither the Company nor any Guarantor shall be required to
preserve any right or franchise if the Board of Directors of the Subject Entity
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of such entity.
SECTION 4.5. Payment of Taxes and Other Claims.
The Subject Entity will pay, and will cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except (i) as contested in good faith by appropriate proceedings and with
respect to which appropriate reserves have been taken to the extent required by
GAAP or (ii) where the failure to effect such payment is not adverse in any
material respect to the Holders.
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SECTION 4.6. Compliance Certificate, Notice of Default.
(a) The Company will deliver to the Trustee within 120 days after
the end of its fiscal year an Officers' Certificate complying with Section
314(a)(4) of the TIA and stating that a review of its activities and the
activities of the Subject Entity and its Subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officers and
stating, as to each such Officer signing such certificate, to the best of his
knowledge, based on such review, whether or not the signer knows of any Event of
Default or event which with notice or the passage of time would become an Event
of Default which has occurred and is continuing. The Officers' Certificate will
also notify the Trustee should there be any change in the Subject Entity's
fiscal year.
(b) The Company will, so long as any of the Securities are
outstanding, deliver to the Trustee, promptly upon becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto. The Trustee shall not be deemed to have knowledge of any
Default or any Event of Default unless one of its Trust Officers receives
written notice thereof from the Company or any of the Holders.
SECTION 4.7. Reports.
The Subject Entity will file with the Commission the annual reports,
quarterly reports and other documents required to be filed with the Commission
pursuant to Sections 13 or 15(d) of the Exchange Act, whether or not the Subject
Entity has a class of securities registered under the Exchange Act, unless the
Commission will not accept such documents; provided that, from and after the
date of the Reorganization, the Subject Entity shall be deemed to have satisfied
its obligations under this sentence if (i) the Parent shall have filed with the
Commission the annual reports, quarterly reports and other documents required to
be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act, whether or not the Parent has a class of securities registered under the
Exchange Act, unless the Commission will not accept such documents (and the
Subject Entity will not be deemed to have failed to satisfy the condition set
forth in this clause (i) solely by reason of the Commission's failure to accept
such documents) and (ii) if, for the most recent fiscal quarter covered by the
Parent's consolidated financial statements included in the most recent annual
report or quarterly report which the Parent has filed or is then filing with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act (or if the
Commission will not accept such documents, which the Parent would have
theretofore or then been required to file, as applicable), the revenues of the
Subject Entity and its Subsidiaries for such fiscal quarter computed on a
consolidated basis in accordance with GAAP shall be less than 95% of the
revenues of the Parent and its subsidiaries for such fiscal quarter computed on
a consolidated basis in accordance with GAAP, the notes to such financial
statements shall set forth the consolidated indebtedness, consolidated sales,
consolidated capital expenditures, consolidated interest expense (net of
interest income and excluding any deferred financing costs), and consolidated
net earnings before interest, income taxes, depreciation, amortization, LIFO
inventory charges and, if applicable, before equity earnings (losses) from
subsidiaries, non-recurring and extraordinary items, and union, pension and
benefit credits of the Subject Entity and its consolidated Subsidiaries,
determined in accordance with GAAP, as of the same dates and for the same
periods for which consolidated financial statements are presented for the Parent
(provided that, in the case of such information included in the notes to the
Parent's audited financial statements, such notes also shall be covered by the
audit report, provided that the Parent's independent accountants may rely on the
audit report of other independent accountants with respect to any acquired
businesses). Whether or not the Subject Entity is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Subject Entity, at
its expense (x) will be required to file with the Trustee and
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mail to each Holder of Securities within 15 days after filing with the
Commission (or if any such filing is not permitted under the Exchange Act, 15
days after such filing would have been required), and to deliver to prospective
purchasers of Securities upon written request, copies of the annual reports,
quarterly reports and other documents required to be filed by Sections 13 or
15(d) of the Exchange Act and (y) so long as any of the Securities are evidenced
by Global Securities, promptly deliver copies of such reports and documents to
any beneficial owner of Securities upon written request by such beneficial
owner; provided that, from and after the date of the Reorganization, the Subject
Entity may satisfy its obligations under this sentence if (A) it shall instead
have delivered the annual reports, quarterly reports and other documents of the
Parent required to be filed by Sections 13 or 15(d) of the Exchange Act (whether
or not Parent is subject to the reporting requirements of such Sections) and (B)
the conditions set forth in clause (ii) of the preceding sentence are satisfied.
In addition, the Subject Entity shall furnish to the Holders and, so long as the
Securities are evidenced by Global Securities, beneficial owners of Securities
and to prospective investors, upon their request, the information, if any,
required to be delivered pursuant to Rule 144A(d)(4) (or any successor thereto)
under the Securities Act.
SECTION 4.8. [Reserved]
SECTION 4.9. Limitation on Transactions with Affiliates.
The Subject Entity will not, and will not cause or permit any of its
Subsidiaries to, enter into any contract, agreement, arrangement or transaction
(or any renewal or extension thereof) with (i) any Affiliate of the Subject
Entity, (ii) any Affiliate of any Subsidiary of the Subject Entity or (iii) any
Affiliate or Subsidiary of Parent (each, an "Affiliate Transaction") or any
series of related Affiliate Transactions, unless the terms of such Affiliate
Transaction are fair and reasonable to the Subject Entity or such Subsidiary, as
the case may be, and are at least as favorable as the terms which could
reasonably be expected to be obtained by the Subject Entity or such Subsidiary,
as the case may be, in a comparable transaction made on an arm's length basis
with persons who are not such Affiliates; provided that the following shall not
be deemed Affiliate Transactions: (A) any contracts, agreements, arrangements or
transactions (or any renewals or extensions thereof) solely between or among the
Subject Entity and any of its Subsidiaries or between or among any Subsidiaries
of the Subject Entity; (B) Permitted Payments; (C) any Restricted Payments made
in compliance with Section 4.3; (D) customary loans, advances, fees and
compensation paid to, and indemnity provided on behalf of, officers, directors,
employees or consultants of the Subject Entity or any of its Subsidiaries; (E)
transactions pursuant to any contract or agreement in effect on the Issue Date
(including, without limitation, the Standstill Agreements) as the same may be
amended, modified or replaced from time to time so long as any such amendment,
modification or replacement is no less favorable to the Subject Entity and its
Subsidiaries than such contract or agreement as in effect on the Issue Date or
is approved by either a majority of the disinterested directors of the Subject
Entity or, in the case of amendments, modifications or replacements of any
Standstill Agreement after the date of the Reorganization, a majority of the
disinterested directors of Parent; (F) employment agreements entered into by the
Subject Entity or any of its Subsidiaries in the ordinary course of business;
(G) transactions with suppliers or other purchases or sales of goods and
services, in each case in the ordinary course of business (including, without
limitation, pursuant to any joint venture agreements) and otherwise in
compliance with the terms of this Indenture, which are fair to the Subject
Entity, in the reasonable determination of its Board of Directors or the senior
management thereof, or are on terms at least as favorable as might reasonably
have been obtained at such time from an unaffiliated party; (H) Investments in
Santee, and other contracts and agreements entered into in connection therewith,
so long as none of the foregoing is prohibited by this Indenture; (I) credit
support and other provisions of comfort in respect of, and other contracts and
agreements entered into in connection with, Indebtedness or
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other obligations of Santee and all amendments, modifications and replacements
thereof, so long as none of the foregoing is prohibited by any other provision
of this Indenture; and (J) transactions pursuant to agreements and contracts
with Santee (including agreements for the purchase of milk and other products)
or with any stockholders of Santee (including stockholder agreements,
indemnifications and other agreements and transactions contemplated thereby) or
entered into in connection with Santee's financing of its new dairy which was
under construction on the Issue Date (including Permitted Liens, guarantees,
credit support and other provisions of comfort) and all amendments,
modifications and replacements thereof, so long as none of the foregoing is
prohibited by any other provision of this Indenture.
Without limiting the foregoing, in connection with any Affiliate
Transaction or series of related Affiliate Transactions (1) involving
consideration to either party in excess of $2.5 million, the Subject Entity must
deliver an Officers' Certificate to the Trustee, stating that the terms of such
Affiliate Transaction are fair and reasonable to the Subject Entity or the
relevant Subsidiary, as the case may be, and are no less favorable to the
Subject Entity or such Subsidiary, as the case may be, than could reasonably be
expected to have been obtained in an arm's length transaction with a
non-Affiliate, (2) involving consideration to either party in excess of $7.5
million, a majority of the disinterested members of the Subject Entity's board
of directors approve such Affiliate Transaction or series of related Affiliate
Transactions, as the case may be, and, in their good faith judgment, believe
that such transaction or transactions, as applicable, are fair and reasonable to
the Subject Entity or such Subsidiary, as the case may be, and are no less
favorable to the Subject Entity or such Subsidiary, as the case may be, than
could reasonably be expected to have been obtained in an arms' length
transaction with a non-Affiliate (all of the foregoing to be evidenced by a
resolution of such disinterested directors delivered to the Trustee), and (3)
involving consideration to either party in excess of $20 million, the Subject
Entity must also, prior to the consummation thereof, obtain a written favorable
opinion as to the fairness of such transaction to the Subject Entity or the
relevant Subsidiary, as the case may be, from a financial point of view from an
independent investment banking firm of recognized standing, provided that the
requirements of this clause (3) shall only be applicable if the transaction or
series of transactions is of a type as to which investment banking firms of
recognized standing customarily render fairness opinions.
SECTION 4.10. Limitation on Additional Indebtedness and Disqualified
Capital Stock.
Except as set forth in this Section 4.10, the Subject Entity will not, and
will not cause or permit any of its Subsidiaries to, directly or indirectly,
issue, create, assume, guarantee, incur, become directly or indirectly liable
with respect to (including as a result of an Acquisition), or otherwise become
responsible for, contingently or otherwise (individually and collectively, to
"Incur" or, as appropriate, an "Incurrence"), any Indebtedness or any
Disqualified Capital Stock (including Acquired Indebtedness), except for
Permitted Indebtedness.
Notwithstanding the foregoing: if (i) no Default or Event of Default shall
have occurred and be continuing at the time of, or would occur after giving
effect on a pro forma basis to, the Incurrence of such Indebtedness or
Disqualified Capital Stock and (ii) on the date of such Incurrence (the
"Incurrence Date"), the Consolidated Interest Coverage Ratio of the Subject
Entity for the Reference Period immediately preceding the Incurrence Date, after
giving effect on a pro forma basis to the Incurrence of such Indebtedness or
Disqualified Capital Stock and, to the extent set forth in the definition of
Consolidated Interest Coverage Ratio, the use of proceeds thereof, would be at
least 2.0 to 1 (the "Debt Incurrence Ratio"), then the Subject Entity and its
Subsidiaries may Incur such Indebtedness or Disqualified Capital Stock.
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Indebtedness of any Person which is outstanding at the time such Person
becomes a Subsidiary of the Subject Entity or is merged with or into or
consolidated with the Subject Entity or any of its Subsidiaries shall be deemed
to have been Incurred at the time such Person becomes such a Subsidiary of the
Subject Entity or is merged with or into or consolidated with the Subject Entity
or any of its Subsidiaries, as applicable.
Notwithstanding anything to the contrary contained in this Indenture, the
Subject Entity and its Subsidiaries each may guarantee Indebtedness of the
Subject Entity or any Subsidiary of the Subject Entity that is permitted to be
Incurred under this Indenture; provided that if such Indebtedness is
subordinated in right of payment to any other Indebtedness of the obligor, then
such guarantee shall be subordinated to Indebtedness of such guarantor to the
same extent; and provided, further, that if the Subject Entity or any of its
Domestic Subsidiaries or Guarantor Foreign Subsidiaries shall guarantee
Indebtedness of any Non-Guarantor Foreign Subsidiary of the Subject Entity, such
guarantee must comply with Section 4.3.
SECTION 4.11. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries.
The Subject Entity will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, create, assume, incur or suffer to
exist any consensual restriction on the ability of the Subject Entity or any of
its Subsidiaries: (i) (x) to pay dividends or make other distributions to the
Subject Entity or any of its Subsidiaries on its Capital Stock or with respect
to any other interest or participation in, or measured by, its profits, or (y)
to pay any Indebtedness owed to Subject Entity or any of its Subsidiaries, (ii)
to make capital contributions, loans or advances to, or purchase Capital Stock
of, the Subject Entity or any of its Subsidiaries or (iii) to transfer any of
its properties or assets to the Subject Entity or any of its Subsidiaries,
except (a) restrictions imposed by the Securities or this Indenture; (b)
restrictions imposed by applicable law and regulation; (c) restrictions under
Existing Indebtedness, as in effect on the Issue Date; (d) restrictions under
any Acquired Indebtedness not Incurred in violation of this Indenture or under
any agreement relating to any property, asset or business acquired by the
Subject Entity or any of its Subsidiaries not acquired in violation of this
Indenture, which restrictions in each case existed at the time of acquisition,
were not put in place in connection with or in anticipation of such acquisition
and are not applicable to any person, other than the person acquired, or to any
property, asset or business, other than the property, assets and business so
acquired, as the case may be; (e) restrictions imposed by the New Credit
Agreement and by any other Indebtedness Incurred under paragraph (b) of the
definition of Permitted Indebtedness; (f) restrictions with respect to a
Subsidiary of the Subject Entity imposed pursuant to a binding agreement which
has been entered into for the sale or disposition of all or substantially all of
the Capital Stock or assets of such Subsidiary (including, without limitation,
by merger or consolidation), provided such sale or disposition would not be
prohibited by this Indenture and such restrictions apply solely to the Capital
Stock or assets of such Subsidiary which are being sold; (g) restrictions on
transfer contained in Indebtedness (including, without limitation, any
Capitalized Lease Obligations) Incurred pursuant to paragraph (d) of the
definition of Permitted Indebtedness and in any other Purchase Money
Indebtedness of the Subject Entity or any of its Subsidiaries not prohibited by
this Indenture, provided such restrictions relate only to the property acquired,
improved, constructed or leased (and proceeds and products thereof) with the
proceeds of such Indebtedness or pursuant to such capitalized lease, as
applicable; (h) customary restrictions imposed on the transfer of copyrighted or
patented materials or other intellectual property and customary provisions in
agreements that restrict the assignment of such agreements or any rights
thereunder; (i) customary provisions restricting subletting or assignment of any
lease entered into in the ordinary course of business; (j) Liens not prohibited
by the terms of this Indenture; (k) customary net worth or similar provisions
contained in leases, subleases or similar arrangements or agreements entered
into by the Subject Entity or any of its Subsidiaries in the ordinary course of
business; (l) customary rights of first refusal, buy-sell provisions and other
similar
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provisions in joint venture agreements and other similar agreements; (m)
restrictions under instruments or agreements (including product purchase
agreements) entered into in connection with Indebtedness incurred by Santee; (n)
restrictions imposed by secured Indebtedness (including, without limitation,
Indebtedness secured by a mortgage or deed of trust) of the Subject Entity or
any of the Subsidiaries not prohibited by this Indenture that limit the right of
the debtor to dispose of the property (or proceeds or products thereof) securing
such Indebtedness; and (o) in connection with and pursuant to permitted
refinancings, replacements of restrictions imposed pursuant to clause (c), (d),
(e), (g), (m) or (n) of this paragraph that are not more restrictive than those
being replaced and do not apply to any other person or assets other than those
covered by the restrictions in the Indebtedness so refinanced.
SECTION 4.12. Limitation on Liens.
The Subject Entity will not, and will not cause or permit any of its
Subsidiaries to, create, incur, assume or suffer to exist, to secure any
Indebtedness other than Senior Debt, any Lien, other than Permitted Liens, upon
any of their respective property (whether owned on the date of this Indenture or
acquired thereafter), or upon any income or profits or proceeds therefrom,
unless the Subject Entity or such Subsidiary, as the case may be, provides,
concurrently therewith, that the Securities are equally and ratably secured;
provided that, if such Indebtedness is Subordinated Indebtedness, the Lien
securing such Subordinated Indebtedness shall be subordinate and junior to the
Lien securing the Securities or the Guarantee, as applicable, with the same
relative priority as such Subordinated Indebtedness shall have with respect to
the Securities or the Guarantee, as applicable; and provided, further, that, in
the case of Indebtedness of a Guarantor, if such Guarantor shall cease to be a
Guarantor in accordance with the provisions of this Indenture, such equal and
ratable Lien to secure the Securities shall, without any further action, cease
to exist.
SECTION 4.13. Limitation on Sale of Assets and Subsidiary Stock.
The Subject Entity will not, and will not cause or permit any of its
Subsidiaries to, in one transaction or a series of related transactions, convey,
sell, transfer, assign or otherwise dispose of, directly or indirectly, any of
their respective property, business or assets (whether owned on the date of this
Indenture or thereafter acquired), including, without limitation, by merger or
consolidation or by a Sale and Leaseback Transaction and including, without
limitation, any sale or other transfer or issuance of any Capital Stock (other
than directors qualifying shares) of any Subsidiary of the Subject Entity, as
the case may be (an "Asset Sale"), unless (1) within 360 days following such
Asset Sale (a) the Net Cash Proceeds received from such Asset Sale are (i) (x)
used to purchase one or more businesses or to purchase more than 50% of the
outstanding Capital Stock of a person operating one or more businesses, which
person becomes a Subsidiary of the Subject Entity concurrently with such
purchase, (y) used to make capital expenditures or to purchase inventory or (z)
used to acquire other assets, in each case so long as such business or
businesses, capital expenditures or assets will constitute, be a part of or be
used in a Related Business (provided that, in the case of the sale of a
supermarket, the Subject Entity may deem the Net Cash Proceeds therefrom to have
been applied in accordance with this clause (i) to the extent of any capital
expenditures made by the Subject Entity or any of its Subsidiaries to acquire or
construct a replacement supermarket in the same general vicinity of the
supermarket sold within 360 days preceding the date of the Asset Sale) or (ii)
used to retire Senior Debt and to permanently reduce the amount of such Senior
Debt outstanding (provided that in the case of a revolving credit facility or
similar arrangement that makes credit available, the commitment thereunder is
also permanently reduced by such amount) and (b) the Net Cash Proceeds of such
Asset Sale not applied as provided in clause (a) (the "Excess Proceeds") are
applied to the optional redemption of the Securities in accordance with the
terms of this Indenture or to the repurchase of the Securities pursuant to an
irrevocable,
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unconditional cash offer (the "Asset Sale Offer") to repurchase Securities at a
purchase price of 100% of the principal amount (the "Asset Sale Offer Price"),
plus accrued interest to the date of payment; (2) no Default or Event of Default
shall have occurred and be continuing or would occur after giving effect, on a
pro forma basis, to such Asset Sale; and (3) the Subject Entity or such
Subsidiary, as applicable, shall have received Fair Market Value for the
property, business or assets, as applicable, disposed of in such Asset Sale;
provided, however, that the Subject Entity shall have the right to exclude from
the foregoing provisions any Asset Sale subsequent to the Issue Date, the
proceeds of which are derived from a Sale and Leaseback Transaction of a
supermarket and/or related assets or equipment which is acquired or constructed
by the Subject Entity or a Subsidiary of the Subject Entity subsequent to the
Issue Date, so long as any such Sale and Leaseback Transaction occurs within 365
days following such acquisition or the completion of such construction, as the
case may be; and, provided, further, that clauses (2) and (3) above shall not
apply to the sale or disposition of assets as a result of a foreclosure (or a
secured party taking ownership of such assets in lieu of foreclosure) or as a
result of an involuntary proceeding in which the Subject Entity cannot, directly
or through its Subsidiaries, direct the type of proceeds received and, in such
event, the 360 day period referred to in clause (1) above shall commence on the
date Net Cash Proceeds therefrom are received (with a separate 360 day period
commencing on each day any such Net Cash Proceeds are received). An Asset Sale
Offer may be deferred until the accumulated Excess Proceeds exceeds $15,000,000
(the date on which the Excess Proceeds exceed $15,000,000 being herein referred
to as the "Excess Proceeds Date") and each Asset Sale Offer shall remain open
for not less than 20 Business Days following its commencement (the "Asset Sale
Offer Period"). Upon expiration of the Asset Sale Offer Period, the Company
shall apply the Excess Proceeds plus an amount equal to accrued interest to the
purchase of all Securities properly tendered (on a pro rata basis if the Excess
Proceeds are insufficient to purchase all Securities so tendered) at the Asset
Sale Offer Price (together with accrued interest). To the extent Holders of
Securities do not tender Securities in connection with any such Asset Sale
Offer, the remaining Excess Proceeds may be applied in any manner not prohibited
by this Indenture and the amount of Excess Proceeds shall be reset to zero.
Pending the utilization of any Net Cash Proceeds in the manner (and within the
time period) described in this paragraph, the Subject Entity may use any such
Net Cash Proceeds to repay revolving loans under any Credit Agreement (provided
that such revolving loans constitute Senior Debt) and, in that event, anything
in the Indenture to the contrary notwithstanding, the Subject Entity shall not
be required to reduce the commitment under the related revolving credit facility
as a result of such repayments of revolving loans except to the extent the
Subject Entity deems such Net Cash Proceeds to have been used to retire Senior
Debt as contemplated by clause (1)(a)(ii) of the first sentence of this
paragraph.
In the event of a transaction as a result of which a Subsidiary Guarantor
will be released from its Guarantee as provided in Section 11.4(c), then,
anything in this Indenture to the contrary notwithstanding, such transaction
shall be deemed to be an Asset Sale and shall be subject to and shall only be
made in compliance with the foregoing covenant.
Notwithstanding the provisions of the first paragraph of this Section
4.13, the following transactions shall not be deemed Asset Sales:
(i) (A) any sale, lease, sublease, conveyance, assignment, transfer or
other disposition of inventory made in the ordinary course of business or (B)
any sale, lease, sublease, conveyance, assignment, transfer or other
disposition, in one transaction or a series of related transactions, of any
other property or assets (other than Capital Stock of a Subsidiary of the
Subject Entity) with an aggregate Fair Market Value (as determined in good faith
by the Board of Directors of the Subject Entity) of less than $1,000,000; (ii)
any merger or consolidation of a Guarantor that is governed by and complies with
the provisions described in
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Section 11.4(a) or any sale, lease, sublease, conveyance, assignment, transfer
or other disposition of property or assets (including, without limitation, by
merger or consolidation) that is governed by and complies with the provisions
described in Section 5.1; (iii) any Restricted Payment permitted in Section 4.3
or any Lien permitted by Section 4.12; (iv) any sale, lease, sublease,
conveyance, assignment, transfer or other disposition of property or assets by
the Subject Entity or any of its Subsidiaries to the Subject Entity or to any of
its Subsidiaries; (v) any sale, lease, sublease, conveyance, assignment,
transfer or other disposition of damaged, worn-out or other obsolete property in
the ordinary course of business so long as such property is no longer necessary
for the proper conduct of the business of the Subject Entity or any of its
Subsidiaries; (vi) any liquidation of Cash Equivalents in the ordinary course of
business; (vii) the sale or other disposition of up to six of the supermarkets
acquired in the KUI Acquisition so long as such sale or other disposition of any
such store occurs prior to the conversion of such store to the Quality Food
Centers name or format; (viii) substantially contemporaneous exchanges by the
Subject Entity or any of its Subsidiaries of property or assets (including,
without limitation, real property and improvements) for other property or
assets, provided that the property or assets received in such exchange by the
Subject Entity or such Subsidiary are part of or will be used in a Related
Business and have a Fair Market Value at least equal to the Fair Market Value of
the property and assets exchanged (determined in each case in good faith by the
Board of Directors of the Subject Entity as evidenced by a board resolution
delivered to the Trustee); provided that, if property or assets are exchanged by
the Subject Entity or any of the Subsidiary Guarantors, the property or assets
received in such exchange are also received by the Subject Entity or a
Subsidiary Guarantor; and provided, further, that, if the property or assets to
be exchanged by the Subject Entity or any of its Subsidiaries in any transaction
or series of related transactions have a Fair Market Value of $20 million or
more, the Board of Directors of the Subject Entity shall have received, prior to
or concurrently with such exchange, one or more written opinions or valuations
from appraisal or valuation firms of national or regional standing selected by
the Subject Entity, with experience in appraisal or valuation of property or
assets of the type to be exchanged and be received by the Subject Entity or such
Subsidiary, as applicable, to the effect that the Fair Market Value of the
property or assets to be received is at least equal to the Fair Market Value of
the property and assets to be exchanged; (ix) any sale, transfer or other
disposition of any shares of Capital Stock of any distributor or supplier of
wholesale groceries or related wholesale products, which shares are (A) owned by
the Subject Entity or any of its Subsidiaries on the Issue Date or (B) acquired
by the Subject Entity or any of its Subsidiaries after the Issue Date in the
ordinary course of business without the payment of any consideration (other than
the purchase of products and services related thereto in the ordinary course of
business); and (x) any Asset Sale the Net Cash Proceeds of which do not exceed
$15 million and which, together with all other Asset Sales the Net Cash Proceeds
of which have not been applied as contemplated by the second preceding
paragraph, do not exceed $15 million in the aggregate (it being understood that,
at such time as the aggregate Net Cash Proceeds from such Asset Sales exceed $15
million, all such Net Cash Proceeds shall be applied as required by the second
preceding paragraph).
All Net Cash Proceeds from any Event of Loss shall be invested, used to
retire Senior Debt, or used to repurchase or redeem Securities, all within the
period, and as otherwise provided, in the first paragraph (other than clauses
(2) and (3) of the first sentence thereof) of this Section 4.13.
Notice of an Asset Sale Offer will be sent 20 Business Days prior to the
close of business on the third Business Day prior to the date set by the Company
to repurchase Securities pursuant to this Section 4.13 (the "Purchase Date"), by
first-class mail, by the Company to each Holder at its registered address, with
a copy to the Trustee. The notice to the Holders will contain all information,
instructions and materials required by applicable law. The notice, which (to the
extent consistent with this Indenture) shall govern the terms of the Asset Sale
Offer, shall state:
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(1) that the Asset Sale Offer is being made pursuant to
such notice and this Section 4.13;
(2) the Asset Sale Offer, the Asset Sale Offer Price
(including the amount of accrued and unpaid interest), and the
Purchase Date, which Purchase Date shall be on or prior to 45
Business Days following the Excess Proceeds Date;
(3) that any Security or portion thereof not tendered or
accepted for payment will continue to accrue interest;
(4) that, unless the Company defaults in depositing Cash
with the Paying Agent in accordance with the provisions of this
Section 4.13 or the payment thereof to Holders is prevented or
prohibited (including, without limitation, pursuant to Article XII
hereof), any Security, or portion thereof, accepted for payment
pursuant to the Asset Sale Offer shall cease to accrue interest on
and after the Purchase Date;
(5) that Holders electing to have a Security, or portion
thereof, purchased pursuant to an Asset Sale Offer will be required
to surrender the Security, with the form entitled "Option of Holder
to Elect Purchase" on the Security completed (or, in the case of
Global Securities, to effect such surrender in accordance with the
Depositary's procedures), to the Paying Agent (which may not for
purposes of this Section 4.13, notwithstanding anything in this
Indenture to the contrary, be the Company or any Affiliate of the
Company) at the address specified in the notice prior to the close
of business on the date (which shall be specified in such notice)
which is the third Business Day prior to the Purchase Date;
(6) that Holders will be entitled to withdraw their
elections, in whole or in part, if the Paying Agent receives, up to
the close of business on the date (which shall be specified in such
notice) which is the third Business Day prior to the Purchase Date,
a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Securities the
Holder is withdrawing and a statement that such Holder is
withdrawing his election to have such principal amount of Securities
purchased;
(7) that if Securities in a principal amount in excess
of the principal amount of Securities to be acquired pursuant to the
Asset Sale Offer (which principal amount shall be specified in such
notice) are tendered and not withdrawn, the Company shall purchase
Securities on a pro rata basis (with such adjustments as may be
deemed appropriate by the Company so that only Securities in
denominations of $1,000 or integral multiples of $1,000 shall be
acquired);
(8) that Holders whose Securities were purchased only in
part will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered; and
(9) a brief description of the circumstances and
relevant facts regarding the relevant Asset Sales.
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On or before the Purchase Date, the Company shall (i) accept for payment
Securities or portions thereof properly tendered and not withdrawn pursuant to
the Asset Sale Offer promptly after the close of business on the third Business
Day prior to the Purchase Date (on a pro rata basis if required pursuant to
paragraph (7) hereof) and (ii) deposit with the Paying Agent Cash sufficient to
pay the Asset Sale Offer Price for all Securities or portions thereof so
tendered and accepted (provided that the amount of Cash which the Company is
required to deposit in respect of the aggregate principal amount of Securities
and portions thereof to be repurchased shall not exceed the amount of Excess
Proceeds) plus accrued and unpaid interest thereon to the Purchase Date. On the
Purchase Date, the Company shall deliver to the Trustee Securities so accepted
together with an Officers' Certificate stating the Securities or portions
thereof being purchased by the Company. The Paying Agent shall on the Purchase
Date mail or deliver to Holders of Securities so accepted (or, in the case of
Securities held in book-entry form through the Depositary, will deliver in
accordance with the Depositary's procedures as then in effect) payment in an
amount equal to the Asset Sale Offer Price for such Securities (together with
accrued and unpaid interest), and the Trustee shall promptly authenticate and
mail or deliver (or deliver in accordance with the Depositary's procedures, as
the case may be) to such Holders new Securities equal in principal amount to any
unpurchased portion of the Securities surrendered. Any Security not so accepted
shall be promptly mailed or delivered (or delivered in accordance with the
Depositary's procedures, as the case may be) by the Company to the Holder
thereof. The Company agrees that any Asset Sale Offer shall be made in
compliance with all applicable laws, rules, and regulations, including, if
applicable, Regulation 14E under the Exchange Act and all other applicable
Federal and state securities laws, and any provisions of this Indenture which
conflict with such laws shall be deemed to be superseded by the provisions of
such laws. The Trustee shall be under no obligation to ascertain the occurrence
of an Asset Sale or, except as directed by the Company, to give notice to the
Securityholders with respect thereto. The Trustee may conclusively assume, in
the absence of written notice to the contrary from the Company, that no Asset
Sale has occurred.
SECTION 4.14. Limitation on Layering Indebtedness.
Neither the Company nor any of the Guarantors will directly or indirectly,
Incur, permit to remain outstanding or otherwise suffer to exist any
Indebtedness that is subordinated by the terms of the instrument creating or
evidencing such Indebtedness in right of payment to any other Indebtedness of
the Company or such Guarantor, as the case may be, unless, by the express terms
of the instrument creating or evidencing such Indebtedness or pursuant to which
such Indebtedness was issued, such Indebtedness is subordinate in right of
payment to, or pari passu in right of payment with, the Securities or the
Guarantee of such Guarantor, as applicable. For purposes of this provision, no
Indebtedness shall be deemed to be subordinated in right of payment to any other
Indebtedness solely by reason of the fact that such other Indebtedness is
secured by any Lien.
SECTION 4.15. Limitation on Lines of Business.
The Subject Entity will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, engage in any line or lines of business
other than a Related Business.
SECTION 4.16. 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 shall not at any time voluntarily insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law or any usury law or other law 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 Securities or any amounts due under the
Guarantees as contemplated herein, wherever enacted, now or at any time
hereafter in force; and (to the extent that it may lawfully do so) each of the
Company and the Guarantors 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 relating to any such law,
but will suffer and permit the execution of every such power as though no such
law had been enacted.
SECTION 4.17. Reorganization as a Holding Company.
The Company will not reorganize into a holding company structure (the
"Reorganization") unless (i) immediately after giving effect to the
Reorganization, the Holding Company shall own, directly, all of the outstanding
Capital Stock (other than directors' qualifying shares) of the Company (provided
that the Holding Company may thereafter cease to own such Capital Stock directly
so long as the Company shall at all times be a Wholly-Owned Subsidiary of the
Holding Company); (ii) immediately after giving affect to the Reorganization,
the Initial Parent shall own, directly, all of the outstanding Capital Stock
(other than directors' qualifying shares) of the Holding Company and shall not
own any other Capital Stock (provided that the Parent may thereafter cease to
directly own all of the outstanding Capital Stock of Holding Company so long as
Holding Company shall at all times be a Subsidiary of Parent, and the Parent
also may thereafter own other Capital Stock); (iii) effective upon consummation
of the Reorganization, the holders of outstanding shares of the Company's
Capital Stock shall generally become holders of Capital Stock of Initial Parent;
(iv) no Event of Default shall exist or shall occur immediately after giving
effect to the Reorganization; (v) the Initial Parent shall have conducted no
business or operations prior to the Reorganization other than in connection with
the Reorganization and matters reasonably related thereto (except that Initial
Parent may be a guarantor under and a party to the New Credit Agreement) and,
immediately prior to and at the time of the Reorganization, the total
Investments made by the Company and its other Subsidiaries in Initial Parent
shall be less than $100,000 and Initial Parent's total assets shall be less than
$100,000; (vi) the Reorganization is not structured with the intention of
evading the effect of the restrictive covenants and other provisions of this
Indenture; and (vii) the Company shall have delivered to the Trustee an
Officers' Certificate to the effect that the Reorganization has been effected in
compliance with this paragraph and an Opinion of Counsel to the effect that the
conditions to the Reorganization set forth in this Indenture have been
satisfied. If the Reorganization is effected in accordance with the provisions
of this Section 4.17, then the Reorganization shall not be deemed to constitute
a breach of or default under any provision of this Indenture and may be effected
notwithstanding anything in this Indenture to the contrary. The provisions of
this Section 4.17 shall permit one Reorganization only.
Anything in this Indenture to the contrary notwithstanding, in the event
that the Company shall organize one or more subsidiaries solely for the purpose
of acting as merger subsidiaries in connection with the Reorganization (each, a
"Merger Subsidiary"), the Company will not be required to cause any such Merger
Subsidiary to become a Guarantor prior to the Reorganization so long as such
Merger Subsidiary has assets of less than $10,000 at all times prior to the
Reorganization and conducts no business or operations other than in connection
with the Reorganization and matters reasonably related thereto.
Anything in this Indenture to the contrary notwithstanding (a) from and
after the date of the Reorganization, the Subject Entity will cause the Company
at all times to be a Wholly-Owned Subsidiary of the Subject Entity, and (b) the
Subject Entity will not cause or permit any of its Non-Guarantor Foreign
Subsidiaries to own any Capital Stock of the Subject Entity or any of its
Domestic Subsidiaries or Guarantor
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Foreign Subsidiaries, and (c) the Subject Entity will not cause or permit any of
its Unrestricted Subsidiaries to own any Capital Stock of the Subject Entity or
any of its Subsidiaries.
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. Limitation on Merger, Sale or Consolidation.
The Company will not, directly or indirectly, consolidate with or merge
with or into any other person or sell, lease, convey, assign, transfer or
otherwise dispose of all or substantially all of its properties and assets
(computed on a consolidated basis), whether in a single transaction or a series
of related transactions, to any other person or persons, or adopt a plan of
liquidation, unless (i) either (a) if the transaction or series of transactions
is a merger, the Company shall be the surviving person of such merger, or (b)
the person formed by such consolidation or into which the Company is merged or
to which the properties and assets of the Company are transferred or, in the
case of a plan of liquidation, the entity which receives the greatest value from
such plan of liquidation (any such surviving person or transferee person or
person receiving the greatest such value referred to in this clause (b) being
hereinafter called the "Surviving Entity") 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 shall expressly assume by a supplemental indenture,
executed and delivered to the Trustee and in form reasonably satisfactory to the
Trustee, all the obligations of the Company under the Securities and this
Indenture (and such supplemental indenture shall also be executed by each
Guarantor and shall further provide that each Guarantor confirms that its
obligations under this Indenture and its Guarantee remain in full force and
effect); (ii) no Default or Event of Default shall exist or shall occur
immediately after giving effect to such transaction or series of transactions
(including, without limitation, any Indebtedness Incurred or to be Incurred in
connection with such transaction or series of transactions) on a pro forma
basis; (iii) immediately after giving effect to such transaction or series of
transactions (including, without limitation, any Indebtedness Incurred or to be
Incurred in connection with such transaction or series of transactions) on a pro
forma basis, the Subject Entity would immediately thereafter be permitted to
Incur at least $1.00 of additional Indebtedness pursuant to the Debt Incurrence
Ratio set forth in the second paragraph of Section 4.10 above; (iv) if such
transaction or series of transactions shall occur in connection with or at any
time from and after the date of the Reorganization, immediately after giving
effect to such transaction or series of transactions the Company or the
Surviving Entity, as applicable, shall be a Wholly-Owned Subsidiary of the
Holding Company; and (v) the Company shall deliver or cause to be delivered to
the Trustee an Officers' Certificate (in form and substance reasonably
satisfactory to the Trustee) stating that such transaction or series of
transactions, as applicable, and, if a supplemental indenture is required in
connection therewith, such supplemental indenture comply with this Indenture and
that all conditions precedent herein relating to such transaction or series of
transactions have been complied with and an Opinion of Counsel (in form and
substance reasonably satisfactory to the Trustee) stating that such transaction
or series of transactions, as applicable, and, if a supplemental indenture is
required in connection therewith, such supplemental indenture comply with the
requirements of clause (i) of this paragraph and that the conditions precedent
provided in clause (iv) of this paragraph have been complied with; provided that
the conditions set forth in clause (iii) of this sentence shall not apply to the
merger of any Guarantor into the Company.
For purposes of the foregoing, the sale, lease, conveyance, assignment,
transfer or other disposition of all or substantially all of the properties and
assets of one or more Subsidiaries of the Company, the Capital
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Stock of which constitutes all or substantially all of the properties and assets
of the Company, shall be deemed to be the transfer of all or substantially all
of the properties and assets of the Company on a consolidated basis.
SECTION 5.2. Successor Corporation Substituted.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company or consummation of a plan of liquidation in
accordance with Section 5.1, the successor corporation formed by such
consolidation or into which the Company is merged or to which such transfer is
made or, in the case of a plan of liquidation, the corporation which receives
the greatest value from such plan of liquidation, shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Securities with the same effect as if such successor
corporation had been named herein and therein as the Company, and thereafter,
except in the case of a lease, the predecessor corporation shall be released
from all obligations under the Securities and this Indenture.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. 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
caused voluntarily or involuntarily or effected, without limitation, by
operation of law, by operation of Article XII hereof, 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 any principal of or premium, if any,
on any of the Securities when the same becomes due and payable (upon
Stated Maturity, acceleration, optional redemption, required purchase in
connection with a Change of Control Offer or Asset Sale Offer, scheduled
principal payment or otherwise); or
(b) default in the payment of any interest on, or any Liquidated
Damages, if any, with respect to, any of the Securities when the same
becomes due and payable, which default continues for a period of 30 days;
or
(c) default by the Company, the Holding Company or any Subsidiary
Guarantor in the performance or observance of any other term, covenant or
agreement contained in the Securities or this Indenture (other than a
default specified in clause (a) or (b) above) and (A) in the case of a
default in the performance of the covenant set forth in clause (a) of the
third paragraph of Section 4.17, written notice of such default shall have
been given to the Company by the Trustee or to the Company and the Trustee
by Holders of at least 25% in aggregate principal amount of the Securities
then outstanding or (B) in any other case, such default continues for a
period of 30 days after written notice of such default shall have been
given to the Company by the Trustee or to the Company and the Trustee by
Holders of at least 25% in aggregate principal amount of the Securities
then outstanding; or
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(d) a default under any mortgage, indenture or other instrument or
agreement under which there may be issued or by which there may be secured
or evidenced any Indebtedness of the Subject Entity or any Subsidiary of
the Subject Entity, whether such Indebtedness exists on the date of this
Indenture or shall be incurred thereafter, if (A) such default results
from the failure to pay any such Indebtedness at its stated final maturity
(after giving effect to any applicable grace period) or as a result of
such default such Indebtedness has been declared due and payable or
otherwise accelerated prior to its stated final maturity and (B) the sum
of (x) the aggregate principal amount of such Indebtedness plus (y) the
aggregate principal amount of all other such Indebtedness in default for
failure to pay any such Indebtedness at its stated final maturity (after
giving effect to any applicable grace period) or which has been so
declared due and payable or otherwise accelerated prior to its stated
final maturity, aggregates more than $20,000,000; or
(e) one or more final judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money (to the extent not covered by insurance) in excess of
$20,000,000, either individually or in the aggregate, shall be entered
against Subject Entity or any Subsidiary of the Subject Entity or any
property of the Subject Entity or any Subsidiary of the Subject Entity and
shall not be discharged or fully bonded and there shall have been a period
of 60 days after the date on which any period for appeal has expired and
during which a stay of enforcement of such judgment, order or decree shall
not be in effect; or
(f) any Guarantor denies that it has any further liability under its
Guarantee or gives notice to such effect (other than by reason of the
termination of this Indenture or the release of any such Guarantee in
accordance with this Indenture or, in the case of any Guarantor which is
not (A) a Significant Subsidiary of the Subject Entity or (B) from and
after the Reorganization, the Subject Entity, if such denial or notice is
given by a trustee in bankruptcy, receiver or other similar person in
connection with bankruptcy, insolvency, reorganization or similar
proceedings relating to such Guarantor) or, prior to the Reorganization,
any Guarantee of a Significant Subsidiary of the Subject Entity is
declared or adjudged invalid in a final judgment or order issued by any
court or governmental authority of competent jurisdiction or, from and
after the Reorganization, the Guarantee of the Subject Entity or any
Guarantor which is a Significant Subsidiary of the Subject Entity is
declared or adjudged invalid in a final judgment or order issued by any
court or governmental authority of competent jurisdiction; or
(g) the commencement by the Company, the Holding Company, the Parent
or any Significant Subsidiary of the Subject Entity of a voluntary case or
proceeding under any Bankruptcy Law or the consent by the Company, the
Holding Company, the Parent or any Significant Subsidiary of the Subject
Entity to the entry of an order for relief or similar decree in respect of
the Company, the Holding Company, the Parent or any Significant Subsidiary
of the Subject Entity in an involuntary case or proceeding under any
Bankruptcy Law or the filing by the Company, the Holding Company, the
Parent or any Significant Subsidiary of the Subject Entity of a petition,
answer or consent seeking reorganization or relief under any Bankruptcy
Law, or the consent by the Company, the Holding Company, the Parent or any
Significant Subsidiary of the Subject Entity to the filing of any such
petition or to the appointment of or taking possession by a Custodian of
the Company, the Holding Company, the Parent or any Significant Subsidiary
of the Subject Entity or of any substantial part of the property of the
Company, the Holding Company, the Parent or any Significant Subsidiary of
the Subject Entity, or the making by the Company, the Holding Company, the
Parent or any Significant Subsidiary of the Subject Entity of an
assignment for the benefit of creditors, or the admission by the
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Company, the Holding Company, the Parent or any Significant Subsidiary of
the Subject Entity in writing that it is bankrupt, insolvent or unable to
pay its debts generally as they become due, or the taking of corporate,
company or partnership action, as the case may be, by the Company, the
Holding Company, the Parent or any Significant Subsidiary of the Subject
Entity in furtherance of any such action; or
(h) the entry by a court having jurisdiction in the premises of a
judgment, decree or order for relief in respect of the Company, the
Holding Company, the Parent or any Significant Subsidiary of the Subject
Entity in an involuntary case or proceeding under any applicable
Bankruptcy Law, or determining that the Company, the Holding Company, the
Parent or any Significant Subsidiary of the Subject Entity is bankrupt or
insolvent or that the Company, the Holding Company, the Parent or any
Significant Subsidiary of the Subject Entity is entitled to seek
reorganization, arrangement, adjustment or composition of its
indebtedness, or appointing a Custodian of or for the Company, the Holding
Company, the Parent or any Significant Subsidiary of the Subject Entity or
any substantial part of property of the Company, the Holding Company, the
Parent or any Significant Subsidiary of the Subject Entity, or ordering
the winding up or liquidation of the affairs of the Company, the Holding
Company, the Parent or any Significant Subsidiary of the Subject Entity,
and any such judgment, order or decree shall remain unstayed and in effect
for a period of 60 consecutive days.
SECTION 6.2. Acceleration of Maturity Date, Rescission and Annulment.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in Section 6.1 (g) or (h)) then in every such case, unless the
principal of all of the Securities shall have already become due and payable,
either the Trustee or the Holders of at least 25% in aggregate principal amount
of the Securities then outstanding, by notice in writing to the Company (and to
the Trustee if given by Holders) (an "Acceleration Notice"), may declare the
principal of, and accrued and unpaid interest on, and accrued and unpaid
Liquidated Damages, if any, with respect to, all of the outstanding Securities
to be due and payable immediately, and upon such declaration all such amounts
shall be and become immediately due and payable. If an Event of Default
specified in Section 6.1 (g) or (h) occurs, then the principal of, and accrued
and unpaid interest on, and accrued and unpaid Liquidated Damages, if any, with
respect to, all of the outstanding Securities shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
Trustee or any of the Holders.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article VI, the Holders of at least
a majority in aggregate principal amount of then outstanding Securities, by
written notice to the Company and the Trustee, may rescind, on behalf of all
Holders, such declaration of acceleration and its consequences if:
(1) the Company has paid or deposited with the Trustee Cash
sufficient to pay
(A) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee and its agents and counsel, and any other amounts due the
Trustee under Section 7.7,
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(B) all interest on and Liquidated Damages, if any, with
respect to the Securities which has become due otherwise than by
such declaration of acceleration and, to the fullest extent
permitted by law, interest thereon at the rate of interest borne by
the Securities, and
(C) the principal of and premium, if any, on any Securities
which have become due otherwise than by such declaration of
acceleration, and, to the fullest extent permitted by law, interest
thereon at the rate of interest borne by the Securities, and
(2) such rescission would not conflict with any judgment or decree
of a court of competent jurisdiction, and
(3) all Events of Default, other than the non-payment of the
principal of, and interest on and Liquidated Damages, if any, with respect
to, the Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 6.12.
Notwithstanding the previous sentence of this Section 6.2, no waiver shall
be effective against any Holder for any Event of Default or event which with
notice or lapse of time or both would be an Event of Default with respect to (i)
any covenant or provision which cannot be modified or amended without the
consent of the Holder of each outstanding Security affected thereby unless all
such affected Holders agree, in writing, to waive such Event of Default or other
event and (ii) any provision requiring supermajority approval to amend unless
such Event of Default or other event has been waived by such a supermajority. No
such waiver shall cure or waive any subsequent default or impair any right
consequent thereon.
The Trustee shall provide to each Senior Debt Representative a copy of
each Acceleration Notice that it sends, and of each Acceleration Notice and
notice of rescission of a declaration of acceleration that it receives, under
this Section 6.2, on the date that the Trustee sends any such notice, and as
promptly as possible following the date that the Trustee receives any such
notice.
SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if an Event of Default in payment of principal,
premium, interest or Liquidated Damages specified in clause (a) or (b) of
Section 6.1 occurs and is continuing, the Company shall, upon demand of the
Trustee, pay to it, for the benefit of the Holders of the Securities, the whole
amount then due and payable on the Securities for principal, premium (if any),
interest and Liquidated Damages (if any), and, to the extent that payment of
such interest shall be legally enforceable, interest on any overdue principal,
premium (if any), interest and Liquidated Damages (if any) at the rate of
interest borne by the Securities, computed semi-annually, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including compensation to, and expenses, disbursements
and advances of the Trustee and its agents and counsel and all other amounts due
the Trustee under Section 7.7.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company, any Guarantor or any other obligor
upon the Securities or the Guarantees and collect the moneys adjudged or decreed
to be payable in the manner provided by law out of the property of the Company,
any Guarantor or any other obligor upon the Securities or the Guarantees,
wherever situated.
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If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 6.4. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company, any Guarantor or any other obligor
upon the Securities or the Guarantees or the property of the Company, any
Guarantor or of such other obligor or its creditors, the Trustee (irrespective
of whether the principal of the Securities shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company or any Guarantor for the
payment of overdue principal or premium, if any, or interest or Liquidated
Damages, if any) shall be entitled and empowered, by intervention in such
proceeding or otherwise to take any and all actions under the TIA, including
(1) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest and Liquidated Damages
(if any) owing and unpaid in respect of the Securities and to file
such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee and its agent and counsel and all other amounts due the
Trustee under Section 7.7) and of the Holders allowed in such
judicial proceeding, and
(2) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the
same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel, and any
other amounts due the Trustee under Section 7.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the Securities
or the Guarantees or the rights of any Holder of the Securities or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.5. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust in favor of the Holders, and any recovery of
judgment shall, after provision for the payment of compensation to, and
expenses, disbursements and advances of, the Trustee, its agents and
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counsel and all other amounts due the Trustee under Section 7.7, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 6.6. Priorities.
Any money collected by the Trustee pursuant to this Article VI shall,
subject to Article XII, 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), interest or Liquidated Damages, if any, upon
presentation of the Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to
Section 7.7;
SECOND: To the Holders in payment of the amounts then due and unpaid
for principal of, premium (if any) and interest on, and Liquidated Damages in
respect of, the Securities in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for principal,
premium (if any) and interest, respectively; and
THIRD: To the Company or such other Person as may be lawfully
entitled thereto, the remainder, if any.
The Trustee may, but shall not be obligated to, fix a record date and
payment date for any payment to the Holders under this Section 6.6.
SECTION 6.7. Limitation on Suits.
Subject to Section 6.8, no Holder of any Security shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or pursue any remedy with
respect to this Indenture or the Securities, unless
(A) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(B) the Holders of not less than 25% in aggregate principal amount
of then outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(C) such Holder or Holders have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities to be
incurred or reasonably probable to be incurred in compliance with such
request;
(D) the Trustee for 30 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
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(E) no direction inconsistent with such written request has been
received by the Trustee during such 30-day period from the Holders of at
least a majority in aggregate principal amount of the outstanding
Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatsoever by virtue of, or by availing of, any provision of
this Indenture 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, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 6.8. Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision of this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of, and premium (if any) and interest on or Liquidated
Damages (if any) with respect to, such Security on the respective dates such
payments are due as expressed in such Security (in the case of redemption, the
Redemption Price on the applicable Redemption Date, in the case of an Asset Sale
Offer, the Asset Sale Offer Price on the Purchase Date, and in the case of a
Change of Control Offer, the Change of Control Purchase Price on the Change of
Control Purchase Date) and to institute suit for the enforcement of any such
payment after such respective dates, and such rights shall not be impaired
without the consent of such Holder.
SECTION 6.9. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in Section 2.7, 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 6.10. Delay or Omission Not Waiver.
No delay or omission by the Trustee or by any Holder of any Security to
exercise any right or remedy arising upon any Event of Default shall impair the
exercise of any such right or remedy or constitute a waiver of any such Event of
Default. Every right and remedy given by this Article VI 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 6.11. Control by Holders.
The Holder or Holders of not less than a majority in aggregate principal
amount of then outstanding Securities 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 upon the Trustee, provided,
that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture or involve the Trustee in personal
liability,
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(2) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Holders not taking
part in such direction, and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 6.12. Waiver of Past Default.
Subject to Section 6.8, the Holder or Holders of not less than a majority
in aggregate principal amount of the Securities then outstanding may, on behalf
of the Holders of all of the Securities, waive any past default under this
Indenture or the Securities and its consequences, except a default
(A) in the payment of the principal of, premium, if any, or
interest on, or Liquidated Damages, if any, with respect to any
Securities;
(B) in respect of a covenant or provision which, under Article
IX, cannot be modified or amended without the consent of the Holder
of each outstanding Security affected; or
(C) in respect of any provision hereof which, under Article
IX, cannot be modified, amended or waived without the consent of the
Holders of at least 662/3% of the aggregate principal amount of the
Securities at the time outstanding; provided, that any such waiver
may be effected with the consent of the Holders of at least 662/3%
of the aggregate principal amount of the Securities then
outstanding.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair the exercise of any right arising therefrom.
SECTION 6.13. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that 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 to be taken by it as
Trustee, any court may in its discretion require 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 6.13 shall not apply to any suit instituted
by the Company, 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
aggregate principal amount of the outstanding Securities, or to any suit
instituted by any Holder for enforcement of the payment of principal of, or
premium (if any) or interest on, or Liquidated Damages (if any) with respect to
any Security on or after the respective dates such payments are due as expressed
in such Security (in the case of redemption, the Redemption Price on the
applicable Redemption Date, in the case of an Asset Sale Offer the Asset Sale
Offer Price on the Purchase Date, and in the case of a Change of Control Offer,
the Change of Control Purchase Price on the Change of Control Purchase Date).
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SECTION 6.14. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture 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 case, subject to any determination in such
proceeding, the Company, the Guarantors, the Trustee and the Holders shall be
restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture and
covenants and agrees to perform the same, as herein expressed, subject to the
terms hereof.
SECTION 7.1. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in the exercise thereof as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no
covenants or obligations shall be implied in or read into this
Indenture which are adverse to 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. However, in the case of any such certificates or
opinions which by any provision hereof are specifically required to
be furnished to the Trustee, the Trustee shall examine the
certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.1,
(2) The Trustee shall not be liable for any error of judgment
made in good faith by it, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts, and
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(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.11.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or at the request, order or direction of the Holders or in
the exercise of any of its rights or powers if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this Section 7.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
SECTION 7.2. Rights of Trustee.
Subject to Section 7.1:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of Counsel,
which shall conform to Sections 13.4 and 13.5. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
certificate or advice of counsel.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture, nor for any action permitted to be
taken or omitted hereunder by any Agent.
(e) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it may
see fit.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
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(g) Unless otherwise specifically provided for in this Indenture,
any demand, request, direction or notice from the Company or any Guarantor shall
be sufficient if signed by an Officer of the Company or such Guarantor, as
applicable.
(h) The Trustee shall have no duty to inquire as to the performance
of the Company's or any Guarantor's covenants in Article IV hereof or as to the
performance by any Agent of its duties hereunder. In addition, the Trustee shall
not be deemed to have knowledge of any Default or Event of Default except any
Default or Event of Default of which the Trustee shall have received written
notification or with respect to which a Trust Officer shall have actual
knowledge.
(i) Whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate.
SECTION 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company, any Guarantor,
any of their Subsidiaries, or their respective Affiliates with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Securities and it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement in the Securities, other than the Trustee's certificate of
authentication (if executed by the Trustee), or the use or application of any
funds received by a Paying Agent other than the Trustee.
SECTION 7.5. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each Securityholder and the
Senior Bank Representative notice of the Default or Event of Default within 30
days after obtaining knowledge thereof. Except in the case of a default in
payment of principal (or premium, if any) of, or interest on, or Liquidated
Damages (if any) in respect of, any Security (including the payment of the
Change of Control Purchase Price on the Change of Control Purchase Date, the
payment of the Redemption Price on the Redemption Date or the payment of the
Asset Sale Price on the Purchase Date), the Trustee may withhold the notice if
and so long as a committee of Trust Officers in good faith determines that
withholding the notice is in the interest of the Securityholders.
SECTION 7.6. Reports by Trustee to Holders.
Within 60 days after each May 15, beginning with May 15, 1997, the Trustee
shall, if required by law, mail to each Securityholder a brief report dated as
of such May 15 that complies with TIA ss. 313(a). The Trustee also shall comply
with TIA ss.ss. 313(b) and 313(c).
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The Company shall promptly notify the Trustee in writing if the Securities
become listed on any stock exchange or automated quotation system.
A copy of each report at the time of its mailing to Securityholders shall
be mailed to the Company and filed with the SEC and each stock exchange, if any,
on which the Securities are listed.
SECTION 7.7. Compensation and Indemnity.
The Company and the Guarantors jointly and severally agree to pay to the
Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company and the Guarantors jointly and
severally shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it in accordance with
this Indenture. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents, accountants, experts and
counsel.
The Company and the Guarantors jointly and severally agree to indemnify
the Trustee (in its capacity as Trustee) and each of its officers, directors,
attorneys-in-fact and agents for, and hold it harmless against, any claim,
demand, expense (including but not limited to reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel), loss or
liability incurred by it without negligence or bad faith on the part of the
Trustee, arising out of or in connection with the administration of this trust
and its rights or duties hereunder including the reasonable costs and expenses
of defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The Trustee
shall notify the Company promptly of any claim asserted against the Trustee for
which it may seek indemnity. The Company and the Guarantors shall defend the
claim and the Trustee shall provide reasonable cooperation at the Company's and
the Guarantors' expense in the defense. The Trustee may have separate counsel
and the Company and the Guarantors shall pay the reasonable fees and expenses of
such counsel. The Company and the Guarantors need not pay for any settlement
made without their written consent, which consent shall not be unreasonably
withheld. The Company and the Guarantors need not reimburse any expense or
indemnify against any loss or liability to the extent incurred by the Trustee
through its negligence, bad faith or willful misconduct. The obligations of the
Company and the Guarantors under this Section 7.7 to compensate the Trustee, to
pay or reimburse the Trustee for reasonable expenses, disbursements and advances
and to indemnify the Trustee shall constitute additional indebtedness hereunder.
Such additional indebtedness shall not be subordinated to the payment of Senior
Debt pursuant to Article XII.
To secure the Company's and the Guarantors' payment obligations in this
Section 7.7, the Trustee shall have a lien prior to the Securities on all assets
held or collected by the Trustee, in its capacity as Trustee, except assets held
in trust to pay principal on, or premium, if any, of or interest on, or
Liquidated Damages (if any) in respect of, particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(g) or (h) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's and the Guarantors' obligations under this Section 7.7 and
any lien arising hereunder shall survive the resignation or removal of the
Trustee, the discharge of the Company's and the Guarantors' obligations pursuant
to Article VIII of this Indenture and any rejection or termination of this
Indenture under any Bankruptcy Law.
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SECTION 7.8. Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing, to become
effective upon the appointment of a successor trustee. The Holder or Holders of
a majority in aggregate principal amount of the outstanding Securities may
remove the Trustee by so notifying the Company and the Trustee in writing and
may appoint a successor trustee with the Company's consent. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver, Custodian, or other public officer takes charge of
the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder or
Holders of a majority in aggregate principal amount of the outstanding
Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that and provided
that all sums owing to the retiring Trustee provided for in Section 7.7 have
been paid, the retiring Trustee shall transfer all property held by it as
trustee to the successor Trustee, subject to the lien provided in Section 7.7,
the resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holder or Holders of at least 10% in aggregate principal amount of the
outstanding Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.8,
the Company's and the Guarantors' obligations under Section 7.7 shall continue
for the benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
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SECTION 7.10. Eligibility: Disqualification.
The Trustee shall at all times satisfy the requirements of TIA ss.
310(a)(1), (2) and (5). The Trustee shall have a combined capital and surplus of
at least $100,000,000 as set forth in its most recent published annual report of
condition. The Trustee shall comply with TIA ss. 310(b).
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 31l(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at its option and at any time, elect to have Section 8.2
or Section 8.3 applied to all outstanding Securities upon compliance with the
conditions set forth below in this Article VIII.
SECTION 8.2. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.1 of the option applicable to
this Section 8.2, the Company and the Guarantors shall be deemed to have been
discharged from their respective obligations with respect to all outstanding
Securities on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means
that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of Section 8.5 and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Securities and this Indenture
(and the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) rights of
Holders to receive payments in respect of the principal of, premium, if any, and
interest on the Securities when such payments are due from the trust funds
described below and the rights of Holders to receive payments of Liquidated
Damages, if any, pursuant to the Registration Rights Agreement; (b) the
Company's obligations with respect to such Securities concerning issuing
temporary Securities, registration of Securities, mutilated, destroyed, lost or
stolen Securities, and the maintenance of an office or agency for payment and
money for security payments held in trust; (c) the rights, powers, trust,
duties, and immunities of the Trustee, and the Company's and the Guarantor's
obligations in connection therewith; and (d) this Article VIII. Without
limitation to the foregoing, the provisions of Article XII shall not be
operative from and after the effectiveness of Legal Defeasance. Upon Legal
Defeasance as provided herein, the Guarantee of each Guarantor shall be fully
released and discharged and the Trustee shall promptly execute and deliver to
the Company any documents reasonably requested by the Company to evidence or
effect the foregoing. Subject to compliance with this Article VIII, the Company
may exercise its option under this Section 8.2 notwithstanding the prior
exercise of its option under Section 8.3 with respect to the Securities.
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SECTION 8.3. Covenant Defeasance.
Upon the Company's exercise under Section 8.1 of the option applicable to
this Section 8.3, the Company and the Guarantors shall be released from their
respective obligations under the covenants contained in Sections 4.3, 4.5, 4.6,
4.7, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.17 (other than clause (a) of the
third paragraph of Section 4.17), Article V and Article X with respect to the
outstanding Securities on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Securities shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder. For this purpose, such Covenant
Defeasance means that, with respect to the outstanding Securities, the Company
need not comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document (and Section 6.1 (c) shall not apply to any such
covenant), but, except as specified above, the remainder of this Indenture and
such Securities shall be unaffected thereby. Without limitation to the
foregoing, the provisions of Article XII shall not be operative from and after
the effectiveness of Covenant Defeasance.
SECTION 8.4. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.2 or Section 8.3 to the outstanding Securities:
(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfactory to the Trustee
satisfying the requirements of Section 7.10 who shall agree to comply with the
provisions of this Article VIII 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 Securities, (a)
Cash in an amount, or (b) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in accordance
with their terms will provide, not later than one day before the due date of any
payment, Cash in an amount, or (c) a combination thereof, in such amounts as in
each case will be 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
Paying Agent (or other qualifying trustee) to pay and discharge the principal
of, premium, if any, and interest on, the outstanding Securities as and when the
same shall become due and payable in accordance with the terms of this Indenture
and the Securities; provided that the Paying Agent shall have been irrevocably
instructed to apply such Cash and the proceeds of such U.S. Government
Obligations to said payments with respect to the Securities. The Paying Agent
shall promptly advise the Trustee in writing of any Cash or U.S. Government
Obligations deposited pursuant to this Section 8.4;
(b) In the case of an election under Section 8.2, the Company shall
have delivered to the Trustee an Opinion of Counsel from independent legal
counsel in the United States reasonably acceptable to the Trustee confirming
that, since the date of this Indenture (i) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (ii) 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 Securities will not recognize income, gain or loss for
Federal income tax purposes as a result of such Legal 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 Legal Defeasance had not
occurred;
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(c) In the case of an election under Section 8.3, the Company shall
have delivered to the Trustee an Opinion of Counsel from independent legal
counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Securities will not recognize income, gain
or loss for Federal income tax purposes as a result of such Covenant Defeasance
and will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(d) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as Events of Default under
Section 6.1(g) or Section 6.1(h) are concerned, at any time in the period ending
on the 91st day after the date of such deposit (it being understood that this
condition is a condition subsequent which shall not be deemed satisfied until
the expiration of such period);
(e) Such Legal 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 Subject Entity or any of its
Subsidiaries is a party or by which the Subject Entity or any of its
Subsidiaries is bound;
(f) In the case of an election under either Section 8.2 or 8.3, the
Company shall have delivered to the Trustee an Officers' Certificate stating
that the deposit made by the Company pursuant to its election under Section 8.2
or 8.3 was not made by the Company with the intent of preferring the Holders
over any other creditors of the Company or the Guarantors or with the intent of
defeating, hindering, delaying or defrauding any other creditors of the Company
or the Guarantors or others;
(g) The Company shall have delivered to the Trustee an Opinion of
Counsel from independent legal counsel in the United States reasonably
acceptable to the Trustee to the effect that, after the 91st day following such
deposit, the trust funds deposited pursuant to clause (a) above will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally under any applicable U.S.
federal or state law and that the Trustee has a perfected security interest in
such trust funds for the ratable benefit of the Holders of the Securities;
(h) If the Cash or U.S. Government Obligations or combination
thereof, as applicable, deposited with the Trustee (or other qualifying trustee)
under clause (a) above are sufficient to pay and discharge the principal of,
premium, if any, and interest on the outstanding Securities provided such
Securities are redeemed on a particular Redemption Date, the Company shall have
given the Trustee irrevocable instructions to redeem such Securities on such
date and to provide notice of such redemption to Holders as provided in this
Indenture; and
(i) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that the conditions
precedent provided for in, in the case of the Officer's Certificate, clauses (a)
through (h), and, in the case of the Opinion of Counsel, clauses (b) or (c), as
applicable, (e) and (g) of this Section 8.4 have been complied with.
SECTION 8.5. Deposited Cash and U.S. Government Obligations to be Held in
Trust, Other Miscellaneous Provisions.
Subject to Section 8.6, all Cash and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 8.5, the
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"Paying Agent") pursuant to Section 8.4 in respect of the outstanding Securities
shall be held in trust and applied by the Paying Agent, in accordance with the
provisions of such Securities and this Indenture, to the payment, either
directly or through any other Paying Agent as the Trustee may determine, to the
Holders of such Securities of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
SECTION 8.6. Repayment to the Company.
Anything in this Article VIII to the contrary notwithstanding, the Trustee
or the Paying Agent, as applicable, shall deliver or pay to the Company from
time to time upon the request of the Company any Cash or U.S. Government
Obligations held by it as provided in Section 8.4 hereof which in the opinion of
a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.4(a) hereof), are in excess of the amount thereof that
would then be required to be deposited to effect an equivalent Legal Defeasance
or Covenant Defeasance.
Any Cash and U.S. Government Obligations (including the proceeds thereof)
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 and
Liquidated Damages, if any, any Security and remaining unclaimed for two years
after such principal, and premium, if any, or interest or Liquidated Damages, if
any, have become due and payable shall, subject to the requirements of
applicable law, be paid to the Company on its request; and the Holder of such
Security shall thereafter look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money
shall thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The Wall Street
Journal (national edition), or mailed to each Holder entitled to such money
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
or mailing, any unclaimed balance of such money then remaining will be repaid to
the Company.
SECTION 8.7. Reinstatement.
If the Trustee or Paying Agent is unable to apply any Cash or U.S.
Government Obligations deposited pursuant to Section 8.4 in accordance with this
Indenture or the Securities, by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the Company's and
the Guarantors' obligations under this Indenture and the Securities shall be
revived and reinstated as though no deposit had occurred pursuant to Section 8.4
until such time as the Trustee or Paying Agent is permitted to apply such money
in accordance with this Indenture or the Securities; provided, however, that, if
the Company makes any payment of principal of, premium, if any, or interest on
any Security following the reinstatement of its obligations, the Company shall
be subrogated to the rights of the Holders of such Securities to receive such
payment from the Cash and U.S. Government Obligations held by the Trustee or
Paying Agent.
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ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holder, the Company, when authorized by Board
Resolutions, the Guarantors, when authorized by Board Resolution (or, if any
Guarantor is not a corporation, when otherwise appropriately authorized) and the
Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following purposes:
(1) to cure any ambiguity, defect, or inconsistency;
(2) to evidence the succession of another Person to the Company in
accordance with this Indenture, and the assumption by any such successor of the
obligations of the Company, herein and in the Securities in accordance with
Article V;
(3) to evidence the succession of another Person to any Guarantor
and assumption by any such successor of the obligations of such Guarantor (as
set forth in Section 11.4) in accordance with Article XI;
(4) to evidence the release of any Guarantor in accordance with
Article XI;
(5) to evidence the addition of any new Guarantor in accordance with
this Indenture;
(6) to add to the covenants of the Company or the Guarantors for the
benefit of the Holders, or to surrender any right or power herein conferred upon
the Company or any of the Guarantors;
(7) to comply with the TIA;
(8) in any other case where a supplemental indenture is required or
permitted to be entered into pursuant to the provisions of Article XI without
the consent of any Holder;
(9) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities;
(10) to secure the Securities in accordance with the provisions of
Section 4.12;
(11) to provide for the issuance and authentication of the Exchange
Securities in exchange for the Initial Securities in compliance with this
Indenture and the Registration Rights Agreement; or
(12) to make any other change that does not adversely affect the
rights of any Holder in any material respect.
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SECTION 9.2. Amendments, Supplemental Indentures and Waivers with Consent
of Holders.
Subject to Section 6.8, with the consent of the Holders of not less than a
majority in aggregate principal amount of then outstanding Securities, by
written act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by Board Resolutions, the Guarantors, when authorized
by Board Resolution (or, if any Guarantor is not a corporation, when otherwise
appropriately authorized) and the Trustee may amend or supplement this Indenture
or the Securities or enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or the Securities or of
modifying in any manner the rights of the Holders under this Indenture or the
Securities. Subject to Section 6.8, the Holder or Holders of not less than a
majority in aggregate principal amount of then outstanding Securities may waive
compliance by the Company or any Guarantor with any provision of this Indenture
or the Securities. Notwithstanding any of the above, however, no such amendment,
supplemental indenture or waiver shall without the consent of the Holders of not
less than 66-2/3% of the aggregate principal amount of Securities at the time
outstanding alter the terms or provisions of Section 10.1 in a manner which
adversely affects the Holders; no such amendment, supplemental indenture or
waiver shall, without the written consent of all holders of Senior Debt alter
the terms or provisions of Article XII; and no such amendment, supplemental
indenture or waiver shall, without the consent of the Holder of each outstanding
Security affected thereby:
(1) reduce the percentage of principal amount of the outstanding
Securities whose Holders must consent to an amendment, supplement or waiver of
any provision of this Indenture or the Securities;
(2) reduce the rate or extend the time for payment of interest on
any Security;
(3) reduce the principal or Redemption Price of any Security, or
reduce the Change of Control Purchase Price or the Asset Sale Offer Price;
(4) change the Stated Maturity of any Security or any installment of
interest thereon;
(5) alter the redemption provisions of Article III in a manner
adverse to any Holder;
(6) make any changes in the provisions concerning waivers by the
Holders of Defaults, Events of Default or other defaults or of compliance by the
Company or any Guarantor with any provision of this Indenture or the Securities,
or impair the right of any Holder to institute suit for the enforcement of any
payment of principal of, premium, if any, or interest on any Security on or
after the date such payment is due as expressed in such Security or in this
Indenture, including without limitation any changes in Section 6.8, 6.12 or the
second sentence or this third sentence of this Section 9.2, except to increase
any required percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder of each
outstanding Security affected thereby;
(7) make the principal of, or the interest or premium on, any
Security payable with anything or in any manner other than as provided for in
this Indenture and the Securities as in effect on the date hereof (including
changing the place of payment where, or the coin or currency in which, any
Security or any premium or the interest thereon is payable); or
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(8) make the Securities or the Guarantees further subordinated in
right of payment to any extent or under any circumstances to any other
Indebtedness (it being understood that amendments to Section 4.10 hereof which
may have the effect of increasing the amount of Senior Debt that the Company and
the Guarantors may Incur shall not, for purposes of this clause (8), be deemed
to make the Securities or the Guarantees further subordinated in right of
payment to any extent or under any circumstances to any other Indebtedness).
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amendment, supplemental indenture
or waiver.
After an amendment, supplement or waiver under this Section 9.2 or Section
9.4 becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this Article
IX, the Company may, but shall not be obligated to, offer to any Holder who
consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
Anything herein to the contrary notwithstanding, each amendment to this
Indenture and each indenture supplemental hereto shall be signed by each of the
Guarantors and shall set forth the agreement of the Guarantors that their
obligations under the Guarantees and this Indenture remain in full force and
effect, and, in the case of any waiver by the Holders of compliance by the
Company or any Guarantor with any provision of this Indenture or the Securities,
the Guarantors shall execute and deliver to the Trustee a written instrument
acknowledging such waiver and agreeing that their obligations under the
Guarantees and this Indenture remain in full force and effect.
SECTION 9.3. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent Holder
of a Security or portion of a Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security. However, any such Holder or subsequent Holder may revoke the consent
as to his Security or portion of his Security by written notice to the Company
or the Person designated by the Company as the Person to whom consents should be
sent if such revocation is received by the Company or such Person before the
date on which the Trustee receives an Officers' Certificate certifying that the
Holders of the requisite principal amount of Securities have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver.
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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 amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at the close of business on such record date, and
only those Persons (or their duly designated proxies), shall be entitled 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 for
more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Security- holder, unless it makes a change described in any of clauses (1)
through (8) of Section 9.2, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security; provided, that any such waiver shall
not impair or affect the right of any other Holder to receive payment of
principal of and premium of, if any, and interest on a Security, on or after the
respective dates set for such amounts to become due and payable expressed in
such Security and this Indenture, or to bring suit for the enforcement of any
such payment on or after such respective dates.
SECTION 9.5. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security, the
Trustee may require the Holder of the Security to deliver it to the Trustee or
require the Holder to put an appropriate notation on the Security. The Trustee
may place an appropriate notation on the Security about the changed terms and
return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the changed terms. Any failure
to make the appropriate notation or to issue a new Security shall not affect the
validity of such amendment, supplement or waiver.
SECTION 9.6. Trustee to Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article IX; provided, that the Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver which affects the
Trustee's own rights, duties or immunities under this Indenture. The Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article IX is authorized or permitted by this
Indenture.
ARTICLE X
RIGHT TO REQUIRE REPURCHASE
SECTION 10.1. Repurchase of Securities at Option of the Holder Upon a
Change of Control.
(a) In the event that a Change of Control occurs, each Holder shall
have the right, at such Holder's option, pursuant to an irrevocable and
unconditional offer by the Company (the "Change of Control Offer") subject to
the terms and conditions of this Indenture, to require the Company to repurchase
all or any part of such Holder's Securities (provided, that the principal amount
purchased must be $1,000 or
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an integral multiple thereof) on a date (the "Change of Control Purchase Date")
selected by the Company that is no later than 45 Business Days after the
occurrence of such Change of Control, at a cash price (the "Change of Control
Purchase Price") equal to 101% of the principal amount thereof, plus accrued and
unpaid interest to the Change of Control Purchase Date.
(b) In the event of a Change of Control, the Company shall be
required to make the Change of Control Offer as follows:
(1) the Change of Control Offer shall commence within 15
Business Days following the occurrence of the Change of Control;
(2) the Change of Control Offer shall remain open for not less
than 20 Business Days following its commencement (the "Change of Control
Offer Period");
(3) upon the expiration of the Change of Control Offer Period,
the Company shall purchase all of the properly tendered Securities at the
Change of Control Purchase Price, plus accrued and unpaid interest
thereon;
(4) the Company shall provide the Trustee and the Paying Agent
with written notice of the Change of Control Offer at least three Business
Days before the commencement of any Change of Control Offer; and
(5) on or before the commencement of any Change of Control
Offer, the Company or the Registrar (upon the request and at the expense
of the Company) shall send, by first-class mail, a notice to each of the
Securityholders, which (to the extent consistent with this Indenture)
shall govern the terms of the Change of Control Offer and shall state:
(i) that the Change of Control Offer is being made
pursuant to such notice and this Section 10.1 and that all
Securities, or portions thereof, tendered will be accepted for
payment;
(ii) the Change of Control Purchase Price (including the
amount of accrued and unpaid interest), the Change of Control
Purchase Date and the Change of Control Put Date (as hereinafter
defined);
(iii) that any Security, or portion thereof, not tendered
or accepted for payment will continue to accrue interest;
(iv) that, unless the Company defaults in depositing
Cash with the Paying Agent in accordance with the last paragraph of
this Article X or the payment to Holders is prevented or prohibited
(including, without limitation, pursuant to Article XII hereof), any
Security, or portion thereof, accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest on and after
the Change of Control Purchase Date;
(v) that Holders electing to have a Security, or
portion thereof, purchased pursuant to a Change of Control Offer
will be required to surrender the Security,
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with the form entitled "Option of Holder to Elect Purchase" on the
Security completed (or, in the case of Global Securities, to effect
such surrender in accordance with the Depositary's procedures), to
the Paying Agent (which may not for purposes of this Section 10.1,
notwithstanding anything in this Indenture to the contrary, be the
Company or any Affiliate of the Company) at the address specified in
the notice prior to the close of business on the earlier of the date
(which shall be specified in such notice) which is (a) the third
Business Day prior to the Change of Control Purchase Date and (b)
the third Business Day following the expiration of the Change of
Control Offer (such earlier date being the "Change of Control Put
Date");
(vi) that Holders will be entitled to withdraw their
election, in whole or in part, if the Paying Agent receives, up to
the close of business on the Change of Control Put Date, a telegram,
telex, facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Securities the Holder is
withdrawing and a statement that such Holder is withdrawing his
election to have such principal amount of Securities purchased;
(vii) that Holders who surrender Securities for purchase
only in part will be issued new Securities equal in principal amount
to the unpurchased portion of the Securities surrendered; and
(viii) a brief description of the events resulting in such
Change of Control.
Any such Change of Control Offer shall be made in compliance with all
applicable Federal and state laws, rules and regulations, including, if
applicable, Regulation 14E under the Exchange Act and all other applicable
Federal and state securities laws, and any provisions of this Indenture which
conflict with such laws shall be deemed to be superseded by the provisions of
such laws.
On or before the Change of Control Purchase Date, the Company will (i)
accept for payment Securities or portions thereof properly tendered pursuant to
the Change of Control Offer on or before the Change of Control Put Date, (ii)
deposit with the Paying Agent Cash sufficient to pay the Change of Control
Purchase Price (together with accrued and unpaid interest) for all Securities or
portions thereof so tendered and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate listing the Securities or
portions thereof being purchased by the Company. The Paying Agent shall promptly
mail to Holders of Securities so accepted (or, in the case of Securities held in
book-entry form through the Depositary, will deliver in accordance with the
Depositary's procedures as then in effect) payment in an amount equal to the
Change of Control Purchase Price (together with accrued and unpaid interest),
for such Securities, and the Trustee or its authenticating agent shall promptly
authenticate and mail or deliver to such Holders (or deliver in accordance with
the Depositary's procedures, as the case may be) new Securities equal in
principal amount to any unpurchased portion of the Securities surrendered;
provided, however, that each such new Security will be in a principal amount of
$1,000 or an integral multiple thereof. Any Securities not so accepted shall be
promptly mailed or delivered (or delivered in accordance with the Depositary's
procedures, as the case may be) by the Company to the Holder thereof. The
Company shall publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Purchase Date. The Trustee
shall be under no obligation to ascertain the occurrence of a Change of Control
or, except as directed by the Company, to give notice to the Securityholders
with respect thereto. The Trustee
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may conclusively assume, in the absence of written notice to the contrary from
the Company, that no Change of Control has occurred.
ARTICLE XI
GUARANTEE
SECTION 11.1. Guarantee.
(a) In recognition of the benefits that the issuance of the
Securities will confer upon the Guarantors, including, without limitation, the
benefits that will inure to the Guarantors from the additional capital provided
by issuance of the Securities and the application of the proceeds therefrom in
connection with, among other things, the Hughes Acquisition, and for $1.00 in
hand paid and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the Guarantors hereby
irrevocably and unconditionally guarantees (individually, a "Guarantee" and,
collectively, the "Guarantees"), jointly and severally, on a senior subordinated
basis, to each Holder of a Security authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Securities or the obligations of the
Company under this Indenture or the Securities, that: (i) the principal of and
premium (if any) and interest on and Liquidated Damages, if any, in respect of
the Securities will be paid in full when due, whether at Stated Maturity or
Interest Payment Date, by acceleration, call for redemption or otherwise, (ii)
the purchase price for all Securities properly and timely tendered in response
to a Change of Control Offer or Asset Sale Offer, together with accrued and
unpaid interest thereon, will be timely, and otherwise in accordance with the
provisions of this Indenture, paid in full; (iii) all other obligations of the
Company to the Holders or the Trustee under this Indenture or the Securities
will be promptly paid in full or performed, all in accordance with the terms of
this Indenture and the Securities; and (iv) in case of any extension of time of
payment or renewal of any Securities or any of such other obligations, they will
be paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at Stated Maturity, by acceleration, call for
redemption, upon a Change of Control Offer, upon an Asset Sale Offer or
otherwise. Failing payment when due of any amount so guaranteed for whatever
reason, each Guarantor shall be jointly and severally obligated to pay the same
before failure so to pay becomes an Event of Default. If the Company or a
Guarantor defaults in the payment of the principal of, premium, if any, or
interest on, or Liquidated Damages in respect of, any of the Securities when and
as the same shall become due, whether upon maturity, acceleration, call for
redemption, upon a Change of Control Offer, Asset Sale Offer or otherwise,
without the necessity of action by the Trustee or any Holder, each Guarantor
shall be required, jointly and severally, to promptly make such payment in full.
(b) Each Guarantor hereby agrees that its obligations with regard to
its Guarantee shall be unconditional, irrespective of the validity, regularity
or enforceability of the Securities or this Indenture, the absence of any action
to enforce the same, any delays in obtaining or realizing upon or failures to
obtain or realize upon collateral, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstances that might
otherwise constitute a legal or equitable discharge or defense of a guarantor
(except the release of such Guarantor pursuant to the last sentence of Section
11.3 or Section 11.4(c)). Each Guarantor hereby waives 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 or right to require the prior disposition of the assets of the Company
to meet its obligations, protest, notice and all demands whatsoever and
covenants that this Guarantee will not be discharged (except
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to the extent released pursuant to the last sentence of Section 11.3 or Section
11.4(c)) except by complete performance of the obligations contained in the
Securities and this Indenture.
(c) If any Holder or the Trustee is required by any court or
otherwise to return to either the Company or any Guarantor, or any Custodian,
trustee, or similar official acting in relation to either the Company or such
Guarantor, any amount paid by either 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 (except to the extent theretofore
released pursuant to the last sentence of Section 11.3 or Section 11.4(c)). Each
Guarantor agrees that it will not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby. Each Guarantor further
agrees, to the extent permitted by law, that, as between such Guarantor, on the
one hand, and the Holders and the Trustee, on the other hand, (i) the maturity
of the obligations guaranteed hereby may be accelerated as provided in Section
6.2 for the purposes of this Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration as to the Company of the
obligations guaranteed hereby, and (ii) in the event of any declaration of
acceleration of those obligations as provided in Section 6.2, those obligations
(whether or not due and payable) will forthwith become due and payable by each
of the Guarantors for the purpose of this Guarantee.
(d) Each Guarantor and by its acceptance of a Security issued
hereunder each Holder hereby confirms that it is the intention of all such
parties that the Guarantee by such Guarantor set forth in Section 11.1(a) not
constitute a fraudulent transfer or conveyance for purpose of any 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 each Guarantor hereby irrevocably agree that the obligations of such
Guarantor under its Guarantee set forth in Section 11.1(a) shall be limited to
the maximum amount as will, under applicable law and (to the extent permitted by
applicable law) after giving effect to all other contingent and fixed
liabilities of such Guarantor and 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 Section
11.1(e), result in the obligations of such Guarantor under its Guarantee not
constituting such a fraudulent transfer or conveyance.
(e) Each Guarantor that makes any payment or distribution under
Section 11.1(a) shall be entitled to a contribution from each other Guarantor
equal to its Pro Rata Share of such payment or distribution. For purposes of the
foregoing, the "Pro Rata Share" of any Guarantor means the percentage of the net
assets of all Guarantors held by such Guarantor, determined in accordance with
GAAP.
SECTION 11.2. Execution and Delivery of Guarantee.
Each Guarantor shall, by virtue of such Guarantor's execution and delivery
of this Indenture or such Guarantor's execution and delivery of an indenture
supplement pursuant to Section 11.3 hereof, be deemed to have signed on each
Security issued hereunder the notation of guarantee set forth on the form of the
Securities attached hereto as Exhibit A to the same extent as if the signature
of such Guarantor appeared on such Security.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
Section 11.1 on behalf of each Guarantor. The notation of a guarantee set forth
on any Security shall be null and void and of no further effect with respect to
the
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Guarantee of any Guarantor which, pursuant to the last sentence of Section 11.3
or Section 11.4(c), is released from its Guarantee.
SECTION 11.3. Additional Guarantors.
The Subject Entity will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, establish or acquire a new Subsidiary
of the Subject Entity or such Subsidiary, as the case may be, unless either (A)
such new Subsidiary is designated as an Unrestricted Subsidiary in accordance
with the definition of the term "Unrestricted Subsidiary" or (B) the Subject
Entity (by delivery of an Officers' Certificate to the Trustee) designates such
new Subsidiary as a Non-Guarantor Foreign Subsidiary and the aggregate amount of
Investments made by the Subject Entity and its Domestic Subsidiaries and
Guarantor Foreign Subsidiaries in such Non-Guarantor Foreign Subsidiary are not
prohibited by this Indenture (provided that the Subject Entity may at any time
thereafter elect to cause such Non-Guarantor Foreign Subsidiary to become a
Guarantor as contemplated by clause (C) of this Section 11.3) or (C) (i) such
new Subsidiary simultaneously executes and delivers a supplemental indenture
pursuant to which such new Subsidiary becomes a Guarantor and guarantees the
obligations of the Company under the Securities and this Indenture on the same
terms as the other Guarantors and (ii) the Subject Entity shall deliver to the
Trustee an Officers' Certificate and an Opinion of Counsel, each in a form
reasonably satisfactory to the Trustee, stating that the Subject Entity has
complied with this Section 11.3 in connection with the establishment or
acquisition of such new Subsidiary. For purposes of this Section 11.3, the
designation of any Unrestricted Subsidiary as a Subsidiary shall be deemed to be
the establishment of a new Subsidiary. Upon the designation of a Subsidiary as
an Unrestricted Subsidiary in accordance with the provisions of this Indenture,
such Unrestricted Subsidiary shall be released from all of its obligations under
its Guarantee and this Indenture. From and after the time of the Reorganization,
the Subject Entity will always be a Guarantor.
SECTION 11.4. Guarantor May Consolidate, Etc., on Certain Terms; Release
of Guarantors.
(a) Except for transactions made in accordance with the provisions
described in Section 11.4(c), no Guarantor will, directly or indirectly,
consolidate with or merge with or into any other person unless (i) either (a) if
such transaction is a merger, such Guarantor shall be the surviving person of
such merger or (b) the person formed by such consolidation or into which such
Guarantor is merged (any such surviving person referred to in this clause (b)
being hereinafter called the "Surviving Person") shall be a corporation (or, if
such Guarantor is not a corporation, such person shall be either a corporation
or the same type of entity as such Guarantor) organized and existing under the
laws of the United States of America, any state thereof or the District of
Columbia (or, if such Guarantor is a Guarantor Foreign Subsidiary, the Surviving
Person may be organized and existing under the laws of a foreign country or
other foreign jurisdiction) which (except in the case of a merger of such
Guarantor into the Subject Entity) is or, concurrently with such merger or
consolidation, becomes a Subsidiary of the Subject Entity and expressly assumes,
by a supplemental indenture executed and delivered to the Trustee in form
reasonably satisfactory to the Trustee, all of the obligations of such Guarantor
under its Guarantee and this Indenture (and such supplemental indenture shall
also be executed by each other Guarantor and shall further provide that each
such other Guarantor confirms that its obligations under this Indenture and its
Guarantee remain in full force and effect); (ii) no Default or Event of Default
shall exist or shall occur immediately after giving effect to such transaction
on a pro forma basis (including, without limitation, after giving effect to any
Indebtedness Incurred or to be Incurred in connection with such transaction);
(iii) immediately after giving effect to such transaction on a pro forma basis
(including, without limitation, any Indebtedness Incurred or to be Incurred in
connection with such transaction), the Subject Entity would be permitted to
incur at least $1.00 of additional
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Indebtedness pursuant to the Debt Incurrence Ratio set forth in the second
paragraph of Section 4.10; (iv) if such transaction shall occur in connection
with or at any time from and after the Reorganization, immediately after giving
effect to such transaction the Company shall be a Wholly-Owned Subsidiary of the
Holding Company; and (v) the Subject Entity shall deliver, or cause to be
delivered, to the Trustee an Officers' Certificate (in form and substance
reasonably satisfactory to the Trustee) stating that such transaction and, if a
supplemental indenture is required in connection therewith, such supplemental
indenture comply with this Indenture and that all conditions precedent herein
relating to such transaction have been complied with and an Opinion of Counsel
(in form and substance reasonably satisfactory to the Trustee) stating that such
transaction and, if a supplemental indenture is required in connection
therewith, such supplemental indenture comply with the requirements of clause
(i) of this paragraph and that the conditions precedent provided in clause (v)
of this paragraph have been complied with; provided that the condition set forth
in clause (i)(b) of this sentence requiring that the Surviving Person enter into
a supplemental indenture and the conditions set forth in clause (iii) of this
sentence shall not apply to the merger of any Guarantor into the Company or with
or into another Guarantor. Upon any consolidation or merger of any Guarantor in
accordance with the foregoing, the successor person formed by such consolidation
or into which such Guarantor is merged shall (unless such successor person is
the Company or another Guarantor) succeed to, and be substituted for, and may
exercise every right and power of, such Guarantor under this Indenture and its
Guarantee, with the same effect as if such successor person had been named
herein as a Guarantor, and in any such case (including the merger of a Guarantor
into another Guarantor or the Company), the predecessor person shall be released
from all obligations under its Guarantee and this Indenture.
(b) Any Guarantor may convey, sell, transfer, assign or dispose of
(other than by merger or consolidation) any property or assets of such Guarantor
(whether or not constituting all or substantially all of the assets of such
Guarantor) to any person, provided that such conveyance, sale, transfer,
assignment or other disposition complies with the provisions of Section 4.13 and
is not otherwise prohibited by this Indenture.
(c) (x) In the event of a merger or consolidation of a Subsidiary
Guarantor with or into a person which is not the Subject Entity or a Subsidiary
Guarantor (and which person does not become a Subsidiary Guarantor concurrently
with such transaction), or (y) in the event of a transaction (including, without
limitation, the sale or disposition of Capital Stock of a Subsidiary Guarantor)
not prohibited by this Indenture which results in a Subsidiary Guarantor no
longer being a Subsidiary of the Subject Entity, and which, in any case
described in clause (x) or (y) of this sentence, is otherwise made in compliance
with this Indenture, the Company may elect to obtain the release of such
Subsidiary Guarantor (and all Subsidiaries of such Subsidiary Guarantor) from
all of their respective obligations under their Guarantees and this Indenture
(in which case any such merger or consolidation need not comply with Section
11.4(a); provided that (i) prior to such transaction, the Subject Entity shall
have delivered an Officers' Certificate to the Trustee stating that such
transaction will be effected in accordance with the provisions of this Section
11.4(c) in order to obtain the release of such Subsidiary Guarantor, (ii) such
transaction is made in accordance with the provisions of Section 4.13, (iii) if
such transaction is a merger or consolidation of a Subsidiary Guarantor into a
Non-Guarantor Foreign Subsidiary, such transaction shall be deemed an Investment
and must comply with the provisions of Section 4.3 hereof and (iv) except in the
case of a merger with or into a Non- Guarantor Foreign Subsidiary, such release
shall occur only if all obligations of such Subsidiary Guarantor and its
Subsidiaries and Unrestricted Subsidiaries, if any, under guarantees of, and
under all pledges of assets or other Liens which secure, Indebtedness of the
Subject Entity or any of its other Subsidiaries or Unrestricted Subsidiaries
shall also terminate. Upon any merger, consolidation or sale or other
disposition of Capital Stock of any Subsidiary Guarantor made in compliance with
the immediately preceding sentence, such Subsidiary
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Guarantor and all of its Subsidiaries shall be released from all of their
obligations under their Guarantees and this Indenture.
SECTION 11.5. Waiver of Subrogation
Until the date that is 91 days after the later of (x) the date on which
the principal of, premium, if any, and interest on all of the outstanding
Securities shall have been indefeasibly paid to the Holders thereof and (y) the
date on which any and all other amounts owing by the Company or any of the
Guarantors under this Indenture, the Securities or the Guarantees shall have
been indefeasibly paid to the persons entitled thereto, each Guarantor hereby
irrevocably waives, to the fullest extent that it may do so under applicable
law, any claim or other rights which it may now have or hereafter acquire
against the Company that arise from the existence, payment, performance or
enforcement of such Guarantor's obligations under its Guarantee and this
Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification, and any right to participate in any
claim or remedy of any Holder of Securities 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 the Securities shall not have been paid in full, then (to the
fullest extent permitted by applicable law) 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 Securities, and shall forthwith be paid to
the Trustee for the benefit of such Holders to be credited and applied upon the
Securities, 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 11.5 is knowingly made in contemplation of
such benefits.
SECTION 11.6. Certain Bankruptcy Events.
Each Guarantor hereby covenants and agrees, to the fullest extent that it
may do so under applicable law, that in the event of the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Company, such Guarantor shall
not file (or join in any filing of), or otherwise seek to participate in the
filing of, any motion or request seeking to stay or to prohibit (even
temporarily) execution on its Guarantee and, to the fullest extent that it may
do so under applicable law, hereby waives and agrees not to take the benefit of
any such stay of execution, whether under the Bankruptcy Law or otherwise.
ARTICLE XII
SUBORDINATION
SECTION 12.1. Securities Subordinated to Senior Debt.
The Company and the Guarantors and each Holder, by its acceptance of
Securities, agree that (a) the payment of the principal of and premium, if any,
interest on, and Liquidated Damages, if any, with respect to the Securities and
(b) any other payment in respect of the Securities, including on account of the
acquisition or redemption of the Securities by the Company and the Guarantors
(including, without limitation, pursuant to Section 4.13 or Section 10.1) is
subordinated, to the extent and in the manner provided in this Article XII,
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to the prior payment in full in Cash or Cash Equivalents of all Senior Debt of
the Company and the Guarantors and that these subordination provisions are for
the benefit of the holders of Senior Debt.
This Article XII shall constitute a continuing offer to all Persons who,
in reliance upon such provisions, become holders of, or continue to hold, Senior
Debt, and such provisions are made for the benefit of the holders of Senior
Debt, and such holders are made obligees hereunder and any one or more of them
may enforce such provisions.
SECTION 12.2. No Payment on Securities in Certain Circumstances.
(a) No payment (by set-off or otherwise, but excluding distributions
of Junior Securities) shall be made by or on behalf of the Company or any
Guarantor, as applicable, on account of the principal of, premium, if any, or
interest on, or Liquidated Damages, if any, in respect of, the Securities
(including any repurchases of Securities), or on account of the redemption
provisions of the Securities (i) upon the maturity of any Senior Debt of the
Company or such Guarantor, as applicable, by lapse of time, acceleration (unless
waived or rescinded) or otherwise, unless and until all such Senior Debt is
first paid in full in cash or Cash Equivalents (or, except in the case of Senior
Debt under any Credit Agreement, such payment is duly provided for), or (ii) in
the event of default in the payment of any principal of, premium, if any, or
interest on any Senior Debt of the Company or such Guarantor, as applicable,
when it becomes due and payable, whether at maturity or at a date fixed for
prepayment or by declaration or otherwise (a "Payment Default"), unless and
until such Payment Default has been cured or waived or otherwise has ceased to
exist.
(b) Upon (i) the happening of an event of default (other than a
Payment Default) that permits the holders of Designated Senior Debt to declare
such Designated Senior Debt to be due and payable and (ii) written notice of
such event of default being given to the Company and the Trustee by the relevant
Senior Bank Representative or the holders of an aggregate of at least
$25,000,000 principal amount outstanding of any other Designated Senior Debt or
their representative (a "Payment Notice"), then, unless and until such event of
default has been cured or waived or otherwise has ceased to exist, no payment
(by set-off or otherwise) may be made by or on behalf of the Company, if the
Company is an obligor under such Designated Senior Debt, or any Guarantor which
is an obligor under such Designated Senior Debt, on account of the principal of,
premium, if any, or interest on, or Liquidated Damages, if any, in respect of,
the Securities (including any repurchases of any of the Securities), or on
account of the redemption provisions of the Securities. Notwithstanding the
foregoing, unless the Designated Senior Debt in respect of which such event of
default exists has been declared due and payable in its entirety within 179 days
after the Payment Notice is delivered as set forth above (the "Payment Blockage
Period") (and such declaration has not been rescinded or waived), at the end of
the Payment Blockage Period, the Company and the Guarantors shall be required to
pay all sums not paid to the Holders of the Securities during the Payment
Blockage Period due to the foregoing prohibitions and to resume all other
payments as and when due on the Securities. Any number of Payment Notices may be
given; provided, however, that (i) not more than one Payment Notice shall be
given within a period of any 360 consecutive days, and (ii) no event of default
that existed upon the date of such Payment Notice or the commencement of such
Payment Blockage Period (whether or not such event of default is on the same
issue of Designated Senior Debt) shall be made the basis for the commencement of
any other Payment Blockage Period, unless such event of default has been cured
or waived for a period of not less than 90 consecutive days.
(c) In furtherance of the provisions of Section 12.1, in the event
that, notwithstanding the foregoing provisions of this Section 12.2, any payment
or distribution of assets of the Company or any
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Guarantor shall be received by the Trustee or the Holders at a time when such
payment or distribution is prohibited by the foregoing provisions of this
Section 12.2, such payment or distribution shall be held in trust for the
benefit of the holders of such Senior Debt, and shall be paid or delivered by
the Trustee or such Holders, as the case may be, to the holders of such Senior
Debt remaining unpaid or unprovided for or to their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Debt may have been issued,
ratably according to the aggregate amounts remaining unpaid on account of such
Senior Debt held or represented by each, for application to the payment of all
such Senior Debt remaining unpaid, to the extent necessary to pay or to provide
for the payment of all such Senior Debt in full in cash or Cash Equivalents
after giving effect to any concurrent payment or distribution to the holders of
such Senior Debt.
SECTION 12.3. Securities Subordinated to Prior Payment of All Senior Debt
on Dissolution, Liquidation or Reorganization.
Upon any distribution of assets of the Company or any Guarantor upon any
dissolution, winding up, total or partial liquidation or reorganization of the
Company or a Guarantor, whether voluntary or involuntary, in bankruptcy,
insolvency, receivership or a similar proceeding or upon assignment for the
benefit of creditors or any marshalling of assets or liabilities:
(a) the holders of all Senior Debt of the Company or such Guarantor,
as applicable, will first be entitled (i) in the case of Senior Debt under any
Credit Agreement, to receive payment in full in cash or Cash Equivalents or (ii)
in the case of any other Senior Debt, to receive payment in full in cash or Cash
Equivalents (or have such payment duly provided for) or otherwise to the extent
holders of such Senior Debt accept satisfaction of amounts due by settlement in
other than cash or Cash Equivalents before the Holders are entitled to receive
any payment on account of the principal of, premium, if any, and interest on, or
Liquidated Damages, if any, in respect of the Securities (other than
distributions of Junior Securities);
(b) any payment or distribution of assets of the Company or such
Guarantor, as applicable, of any kind or character from any source, whether in
cash, property or securities (other than Junior Securities), to which the
Holders or the Trustee on behalf of the Holders would be entitled (by set-off or
otherwise), except for the provisions of this Article XII, will be paid by the
liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of such Senior Debt or their representative
to the extent necessary to make payment in full (or to have such payment duly
provided for) on all such Senior Debt remaining unpaid, after giving effect to
any concurrent payment or distribution to the holders of such Senior Debt; and
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company or any Guarantor (other than Junior
Securities) shall be received by the Trustee or the Holders at a time when such
payment or distribution is prohibited by the foregoing provisions, such payment
or distribution shall be held in trust for the benefit of the holders of such
Senior Debt, and shall be paid or delivered by the Trustee or such Holders, as
the case may be, to the holders of such Senior Debt remaining unpaid or
unprovided for or to their representative or representatives, or to the trustee
or trustees under any indenture pursuant to which any instruments evidencing any
of such Senior Debt may have been issued, ratably according to the aggregate
amounts remaining unpaid on account of such Senior Debt held or represented by
each, for application to the payment of all such Senior Debt remaining unpaid,
to the extent necessary to pay all such Senior Debt in full in cash or Cash
Equivalents after giving effect to any concurrent payment or distribution to the
holders of such Senior Debt.
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SECTION 12.4. Securityholders to Be Subrogated to Rights of Holders of
Senior Debt.
Subject to the payment in full in Cash or Cash Equivalents of all Senior
Debt of the Company or any Guarantor as provided herein, the Holders of
Securities shall be subrogated to the rights of the holders of such Senior Debt
to receive payments or distributions of assets of the Company applicable to the
Senior Debt until all amounts (including, without limitation, Liquidated
Damages) owing on or in respect of the Securities shall be paid in full, and for
the purpose of such subrogation no such payments or distributions to the holders
of such Senior Debt by or on behalf of the Company or any Guarantor, or by or on
behalf of the Holders by virtue of this Article XII, which otherwise would have
been made to the Holders shall, as between the Company or any Guarantor and the
Holders, be deemed to be payment by the Company or any Guarantor or on account
of such Senior Debt, it being understood that the provisions of this Article XII
are and are intended solely for the purpose of defining the relative rights of
the Holders, on the one hand, and the holders of such Senior Debt, on the other
hand.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article XII shall have been
applied, pursuant to the provisions of this Article XII, to the payment of
amounts payable under Senior Debt of the Company or any Guarantor, then the
Holders shall be entitled to receive from the holders of such Senior Debt any
payments or distributions received by such holders of Senior Debt in excess of
the amount sufficient to pay all amounts payable under or in respect of such
Senior Debt in full in Cash or Cash Equivalents.
SECTION 12.5. Obligations of the Company and the Guarantors Unconditional.
Nothing contained in this Article XII or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as between the Company and
the Guarantors and the Holders, the obligation of the Company and the
Guarantors, which is absolute and unconditional, to pay to the Holders the
principal of, premium, if any, and interest on the Securities as and when the
same shall become due and payable in accordance with their terms, or is intended
to or shall affect the relative rights of the Holders and creditors of the
Company and the Guarantors other than the holders of the Senior Debt, nor shall
anything herein or therein limit or prevent the Trustee or any Holder from
exercising all rights and remedies otherwise permitted by this Indenture or by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article XII, of the holders of Senior Debt in respect of cash,
property or securities of the Company and the Guarantors received upon the
exercise of any such remedy. Notwithstanding anything to the contrary in this
Article XII or elsewhere in this Indenture or in the Securities, upon any
distribution of assets of the Company or any of the Guarantors referred to in
this Article XII, the Trustee, subject to the provisions of Sections 7.1 and
7.2, and the Holders shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, or a certificate of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders for the purpose of ascertaining the Persons entitled
to participate in such distribution, the holders of the Senior Debt and other
Indebtedness of the Company or any Guarantor, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article XII so long as such court has been apprised
of the provisions of, or the order, decree or certificate makes reference to,
the provisions of this Article XII. Nothing in this Section 12.5 shall apply to
the claims of, or payments to, the Trustee under or pursuant to Section 7.7.
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SECTION 12.6. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee unless and until a Trust Officer of the Trustee or any Paying Agent
shall have received at its address set forth in, or established in accordance
with, Section 13.2, no later than one Business Day prior to such payment,
written notice thereof from the Company or from one or more holders of Senior
Debt or from any representative therefor and, prior to the receipt of any such
written notice, the Trustee, subject to the provisions of Sections 7.1 and 7.2,
shall be entitled in all respects conclusively to assume that no such fact
exists.
SECTION 12.7. Application by Trustee of Assets Deposited with It.
Amounts deposited in trust with the Trustee pursuant to and in accordance
with Article VIII shall be for the sole benefit of Securityholders and, to the
extent (i) the making of such deposit by the Company shall not be in
contravention of any term or provision of the Credit Agreements and (ii)
allocated for the payment of Securities, shall not be subject to the
subordination provisions of this Article XII. Otherwise, any deposit of assets
with the Trustee or a Paying Agent (whether or not in trust) for the payment of
principal of, premium, if any, interest on, or Liquidated Damages, if any, in
respect of, any Securities shall be subject to the provisions of Sections 12.1,
12.2, 12.3 and 12.4; provided that, if prior to one Business Day preceding the
date on which by the terms of this Indenture or the Registration Rights
Agreement, as applicable, any such assets may become distributable for any
purpose (including without limitation, the payment of either principal of,
premium, if any, interest on, or Liquidated Damages, if any, in respect of, any
Security) the Trustee or such Paying Agent shall not have received with respect
to such assets the written notice provided for in Section 12.6 at its address
set forth in , or established in accordance with, Section 13.2, then the Trustee
or such Paying Agent shall have full power and authority to receive such assets
and to apply the same to the purpose for which they were received, and shall not
be affected by any notice to the contrary which may be received by it on or
after such date.
SECTION 12.8. Subordination Rights Not Impaired by Acts or Omissions of
the Company, the Guarantors or Holders of Senior Debt.
No right of any present or future holders of any Senior Debt to enforce
subordination provisions contained in this Article XII shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company or any Guarantor or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Company or any Guarantor with the
terms of this Indenture, regardless of any knowledge thereof which any such
holder may have or be otherwise charged with. The holders of Senior Debt may
extend renew, modify or amend the terms of the Senior Debt or any security
therefor and release, sell or exchange such security and otherwise deal freely
with the Company and the Guarantors, all without affecting the liabilities and
obligations of the parties to this Indenture or the Holders.
SECTION 12.9. Securityholders Authorize Trustee to Effectuate
Subordination of Securities.
Each Holder of the Securities by his acceptance thereof authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provisions contained in
this Article XII and to protect the rights of the Holders pursuant to this
Indenture, and appoints the Trustee his attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company or any Guarantor (whether in bankruptcy,
insolvency or
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receivership proceedings or upon an assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company or any
Guarantor), the immediate filing of a claim for the unpaid balance of his
Securities in the form required in said proceedings and causing said claim to be
approved. If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Debt or their
representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Securities. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Debt or their representative to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee or
the holders of Senior Debt or their representative to vote in respect of the
claim of any Securityholder in any such proceeding.
SECTION 12.10. Right of Trustee to Hold Senior Debt.
The Trustee shall be entitled to all of the rights set forth in this
Article XII in respect of any Senior Debt at any time held by it to the same
extent as any other holder of Senior Debt, and nothing in this Indenture shall
be construed to deprive the Trustee of any of its rights as such holder.
SECTION 12.11. Article XII Not to Prevent Events of Default.
The failure to make a payment on account of principal of, premium, if any,
interest on, or Liquidated Damages in respect of, the Securities by reason of
any provision of this Article XII shall not be construed as preventing the
occurrence of a Default or an Event of Default under Section 6.1 or in any way
limit the rights of the Trustee or any Holder to pursue any other rights or
remedies with respect to the Securities.
As set forth in Article VIII of this Indenture, the provisions of this
Article XII shall not be operative from and after the effectiveness of Legal
Defeasance or Covenant Defeasance with respect to the Securities.
SECTION 12.12. No Fiduciary Duty of Trustee to Holders of Senior Debt.
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Debt, and shall not be liable to any such holders (other than for its
willful misconduct or negligence) if it shall in good faith mistakenly pay over
or distribute to the Holders of Securities or the Company, any Guarantor or any
other Person, cash, property or securities to which any holders of Senior Debt
shall be entitled by virtue of this Article XII or otherwise. Nothing in this
Section 12.12 shall affect the obligation of any other such Person to hold such
payment for the benefit of, and to pay such payment over to, the holders of
Senior Debt or their representative. In the event of any conflict between the
fiduciary duty of the Trustee to the Holders of Securities and to the holders of
Senior Debt, the Trustee is expressly authorized to resolve such conflict in
favor of the Holders.
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ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of the TIA, the imposed duties, upon
qualification of this Indenture under the TIA, shall control.
SECTION 13.2. Notices.
Any notices or other communications to the Company or any Guarantor,
Paying Agent, Registrar, Securities Custodian, transfer agent or the Trustee
required or permitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery or delivery by overnight courier, by telex, by
telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to the Company or any Guarantor:
Quality Food Centers, Inc.
10112 NE 10th Street, Suite 201
Bellevue, WA 98004
Attention: Marc W. Evanger
Telephone: (206) 455-3761
Telecopy: (206) 340-9055
If to the Trustee:
First Trust National Association
111 East Wacker Drive - Suite 3000
Chicago, IL 60601
Attention: Corporate Trust Administration
Telephone: (312) 228-9455
Telecopy: (312) 228-9459
If to the Senior Bank Representative:
Bank of America National Trust & Savings Association
231 South LaSalle Street
Chicago, IL 60697
Attention: Eric A. Schubert
Telephone: (312) 828-6517
Telecopy: (312) 828-3864
and
The Chase Manhattan Bank
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270 Park Avenue
New York, NY 10017
Attention: Ellen Geitzog
Telephone: (212) 270-1539
Telecopy: (212) 270-1474
Any party named above by notice to each other party named above may
designate additional or different addresses as shall be furnished in writing by
such party. Any notice or communication to any party shall be deemed to have
been given or made as of the date so delivered, if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and five
Business Days after mailing if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed to
him or her by first-class mail or other equivalent means at his or her address
as it appears on the registration books of the Registrar and shall be
sufficiently given to him or her if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.3. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA ss. 312(c).
SECTION 13.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or any Guarantor to the
Trustee to take any action under this Indenture, such Person shall furnish to
the Trustee:
(1) an Officers' Certificate (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been met; and
(2) an Opinion of Counsel (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of such counsel,
all such conditions precedent have been met;
provided, however, that in the case of any such request or application as
to which the furnishing of particular documents is specifically required
by any provision of this Indenture, no additional certificate or opinion
need be furnished under this Section 13.4.
SECTION 13.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
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(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been met; and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been met; provided, however,
that with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 13.6. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 13.7. Non-Business Days.
If a payment date is not a Business Day at the relevant place of payment,
payment may be made at such place on the next succeeding day that is a Business
Day, and no interest shall accrue for the intervening period.
SECTION 13.8. Governing Law.
THIS INDENTURE AND THE SECURITIES AND GUARANTEES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE COMPANY AND THE GUARANTORS HEREBY
IRREVOCABLY SUBMITS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE
BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE
BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE SECURITIES OR
GUARANTEES, AND IRREVOCABLY ACCEPTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO
SO UNDER APPLICABLE LAW, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF THE COMPANY
AND THE GUARANTORS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE TRUSTEE OR ANY
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SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY AND THE
GUARANTORS IN ANY OTHER JURISDICTION.
SECTION 13.9. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any Guarantor or any of their respective
Subsidiaries. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 13.10. No Recourse against Others.
No direct or indirect stockholder, employee, officer or director, as such,
past, present or future, of the Company, the Guarantors or any successor entity,
shall have any personal liability in respect of the obligations of the Company
or the Guarantors under the Securities or this Indenture by reason of his, her
or its status as such stockholder, employee, officer or director. Each Security-
holder by accepting a Security waives and releases all such liability. Such
waiver and release are part of the consideration for the issuance of the
Securities.
SECTION 13.11. Successors.
All agreements of the Company and the Guarantors in this Indenture and the
Securities shall bind their respective successors. All agreements of the Trustee
in this Indenture shall bind its successor.
SECTION 13.12. Duplicate Originals.
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of them
together shall represent the same agreement.
SECTION 13.13. Severability.
In case any one or more of the provisions in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
SECTION 13.14. Table of Contents, Headings, Etc.
The Table of Contents and headings of the Articles and the Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duty executed as of the date first written above.
QUALITY FOOD CENTERS, INC.
By: /s/ Marc Evanger
--------------------------------
Name:
Title:
HUGHES MARKETS, INC.
By: /s/ Marc Evanger
--------------------------------
Name:
Title:
KU ACQUISITION CORPORATION
By: /s/ Marc Evanger
--------------------------------
Name:
Title:
QUALITY FOOD HOLDINGS, INC.
By: /s/ Marc Evanger
--------------------------------
Name:
Title:
FIRST TRUST NATIONAL ASSOCIATION, as
Trustee, Registrar, Paying Agent and
Securities Custodian
By: /s/ Martha L. Sanders
--------------------------------
Name:
Title:
93
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Exhibit A
Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"),
to the Company or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or 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.(1)
THIS SECURITY AND THE GUARANTEES HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.(2)
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS THREE YEARS (OR SUCH SHORTER PERIOD THAT MAY
HEREAFTER BE PROVIDED UNDER RULE 144(K) (OR ANY SUCCESSOR THERETO) UNDER THE
SECURITIES ACT AS PERMITTING THE RESALE BY NON-AFFILIATES OF RESTRICTED
SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY GUARANTOR (AS DEFINED) OR
ANY "AFFILIATE" (AS DEFINED IN RULE 144 (OR ANY SUCCESSOR THERETO) UNDER THE
SECURITIES ACT) OF THE COMPANY OR ANY GUARANTOR WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT
TO
- ----------
(1) This paragraph should only be added if the Security is issued in global
form.
(2) This paragraph should be included only for the Transfer Restricted
Securities.
A-1
<PAGE>
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),(2),(3) OR (7)
OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D),(E) OR (F) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON 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.2
THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION RIGHTS
AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED TO BELOW) AND, BY
ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO COMPLY WITH THE PROVISIONS
OF SUCH REGISTRATION RIGHTS AGREEMENT.(2)
QUALITY FOOD CENTERS, INC.
8.70% SENIOR SUBORDINATED NOTE
DUE 2007
CUSIP: ______________
No. $_______
Quality Food Centers, Inc., a Washington corporation (hereinafter called
the "Company," which term includes any successors under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
______________________, or registered assigns, the principal sum of
__________________ Dollars, on March 15, 2007.
Interest Payment Dates: March 15 and September 15 commencing September 15,
1997.
- ----------
(2) This paragraph should be included only for the Transfer Restricted
Securities.
Record Dates: March 1 and September 1
A-2
<PAGE>
Reference is made to the further provisions of this Security on the
reverse side, which will, for all purposes, have the same effect as if set forth
at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed under its corporate seal.
Dated: QUALITY FOOD CENTERS, INC.
[Seal]
By:______________________________________
Name:
Title:
Attest:______________________________
Secretary
A-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned Indenture.
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
By: ______________________________________
Authorized Signatory
A-4
<PAGE>
QUALITY FOOD CENTERS, INC.
8.70% Senior Subordinated Note
due 2007
1. Interest.
Quality Food Centers, Inc., a Washington corporation (hereinafter called
the "Company," which term includes any successors under the Indenture
hereinafter referred to), promises to pay interest on the principal amount of
this Security at the rate of 8.70% per annum from March 19, 1997 until the
principal hereof is paid or duly provided for. The Company promises to pay
interest on any principal of and, to the extent permitted by applicable law,
premium, if any, or interest on this Security which is not paid when due at a
rate of 8.70% per annum compounded semi-annually.
The Company will pay interest semi-annually on March 15 and September 15
of each year or, if any such day is not a Business Day, on the next succeeding
Business Day (each, an "Interest Payment Date"), commencing September 15, 1997.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or duly provided for or, if no interest has been paid or
duly provided for on the Securities, from March 19, 1997 (the "Issue Date").
Interest will be computed on the basis of a 360-day year consisting of twelve
30-day months.
2. Method of Payment.
The Company shall pay interest on the Securities (except Defaulted
Interest) to the Persons who are the registered Holders at the close of business
on the March 1 or September 1 (each, a "Record Date") immediately preceding the
Interest Payment Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. Except as provided below, the Company shall pay
principal, premium, if any, and interest in such coin or currency of the United
States of America as at the time of payment shall be legal tender for payment of
public and private debts ("Cash"). The Securities will be payable as to
principal, premium, if any, and interest, and the Securities may be presented
for registration of transfer or exchange, at the office or agency of the Company
maintained for such purpose in the Borough of Manhattan, the City and State of
New York or, at the option of the Company, payment of interest may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest and premium on
all Global Securities and all other Securities the Holders of which shall have
provided wire transfer instructions to an account within the United States to
the Company or the Paying Agent. Until otherwise designated by the Company, the
Company's office or agency will be the corporate trust agency of the Trustee
presently located at the First Trust of New York, National Association, 100 Wall
Street, New York, New York 10005.
A-5
<PAGE>
3. Paying Agent and Registrar.
Initially, First Trust National Association (the "Trustee," which term
includes any successor Trustee under the Indenture) will act as Paying Agent and
Registrar. The Company may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders. The Company, any of the Guarantors or any of
their respective Subsidiaries may, subject to certain exceptions, act as Paying
Agent, Registrar or co-Registrar.
4. Indenture; Defined Terms.
The Company issued the Securities under an Indenture dated as of March 19,
1997 (the "Indenture") among the Company, the Guarantors named therein and the
Trustee. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act, as in effect on the date of the Indenture. The Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and said Act for a statement of them. The Securities are senior
subordinated, unsecured general obligations of the Company limited, subject to
certain exceptions, in aggregate principal amount to $150,000,000. The
Securities and the Guarantees are subordinated in right of payment to certain
other debt obligations of the Company and the Guarantors, respectively. The
Securities are guaranteed on a senior subordinated basis by each of the
Guarantors.
5. Redemption.
The Company will not have the right to redeem any Securities prior to
March 15, 2002, except as provided in the immediately following paragraph. The
Securities will be redeemable at the option of the Company, in whole or in part,
at any time on or after March 15, 2002, upon not less than 30 days nor more than
60 days notice to each Holder of Securities to be redeemed, at the following
Redemption Prices (expressed as percentages of the principal amount) if redeemed
during the 12-month period commencing on March 15 of the years indicated below,
together with accrued and unpaid interest thereon to the Redemption Date
(subject to the right of Holders of record at the close of business on a Record
Date to receive interest due on an Interest Payment Date that is on or prior to
such Redemption Date):
Year Redemption Price
---- ----------------
2002..................... 104.35%
2003..................... 102.90%
2004..................... 101.45%
2005 and thereafter...... 100.00%
A-6
<PAGE>
Notwithstanding the foregoing, prior to March 15, 2000, the Company may
redeem up to 20% of the aggregate principal amount of the Securities originally
issued at a redemption price of 108% of the principal amount thereof, plus
accrued and unpaid interest thereon to the Redemption Date, with the net cash
proceeds of one or more public Equity Offerings of common stock, prior to the
Reorganization, of the Company or, after the Reorganization, of the Parent;
provided that at least 80% of the aggregate principal amount of the Securities
originally issued remains outstanding immediately after the occurrence of such
redemption; and provided, further, that if Securities are redeemed with the net
proceeds from the sale of common stock of Parent, the Subject Entity shall have
received cash from the Parent, as a capital contribution or as the net proceeds
from the issuance and sale to the Parent of common stock of the Subject Entity,
in an amount at least equal to the aggregate principal amount of the Securities
so redeemed; and provided, further, that such notice of redemption shall be sent
within 30 days after the date of closing of any such Equity Offering, and such
redemption shall occur within 60 days after the date such notice is sent.
Any such redemption will comply with Article III of the Indenture.
6. Notice of Redemption.
Notice of redemption will be sent by first class mail, at least 30 days
and not more than 60 days prior to the Redemption Date, to the Holder of each
Security to be redeemed at such Holder's last address as then shown upon the
registry books of the Registrar. Securities may be redeemed in part in multiples
of $1,000 only.
Except as set forth in the Indenture, from and after any Redemption Date,
if monies for the redemption of the Securities called for redemption shall have
been deposited with the Paying Agent on such Redemption Date and payment of the
Securities called for redemption is not otherwise prevented or prohibited, the
Securities called for redemption will cease to bear interest and the only right
of the Holders of such Securities will be to receive payment of the Redemption
Price plus accrued and unpaid interest to the Redemption Date.
7. Denominations; Transfer; Exchange.
The Securities are in fully registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of Securities in accordance with the Indenture. No service charge
will be made for any registration of transfer or exchange of the Securities, but
the Company may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes or other governmental
charge payable in connection therewith. The Registrar need not register the
transfer of or exchange any Securities selected for redemption.
8. Persons Deemed Owners.
A-7
<PAGE>
The registered Holder of a Security may be treated as the owner of it for
all purposes.
9. Unclaimed Money.
If money for the payment of principal, premium or interest remains
unclaimed for two years, the Trustee and the Paying Agents will pay the money
back to the Company at its written request. After that, all liability of the
Trustee and any such Paying Agents with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
Except as set forth in the Indenture, if the Company irrevocably deposits
with the Trustee, in trust, for the benefit of the Holders, Cash, U.S.
Government Obligations or a combination thereof, in such amounts as will be
sufficient in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
Securities to redemption or maturity and complies with the other provisions of
the Indenture relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Securities (including certain restrictive
covenants described in paragraph 12 below).
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may under certain circumstances amend or supplement
the Indenture or the Securities to, among other things, cure any ambiguity,
defect or inconsistency, or make any other change that does not adversely affect
the rights of any Holder of a Security in any material respect.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the Company
and its Subsidiaries to, among other things, incur additional Indebtedness and
Disqualified Capital Stock, pay dividends or make certain other Restricted
Payments, enter into certain transactions with Affiliates, incur Liens, sell
assets, merge or consolidate with any other Person or transfer (by lease,
assignment or otherwise) substantially all of the properties and assets of the
Company. The limitations are subject to a number of important qualifications and
exceptions. The Company must periodically report to the Trustee on compliance
with such limitations.
A-8
<PAGE>
13. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required to
offer to purchase on the Change of Control Purchase Date all outstanding
Securities at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest to the Change of Control Purchase Date. Holders
of Securities will receive a Change of Control Offer from the Company prior to
any related Change of Control Purchase Date and may elect to have such
Securities purchased by completing the form entitled "Option of Holder to Elect
Purchase" appearing below.
(b) The Indenture imposes certain limitations on the ability of the
Company and its Subsidiaries to sell assets. In the event the proceeds from a
permitted Asset Sale exceed certain amounts, as specified in the Indenture, the
Company generally will be required either to reinvest the proceeds of such Asset
Sale in its business, use such proceeds to retire Senior Debt, or to make an
Asset Sale Offer to purchase a certain amount of each Holder's Securities at
100% of the principal amount thereof, plus accrued interest to the Purchase
Date, as more fully set forth in the Indenture.
14. Notation of Guarantee.
As set forth more fully in the Indenture, the Persons constituting
Guarantors from time to time, in accordance with the provisions of the
Indenture, unconditionally and jointly and severally guarantee, in accordance
with Section 11.1 of the Indenture, to the Holders and to the Trustee and its
successors and assigns, that (i) the principal of, and premium (if any) and
interest on, and Liquidated Damages, if any, in respect of, the Securities will
be paid, whether at Stated Maturity or Interest Payment Dates, by acceleration,
call for redemption or otherwise, (ii) the purchase price for all Securities
properly and timely tendered in response to a Change of Control Offer or Asset
Sale Offer, together with accrued and unpaid interest thereon, will be timely,
and otherwise in accordance with the provisions of the Indenture, paid in full,
(iii) all other obligations of the Company to the Holders or the Trustee under
the Indenture or the Securities will be promptly paid in full or performed, all
in accordance with the terms of the Indenture and the Securities, and (iv) in
the case of any extension of payment or renewal of this Security or any of such
other obligations, they will be paid in full when due or performed in accordance
with the terms of such extension or renewal, whether at Stated Maturity, by
acceleration, call for redemption, upon a Change of Control Offer, upon an Asset
Sale Offer or otherwise. Such Guarantee shall cease to apply, and shall be null
and void, with respect to any Guarantor who, pursuant to Article XI of the
Indenture, is released from its Guarantee or whose Guarantee otherwise cease to
be applicable pursuant to the terms of the Indenture.
15. Ranking.
Payment of principal, premium, if any, and interest on and Liquidated
Damages, if any, in respect of, the Securities is subordinated, in the manner
and to the extent set forth in the Indenture, to the prior payment in full of
all Senior Debt.
A-9
<PAGE>
16. Successors.
When a successor assumes all the obligations of its predecessor under the
Securities and the Indenture, the predecessor will, subject to certain
exceptions, be released from those obligations.
17. Defaults and Remedies.
If an Event of Default occurs and is continuing (other than an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization),
then in every such case, unless the principal of all of the Securities shall
have already become due and payable, either the Trustee or the Holders of at
least 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable in the manner and with the
effect provided in the Indenture. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization occurs, then the Securities
shall ipso facto become and be immediately due and payable as provided in the
Indenture. Holders of Securities may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Securities. Subject
to certain limitations, Holders of a majority in aggregate principal amount of
the Securities then outstanding may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of Securities notice of
any continuing Default or Event of Default (except a Default in payment of
principal, premium, interest or Liquidated Damages), if a committee of Trust
Officers determines that withholding notice is in the interest of Holders.
18. Trustee or Agent Dealings with Company.
The Trustee and each Agent under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company, any Guarantor or their respective Affiliates, and may otherwise
deal with the Company, any Guarantor or their respective Affiliates as if it
were not the Trustee and such Agent.
19. No Recourse Against Others.
No direct or indirect stockholder, employee, officer or director, as such,
past, present or future, of the Company, the Guarantors or any successor entity
shall have any personal liability in respect of the obligations of the Company
or the Guarantors under the Securities or the Indenture by reason of his or its
status as such stockholder, employee, officer or director. Each Holder of a
Security by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Securities.
A-10
<PAGE>
20. Authentication.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on this Security.
21. Abbreviations.
Customary abbreviations may be used in the name of a Holder of a Security
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
22. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
23. Additional Rights of Holders of Securities.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Quality Food Centers, Inc.
10112 NE 10th Street, Suite 201
Bellevue, WA 98004
Attn: Corporate Secretary
A-11
<PAGE>
ASSIGNMENT
I or we assign this Security to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee
________________________________________________________________________________
and irrevocably appoint ________________________________________ agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Dated: ________________ Signed:________________________________________________
________________________________________________________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee**
- ----------
** NOTICE: The Signature must be guaranteed by an institution which is a
member of one of the following recognized Signature Guaranty Programs: (i)
The Securities Transfer Agent Medallion Program (Stamp); (ii) The New York
Stock Exchange Medallion Program
A-12
<PAGE>
(MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such
other guarantee program acceptable to the Trustee.
A-13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.13 or Article X of the Indenture, check the appropriate
box:
|_| Section 4.13 |_| Article X
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.13 or Article X of the Indenture, as the case may
be, state the amount you want to be purchased (must be $1,000 or a multiple of
$1,000): $_____________
Date:______________________ Signature:_________________________________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee**
- ----------
** NOTICE: The Signature must be guaranteed by an institution which is a
member of one of the following recognized Signature Guaranty Programs: (i)
The Securities Transfer Agent
A-14
<PAGE>
Medallion Program (Stamp); (ii) The New York Stock Exchange Medallion
Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv)
such other guarantee program acceptable to the Trustee.
A-15
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES(3)
The following exchanges of a part of this Global Security for Definitive
Securities have been made:
<TABLE>
<CAPTION>
Principal amount of this
Amount of decrease in Amount of increase in Global Security following Signature of authorized
Date of principal amount of this principal amount of this such decrease officer of Trustee or
exchange Global Security Global Security or increase Securities Custodian
- -------- ------------------------ ------------------------ ------------------------- -----------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------
(3) This schedule should only be added if the Security is issued in global
form.
A-16
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER OF SECURITIES
Re: 8.70% SENIOR SUBORDINATED NOTES DUE 2007 OF QUALITY FOOD
CENTERS, INC.
This certificate relates to $________________ principal amount of
Securities held in (check applicable box)
|_| book-entry or |_| definitive form by _____________________ (the
"Transferor").
The Transferor (check applicable box):
|_| has requested the Registrar by written order to deliver in exchange
for its beneficial interest in the Global Security held by the Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial interest
in such Global Security (or the portion thereof indicated above); or
|_| has requested the Registrar by written order to exchange or register
the transfer of a Security or Securities.
In connection with such request and in respect of each such Security, the
Transferor does hereby certify that Transferor is familiar with transfer
restrictions relating to the above-captioned Securities as provided in Section
2.6 of such Indenture, and the transfer of this Security does not require
registration under the Securities Act (as defined below) because (check
applicable box):
|_| Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture).
|_| Such Security is being transferred to a person the Transferor
reasonably believes is a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act of 1933, as amended (the "Securities Act")) that
is purchasing 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 such Rule 144A, in each case in reliance on Rule 144A (in
satisfaction of Section 2.6(a)(ii)(B), 2.6(b)(i) or Section 2.6(d)(i)(B) of the
Indenture) or pursuant to an effective registration statement under the
Securities Act (in satisfaction of Section 2.6(a)(ii)(C) or Section 2.6(d)(i)(C)
of the Indenture).
|_| Such Security is being transferred (w) pursuant to an exemption from
registration in accordance with Rule 144 or Regulation S under the Securities
Act or (x) to an institutional "accredited investor" within the meaning of Rule
501(A)(1), (2), (3) or (7) under the Securities Act that is acquiring the
Security for its own account, or for the account of such an institutional
accredited investor, in each case in a minimum principal amount of $100,000, for
investment purposes and not with a view to, or for offer or sale in connection
with, any distribution in
A-17
<PAGE>
violation of the Securities Act (in satisfaction of Section 2.6(a)(ii)(C) or
Section 2.6(d)(i)(C) of the Indenture).
|_| Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act
(other than an exemption referred to above) (in satisfaction of Section
2.6(a)(ii)(C) or Section 2.6(d)(i)(C) of the Indenture).
[INSERT NAME OF TRANSFEROR]
By:_________________________________________
Date:___________________________
A-18
================================================================================
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of March 14, 1997
among
QUALITY FOOD CENTERS, INC.,
QUALITY FOOD HOLDINGS, INC.,
QUALITY FOOD, INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
and Paying Agent,
THE CHASE MANHATTAN BANK,
as Administrative Agent,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
Arranged by
BANCAMERICA SECURITIES, INC.
and
CHASE SECURITIES INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
Section Page
----
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms............................................ 1
1.2 Other Interpretive Provisions.................................... 27
1.3 Accounting Principles............................................ 28
ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Credits..................................... 29
(a) The Term Credit............................................. 29
(b) The Revolving Credit....................................... 29
(c) The Acquisition Credit..................................... 29
2.2 Loan Accounts.................................................... 29
2.3 Procedure for Borrowing of Term Loans, Revolving Loans
and Acquisition Loans............................................ 30
2.4 Conversion and Continuation Elections............................ 31
2.5 Swingline Loans.................................................. 33
2.6 Reduction or Termination of Commitments.......................... 35
(a) Voluntary Reduction or Termination of Commitments........... 35
(b) Scheduled Mandatory Reductions of Acquisition
Facility Commitment Amount................................. 36
(c) Mandatory Reductions resulting from Potential
Subordinated Note Prepayment............................... 36
2.7 Optional Prepayments of Revolving Loans, Acquisition
Loans and Term Loans............................................. 36
2.8 Mandatory Prepayments............................................ 37
(a) Term Loans.................................................. 37
(b) Prepayments resulting from Acquisition Facility
Commitment Amount Reductions............................... 38
(c) Prepayments of Acquisition Loans and Revolving
Loans resulting from Potential Subordinated
Note Prepayments........................................... 38
2.9 Repayment........................................................ 38
(a) The Term Credit............................................. 38
(b) The Revolving Credit....................................... 38
(c) The Acquisition Facility Credit............................ 38
2.10 Interest......................................................... 38
2.11 Fees............................................................. 39
(a) Arrangement, Agency Fees................................... 39
(b) Commitment Fees............................................ 39
2.12 Computation of Fees and Interest................................. 40
2.13 Payments by the Borrowers........................................ 40
i
<PAGE>
2.14 Payments by the Lenders to the Paying Agent...................... 41
2.15 Sharing of Payments, Etc......................................... 42
ARTICLE III
THE LETTERS OF CREDIT
3.1 The Letter of Credit Subfacility................................. 43
3.2 Issuance, Amendment and Renewal of Letters of Credit............. 44
3.3 Existing Letters of Credit; Risk Participations,
Drawings and Reimbursements...................................... 47
3.4 Repayment of Participations...................................... 49
3.5 Role of the Issuing Lenders...................................... 49
3.6 Obligations Absolute............................................. 50
3.7 Cash Collateral Pledge........................................... 52
3.8 Letter of Credit Fees............................................ 52
3.9 Uniform Customs and Practice..................................... 52
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.1 Taxes............................................................ 53
4.2 Illegality....................................................... 54
4.3 Increased Costs and Reduction of Return.......................... 55
4.4 Funding Losses................................................... 56
4.5 Inability to Determine Rates..................................... 57
4.6 Certificates of Lenders.......................................... 58
4.7 Substitution of Lenders.......................................... 58
4.8 Survival......................................................... 59
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions of Effectiveness...................................... 59
(a) Credit Agreement and Notes................................. 59
(b) Resolutions and Incumbency of the Credit Parties........... 59
(c) Organization Documents; Good Standing...................... 60
(d) Legal Opinions............................................. 60
(e) Payment of Fees............................................ 60
(f) Certificate................................................ 60
(g) Pledge Agreements.......................................... 61
(h) Intercompany Guaranty (QFC)................................ 61
(i) Pricing Certificate........................................ 61
(j) Other Documents............................................ 61
5.2 Conditions to All Credit Extensions.............................. 61
(a) Notice, Application........................................ 61
(b) Continuation of Representations and Warranties............. 62
(c) No Existing Default........................................ 62
(d) Availability............................................... 62
ii
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Corporate Existence and Power.................................... 62
6.2 Corporate Authorization; No Contravention........................ 63
6.3 Governmental Authorization....................................... 63
6.4 Binding Effect................................................... 63
6.5 Litigation....................................................... 63
6.6 No Default....................................................... 64
6.7 ERISA Compliance................................................. 64
6.8 Use of Proceeds; Margin Regulations.............................. 65
6.9 Title to Properties.............................................. 65
6.10 Taxes............................................................ 65
6.11 Financial Condition.............................................. 65
6.12 Environmental Matters............................................ 66
6.13 Regulated Entities............................................... 66
6.14 No Burdensome Restrictions....................................... 66
6.15 Copyrights, Patents, Trademarks and Licenses, etc................ 66
6.16 Subsidiaries..................................................... 67
6.17 Insurance........................................................ 67
6.18 Full Disclosure.................................................. 67
6.19 Solvency, etc.................................................... 67
ARTICLE VII
AFFIRMATIVE COVENANTS
7.1 Financial Statements............................................. 68
7.2 Certificates; Other Information.................................. 68
7.3 Notices.......................................................... 69
7.4 Preservation of Corporate Existence, Etc......................... 70
7.5 Maintenance of Property.......................................... 71
7.6 Insurance........................................................ 71
7.7 Payment of Obligations........................................... 71
7.8 Compliance with Laws............................................. 72
7.9 Compliance with ERISA............................................ 72
7.10 Inspection of Property and Books and Records..................... 72
7.11 Environmental Laws............................................... 72
7.12 Use of Proceeds.................................................. 72
7.13 Further Assurances............................................... 73
7.14 Interest Rate Protection......................................... 74
ARTICLE VIII
NEGATIVE COVENANTS
8.1 Limitation on Liens.............................................. 74
8.2 Consolidations and Mergers....................................... 76
8.3 Loans and Investments............................................ 77
8.4 Limitation on Funded Debt........................................ 78
iii
<PAGE>
8.5 Transactions with Affiliates..................................... 80
8.6 Margin Stock..................................................... 80
8.7 Contingent Obligations........................................... 80
8.8 Amendments to Certain Documents.................................. 81
8.9 Restricted Payments.............................................. 81
8.10 Interest and Rental Expense Coverage Ratio....................... 82
8.11 Leverage Ratio................................................... 82
8.12 Senior Leverage Ratio............................................ 83
8.13 Net Worth........................................................ 83
8.14 ERISA............................................................ 83
8.15 Line of Business................................................. 83
8.16 Restrictive Agreements........................................... 83
8.17 Accounting Changes............................................... 84
8.18 Santee Agreements................................................ 84
ARTICLE IX
EVENTS OF DEFAULT
9.1 Event of Default................................................. 84
(a) Non-Payment................................................. 84
(b) Representation or Warranty.................................. 84
(c) Specific Defaults........................................... 85
(d) Other Defaults.............................................. 85
(e) Cross-Default............................................... 85
(f) Insolvency; Voluntary Proceedings........................... 85
(g) Involuntary Proceedings..................................... 85
(h) ERISA....................................................... 86
(i) Monetary Judgments.......................................... 86
(j) Non-Monetary Judgments...................................... 86
(k) Change of Control........................................... 86
(l) Ownership of Certain Subsidiaries........................... 87
(m) Guaranties.................................................. 87
(n) Collateral Documents, etc................................... 87
9.2 Remedies......................................................... 87
9.3 Rights Not Exclusive............................................. 88
ARTICLE X
PARENT GUARANTY PROVISIONS
10.1 Parent Guaranty.................................................. 88
10.2 Acceleration of Parent Guaranty.................................. 89
10.3 Parent Guaranty Absolute, etc.................................... 89
10.4 Reinstatement, etc............................................... 90
10.5 Waiver, etc...................................................... 91
10.6 Delay of Subrogation............................................. 91
10.7 Binding on Successors, Transferees and Assigns;
Assignment of Parent Guaranty.................................... 91
10.8 No Waiver; Remedies; Security.................................... 91
iv
<PAGE>
ARTICLE XI
THE AGENTS
11.1 Appointment and Authorization................................... 92
11.2 Delegation of Duties............................................ 92
11.3 Liability of Agent.............................................. 92
11.4 Reliance by Agents.............................................. 93
11.5 Notice of Default............................................... 94
11.6 Credit Decision................................................. 94
11.7 Indemnification of Agents....................................... 95
11.8 Agents in Individual Capacity................................... 95
11.9 Successor Agent................................................. 95
11.10 Withholding Tax................................................. 96
11.11 Collateral Matters.............................................. 98
11.12 Other Agents.................................................... 99
12.1 Amendments and Waivers.......................................... 99
12.2 Notices.........................................................100
12.3 No Waiver; Cumulative Remedies..................................101
12.4 Costs and Expenses..............................................101
12.5 Indemnification by Borrowers....................................102
12.6 Payments Set Aside..............................................102
12.7 Successors and Assigns..........................................103
12.8 Assignments, Participations, etc................................103
12.9 Confidentiality.................................................105
12.10 Set-off.........................................................106
12.11 Automatic Debits of Fees........................................106
12.12 Notification of Addresses, Lending Offices, Etc.................106
12.13 Counterparts....................................................106
12.14 Severability....................................................107
12.15 No Third Parties Benefited......................................107
12.16 Subsidiary References...........................................107
12.17 Governing Law and Jurisdiction..................................107
12.18 Waiver of Jury Trial............................................107
12.19 Entire Agreement................................................108
12.20 Restructuring Effective Date....................................108
12.21 Amendment and Restatement.......................................108
v
<PAGE>
SCHEDULES
Schedule 1.1(a) Pricing Schedule
Schedule 1.1(b) Commitments and Pro Rata Shares
Schedule 1.1(c) Properties Held For Sale
Schedule 1.1(d) Terms of Product Purchase Agreement
Schedule 1.1(e) Terms of Santee Debt Placement Agreement
Schedule 1.1(f) Terms Governing Santee Loans
Schedule 1.1(g) Terms Governing Santee Guaranty
Schedule 1.1(h) Form of Permitted Comfort Letter
Schedule 2.1 Term Commitment Amount and Acquisition Facility
Commitment Amount
Schedule 2.9 Term Loan Repayment Dates
Schedule 3.3 Existing Letters of Credit
Schedule 6.5 Litigation
Schedule 6.7 ERISA
Schedule 6.11 Material Indebtedness and other Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.16 Subsidiaries and Equity Investments
Schedule 6.17 Insurance
Schedule 8.1 Liens
Schedule 8.3 Investments
Schedule 8.4 Funded Debt
Schedule 8.7 Contingent Obligations
Schedule 12.2 Offshore and Domestic Lending Offices;
Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D-1 Form of Legal Opinion of Bogle & Gates P.L.L.C.
Exhibit D-2 Form of Opinion of Paul, Hastings, Janofsky &
Walker LLP
Exhibit D-3 Form of Opinion of Rosenberg & Liebentritt, P.C.
Exhibit E Form of Legal Opinion of Mayer, Brown & Platt
Exhibit F Form of Assignment and Acceptance
Exhibit G Form of Note
Exhibit H Form of Pledge Agreement
Exhibit I Form of Guaranty
Exhibit J Form of Intercompany Note
vi
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of March 14,
1997, among QUALITY FOOD CENTERS, INC., a Washington corporation ("QFC"),
QUALITY FOOD HOLDINGS, INC., a Delaware corporation ("Holdings"), QUALITY FOOD,
INC., a Delaware corporation ("Parent"), the financial institutions from time to
time party to this Agreement (collectively the "Lenders"; individually each a
"Lender"), THE CHASE MANHATTAN BANK, as Administrative Agent, and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent and
Paying Agent.
WHEREAS, QFC, various financial institutions and Bank of America National
Trust and Savings Association, as agent, have entered into a Credit Agreement,
dated as of March 15, 1995 (as amended or otherwise modified, the "Existing
Agreement"); and
WHEREAS, QFC, the Agents and the Lenders have agreed to amend and restate
the Existing Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficient of which are hereby acknowledged, the parties hereto agree that the
Existing Agreement shall be amended and restated in its entirety as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. The following terms have the following
meanings:
Acquisition means any transaction for the purpose of or resulting,
directly or indirectly, in (a) the acquisition of all or substantially all
of the assets of a Person, or of any business unit (including any retail
store) or division of a Person, (b) the acquisition of in excess of 50% of
the capital stock, partnership interests, membership interests or other
equity of any Person, or otherwise causing any Person to become a
Subsidiary, or (c) a merger or consolidation or any similar combination
with another Person (other than a Person that is a Subsidiary), provided
that (i) in the case of any such transaction involving the Company or a
Borrower, the Company or such Borrower is the surviving entity and (ii) in
the case of any other such
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<PAGE>
transaction, the surviving entity is, or as a result of such transaction
becomes, a Subsidiary.
Acquisition Facility Commitment Amount means the amount determined
in accordance with Schedule 2.1, subject to the Facility Adjustment and
subject to reduction from time to time in accordance with the terms
hereof.
Acquisition Loan - see Section 2.1.
Administrative Agent means each of BofA and Chase, in each case
acting in its capacity as administrative agent for the Lenders hereunder,
and any successor administrative agent arising under Section 11.9.
Affected Lender means any Lender which has (a) made a claim for
compensation under Section 4.1 or 4.3, (b) given a notice (which has not
been withdrawn) of the type described in subsection 4.2(a) or 4.2(b) or
(c) wrongfully failed to make any Loan.
Affiliate means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common
control with such Person. A Person shall be deemed to control another
Person if the controlling Person possesses, directly or indirectly, the
power (a) to direct or cause the direction of the management and policies
of the other Person, whether through the ownership of voting securities,
membership interests, by contract, or otherwise, or (b) to vote 10% or
more of the securities (on a fully diluted basis) having ordinary voting
power for election of directors, managing general partners or similar
officials of the other Person.
Agent means the Paying Agent and each Administrative Agent.
Agent-Related Persons means each Agent and any successor agent
arising under Section 11.9, any Issuing Lender, and the Swingline Lender
and any successor thereto, together with their respective Affiliates
(including the Arrangers), and the officers, directors, employees, agents
and attorneys-in-fact of such Persons and Affiliates.
Agent's Payment Office means the address for payments set forth on
the signature page hereto in relation to the Paying Agent, or such other
address as the Paying Agent may from time to time specify.
Agreement means this Amended and Restated Credit Agreement.
2
<PAGE>
Applicable Margin means
(i) with respect to Base Rate Loans, the Base Rate Margin set
forth in Schedule 1.1(a); and
(ii) with respect to Offshore Rate Loans, the Offshore Margin
set forth in Schedule 1.1(a).
Arrangers means each of BancAmerica Securities, Inc. and Chase
Securities Inc.
Asset Sale means any sale, lease or other disposition by the Company
or any Subsidiary of any assets outside the ordinary course of business
(excluding Sale-Leasebacks but including sales of surplus property);
provided that no sale or other disposition of any store acquired in
connection with the acquisition of the stock of KUI pursuant to the KUI
Acquisition Agreement shall be considered an "Asset Sale" if such sale is
completed prior to the time such store has converted to operation under
the "Quality Food" name.
Assignee - see subsection 12.8(a).
Assignment and Acceptance - see subsection 12.8(a).
Attorney Costs means and includes all reasonable fees and
disbursements of any law firm or other external counsel and, without
duplication, the reasonable allocated cost of internal legal services and
all reasonable disbursements of internal counsel.
Bankruptcy Code means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. ss.101, et seq.).
Base Rate means, for any day, the higher of: (a) 0.50% per annum
above the latest Federal Funds Rate; and (b) the rate of interest in
effect for such day as publicly announced from time to time by BofA in San
Francisco, California, as its "reference rate." (The "reference rate" is a
rate set by BofA based upon various factors including BofA's costs and
desired return, general economic conditions and other factors, and is used
as a reference point for pricing some loans, which may be priced at,
above, or below such announced rate.) Any change in the reference rate
announced by BofA shall take effect at the opening of business on the day
specified in the public announcement of such change.
Base Rate Loan means a Loan, or an L/C Advance, that bears interest
based on the Base Rate.
3
<PAGE>
BofA means Bank of America National Trust and Savings Association, a
national banking association.
Borrower means (a) prior to the Restructuring Effective Date, QFC,
and (b) on and after the Restructuring Effective Date, with respect to the
Term Loans, QFC, and with respect to all other Loans and all Letters of
Credit (and all fees and other matters related thereto), Holdings.
Borrowing means a borrowing hereunder consisting of (a) Acquisition
Loans, Revolving Loans or Term Loans made to a Borrower of the same Type,
made (or continued or converted) on the same day and, other than in the
case of Base Rate Loans, having the same Interest Period or (b) a
Swingline Loan made to a Borrower by the Swingline Lender, in each case
pursuant to Article II.
Borrowing Date means any date on which a Borrowing occurs under
Section 2.3 or 2.5.
Business Day means any day other than a Saturday, Sunday or other
day on which commercial banks in Seattle, Chicago, New York or San
Francisco are authorized or required by law to close and, if the
applicable Business Day relates to an Offshore Rate Loan, means such a day
on which dealings are carried on in the applicable offshore dollar
interbank market.
Canadian Acquisition means any Acquisition (x) of a Person which
will be a Canadian Subsidiary or (y) where more than an immaterial portion
of the assets acquired, or more than an immaterial portion of the
businesses of the Person acquired, are located in Canada.
Canadian Subsidiary means any Subsidiary organized under the Laws of
Canada or one of its Provinces and which conducts substantially all of its
business in Canada.
Capital Adequacy Regulation means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law, in
each case, regarding capital adequacy of any bank or of any corporation
controlling a bank.
Capital Expenditures means all expenditures which, in accordance
with GAAP, would be required to be capitalized and shown on the
consolidated balance sheet of the Company, but excluding expenditures made
in connection with the replacement, substitution or restoration of assets
to the extent financed (i) from insurance proceeds (or other
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similar recoveries) paid on account of the loss of or damage to the assets
being replaced or restored or (ii) with awards of compensation arising
from the taking by eminent domain or condemnation of the assets being
replaced.
Cash Collateralize means to pledge and deposit with or deliver to
the Paying Agent, for the benefit of the Paying Agent, the Issuing Lenders
and the Lenders, as additional collateral for the L/C Obligations, cash or
deposit account balances pursuant to documentation in form and substance
reasonably satisfactory to the Paying Agent and the Issuing Lenders (which
documents are hereby consented to by the Lenders). Derivatives of such
term shall have corresponding meanings. Each Borrower hereby grants the
Paying Agent, for the benefit of the Paying Agent, the Issuing Lenders and
the Lenders, a security interest in all such cash and deposit account
balances. Cash collateral shall be maintained in blocked, interest bearing
deposit accounts at BofA.
Chase means The Chase Manhattan Bank, a New York banking
corporation.
Code means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
Collateral Document means each Pledge Agreement and any other
document pursuant to which collateral securing the liabilities of either
Borrower or any Guarantor under any Loan Document is granted to the Paying
Agent for the benefit of itself and the Lenders.
Comfort Letter Debt means all Indebtedness of Santee in excess of
$10,000,000 benefitting from a comfort letter substantially in the form
set forth on Schedule 1.1(h).
Commitment means, as to each Lender, its commitment to make or
maintain Loans and participate in other Credit Extensions hereunder. The
initial amount of each Lender's Commitment is set forth opposite such
Lender's name on Schedule 1.1(b). After the making of the Term Loans on
the Effective Date, the amount of each Lender's Commitment shall be deemed
to be equal to the amount of such Lender's Term Loan plus such Lender's
ratable share of the Revolving Credit Amount and the Acquisition Facility
Commitment Amount (or, after termination of the commitments to make
Revolving Loans and Acquisition Loans, the amount of such Lender's
Revolving Loans and Acquisition Loans).
Commitment Fee Rate means the applicable Commitment Fee Rate per
annum set forth in Schedule 1.1(a).
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Company means (x) prior to the Restructuring Effective Date, QFC,
and (y) on and after the Restructuring Effective Date, Parent.
Compliance Certificate means a certificate substantially in the form
of Exhibit C.
Computation Period means any period of four consecutive fiscal
quarters of the Company ending on the last day of a fiscal quarter;
provided that for purposes of calculating the Interest and Rental Expense
Coverage Ratio pursuant to Section 8.10, the Computation Periods ending on
the last day of the second, third and fourth fiscal quarters of fiscal
year 1997 shall be comprised of the one, two and three fiscal quarter
periods, respectively, ending on such dates.
Contemplated Equity Issuance means the contemplated offering of
4,500,000 Shares (5,175,000 Shares if the underwriters' over-allotment
options are exercised in full) substantially on the terms described in the
preliminary Prospectus Supplement dated February 18, 1997.
Contingent Obligation means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease, dividend,
letter of credit or other obligation (the "primary obligation") of another
Person (the "primary obligor"), including any obligation of that Person
(i) to purchase, repurchase or otherwise acquire such primary obligation
or any security therefor, (ii) to advance or provide funds for the payment
or discharge of such primary obligation, or to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net
worth or solvency or any balance sheet item, level of income or financial
condition of the primary obligor, (iii) to purchase property, securities
or services primarily for the purpose of assuring the holder of such
primary obligation of the ability of the primary obligor to make payment
of such primary obligation, or (iv) otherwise to assure or hold harmless
the holder of such primary obligation against loss in respect thereof
(each, a "Guaranty Obligation"); (b) with respect to any Surety Instrument
(other than any Letter of Credit) issued for the account of that Person or
as to which that Person is otherwise liable for reimbursement of drawings
or payments; (c) to purchase any materials, supplies or other property
from, or to obtain the services of, another Person if the relevant
contract or other related document or obligation requires that payment for
such materials, supplies or other property, or for such services, shall be
made regardless of
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whether delivery of such materials, supplies or other property is ever
made or tendered, or such services are ever performed or tendered; or (d)
in respect of any Swap Contract. The amount of any Contingent Obligation
shall (a) in the case of any Guaranty Obligation, be deemed equal to the
stated or determinable amount of the primary obligation in respect of
which such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in respect
thereof, and (b) in the case of any other Contingent Obligation, be equal
to the maximum reasonably anticipated liability in respect thereof.
Contractual Obligation means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or
agreement to which such Person is a party or by which it or any of its
property is bound.
Conversion/Continuation Date means any date on which, under Section
2.4, the Company (a) converts Loans of one Type to the other Type or (b)
continues a Borrowing of Offshore Rate Loans having an Interest Period
expiring on such date for a new Interest Period.
Credit Extension means and includes (a) the making of any Loan
hereunder and (b) the Issuance of any Letter of Credit hereunder.
Credit Party means each Borrower and each Guarantor.
Debt to be Repaid means all Debt listed under the heading "Debt to
be Repaid" on Schedule 8.4.
Dollars, dollars and $ each mean lawful money of the United States.
EBITDA means, for any period, Net Income for such period before
gross interest expense, income tax expense, depreciation and amortization
and before (i) any extraordinary gains or losses, (ii) any LIFO charges
(or credits), (iii) any equity earnings or losses with respect to
unconsolidated subsidiaries and (iv) any gain or loss on the sale or other
disposition of any of the properties listed on Schedule 1.1(c). For
purposes of calculating the Leverage Ratio and the Senior Leverage Ratio
for any Computation Period, EBITDA shall be calculated on a pro forma
basis (as certified by the Company to the Administrative Agents) assuming
that all Acquisitions (including the Acquisitions of KUI and HMI) made,
and all
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divestitures completed, during such Computation Period had been made on
the first day of such Computation Period (but without adjustment for
expected cost savings or other synergies).
Effective Amount means, with respect to any outstanding L/C
Obligations on any date, the aggregate amount of such L/C Obligations on
such date after giving effect to any Issuances of Letters of Credit
occurring on such date and any other changes in the aggregate amount of
the L/C Obligations as of such date, including as a result of any
reimbursement of outstanding unpaid drawings under any Letter of Credit or
any reductions in the maximum amount available for drawing under Letters
of Credit taking effect on such date.
Effective Date means the date on which all conditions precedent set
forth in Section 5.1 are satisfied or waived by all Lenders (or, in the
case of subsection 5.1(e), waived by the Person entitled to receive the
applicable payment).
Eligible Assignee means a commercial bank, savings and loan
association, insurance company, mutual fund, commercial finance company or
similar financial institution, in each case having a combined capital and
surplus of at least $100,000,000.
Environmental Claims means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or
injury to the environment.
Environmental Laws means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with
all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authority, in each case relating to environmental matters (including
pollution control and protection of the environment).
ERISA means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
ERISA Affiliate means any trade or business (whether or not
incorporated) under common control with the Company within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code
for purposes of provisions relating to Section 412 of the Code).
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ERISA Event means (a) a Reportable Event with respect to a Pension
Plan; (b) the failure to make a required contribution to a Pension Plan if
such failure is sufficient to give rise to a Lien under Section 302(f) of
ERISA; (c) a withdrawal by the Company or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which
it was a substantial employer (as defined in Section 4001(a)(2) of ERISA)
or a cessation of operations which is treated as such a withdrawal under
Section 4062(e) of ERISA; (d) a complete or partial withdrawal by the
Company or any ERISA Affiliate from a Multiemployer Plan or notification
that a Multiemployer Plan is in reorganization; (e) the filing of a notice
of intent to terminate, the treatment of a Plan amendment as a termination
under Section 4041 or 4041A of ERISA, or the commencement of proceedings
by the PBGC to terminate a Pension Plan or Multiemployer Plan; (f) an
event or condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer
Plan; or (g) the imposition of any liability under Title IV of ERISA,
other than PBGC premiums under Section 4007 of ERISA which are due but not
delinquent, upon the Company or any ERISA Affiliate.
Event of Default means any of the events or circumstances specified
in Section 9.1.
Excess Cash Flow means, for any fiscal year, the remainder, if any,
of (a) EBITDA for such fiscal year minus (b) the sum of Capital
Expenditures (to the extent paid in cash, but excluding Capital
Expenditures made with the proceeds of Funded Debt (other than the Loans))
plus the aggregate amount paid with respect to scheduled payments of
principal of Funded Debt plus the aggregate amount of all optional
prepayments of the Term Loans pursuant to Section 2.7 plus gross cash
interest expense plus the aggregate amount of all cash tax payments, in
each case made during such fiscal year.
Exchange Act means the Securities and Exchange Act of 1934, and
regulations promulgated thereunder.
Excluded Entity means Hughes Realty, Inc., a California corporation,
Second Story, Inc., a Washington corporation, Univar San Bernadino, Inc.,
a California corporation, and MM Foods, Inc., a California corporation, in
each case so long as (x) such Person engages in no business other than the
businesses such Person is engaged in on the Effective Date and (y) the
book value of all assets of such Person does not exceed (i) $5,000,000, in
the case
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of Hughes Realty, Inc., (ii) $4,000,000, in the case of Second Story,
Inc., (iii) $100,000, in the case of Univar San Bernadino, Inc., and (iv)
$100,000, in the case of MM Foods, Inc.
Existing Agreement has the meaning specified in the first recital
hereof.
Existing Letters of Credit means the letters of credit described on
Schedule 3.3.
Facility Adjustment - see Schedule 2.1.
Federal Funds Rate means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including
any such successor, "H.15(519)") on the preceding Business Day opposite
the caption "Federal Funds (Effective)"; or, if for any relevant day such
rate is not so published on any such preceding Business Day, the rate for
such day will be the arithmetic mean as determined by the Paying Agent of
the rates for the last transaction in overnight Federal funds arranged
prior to 9:00 a.m. (New York City time) on that day by each of three
leading brokers of Federal funds transactions in New York City selected by
the Paying Agent.
Fee Letter - see subsection 2.11(a).
Foreign Acquisition means any Acquisition (x) of an entity organized
under the laws of any jurisdiction other than the United States or any
political subdivision thereof or (y) where more than an immaterial portion
of the assets acquired, or more than an immaterial portion of the
businesses of the Person acquired, are located outside the United States.
FRB means the Board of Governors of the Federal Reserve System, and
any Governmental Authority succeeding to any of its principal functions.
Funded Debt means (i) all Indebtedness of the Company and its
Subsidiaries of the type described in clauses (a), (b), (c), (d), (e) and
(f) of the definition of Indebtedness (including the Loans) and, without
duplication, (ii) all Guaranty Obligations of the Company and its
Subsidiaries with respect to Indebtedness of the type described in clause
(i) above (excluding, to the extent they would otherwise constitute
Guaranty Obligations, any obligations described in subsection 8.7(e) or
8.7(f)).
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GAAP means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature
and authority within the U.S. accounting profession), which are applicable
to the circumstances as of the date of determination.
Governmental Authority means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary
or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
Guaranteed Obligations has the meaning specified in Section 10.1
hereof.
Guarantor means (a) as of the Effective Date, each of HMI, KUA,
Parent and Holdings and (b) thereafter, the Persons referred to in clause
(a), QFC and each other Person which from time to time executes and
delivers a counterpart of a Guaranty (but excluding any Person which has
been released in writing from its obligations under the applicable
Guaranty in accordance with the terms of this Agreement).
Guaranty means (a) as of the Effective Date, the Intercompany
Guaranty (QFC) and the Parent Guaranty and (b) on and after the
Restructuring Effective Date, the Intercompany Guaranty (QFC), the
Intercompany Guaranty (Holdings) and the Parent Guaranty.
Guaranty Obligation has the meaning specified in the definition of
Contingent Obligation.
HMI means Hughes Markets, Inc., a California corporation.
HMI Acquisition Agreement means the Agreement and Plan of Merger,
dated as of November 20, 1996, as amended, among QFC, QHI Acquisition
Corporation and HMI.
Holdings - see the Preamble.
Honor Date - see subsection 3.3(c).
Indebtedness of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations
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issued, undertaken or assumed as the deferred purchase price of property
or services; (c) all non-contingent reimbursement or payment obligations
with respect to Surety Instruments; (d) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets
or businesses; (e) all indebtedness created or arising under any
conditional sale agreement or other title retention agreement, or incurred
as financing, in either case with respect to property acquired by such
Person (even though 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); (f) all obligations with respect to capital leases; (g)
all net obligations with respect to Swap Contracts; (h) all indebtedness
referred to in clauses (a) through (g) above 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 in property (including
accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Indebtedness; and (i) all Guaranty Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (a) through
(g) above. Notwithstanding the foregoing, (x) Indebtedness shall not
include trade payables entered into in the ordinary course of business on
ordinary terms and (y) neither the Company nor any Subsidiary shall be
deemed to have any Indebtedness under clause (h) above solely due to a
Lien on the capital stock of Santee or on the equity interest in Santee
Holding granted to secure obligations of Santee under the Santee Debt
Placement Agreement.
Indemnified Liabilities - see Section 12.5.
Indemnified Person - see Section 12.5.
Independent Auditor - see subsection 7.1(a).
Insolvency Proceeding means, with respect to any Person, (a) any
case, action or proceeding with respect to such Person before any court or
other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief
of debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar
arrangement in respect of such Person's creditors generally or any
substantial portion of its creditors, in each case undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
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Intercompany Guaranty (Holdings) means a guaranty, substantially in
the form of Exhibit I, to be executed on the Restructuring Effective Date
by each then-existing Subsidiary of Parent other than Holdings (and to be
subsequently executed by any new Subsidiary of the Company to the extent
required by Section 7.13).
Intercompany Guaranty (QFC) - see subsection 5.1(h).
Intercompany Loan means any loan made by a Borrower to the Company
or any of its Subsidiaries and any loan made by the Company or any of its
Subsidiaries to Santee; it being understood that all such loans shall be
evidenced by an Intercompany Note.
Intercompany Note means a promissory note, substantially in the form
of Exhibit J, evidencing an Intercompany Loan.
Interest Payment Date means, as to any Loan other than a Base Rate
Loan, the last day of each Interest Period applicable to such Loan and, as
to any Base Rate Loan, the last Business Day of each calendar quarter,
provided that if any Interest Period for an Offshore Rate Loan exceeds
three months, the date that falls three months after the beginning of such
Interest Period and after each Interest Payment Date thereafter is also an
Interest Payment Date.
Interest Period means, as to any Offshore Rate Loan, the period
commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which such Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two, three
or six months thereafter as selected by the applicable Borrower in its
Notice of Borrowing or Notice of Conversion/Continuation; provided that:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the
following Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at
the end of such Interest Period;
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(iii) no Interest Period for any Revolving Loan or Acquisition
Loan shall extend beyond the Termination Date; and
(iv) no Interest Period applicable to a Term Loan or portion
thereof shall extend beyond any Repayment Date unless the aggregate
principal amount of Term Loans represented by Base Rate Loans, or by
Offshore Rate Loans having Interest Periods that will expire on or
before such Repayment Date, equals or exceeds the amount of the
scheduled principal payment on such Repayment Date.
Investment means, relative to any investment of the Company or any
Subsidiary,
(a) any loan, advance or other extension of credit made by it
to any other Person (excluding (i) reasonable commission, travel,
salary, relocation, and similar advances or loans to officers and
employees made in the ordinary course of business, (ii) other loans
and advances to officers and employees for bona fide business
purposes not in excess of $2,500,000 in the aggregate at any time
outstanding and (iii) deposits in connection with leases, utility
services or similar items in the ordinary course of business);
(b) any Guaranty Obligation of the Company or such Subsidiary;
and
(c) any capital contribution by the Company or such Subsidiary
to, or purchase by the Company or such Subsidiary of stock or other
securities or partnership, limited liability company or similar
interests in, any other Person, or any other investment evidencing
an ownership or similar interest of the Company or such Subsidiary
in any other Person;
and the amount of any Investment shall be the original principal or
capital amount thereof less
(i) all cash returns of principal or equity thereof; and
(ii) in the case of any Guaranty Obligation, any reduction in
the aggregate amount of liability under such Guaranty Obligation
(and, in each case, without adjustment by reason of the financial
condition of such other Person);
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<PAGE>
and the amount of such Investment shall, if made by the transfer or
exchange of property other than cash, be deemed to have been made in an
original principal or capital amount equal to the fair market value of
such property. Notwithstanding the foregoing, increases in prices payable
for product by HMI under or in connection with the Product Purchase
Agreement shall not be considered Investments.
IRS means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
Issuance Date -see subsection 3.1(a).
Issue means, with respect to any Letter of Credit, to incorporate
the Existing Letters of Credit into this Agreement, or to issue or to
extend the expiry of, or to renew or increase the amount of, such Letter
of Credit; and the terms Issued, Issuing and Issuance have corresponding
meanings.
Issuing Lender means each of BofA, Chase and Union Bank of
California, N.A. in its capacity as issuer of one or more Letters of
Credit hereunder, together with (i) any replacement letter of credit
issuer arising under subsection 11.1(b) or Section 11.9 and (ii) any other
Lender which the Agents and the Company have approved in writing as, and
which has agreed to act as, an "Issuing Lender" hereunder.
KUA means KU Acquisition Corporation, a Washington corporation.
KUI means Keith Uddenberg, Inc., a Washington corporation.
KUI Acquisition Agreement means the Agreement and Plan of Merger,
dated as of December 18, 1996, among QFC, KUA, KUI and certain KUI
shareholders.
L/C Advance means each Lender's participation in any L/C Borrowing
in accordance with its Pro Rata Share.
L/C Amendment Application means an application form for amendment of
outstanding standby or commercial documentary letters of credit as shall
at any time be in use at the applicable Issuing Lender, as such Issuing
Lender shall reasonably request.
L/C Application means an application form for issuances of standby
or commercial documentary letters of credit as shall at any time be in use
at the applicable
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Issuing Lender, as such Issuing Lender shall reasonably request.
L/C Borrowing means an extension of credit resulting from a drawing
under any Letter of Credit which shall not have been reimbursed on the
date when made nor converted into a Borrowing of Revolving Loans under
subsection 3.3(c).
L/C Commitment means the commitment of the Issuing Lenders to Issue,
and the commitment of the Lenders severally to participate in, Letters of
Credit (including the Existing Letters of Credit) from time to time Issued
or outstanding under Article III, in an aggregate amount not to exceed on
any date the lesser of (a) the Revolving Commitment Amount and (b)
$20,000,000, it being understood that the L/C Commitment is a subfacility
which may utilize a part of the Revolving Commitment Amount and does not
constitute a separate, independent commitment.
L/C Obligations means at any time the sum of (a) the aggregate
undrawn amount of all Letters of Credit then outstanding, plus (b) the
amount of all unreimbursed drawings under all Letters of Credit, including
all outstanding L/C Borrowings.
L/C-Related Documents means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit, including any of the applicable Issuing
Lender's standard form documents for letter of credit issuances.
Lender - see the Preamble. References to the "Lenders" shall include
each Issuing Lender in its capacity as such and the Swingline Lender in
its capacity as such; for purposes of clarification only, to the extent
that any Issuing Lender or the Swingline Lender may have any rights or
obligations in addition to those of the Lenders due to its status as
Issuing Lender or Swingline Lender, respectively, its status as such will
be specifically referenced.
Lending Office means, as to any Lender, the office or offices of
such Lender specified as its "Lending Office" or "Domestic Lending Office"
or "Offshore Lending Office", as the case may be, on Schedule 12.2, or
such other office or offices as such Lender may from time to time notify
the Company and the Paying Agent.
Letter of Credit means the Existing Letters of Credit and any letter
of credit Issued by an Issuing Lender pursuant to Article III.
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Leverage Ratio means, as of any date, the ratio of (a) Funded Debt
determined on a consolidated basis as of such date to (b) EBITDA for the
Computation Period most recently ended on or before such date for which
financial statements have been delivered pursuant to Section 7.1.
Lien means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance,
lien (statutory or other) in respect of any property (including those
created by, arising under or evidenced by any conditional sale or other
title retention agreement, the interest of a lessor under a capital lease,
or the filing of any financing statement naming the owner of the asset to
which such lien relates as debtor, under the Uniform Commercial Code or
any comparable law), but not including the interest of a lessor under an
operating lease.
Line of Business Percentage means the result, expressed as a
percentage, of (x) that portion of EBITDA generated from retail grocery
operations in the United States in conventional retail grocery store
formats (including, without limitation, the formats of QFC and HMI in
existence on the Effective Date) for any Computation Period divided by (y)
total EBITDA for such Computation Period.
Liquidity Amount means the sum of (i) the aggregate amount of all
Contingent Obligations of the Company and its Subsidiaries permitted only
by Subsection 8.7(h) plus (ii) the greater of (A) 1.5% of the consolidated
sales of the Company and its Subsidiaries for the most recently ended
Computation Period and (B) $35,000,000.
Loan means an extension of credit by a Lender to a Borrower under
Article II or Article III in the form of a Revolving Loan, Term Loan,
Acquisition Loan, Swingline Loan or L/C Advance.
Loan Documents means this Agreement, any Notes, the Fee Letter, the
L/C-Related Documents, each Pledge Agreement, each Guaranty, each interest
rate protection agreement entered into with a Lender pursuant to Section
7.14 and all other agreements, certificates or documents delivered to any
Agent or Lender in connection herewith.
Majority Lenders means at any time Lenders then having Pro Rata
Shares totaling more than 50%.
Margin Stock means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
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Material Adverse Effect means (a) a material adverse change in, or a
material adverse effect upon, the actual or prospective operations,
business, properties or condition (financial or otherwise) of the Company
and its Subsidiaries taken as a whole; or (b) a material adverse effect
upon the legality, validity, binding effect or enforceability against the
Company or any Subsidiary of any applicable Loan Document.
Merger Subsidiary means a Subsidiary organized solely for the
purpose of acting as a merger subsidiary in connection with the
acquisition of HMI or the consummation of the Restructuring; provided that
no such Subsidiary shall have assets of more than $10,000 (prior to the
consummation of the applicable transaction at which time it shall cease to
be a Merger Subsidiary).
Multiemployer Plan means a "multiemployer plan", within the meaning
of Section 4001(a)(3) of ERISA, with respect to which the Company or any
ERISA Affiliate may have any liability.
Net Cash Proceeds means the cash proceeds (including any cash
payments received by way of deferred payment of principal pursuant to a
note or installment receivable or purchase price adjustment or otherwise,
but only as and when received) of any Asset Sale, net of (i) all
commissions, attorney's fees, accountants' fees, investment banking fees,
survey costs, title insurance premiums, required debt payments (other than
pursuant to this Agreement) and other fees and charges in connection with
such Asset Sale, (ii) estimated taxes (determined in good faith), if any,
payable as a result of such Asset Sale and (iii) amounts necessary to
retire any Permitted Liens which encumber the applicable assets.
Net Income means, for any period, the Company's consolidated net
income for such period.
Note means a promissory note executed by a Borrower in favor of a
Lender pursuant to subsection 2.2(b) in substantially the form of Exhibit
G.
Notice of Borrowing means a notice in substantially the form of
Exhibit A.
Notice of Conversion/Continuation means a notice in substantially
the form of Exhibit B.
Obligations means all debts, liabilities, obligations, covenants and
duties arising under any Loan Document owing
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by either Borrower to any Lender, the Agents, or any Indemnified Person,
whether direct or indirect (including those acquired by assignment),
absolute or contingent, due or to become due, or now existing or hereafter
arising.
Offshore Rate means, for any Interest Period, with respect to
Offshore Rate Loans comprising part of the same Borrowing, the rate of
interest per annum (rounded upward, unless such rate is an integral
multiple of 1/16 or 1/100 of 1%, to an integral multiple of 1/100th of 1%)
determined by the Paying Agent as follows:
Offshore Rate = IBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any Interest
Period the maximum reserve percentage (expressed as a decimal) in
effect on such day (whether or not applicable to any Lender) under
regulations issued from time to time by the FRB for determining the
maximum reserve requirement (including any emergency, supplemental
or other marginal reserve requirement) with respect to Eurocurrency
funding (currently referred to as "Eurocurrency liabilities"); and
"IBOR" means the rate of interest per annum determined by the Paying
Agent to be the arithmetic mean (rounded upward, unless it is an
integral multiple of 1/16 or 1/100 of 1%, to an integral multiple of
1/100th of 1%) of the rates of interest per annum notified to the
Paying Agent by each Reference Lender as the rate of interest at
which dollar deposits in the approximate amount of the amount of the
Loan to be made or continued as, or converted into, an Offshore Rate
Loan by such Reference Lender and having a maturity comparable to
such Interest Period would be offered to prime banks in the offshore
dollar interbank market at their request at approximately 11:00 a.m.
(New York City time) two Business Days prior to the commencement of
such Interest Period.
The Offshore Rate shall be adjusted automatically as to all Offshore
Rate Loans then outstanding as of the effective date of any change in the
Eurodollar Reserve Percentage.
Offshore Rate Loan means a Loan that bears interest based on the
Offshore Rate.
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Organization Documents means, for any corporation, the certificate
or articles of incorporation, the bylaws, any certificate of determination
or instrument relating to the rights of preferred shareholders of such
corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof) of such
corporation.
Other Taxes means any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any other
Loan Document.
Parent - see the Preamble.
Parent Guaranty means the guaranty by Parent set forth in Article X
hereof.
Participant - see subsection 12.8(c).
Paying Agent means BofA in its capacity as paying agent for the
Lenders hereunder, and any successor paying agent arising under Section
11.9.
PBGC means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under
ERISA.
Pension Plan means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA with respect to which the Company may
have any liability.
Permitted Liens - see Section 8.1.
Permitted Santee Investments means (x) Investments in and to Santee
in an aggregate maximum amount not to exceed $10,000,000 (plus all
dividends received by HMI from Santee from and after the Effective Date);
(y) prior to the closing of the Santee Debt Placement Agreement, advance
payments for product purchases in an amount not at any time exceeding
$17,000,000 minus the amount of any Comfort Letter Debt; and (z) on terms
and conditions substantially consistent with those set forth in Schedule
1.1(f), additional Investments in Santee in the form of loans and advances
in an aggregate amount not exceeding $80,000,000 (less the amount of any
outstanding guaranty described in subsection 8.4(g), the amount of any
Comfort Letter Debt and the outstanding amount of advance payments for
product purchases referred to in clause (y) above), it being
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understood that such $80,000,000 shall be reduced to the extent that any
Permitted Santee Investment (other than advance payments for product
purchases) is repaid by the proceeds of any Indebtedness incurred under
the Santee Debt Placement Agreement.
Person means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
Plan means an employee benefit plan (as defined in Section 3(3) of
ERISA) which the Company sponsors or maintains or to which the Company
makes, is making, or is obligated to make contributions, and includes any
Pension Plan.
Pledge Agreement - see Section 5.1(g).
Potential Subordinated Note Prepayment means any optional redemption
or repurchase of the Subordinated Notes in connection with an "Asset Sale"
(as defined in the Subordinated Note Indenture) required by subsection
4.13(1)(b) of the Subordinated Note Indenture.
Potential Subordinated Note Prepayment Notice means (x) any notice
to the Trustee (as defined in the Subordinated Note Indenture) of any
optional redemption of the Subordinated Notes or (y) any notice of an
"Asset Sale Offer" to the holders of the Subordinated Notes, in each case
in connection with a Potential Subordinated Note Prepayment.
Pro Rata Share means, as to any Lender at any time, the percentage
(rounded to the ninth decimal place) at such time of such Lender's
Commitment (whether used or unused) divided by the combined Commitments of
all Lenders. The initial Pro Rata Share of each Lender is set forth on
Schedule 1.1(b).
Product Purchase Agreement means an arrangement (which may be
embodied in one or more agreements) by the Santee Owners with Santee for
the purchase of product, substantially consistent with the terms and
conditions set forth in Schedule 1.1(d).
QFC - see the Preamble.
Reference Lenders means BofA and Chase.
Repayment Date - see subsection 2.9(a).
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Replacement Lender - see Section 4.7.
Reportable Event means, any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such event
for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
Requirement of Law means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or
of a Governmental Authority, in each case applicable to or binding upon
the Person or any of its property or to which the Person or any of its
property is subject.
Responsible Officer means the chief executive officer or the
president of the Company, as applicable, or any other officer of such
entity having substantially the same authority and responsibility; or,
with respect to compliance with financial covenants, the chief financial
officer or the treasurer of the Company, or any other officer of the
Company having substantially the same authority and responsibility.
Restructuring - see the definition of Restructuring Effective Date.
Restructuring Effective Date means the date on which each of the
following conditions shall have been satisfied:
(i) the required percentage of shareholders of QFC shall have
approved, and QFC and its Subsidiaries shall have consummated, the
restructuring (the "Restructuring") of QFC and its Subsidiaries so
that each of QFC and HMI shall be Wholly-Owned Subsidiaries of
Holdings, which shall be a Wholly-Owned Subsidiary of Parent, which
shall be a publicly held entity, the holders of the Shares of which
shall be substantially similar to the holders of the Shares of QFC
immediately prior to such restructuring;
(ii) Parent shall have delivered to the Administrative Agents
a certificate of a Responsible Officer stating that (x) the
Restructuring has occurred and (y) no Unmatured Event of Default or
Event of Default exists or will result from the Restructuring; and
(iii) all Subsidiaries of Parent (other than Holdings) shall
have executed and delivered a counterpart of the Intercompany
Guaranty (Holdings),
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and Parent and each Subsidiary thereof shall have executed and
delivered to the Agents all agreements and other documents
reasonably requested by the Agents pursuant to Section 7.13.
Revolving Commitment Amount means $125,000,000, subject to reduction
from time to time in accordance with the terms hereof.
Revolving Loan - see Section 2.1.
Sale-Leaseback means any transaction pursuant to which the Company
or any Subsidiary sells or otherwise disposes of any property with the
intention of retaining the use thereof under a lease or other comparable
arrangement.
Santee means Santee Dairies, Inc., a California corporation.
Santee Agreements means the Product Purchase Agreement and the
Santee Debt Placement Agreement.
Santee Debt Placement Agreement means an agreement between Santee
and its lenders substantially consistent with the terms and conditions set
forth in Schedule 1.1(e).
Santee Debt Service Coverage Ratio means, for any period, the ratio
of (i) the total of Santee's earnings before interest expense, income tax
expense, depreciation and amortization for such period before any
extraordinary gains or losses minus Santee's capital expenditures for such
period to (ii) the sum of required principal payments made by Santee on
Indebtedness during such period plus interest expense of Santee for such
period.
Santee Entities means Santee and Santee Holdings.
Santee Fixed Charge Coverage Ratio means, for any period, the ratio
of (i) the total of Santee's earnings before interest expense, income tax
expense, depreciation and amortization for such period before any
extraordinary gains or losses plus net rents minus Santee's capital
expenditures (net of asset sales) for such period to (ii) net interest
expense plus net rents.
Santee Guaranty means a guaranty by the Company or any Subsidiary of
Indebtedness of Santee, on terms and conditions substantially consistent
with those set forth in Schedule 1.1(g).
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Santee Holdings means any Person, the sole business of which is to
hold a 100% ownership interest in Santee and activities reasonably related
thereto, and which is initially owned 50% by each Santee Owner.
Santee Loan means a loan to Santee by the Company or any Subsidiary.
Santee Owner means HMI or Stater.
SEC means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
Senior Funded Debt means all Funded Debt of the Company and its
Subsidiaries other than Subordinated Debt.
Senior Leverage Ratio means, as of any date, the ratio of (a) Senior
Funded Debt determined on a consolidated basis as of such date to (b)
EBITDA for the Computation Period most recently ended on or before such
date for which financial statements have been delivered pursuant to
Section 7.1 (or in the Certificate described in the footnote in Schedule
1.1(a)).
Shares means the Company's common stock, $.001 par value per share.
Specified Net Proceeds means, for any fiscal year, all Net Cash
Proceeds received by the Company or any Subsidiary during such fiscal year
in excess of $7,500,000; provided that no Net Cash Proceeds shall be
included in the calculation of "Specified Net Proceeds" for any fiscal
year (x) if such Net Cash Proceeds are invested by the Company or any of
its Subsidiaries, as applicable, in noncurrent assets of the Company or
any of its Subsidiaries within twelve months of the receipt of such Net
Cash Proceeds and (y) after giving effect to such investment, the Line of
Business Percentage for the most recent Computation Period (calculated on
a pro forma basis (if necessary) as if such investment and the Asset Sale
giving rise to such Net Cash Proceeds had occurred at the beginning of
such Computation Period) was at least 80%. For purposes of the foregoing
and subsection 2.8(a)(i), Net Cash Proceeds shall be deemed received on
the earlier of (i) the date the Company certifies that such Net Cash
Proceeds will not be reinvested as contemplated by the proviso above and
(ii) the date one year after actual receipt of such Net Cash Proceeds.
Stater means Stater Bros. Markets, a California corporation.
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Subordinated Debt means (i) the Subordinated Notes and (ii) any
unsecured indebtedness of Parent or Holdings the terms and conditions of
which either (x) are no less favorable to the Agents and the Lenders than
the Subordinated Notes or (y) have been approved by the Majority Lenders.
Subordinated Note Indenture means the Indenture among QFC, certain
guarantors named therein and First Trust National Association, as trustee,
substantially on the terms set forth in the draft of such Indenture dated
March 7, 1997.
Subordinated Notes means the Senior Subordinated Notes due 2007
issued by QFC pursuant to the Subordinated Note Indenture.
Subsidiary of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the Voting Stock, membership interests or
other equity interests (in the case of Persons other than corporations),
is owned or controlled directly or indirectly by such Person, or one or
more of the other Subsidiaries of such Person, or a combination thereof.
Unless the context otherwise clearly requires, references herein to a
"Subsidiary" refer to a Subsidiary of the Company. Notwithstanding
anything to the contrary set forth above, (a) no Santee Entity shall be
considered a Subsidiary of the Company or HMI; and (ii) except for
purposes of (x) the preparation of financial statements, and any financial
calculations to be made, on a consolidated basis, and (y) the definitions
of Asset Sale, Net Cash Proceeds and Specified Net Cash Proceeds and
subsection 2.8(a)(i), no Excluded Entity shall be considered to be a
Subsidiary of the Company or any of its Subsidiaries.
Supermajority Lenders means at any time Lenders then having Pro Rata
Shares of 66-2/3% or more.
Surety Instrument means any letter of credit (including standby and
commercial), banker's acceptance, bank guaranty, surety bond or similar
instrument.
Swap Contract means any agreement (including any master agreement
and any agreement, whether or not in writing, relating to any single
transaction) that is an interest rate swap agreement, basis swap, forward
rate agreement, commodity swap, commodity option, equity or equity index
swap or option, bond option, interest rate option, forward foreign
exchange agreement, rate cap, collar
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or floor agreement, currency swap agreement, cross-currency rate swap
agreement, swaption, currency option or any other, similar agreement
(including any option to enter into any of the foregoing).
Swingline Lender means BofA.
Swingline Loan - see subsection 2.5(a).
Taxes means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and Agent, (i) income
taxes, (ii) franchise taxes based on net income and (iii) any Taxes
imposed on such Lender or Agent as a result of a present, former or future
connection between the jurisdiction of the government or taxing authority
imposing such tax or any political subdivision or taxing authority thereof
or therein and such Lender or Agent (other than, in the case of this
clause (iii), a connection arising solely from such Lender or Agent having
executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement).
Term Commitment Amount means the amount determined in accordance
with Schedule 2.1, subject to the Facility Adjustment and subject to
reduction from time to time in accordance with the terms hereof.
Term Loan - see Section 2.1.
Termination Date means the earlier to occur of:
(a) March 31, 2004; and
(b) the date on which the commitments of the Lenders to make
Credit Extensions hereunder terminate in accordance with the
provisions of this Agreement.
Type of Loan means the characterization of a Loan as a Base Rate
Loan or an Offshore Rate Loan.
Unfunded Pension Liability means the excess of a Pension Plan's
benefit liabilities under Section 4001(a)(16) of ERISA as of the end of
the most recent plan year over the value of such Plan's assets as of such
date, determined in accordance with the assumptions that would be used in
a termination of such Plan for the applicable plan year.
Unmatured Event of Default means any event or circumstance which,
with the giving of notice, the lapse of
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time, or both, would (if not cured or otherwise remedied during such time)
constitute an Event of Default.
United States and U.S. each means the United States of America.
Voting Stock means, with respect to any corporation, the capital
stock of such corporation having general voting power under ordinary
circumstances to elect directors to the board of directors of such
corporation, but shall not include any capital stock that has or would
have such voting power solely by reason of the happening of any
contingency.
Wholly-Owned Subsidiary means any corporation in which (other than
directors' qualifying shares required by law) 100% of the capital stock of
each class having ordinary voting power, and 100% of the capital stock of
every other class, in each case, at the time as of which any determination
is being made, is owned, beneficially and of record, by the Company, or by
one or more other Wholly-Owned Subsidiaries, or both.
Z/C means Zell/Chilmark Fund, L.P.
1.2 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including"; the words "to" and "until" each mean "to but excluding", and
the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent
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amendments and other modifications thereto, but only to the extent such
amendments and other modifications are not prohibited by the terms of any Loan
Document, and (ii) references to any statute or regulation are to be construed
as including all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agents, QFC,
Holdings and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the Agents
merely because of the Agents' or Lenders' involvement in their preparation.
1.3 Accounting Principles.
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied; provided that if the Borrowers notify the Agents
that the Borrowers wish to amend any covenant or other provision of this
Agreement to eliminate the effect of any change in GAAP on the operation of such
covenant or other provision (or if the Agents notify the Borrowers that the
Majority Lenders wish to amend any covenant or other provision for such
purpose), then compliance with such covenant or other provision shall be
determined on the basis of GAAP in effect immediately before the relevant change
in GAAP became effective, until either such notice is withdrawn or such covenant
or other provision is amended in a manner satisfactory to the Borrowers and the
Majority Lenders.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
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ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Credits. (a) The Term Credit. Each Lender
severally agrees, on the terms and conditions set forth herein, to make a single
loan to the Borrower (each such loan, a "Term Loan") on the Effective Date in an
amount not to exceed such Lender's Pro Rata Share of the Term Commitment Amount.
Amounts borrowed as Term Loans which are repaid or prepaid may not be
reborrowed.
(b) The Revolving Credit. Each Lender severally agrees, on the terms
and conditions set forth herein, to make loans to the Borrower (each such loan,
a "Revolving Loan") from time to time on any Business Day during the period from
the Effective Date to the Termination Date, in an aggregate amount not to exceed
at any time outstanding such Lender's Pro Rata Share of the Revolving Commitment
Amount; provided that, after giving effect to any Borrowing of Revolving Loans,
the aggregate amount of all outstanding Revolving Loans and Swingline Loans plus
the Effective Amount of all L/C Obligations shall not exceed the Revolving
Commitment Amount. Within the foregoing limits, and subject to the other terms
and conditions hereof, the Borrower may borrow under this subsection 2.1(b),
prepay under Section 2.7 and reborrow under this subsection 2.1(b).
(c) The Acquisition Credit. Each Lender severally agrees, on the
terms and conditions set forth herein, to make loans to the Borrower (each such
loan, an "Acquisition Loan") from time to time on any Business Day during the
period from the Effective Date to the Termination Date, in an aggregate amount
not to exceed at any time outstanding such Lender's Pro Rata Share of the
Acquisition Facility Commitment Amount. Within the foregoing limits, and subject
to the other terms and conditions hereof, the Borrower may borrow under this
subsection 2.1(c), prepay under Section 2.7 and reborrow under this subsection
2.1(c).
2.2 Loan Accounts. (a) Each Lender (including the Swingline Lender), with
respect to amounts payable to it hereunder, each Issuing Lender, with respect to
all Letters of Credit issued by such Issuing Lender and L/C Obligations with
respect thereto, and the Paying Agent, with respect to all amounts payable
hereunder, shall maintain on its books, in accordance with its usual practice,
loan accounts or other records setting forth each applicable Loan or Letter of
Credit hereunder. The accounts or records maintained by each Lender, each
Issuing Lender and the Paying Agent shall be prima facie evidence as to the
amount of the Loans made by the Lenders to the Borrower and the Letters of
Credit Issued for the account of the
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Borrower (or jointly for the account of the Borrower and any Subsidiary), and
the interest and payments thereon. Any failure so to record or any error in
doing so shall not, however, limit or otherwise affect the obligation of either
Borrower hereunder to pay any amount owing with respect to any Loan or any
Letter of Credit.
(b) Upon the request of any Lender made through the Paying Agent,
the Loans made by such Lender may be evidenced by one or more Notes, instead of
loan accounts. Each such Lender shall endorse on the schedules annexed to its
Note(s) the date and amount of each Loan made by it and the amount of each
payment of principal made by the applicable Borrower with respect thereto. Each
such Lender is irrevocably authorized by each Borrower to endorse its respective
Note(s) and each Lender's record shall be prima facie evidence of the amount of
the Loans evidenced thereby; provided, however, that the failure of a Lender to
make, or an error in making, a notation thereon with respect to any Loan shall
not limit or otherwise affect the obligations of the applicable Borrower
hereunder or under any such Note to such Lender.
2.3 Procedure for Borrowing of Term Loans, Revolving Loans and Acquisition
Loans. (a) Except for Borrowings of Revolving Loans made pursuant to Sections
2.5(e) or 3.3(c), each Borrowing of Revolving Loans, Acquisition Loans or Term
Loans shall be made upon the applicable Borrower's irrevocable written notice
delivered to the Paying Agent in the form of a Notice of Borrowing, which notice
must be received by the Paying Agent prior to 9:00 a.m. (San Francisco time) (i)
three Business Days prior to the requested Borrowing Date, in the case of
Offshore Rate Loans, and (ii) one Business Day prior to the requested Borrowing
Date, in the case of Base Rate Loans, specifying:
(A) the amount of the Borrowing, which shall be in the
amount of $5,000,000 or a higher integral multiple of $100,000;
(B) the requested Borrowing Date, which shall be a
Business Day;
(C) the Type of Loans comprising the Borrowing; and
(D) the duration of the Interest Period applicable to
any Offshore Rate Loans included in such notice. If the Notice of
Borrowing fails to specify the duration of the Interest Period for
any Borrowing comprised of Offshore Rate Loans, such Interest Period
shall be one month.
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(b) The Paying Agent will promptly notify each Lender of its receipt
of any Notice of Borrowing and of the amount of such Lender's Pro Rata Share of
such Borrowing.
(c) Each Lender will make the amount of its Pro Rata Share of each
Borrowing available to the Paying Agent for the account of the applicable
Borrower at the Agent's Payment Office by 11:00 a.m. (San Francisco time) on the
Borrowing Date requested by such Borrower in funds immediately available to the
Paying Agent. The proceeds of all such Loans will then be made available to the
applicable Borrower by the Paying Agent by wire transfer in accordance with
written instructions provided to the Paying Agent by such Borrower of like funds
as received by the Paying Agent.
(d) After giving effect to any Borrowing, there may not be more than
12 different Interest Periods in effect.
2.4 Conversion and Continuation Elections. (a) Each Borrower may, upon
irrevocable written notice to the Paying Agent in accordance with subsection
2.4(b):
(i) elect to convert, on any Business Day, any Base Rate Loans
(or any part thereof in an amount not less than $5,000,000 or a higher
integral multiple of $100,000) into Offshore Rate Loans; or
(ii) elect to convert, on the last day of the applicable
Interest Period, any Offshore Rate Loans maturing on such day (or any part
thereof in an amount not less than $5,000,000 or a higher integral
multiple of $100,000) into Base Rate Loans; or
(iii) elect to continue, on the last day of the applicable
Interest Period, any Offshore Rate Loans maturing on such day (or any part
thereof in an amount not less than $5,000,000 or a higher integral
multiple of $100,000) for a new Interest Period;
provided that (x) notwithstanding the foregoing, but subject to clause (y)
below, Borrowings of Term Loans may be in an amount which is not an integral of
$100,000 to the extent (and only to the extent) necessary to permit payment of
scheduled installments of Term Loans without breaking Interest Periods or as a
result of prepayments required pursuant to Section 2.8 and (y) if the aggregate
amount of Offshore Rate Loans in respect of any Borrowing shall have been
reduced, by payment, prepayment or conversion of part thereof to be less than
$5,000,000, such Offshore Rate Loans shall automatically convert into Base Rate
Loans.
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(b) The applicable Borrower shall deliver a Notice of
Conversion/Continuation to be received by the Paying Agent not later than 9:00
a.m. (San Francisco time) at least (i) three Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as Offshore Rate Loans; and (ii) one Business Day in advance of the
Conversion/Continuation Date, if the Loans are to be converted into Base Rate
Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or
continued;
(C) the Type of Loans resulting from the proposed
conversion or continuation; and
(D) other than in the case of conversions into Base Rate
Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans, the applicable Borrower has failed to select timely a new
Interest Period to be applicable to such Offshore Rate Loans, or if any
Unmatured Event of Default or Event of Default then exists (and the Majority
Lenders have not otherwise agreed pursuant to subsection 2.4(e)), such Borrower
shall be deemed to have elected to convert such Offshore Rate Loans into Base
Rate Loans effective as of the expiration date of such Interest Period.
(d) The Paying Agent will promptly notify each Lender of its receipt
of a Notice of Conversion/Continuation or, if no timely notice is provided by
the applicable Borrower, the Paying Agent will promptly notify each Lender of
the details of any automatic conversion. All conversions and continuations shall
be made ratably according to the Pro Rata Shares of the Lenders.
(e) Unless the Majority Lenders otherwise agree, during the
existence of any Unmatured Event of Default or Event of Default, no Borrower may
elect to have a Loan converted into or continued as an Offshore Rate Loan.
(f) After giving effect to any conversion or continuation of Loans,
there may not be more than 12 different Interest Periods in effect.
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2.5 Swingline Loans.
(a) Subject to the terms and conditions hereof, the Swingline Lender
may, in its sole discretion (subject to subsection 2.5(b)), make a portion of
the Revolving Commitment Amount available to the Borrower by making swingline
loans (each such loan, a "Swingline Loan") to the Borrower on any Business Day
during the period from the Effective Date to the Termination Date in accordance
with the procedures set forth in this Section 2.5 in an aggregate principal
amount at any one time outstanding not to exceed the lesser of (x) the Revolving
Commitment Amount and (y) $25,000,000 (and notwithstanding the fact that such
Swingline Loans, when aggregated with the Swingline Lender's outstanding
Revolving Loans, may exceed the Swingline Lender's Pro Rata Share of the
Revolving Commitment Amount); provided that at no time shall the sum of the
outstanding principal amount of all Swingline Loans and Revolving Loans plus the
Effective Amount of all L/C Obligations exceed the Revolving Commitment Amount.
Subject to the other terms and conditions hereof, the Borrower may borrow under
this subsection 2.5(a), prepay pursuant to subsection 2.5(d) and reborrow
pursuant to this subsection 2.5(a) from time to time; provided that the
Swingline Lender shall not be obligated to make any Swingline Loan.
(b) The Borrower shall provide the Paying Agent and the Swingline
Lender irrevocable written notice (including notice via facsimile confirmed
promptly by a telephone call) of any Swingline Loan requested hereunder (which
notice must be received by the Swingline Lender and the Paying Agent prior to
1:00 p.m. (San Francisco time) on the requested Borrowing Date) specifying (i)
the amount to be borrowed and (ii) the requested Borrowing Date, which shall be
a Business Day. Upon receipt of such notice, the Swingline Lender will promptly
confirm with the Paying Agent (by telephone or in writing) that the Paying Agent
has received a copy of such notice from the Borrower and, if not, the Swingline
Lender will provide the Paying Agent with a copy thereof. Unless the Swingline
Lender has received notice prior to 2:00 p.m. (San Francisco time) on the
proposed Borrowing Date from the Paying Agent (including at the request of any
Lender) (A) directing the Swingline Lender not to make the requested Swingline
Loan as a result of the limitations set forth in the proviso set forth in the
first sentence of subsection 2.5(a) or (B) that one or more conditions specified
in Article V is not then satisfied, then, subject to the terms and conditions
hereof, the Swingline Lender may make the amount of the requested Swingline Loan
available to the Borrower by crediting the account of the Borrower on the books
of the Swingline Lender with the amount of such Swingline Loan. Each Swingline
Loan shall be in an aggregate principal amount equal to $500,000 or a higher
integral multiple of $100,000. The Swingline Lender will
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promptly notify the Paying Agent of the amount of each Swingline Loan.
(c) Principal of and accrued interest on each Swingline Loan shall
be due and payable (i) on demand made by the Swingline Lender at any time upon
one Business Day's prior written notice to the Borrower furnished at or before
8:45 a.m. (San Francisco time) and (ii) in any event on the Termination Date.
Interest on Swingline Loans shall be for the sole account of the Swingline
Lender (except to the extent that the other Lenders have funded the purchase of
participations therein pursuant to subsection 2.5(e)).
(d) The Borrower may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding principal amount
of any Swingline Loan, without incurring any premium or penalty; provided that
(i) each such voluntary prepayment shall require prior written
notice given to the Paying Agent and the Swingline Lender no later
than 1:00 p.m. (San Francisco time) on the day on which the Borrower
intends to make a voluntary prepayment, and
(ii) each such voluntary prepayment shall be in an amount
equal to $500,000 or a higher integral multiple of $100,000 (or, if
less, the aggregate outstanding principal amount of all Swingline
Loans then outstanding).
Voluntary prepayments of Swingline Loans shall be made by the Borrower to
the Swingline Lender at such office in the continental United States as the
Swingline Lender may designate by notice to the Borrower from time to time. All
such payments shall be made in dollars and in immediately available funds no
later than 2:00 p.m. (San Francisco time) on the date specified by the Borrower
pursuant to clause (i) above (and any payment received later than such time
shall be deemed to have been received on the next Business Day). The Swingline
Lender will promptly notify the Paying Agent of the amount of each prepayment of
Swingline Loans.
(e) If (i) any Swingline Loan shall remain outstanding at 9:00 a.m.
(San Francisco time) on the Business Day immediately prior to a Business Day on
which Swingline Loans are due and payable pursuant to subsection 2.5(c) and by
such time on such Business Day the Paying Agent shall have received neither (A)
a Notice of Borrowing delivered pursuant to Section 2.3 requesting that
Revolving Loans be made pursuant to subsection 2.1(b) on such following Business
Day in an amount at least equal to the aggregate principal amount of such
Swingline Loans, nor
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(B) any other notice indicating the Borrower's intent to repay such Swingline
Loans with funds obtained from other sources, or (ii) any Swingline Loans shall
remain outstanding during the existence of an Unmatured Event of Default or
Event of Default and the Swingline Lender shall in its sole discretion notify
the Paying Agent that the Swingline Lender desires that such Swingline Loans be
converted into Revolving Loans, then the Paying Agent shall be deemed to have
received a Notice of Borrowing from the Borrower pursuant to Section 2.3
requesting that Base Rate Loans be made pursuant to subsection 2.1(b) on the
following Business Day in an amount equal to the aggregate amount of such
Swingline Loans, and the procedures set forth in subsections 2.3(b) and 2.3(c)
shall be followed in making such Base Rate Loans; provided that such Base Rate
Loans shall be made notwithstanding the Borrower's failure to comply with
Section 5.2; and provided, further, that if a Borrowing of Revolving Loans
becomes legally impractical and if so required by the Swingline Lender at the
time such Revolving Loans are required to be made by the Lenders in accordance
with this subsection 2.5(e), each Lender agrees that in lieu of making Revolving
Loans as described in this subsection 2.5(e), such Lender shall purchase a
participation from the Swingline Lender in the applicable Swingline Loans in an
amount equal to such Lender's Pro Rata Share of such Swingline Loans, and the
procedures set forth in subsections 2.3(b) and 2.3(c) shall be followed in
connection with the purchases of such participations. The proceeds of such Base
Rate Loans (or participations purchased) shall be delivered by the Paying Agent
to the Swingline Lender to repay such Swingline Loans (or as payment for such
participations). A copy of each notice given by the Paying Agent to the Lenders
pursuant to this subsection 2.5(e) with respect to the making of Revolving
Loans, or the purchases of participations, shall be promptly delivered by the
Paying Agent to the Borrower. Each Lender's obligation in accordance with this
Agreement to make Revolving Loans, or purchase participations, as contemplated
by this subsection 2.5(e), shall be absolute and unconditional and shall not be
affected by any circumstance, including (1) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the
Swingline Lender, the Borrower or any other Person for any reason whatsoever;
(2) the occurrence or continuance of an Event of Default, an Unmatured Event of
Default or a Material Adverse Effect; or (3) any other circumstance, happening
or event whatsoever, whether or not similar to any of the foregoing.
2.6 Reduction or Termination of Commitments.
(a) Voluntary Reduction or Termination of Commitments. The Borrower
may, from time to time upon not less than five Business Days' prior notice
to the Paying Agent terminate or permanently reduce the Revolving
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Commitment Amount, the Acquisition Facility Commitment Amount or (prior to
the making of the Term Loans) the Term Commitment Amount by an aggregate
amount of $5,000,000 or a higher integral multiple of $1,000,000; provided
that (i) the Borrower may not reduce the Revolving Commitment Amount to an
amount which is less than the sum of the aggregate principal amount of all
outstanding Revolving Loans and Swingline Loans plus the Effective Amount
of all L/C Obligations and (ii) the Borrower may not reduce the
Acquisition Facility Commitment Amount to an amount which is less than the
aggregate principal amount of all outstanding Acquisition Loans. Any
reduction of the Revolving Commitment Amount, the Acquisition Facility
Commitment Amount or the Term Commitment Amount shall ratably reduce the
Commitment of each Lender according to its Pro Rata Share.
(b) Scheduled Mandatory Reductions of Acquisition Facility
Commitment Amount. The Acquisition Facility Commitment Amount shall be
reduced by $25,000,000 on each of March 31, 2000, March 31, 2001, March
31, 2002 and March 31, 2003; provided that if there is a Facility
Adjustment, the amount of each such scheduled reduction shall be increased
by $1,000,000 for each $5,000,000 increase in the Acquisition Facility
Commitment Amount as a result of such Facility Adjustment; and provided,
further, that if there is any reduction of the Acquisition Facility
Commitment Amount pursuant to subsection (a) above or subsection (c) below
(each a "Non-Scheduled Reduction"), the amount of each such scheduled
reduction shall be reduced by the product of (x) the amount of such
Non-Scheduled Reduction multiplied by (y) a fraction, the numerator of
which is the original amount of such scheduled reduction (after giving
effect to any Facility Adjustment) and the denominator of which is the
original Acquisition Facility Commitment Amount (after giving effect to
any Facility Adjustment).
(c) Mandatory Reductions resulting from Potential Subordinated Note
Prepayment. The Acquisition Facility Commitment Amount and/or the
Revolving Commitment Amount, as applicable, shall be automatically reduced
on any date on which the Borrower makes any prepayment of Acquisition
Loans or Revolving Loans, as the case may be, pursuant to subsection
2.8(c), in each case in an amount equal to the amount of such prepayment.
2.7 Optional Prepayments of Revolving Loans, Acquisition Loans and Term
Loans. Subject to Section 4.4, each Borrower may, at any time or from time to
time, upon not less than three Business Days' irrevocable notice to the Paying
Agent in the case of Offshore Rate Loans and not less than one Business Day's
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irrevocable notice to the Paying Agent in the case of Base Rate Loans, prepay
any Borrowing of Revolving Loans, Acquisition Loans or Term Loans, in whole or
ratably among the Lenders in part, in an aggregate amount of $5,000,000 or a
higher integral multiple of $100,000 (or, if any Swingline Loans have become
Revolving Loans pursuant to subsection 2.5(e) or any Revolving Loans have been
made pursuant to Section 3.3, in such other amount as is necessary to cause the
amount of each Borrowing of Revolving Loans to be an aggregate amount of
$5,000,000 and an integral multiple of $100,000). Such notice of prepayment
shall specify the date and amount of such prepayment and the Loans to be
prepaid. The Paying Agent will promptly notify each Lender of its receipt of any
such notice and of such Lender's Pro Rata Share of such prepayment. If any such
notice is given by either Borrower, the payment amount specified in such notice
shall be due and payable on the date specified therein, together with accrued
interest to the date of such prepayment on the amount prepaid and any amount
required pursuant to Section 4.4. Optional prepayments of Term Loans shall be
applied pro rata to the remaining installments thereof.
2.8 Mandatory Prepayments.
(a) Term Loans. So long as Term Loans are outstanding:
(i) within ten days after receipt thereof by the Company or
any Subsidiary, QFC shall make a prepayment of the Term Loans in an
amount equal to such Specified Net Proceeds (provided that no such
prepayment shall be required until the aggregate amount of unapplied
Specified Net Proceeds equals or exceeds $500,000);
(ii) at least one Business Day prior to the date on which QFC
would be required to give any Potential Subordinated Note Prepayment
Notice, QFC shall make a prepayment of the Term Loans in an amount
equal to the applicable Potential Subordinated Note Prepayment; and
(iii) within ten days after the date on which the Company is
required to deliver the financial statements referred to in
subsection 7.1(b) for the first fiscal quarter of any fiscal year
(excluding the first fiscal quarter of 1997), QFC shall make a
prepayment of the Term Loans in an amount equal to 35% of Excess
Cash Flow for the immediately preceding fiscal year; provided that
no such prepayment shall be required if the Leverage Ratio was less
than 4.50 to 1 as of either (x) the end of such immediately
preceding fiscal year or (y) the end of such first fiscal quarter.
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Each prepayment of Term Loans pursuant to this Section 2.8(a) shall be
applied pro rata to the then-unpaid installments of the Term Loans.
(b) Prepayments resulting from Acquisition Facility Commitment
Amount Reductions. On each date on which the Acquisition Facility Commitment
Amount is reduced pursuant to subsection 2.6(b), the Borrower shall immediately,
and without notice or demand, prepay the outstanding principal amount of the
Acquisition Loans by an amount equal to the excess, if any, of the aggregate
amount of all Acquisition Loans over the Acquisition Facility Commitment Amount
(as so reduced).
(c) Prepayments of Acquisition Loans and Revolving Loans resulting
from Potential Subordinated Note Prepayments. At least one Business Day prior to
the date on which QFC would be required to give a Potential Subordinated Note
Prepayment Notice, the Borrower shall prepay Acquisition Loans and/or Revolving
Loans in an amount equal to the remainder, if any, of the amount of the
applicable Potential Subordinated Note Prepayment minus any concurrent
prepayment of Term Loans required by subsection 2.8(a)(2). Any such prepayment
shall be applied first to the Acquisition Loans and then to the Revolving Loans.
2.9 Repayment. (a) The Term Credit. The Borrower shall repay the Term
Loans on each of the dates set forth in Schedule 2.9 (each a "Repayment Date")
in the amount set forth opposite such date on Schedule 2.9 (subject to
adjustment pursuant to Sections 2.7 and 2.8(a)).
(b) The Revolving Credit. The Borrower shall repay to the Lenders on
the Termination Date the aggregate principal amount of all Revolving Loans
outstanding on such date.
(c) The Acquisition Facility Credit. The Borrower shall repay to the
Lenders on the Termination Date the aggregate principal amount of all
Acquisition Loans outstanding on such date.
2.10 Interest. (a) Each Revolving Loan, Acquisition Loan and Term Loan
shall bear interest on the outstanding principal amount thereof from the
applicable Borrowing Date at a rate per annum equal to the Offshore Rate or the
Base Rate, as the case may be (and subject to the Borrower's right to convert to
the other Type of Loan under Section 2.4) plus the Applicable Margin. Each
Swingline Loan shall bear interest on the outstanding principal amount thereof
from the applicable Borrowing Date at a rate per annum equal to the Base Rate
plus the Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the
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date of any prepayment of Term Loans under Section 2.7, 2.8 or 2.9 for the
portion of the Term Loans so prepaid and upon payment (including prepayment) in
full thereof.
(c) Notwithstanding subsection (a) of this Section, after the
occurrence of any Unmatured Event of Default under subsection (a) or (g) of
Section 9.1 or any Event of Default under subsection (a), (f) or (g) of Section
9.1 and, at the election of the Majority Lenders, after the occurrence of any
other Event of Default, and so long as such Unmatured Event of Default or Event
of Default exists, each Borrower will pay interest (after as well as before
judgment thereon to the extent permitted by applicable law) on the principal
amount of all of its outstanding Loans and, to the extent permitted by
applicable law, on any other amount payable by such Borrower hereunder or under
any other Loan Document, at a rate per annum equal to the rate otherwise
applicable thereto pursuant to the terms hereof or such other Loan Document (or,
if no such rate is specified, the Base Rate) plus 2%. All such interest shall be
payable on demand.
(d) Anything herein to the contrary notwithstanding, the obligations
of each Borrower to any Lender hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder to the extent (but only to the extent) that contracting for
or receiving such payment by such Lender would be contrary to the provisions of
any law applicable to such Lender limiting the highest rate of interest that may
be lawfully contracted for, charged or received by such Lender, and in such
event each Borrower shall pay such Lender interest at the highest rate permitted
by applicable law.
2.11 Fees. In addition to certain fees described in Section 3.8:
(a) Arrangement, Agency Fees. QFC shall pay to the Arrangers and the
Agents such fees as are required by the letter agreement (the "Fee Letter")
among QFC, the Arrangers and the Agents dated February 14, 1997.
(b) Commitment Fees. The Borrower shall pay to the Paying Agent for
the account of each Lender a commitment fee at the Commitment Fee Rate on such
Lender's Pro Rata Share of the average daily unused portion of the Revolving
Commitment Amount and the Acquisition Facility Commitment Amount, computed on a
quarterly basis in arrears on the last Business Day of each calendar quarter
based upon the daily utilization for that quarter as calculated by the Paying
Agent. For purposes of calculating utilization under this subsection, the
Revolving Commitment Amount and the Acquisition Facility Commitment Amount
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shall be deemed used to the extent of the aggregate amount of all Revolving
Loans, Acquisition Loans and L/C Obligations outstanding (but Swingline Loans
shall not constitute usage of the Revolving Commitment Amount). Such commitment
fee shall accrue from the Effective Date to the Termination Date and shall be
due and payable in arrears on the last Business Day of each calendar quarter
through the Termination Date, with the final payment to be made on the
Termination Date. The commitment fees provided in this subsection shall accrue
at all times after the above-mentioned commencement date, including at any time
during which one or more conditions in Article V are not met.
2.12 Computation of Fees and Interest. (a) All computations of interest
for Base Rate Loans when the Base Rate is determined by BofA's "reference rate"
shall be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed. All other computations of fees and interest shall be made
on the basis of a 360-day year and actual days elapsed. Interest and fees shall
accrue during each period during which interest or fees are computed from the
first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Paying Agent shall
be conclusive and binding on the Borrowers and the Lenders in the absence of
manifest error. The Paying Agent will, at the request of either Borrower or any
Lender, deliver to such Borrower or such Lender a statement showing the
quotations used by the Paying Agent in determining any interest rate and the
resulting interest rate.
(c) If for any reason whatsoever a Reference Lender ceases to be a
Lender hereunder, such Reference Lender shall thereupon cease to be a Reference
Lender, and the Offshore Rate shall be determined on the basis of the rates as
notified by the remaining Reference Lender.
(d) Each Reference Lender shall use its best efforts to furnish
quotations of rates to the Paying Agent as contemplated hereby. If either
Reference Lender fails to supply such rates to the Paying Agent upon its
request, the Offshore Rate shall be determined on the basis of the quotations of
the remaining Reference Lender.
2.13 Payments by the Borrowers. (a) All payments to be made by either
Borrower shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by either Borrower shall be
made to the Paying Agent for the account of the Lenders at the Agent's Payment
Office, and shall be made in dollars and in immediately available funds, no
later than 10:00 a.m. (San Francisco time) on the date specified herein. The
Paying Agent will promptly distribute to each Lender
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its Pro Rata Share (or other applicable share as expressly provided herein) of
such payment in like funds as received. Any payment received by the Paying Agent
later than 10:00 a.m. (San Francisco time) shall be deemed to have been received
on the following Business Day and any applicable interest or fee shall continue
to accrue.
(b) Whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following Business Day (unless, in the case of
interest on an Offshore Rate Loan, such following Business Day is the first
Business Day of a calendar month, in which case such payment shall be made on
the preceding Business Day), and such extension of time shall in such case be
included in the computation of interest or fees, as the case may be.
(c) Unless the Paying Agent receives notice from the applicable
Borrower prior to the date on which any payment is due to the Lenders that such
Borrower will not make such payment in full as and when required, the Paying
Agent may assume that such Borrower has made such payment in full to the Paying
Agent on such date in immediately available funds, and the Paying Agent may (but
shall not be so required), in reliance upon such assumption, distribute to each
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent the applicable Borrower has not made such payment in full to
the Paying Agent, each Lender shall repay to the Paying Agent on demand such
amount distributed to such Lender, together with interest thereon at the Federal
Funds Rate for each day from the date such amount is distributed to such Lender
until the date repaid.
2.14 Payments by the Lenders to the Paying Agent. (a) Unless the Paying
Agent receives notice from a Lender on or prior to the Effective Date or, with
respect to any Borrowing after the Effective Date, not later than 3:00 p.m. (San
Francisco time) on the Business Day preceding the date of such Borrowing, that
such Lender will not make available as and when required hereunder to the Paying
Agent for the account of the applicable Borrower the amount of such Lender's Pro
Rata Share of such Borrowing, the Paying Agent may assume that each Lender has
made such amount available to the Paying Agent in immediately available funds on
the Borrowing Date, and the Paying Agent may (but shall not be so required), in
reliance upon such assumption, make available to such Borrower on such date a
corresponding amount. If and to the extent any Lender shall not have made its
full amount available to the Paying Agent in immediately available funds and the
Paying Agent in such circumstances has made available to the applicable Borrower
such amount, such Lender shall on the Business Day following such Borrowing Date
make such amount available to the Paying Agent, together with interest at the
Federal Funds Rate
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for each day during such period. A notice of the Paying Agent submitted to any
Lender with respect to amounts owing under this subsection (a) shall be
conclusive, absent manifest error. If such amount is so made available, such
payment to the Paying Agent shall constitute such Lender's Loan on the date of
Borrowing for all purposes of this Agreement. If such amount is not made
available to the Paying Agent on the Business Day following the Borrowing Date,
the Paying Agent will notify the applicable Borrower of such failure to fund
and, upon demand by the Paying Agent, such Borrower shall pay such amount to the
Paying Agent for the Paying Agent's account, together with interest thereon for
each day elapsed since the date of such Borrowing, at a rate per annum equal to
the interest rate applicable at the time to the Loans comprising such Borrowing.
(b) The failure of any Lender to make any Loan on any Borrowing Date
shall not relieve any other Lender of any obligation hereunder to make a Loan on
such Borrowing Date, but no Lender shall be responsible for the failure of any
other Lender to make the Loan to be made by such other Lender on any Borrowing
Date.
2.15 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Lender shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, pursuant to any guaranty or otherwise) in excess of its Pro Rata Share,
such Lender shall immediately (a) notify the Paying Agent of such fact, and (b)
purchase from the other Lenders such participations in the Loans made by them as
shall be necessary to cause such purchasing Lender to share the excess payment
pro rata with each of them; provided, however, that if all or any portion of
such excess payment is thereafter recovered from the purchasing Lender, such
purchase shall to that extent be rescinded and each other Lender shall repay to
the purchasing Lender the purchase price paid therefor, together with an amount
equal to such paying Lender's ratable share (according to the proportion of (i)
the amount of such paying Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
Each Borrower agrees that any Lender so purchasing a participation from another
Lender may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off, but subject to Section 12.10) with
respect to such participation as fully as if such Lender were the direct
creditor of such Borrower in the amount of such participation. The Paying Agent
will keep records (which shall be conclusive and binding in the absence of
manifest error) of participations purchased under this Section and will in each
case notify the Lenders following any such purchases or repayments.
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ARTICLE III
THE LETTERS OF CREDIT
3.1 The Letter of Credit Subfacility. (a) On the terms and conditions set
forth herein (i) each Issuing Lender agrees, (A) from time to time on any
Business Day, during the period from the Effective Date to the earlier of the
Termination Date or 25 days prior to the scheduled Termination Date, to issue
Letters of Credit for the account of the Borrower (or jointly for the account of
the Borrower and any Subsidiary thereof), and to amend or renew Letters of
Credit previously issued by it, in accordance with subsections 3.2(c) and
3.2(d), and (B) to honor drafts under the Letters of Credit; and (ii) the
Lenders severally agree to participate in Letters of Credit Issued for the
account of the Borrower (or jointly for the account of the Borrower and any of
its Subsidiaries); provided that no Issuing Lender shall be obligated to Issue,
and no Lender shall be obligated to participate in, any Letter of Credit if as
of the date of Issuance of such Letter of Credit (the "Issuance Date") (1) the
Effective Amount of all L/C Obligations plus the aggregate amount of all
Revolving Loans and Swingline Loans exceeds the Revolving Commitment Amount or
(2) the Effective Amount of all L/C Obligations exceeds the L/C Commitment.
Within the foregoing limits, and subject to the other terms and conditions
hereof, the Borrower's ability to obtain Letters of Credit shall be fully
revolving, and, accordingly, the Borrower may, during the foregoing period,
obtain Letters of Credit to replace Letters of Credit which have expired or
which have been drawn upon and reimbursed.
(b) No Issuing Lender shall be under any obligation to Issue any
Letter of Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or restrain
such Issuing Lender from Issuing such Letter of Credit, or any Requirement
of Law applicable to such Issuing Lender or any request or directive
(whether or not having the force of law) from any Governmental Authority
with jurisdiction over such Issuing Lender shall prohibit, or request that
such Issuing Lender refrain from, the Issuance of letters of credit
generally or such Letter of Credit in particular or shall impose upon such
Issuing Lender with respect to such Letter of Credit any restriction,
reserve or capital requirement (for which such Issuing Lender is not
otherwise compensated hereunder) not in effect on the Effective Date, or
shall impose upon such Issuing Lender any unreimbursed loss, cost or
expense
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which was not applicable on the Effective Date and which such Issuing
Lender in good faith deems material to it;
(ii) such Issuing Lender has received written notice from any
Lender, any Agent or the Borrower, on or prior to the Business Day prior
to the requested date of Issuance of such Letter of Credit, that one or
more of the applicable conditions contained in Article V is not then
satisfied;
(iii) the expiry date of such Letter of Credit is (A) more
than 365 days after the date of Issuance, unless the Majority Lenders have
approved such expiry date in writing, or (B) after the date which is 25
days prior to the scheduled Termination Date, unless all of the Lenders
have approved such expiry date in writing;
(iv) such requested Letter of Credit does not provide for
drafts, or is not otherwise in form and substance acceptable to such
Issuing Lender, or the Issuance of such Letter of Credit shall violate any
applicable policies of such Issuing Lender; or
(v) such Letter of Credit is denominated in a currency other
than Dollars.
3.2 Issuance, Amendment and Renewal of Letters of Credit. (a) Each Letter
of Credit shall be issued upon the irrevocable written request of the Borrower
received by the applicable Issuing Lender (with a copy sent by the Borrower to
the Paying Agent) at least four days (or such shorter time as the applicable
Issuing Lender and the Paying Agent may agree in a particular instance in their
sole discretion) prior to the proposed date of issuance. Each such request for
issuance of a Letter of Credit shall be by facsimile, confirmed promptly in an
original writing, in the form of an L/C Application, and shall specify in form
and detail satisfactory to the applicable Issuing Lender: (i) the proposed date
of issuance of the Letter of Credit (which shall be a Business Day); (ii) the
face amount of the Letter of Credit; (iii) the expiry date of the Letter of
Credit; (iv) the name and address of the beneficiary thereof; (v) the documents
to be presented by the beneficiary of the Letter of Credit in case of any
drawing thereunder; (vi) the full text of any certificate to be presented by the
beneficiary in case of any drawing thereunder; and (vii) such other matters as
the applicable Issuing Lender may reasonably require.
(b) At least two Business Days prior to the Issuance of any Letter
of Credit, the applicable Issuing Lender will confirm with the Paying Agent (by
telephone or in writing) that the Paying Agent has received a copy of the L/C
Application or
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L/C Amendment Application from the Borrower and, if not, such Issuing Lender
will provide the Paying Agent with a copy thereof. Unless the applicable Issuing
Lender has received, on or before the Business Day immediately preceding the
date such Issuing Lender is to issue a requested Letter of Credit, (A) notice
from the Paying Agent directing such Issuing Lender not to issue such Letter of
Credit because such issuance is not then permitted under subsection 3.1(a) as a
result of the limitations set forth in clause (1) or (2) thereof or (B) a notice
described in subsection 3.1(b)(ii), then, subject to the terms and conditions
hereof, such Issuing Lender shall, on the requested date, issue a Letter of
Credit for the account of the Borrower (or jointly for the account of the
Borrower and any of its Subsidiaries) in accordance with such Issuing Lender's
usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding and
prior to the Termination Date, the applicable Issuing Lender will, upon the
written request of the Borrower received by such Issuing Lender (with a copy
sent by the Borrower to the Paying Agent) at least four days (or such shorter
time as such Issuing Lender and the Paying Agent may agree in a particular
instance in their sole discretion) prior to the proposed date of amendment,
amend any Letter of Credit issued by it. Each such request for amendment of a
Letter of Credit shall be made by facsimile, confirmed promptly in an original
writing, made in the form of an L/C Amendment Application and shall specify in
form and detail satisfactory to the applicable Issuing Lender: (i) the Letter of
Credit to be amended; (ii) the proposed date of amendment of the Letter of
Credit (which shall be a Business Day); (iii) the nature of the proposed
amendment; and (iv) such other matters as such Issuing Lender may reasonably
require. No Issuing Lender shall have any obligation to amend any Letter of
Credit if: (A) such Issuing Lender would have no obligation at such time to
issue such Letter of Credit in its amended form under the terms of this
Agreement; or (B) the beneficiary of any such Letter of Credit does not accept
the proposed amendment to the Letter of Credit. The Paying Agent will promptly
notify the Lenders of the receipt by it of any L/C Application or L/C Amendment
Application.
(d) The Issuing Lenders and the Lenders agree that, while a Letter
of Credit is outstanding and prior to the Termination Date, at the option of the
Borrower and upon the written request of the Borrower received by the applicable
Issuing Lender (with a copy sent by the Borrower to the Paying Agent) at least
four days (or such shorter time as such Issuing Lender and the Paying Agent may
agree in a particular instance in their sole discretion) prior to the proposed
date of notification of renewal, such Issuing Lender shall be entitled to
authorize the automatic renewal of any Letter of Credit issued by it. Each
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such request for renewal of a Letter of Credit shall be made by facsimile,
confirmed promptly in an original writing, in the form of an L/C Amendment
Application, and shall specify in form and detail satisfactory to the applicable
Issuing Lender: (i) the Letter of Credit to be renewed; (ii) the proposed date
of notification of renewal of the Letter of Credit (which shall be a Business
Day); (iii) the revised expiry date of the Letter of Credit; and (iv) such other
matters as the Issuing Lender may reasonably require. No Issuing Lender shall
have any obligation to renew any Letter of Credit if: (A) such Issuing Lender
would have no obligation at such time to issue or amend such Letter of Credit in
its renewed form under the terms of this Agreement; or (B) the beneficiary of
any such Letter of Credit does not accept the proposed renewal of the Letter of
Credit. If any outstanding Letter of Credit shall provide that it shall be
automatically renewed unless the beneficiary thereof receives notice from the
applicable Issuing Lender that such Letter of Credit shall not be renewed, and
if at the time of renewal such Issuing Lender would be entitled to authorize the
automatic renewal of such Letter of Credit in accordance with this subsection
3.2(d) upon the request of the Borrower but such Issuing Lender shall not have
received any L/C Amendment Application from the Borrower with respect to such
renewal or other written direction by the Borrower with respect thereto, such
Issuing Lender shall nonetheless be permitted to allow such Letter of Credit to
renew, and the Borrower and the Lenders hereby authorize such renewal, and,
accordingly, such Issuing Lender shall be deemed to have received an L/C
Amendment Application from the Borrower requesting such renewal.
(e) Each Issuing Lender may, at its election (or as required by the
Paying Agent at the direction of the Majority Lenders), deliver any notices of
termination or other communications to any Letter of Credit beneficiary or
transferee, and take any other action as necessary or appropriate, at any time
and from time to time, in order to cause the expiry date of such Letter of
Credit to be a date not later than 25 days prior to the scheduled Termination
Date.
(f) This Agreement shall control in the event of any conflict with
any L/C-Related Document (other than any Letter of Credit).
(g) Each Issuing Lender will deliver to the Paying Agent (which, if
so requested by any Lender, will promptly deliver a copy thereof to such
Lender), concurrently or promptly following its delivery of a Letter of Credit,
or amendment to or renewal of a Letter of Credit, to an advising bank or a
beneficiary, a true and complete copy of each such Letter of Credit or amendment
to or renewal of a Letter of Credit.
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3.3 Existing Letters of Credit; Risk Participations, Drawings and
Reimbursements. (a) On and after the Effective Date, the Existing Letters of
Credit shall be deemed for all purposes, including for purposes of the fees to
be collected pursuant to Section 3.8, and reimbursement of costs and expenses to
the extent provided herein, to be Letters of Credit outstanding under this
Agreement, QFC shall be deemed to be a co-applicant with respect to each such
Existing Letter of Credit, and each such Letter of Credit shall be governed by
the applications and agreements pertaining thereto and by this Agreement. Each
Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the Issuing Lender on the Effective Date a participation in each
Existing Letter of Credit and each drawing thereunder in an amount equal to the
product of (i) such Lender's Pro Rata Share times (ii) the maximum amount
available to be drawn under such Letter of Credit and the amount of such
drawing, respectively. For purposes of subsection 2.1(b) and subsection 2.11(b),
the Existing Letters of Credit shall be deemed to utilize pro rata the
Commitment of each Lender.
(b) Immediately upon the Issuance of each Letter of Credit in
addition to those described in subsection 3.3(a), each Lender shall be deemed
to, and hereby irrevocably and unconditionally agrees to, purchase from the
applicable Issuing Lender a participation in such Letter of Credit and each
drawing thereunder in an amount equal to the product of (i) the Pro Rata Share
of such Lender times (ii) the maximum amount available to be drawn under such
Letter of Credit and the amount of such drawing, respectively.
(c) In the event of any request for a drawing under a Letter of
Credit by the beneficiary or transferee thereof, the applicable Issuing Lender
will promptly notify the Borrower and the Paying Agent. The Borrower shall
reimburse the applicable Issuing Lender prior to 10:00 a.m. (San Francisco
time), on each date that any amount is paid by such Issuing Lender under any
Letter of Credit (each such date, an "Honor Date"), in an amount equal to the
amount so paid by such Issuing Lender. In the event the Borrower fails to
reimburse the applicable Issuing Lender for the full amount of any drawing under
any Letter of Credit by 10:00 a.m. (San Francisco time) on the Honor Date, such
Issuing Lender will promptly notify the Paying Agent and the Paying Agent will
promptly notify each Lender thereof, and the Borrower shall be deemed to have
requested that Base Rate Loans be made by the Lenders to be disbursed on the
Honor Date in the unreimbursed amount of such drawing under such Letter of
Credit, subject to the amount of the unutilized portion of the Revolving
Commitment Amount and subject to the conditions set forth in Section 5.2. Any
notice given by an Issuing Lender or the Paying Agent pursuant to this
subsection 3.3(c) may be oral if immediately confirmed in writing (including by
facsimile); provided that the
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lack of such an immediate confirmation shall not affect the conclusiveness or
binding effect of such notice.
(d) Each Lender shall upon any notice pursuant to subsection 3.3(c)
make available to the Paying Agent for the account of the applicable Issuing
Lender an amount in Dollars and in immediately available funds equal to its Pro
Rata Share of the amount of the drawing, whereupon the participating Lenders
shall (subject to subsection 3.3(e)) each be deemed to have made a Revolving
Loan consisting of a Base Rate Loan to the Borrower in that amount. If any
Lender so notified fails to make available to the Paying Agent for the account
of the applicable Issuing Lender the amount of such Lender's Pro Rata Share of
the amount of the drawing by no later than 12:00 noon (San Francisco time) on
the Honor Date, then interest shall accrue on such Lender's obligation to make
such payment, from the Honor Date to the date such Lender makes such payment, at
a rate per annum equal to the Federal Funds Rate in effect from time to time
during such period. The Paying Agent will promptly give notice of the occurrence
of the Honor Date, but failure of the Paying Agent to give any such notice on
the Honor Date or in sufficient time to enable any Lender to effect such payment
on such date shall not relieve such Lender from its obligations under this
Section 3.3 (provided that no Lender shall be obligated to pay interest pursuant
to the immediately preceding sentence in respect of any date prior to the date
it receives such notice from the Paying Agent).
(e) With respect to any unreimbursed drawing that is not converted
into Revolving Loans consisting of Base Rate Loans to the Borrower in whole or
in part, because of the Borrower's failure to satisfy the conditions set forth
in Section 5.2 or for any other reason, the Borrower shall be deemed to have
incurred from the applicable Issuing Lender an L/C Borrowing in the amount of
such drawing, which L/C Borrowing shall be due and payable on demand (together
with interest) and shall bear interest at a rate per annum equal to the Base
Rate plus 2% per annum, and each Lender's payment to such Issuing Lender
pursuant to subsection 3.3(d) shall be deemed payment in respect of its
participation in such L/C Borrowing and shall constitute an L/C Advance from
such Lender in satisfaction of its participation obligation under this Section
3.3.
(f) Each Lender's obligation in accordance with this Agreement to
make Revolving Loans or L/C Advances, as contemplated by this Section 3.3, as a
result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to any Issuing Lender and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the
applicable Issuing Lender, the Borrower or any other
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Person for any reason whatsoever; (ii) the occurrence or continuance of an
Unmatured Event of Default, an Event of Default or a Material Adverse Effect; or
(iii) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing; provided, however, that each Lender's
obligation to make Revolving Loans under this Section 3.3 is subject to the
conditions set forth in Section 5.2.
3.4 Repayment of Participations. (a) Upon (and only upon) receipt by the
Paying Agent for the account of an Issuing Lender of immediately available funds
from the Borrower (i) in reimbursement of any payment made by such Issuing
Lender under a Letter of Credit with respect to which any Lender has paid the
Paying Agent for the account of such Issuing Lender for such Lender's
participation in such Letter of Credit pursuant to Section 3.3 or (ii) in
payment of interest thereon, the Paying Agent will pay to each Lender, in the
same funds as those received by the Paying Agent for the account of such Issuing
Lender, the amount of such Lender's Pro Rata Share of such funds, and such
Issuing Lender shall receive the amount of the Pro Rata Share of such funds of
any Lender that did not so pay the Paying Agent for the account of such Issuing
Lender.
(b) If the Paying Agent or an Issuing Lender is required at any time
to return to the Borrower, or to a trustee, receiver, liquidator, custodian, or
any official in any Insolvency Proceeding, any portion of the payments made by
the Borrower to the Paying Agent for the account of an Issuing Lender pursuant
to subsection 3.4(a) in reimbursement of a payment made under any Letter of
Credit or interest or fee thereon, each Lender shall, on demand of the Paying
Agent, forthwith return to the Paying Agent or the applicable Issuing Lender the
amount of its Pro Rata Share of any amounts so returned by the Paying Agent or
such Issuing Lender plus interest thereon from the date such demand is made to
the date such amounts are returned by such Lender to the Paying Agent or such
Issuing Lender, at a rate per annum equal to the Federal Funds Rate in effect
from time to time.
3.5 Role of the Issuing Lenders. (a) Each Lender and the Borrower agree
that, in paying any drawing under a Letter of Credit, the applicable Issuing
Lender shall not have any responsibility to obtain any document (other than any
sight draft and certificates expressly required by such Letter of Credit) or to
ascertain or inquire as to the validity or accuracy of any such document or the
authority of the Person executing or delivering any such document.
(b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of any Issuing Lender shall be liable
to any Lender for: (i) any action taken or
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omitted in connection herewith at the request or with the approval of the
Lenders (including the Majority Lenders, as applicable); (ii) any action taken
or omitted in the absence of gross negligence or willful misconduct; or (iii)
the due execution, effectiveness, validity or enforceability of any L/C-Related
Document.
(c) The Borrower hereby assumes all risks of the acts or omissions
of any beneficiary or transferee with respect to its use of any Letter of
Credit; provided that this assumption is not intended to, and shall not,
preclude the Borrower's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of any Issuing Lender, shall be liable or responsible for any of the
matters described in clauses (i) through (vii) of Section 3.6; provided that,
anything in such clauses to the contrary notwithstanding, the Borrower (or the
Subsidiary which was the co-applicant on the applicable Letter of Credit) may
have a claim against an Issuing Lender, and such Issuing Lender may be liable to
the Borrower (or such Subsidiary), to the extent, but only to the extent, of any
direct, as opposed to consequential or exemplary, damages suffered by the
Borrower (or such Subsidiary) which the Borrower (or such Subsidiary) proves
were caused by such Issuing Lender's bad faith, willful misconduct or gross
negligence or such Issuing Lender's grossly negligent or willful failure to pay
under any Letter of Credit after the presentation to it by the beneficiary of a
sight draft and certificate(s) strictly complying with the terms and conditions
of a Letter of Credit. In furtherance and not in limitation of the foregoing:
(i) an Issuing Lender may accept documents that appear on their face to be in
order, without responsibility for further investigation, regardless of any
notice or information to the contrary; and (ii) no Issuing Lender shall be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason.
3.6 Obligations Absolute. The obligations of the Borrower under this
Agreement and any L/C-Related Document to reimburse the applicable Issuing
Lender for a drawing under a Letter of Credit, and to repay any L/C Borrowing
and any drawing under a Letter of Credit converted into Revolving Loans, shall
be unconditional and irrevocable, and shall be paid strictly in accordance with
the terms of this Agreement and each such other L/C-Related Document under all
circumstances, including the following:
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(i) any lack of validity or enforceability of this Agreement
or any L/C-Related Document;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of the Borrower in
respect of any Letter of Credit or any other amendment or waiver of or any
consent to departure from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defense or other
right that the Borrower may have at any time against any beneficiary or
any transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the applicable Issuing
Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C-Related Documents or any
unrelated transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit;
(v) any payment by an Issuing Lender under any Letter of
Credit against presentation of a draft or certificate that does not
strictly comply with the terms of any Letter of Credit; or any payment
made by an Issuing Lender under any Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession, assignee
for the benefit of creditors, liquidator, receiver or other representative
of or successor to any beneficiary or any transferee of any Letter of
Credit, including any such payment arising in connection with any
Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the obligations of the
Borrower in respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing, including any other circumstance
that might otherwise constitute a defense available to, or a discharge of,
the Borrower or a guarantor.
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3.7 Cash Collateral Pledge. If any Letters of Credit remain outstanding
and partially or wholly undrawn as of the Termination Date, then the Borrower
shall Cash Collateralize the L/C Obligations in an amount equal to the maximum
amount then available to be drawn under such Letters of Credit.
3.8 Letter of Credit Fees. (a) The Borrower shall pay to the Paying Agent
for the account of each of the Lenders a letter of credit fee with respect to
the Letters of Credit at a percentage rate per annum equal to the Applicable
Margin for Offshore Rate Loans (as in effect from time to time) of the average
daily maximum amount available to be drawn under the outstanding Letters of
Credit, computed on a quarterly basis in arrears on the last Business Day of
each calendar quarter and on the Termination Date (or such later date on which
the outstanding Letters of Credit shall expire) based upon Letters of Credit
outstanding for the applicable period as calculated by the Paying Agent.
(b) The Borrower shall pay to each Issuing Lender a letter of credit
fronting fee for each Letter of Credit Issued by such Issuing Lender equal to
0.25% per annum of the average daily maximum amount available to be drawn on
such Letter of Credit, computed on the last Business Day of each calendar
quarter and on the Termination Date (or such later date on which such Letter of
Credit shall expire).
(c) The letter of credit fees payable under subsection 3.8(a) and
the fronting fees payable under subsection 3.8(b) shall be due and payable
quarterly in arrears on the last Business Day of each calendar quarter during
which Letters of Credit are outstanding, commencing on the first such quarterly
date to occur after the Effective Date, through the Termination Date (or such
later date upon which all outstanding Letters of Credit shall expire), with the
final payment to be made on the Termination Date (or such later expiration
date).
(d) The Borrower shall pay to each Issuing Lender from time to time
on demand the normal issuance, presentation, amendment and other processing
fees, and other standard costs and charges, of such Issuing Lender relating to
letters of credit as from time to time in effect.
3.9 Uniform Customs and Practice. The Uniform Customs and Practice for
Documentary Credits as published by the International Chamber of Commerce most
recently at the time of issuance of any Letter of Credit shall (unless otherwise
expressly provided in such Letter of Credit) apply to such Letter of Credit.
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ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.1 Taxes. (a) Any and all payments by the Borrowers to each Lender or
Agent under this Agreement and any other Loan Document shall be made free and
clear of, and without deduction or withholding for, any Taxes. In addition, the
Borrowers shall pay all Other Taxes.
(b) Each Borrower agrees to indemnify and hold harmless each Lender
and Agent for the full amount of Taxes or Other Taxes (including any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section)
paid by the Lender or Agent and any penalty, interest, addition to tax or
expense arising therefrom or with respect thereto (except to the extent such
penalty, interest, addition to tax or expense arose from any failure of the
applicable Lender or Agent to promptly pay any Taxes assessed against it).
Payment under this indemnification shall be made within 30 days after the date
the Lender or Agent makes written demand therefor.
(c) If either Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or Agent, then:
(i) the sum payable shall be increased as necessary so that
after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section) such Lender or Agent, as the case may be, receives an amount
equal to the sum it would have received had no such deductions or
withholdings been made;
(ii) such Borrower shall make such deductions
and withholdings; and
(iii) such Borrower shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in accordance
with applicable law.
(d) Within 30 days after the date of any payment by either Borrower
of Taxes or Other Taxes, such Borrower shall furnish the Paying Agent the
original or a copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to the Paying Agent.
(e) No Borrower shall be required to pay an additional amount to, or
indemnify, any Lender or Agent pursuant to this Section 4.1 to the extent that
(i) the obligation to withhold or pay such amount existed on the Initial Date
(as
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hereinafter defined) or (ii) the obligation to withhold or pay such amount would
not have arisen but for the failure of any Agent or such Lender to comply with
the provisions of Section 11.10 of this Agreement. For purposes of this Section
4.1(e), "Initial Date" shall mean (a) in the case of any Agent and any Lender
that is a signatory hereto, the date of this Agreement, (b) in the case of any
Person which subsequently becomes a Lender hereunder, the date of the applicable
Assignment and Acceptance, and (c) in the case of any Participant, the date on
which it becomes a Participant.
(f) If either Borrower is required to pay additional amounts to any
Lender or Agent pursuant to subsection (c) of this Section, then such Lender
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its Lending Office or take other appropriate
action so as to eliminate any such additional payment by such Borrower which may
thereafter accrue, if such change or other action in the judgment of such Lender
is not otherwise disadvantageous to such Lender.
(g) If either Borrower determines in good faith that a reasonable
basis exists for contesting a Tax, the relevant Lender or the Agents, as
applicable, shall cooperate with such Borrower in challenging such Tax at such
Borrower's expense if requested by such Borrower. If any Lender or Agent, as
applicable, receives a refund of a Tax for which a payment has been made by such
Borrower pursuant to this Agreement, or claims any credit, relief or other tax
benefit as a result of the payment of such Tax by either Borrower (a "Tax
Credit"), which refund or Tax Credit in the good faith judgment of such Lender
or Agent, as the case may be, is attributable to such payment made by such
Borrower, then such Lender or Agent, as applicable, shall reimburse to such
Borrower such amount as such Lender or Agent, as applicable, determines to be
the proportion of the Tax Credit or refund as will leave it, after such
reimbursement, in no better or worse position than it would have been in if the
payment had not been required. The Agents and each Lender shall claim any refund
or Tax Credit that it determines is available to it, unless it concludes in its
good faith judgment that it would be adversely affected by making such a claim.
In no event shall the Agents or any Lender be obliged to disclose any
information regarding its tax affairs or computations to either Borrower.
4.2 Illegality. (a) If any Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for such Lender or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by the Lender
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to each Borrower through the Paying Agent, any obligation of that Lender to make
Offshore Rate Loans shall be suspended until the Lender notifies the Paying
Agent and each Borrower that the circumstances giving rise to such determination
no longer exist.
(b) If a Lender determines that the introduction of any Requirement
of Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for such Lender or its applicable Lending Office to maintain any Offshore Rate
Loan, then such Lender shall promptly notify the applicable Borrower and the
Paying Agent and, on the last day of the Interest Period for each applicable
Offshore Rate Loan made by such Lender (or, if earlier, on such date on which
such Lender may not lawfully continue to maintain such Offshore Rate Loan) such
Offshore Rate Loan shall convert to a Base Rate Loan (and, so long as such
circumstances continue, such Lender shall make and maintain Base Rate Loans in
lieu of Offshore Rate Loans to fulfill its obligation to have a Pro Rata Share
of each applicable Borrowing of Offshore Rate Loans).
(c) If the obligation of any Lender to make or maintain Offshore
Rate Loans has been so terminated or suspended, each Borrower may elect, by
giving notice to the Lender through the Paying Agent, that all Loans which would
otherwise be made by such Lender as Offshore Rate Loans shall be instead Base
Rate Loans.
(d) Before giving any notice or demand to the Paying Agent under
this Section, the affected Lender shall designate a different Lending Office
with respect to its Offshore Rate Loans or take other appropriate action if such
designation or other action will avoid the need for giving such notice or making
such demand and will not, in the judgment of such Lender, be illegal or
otherwise disadvantageous to such Lender.
4.3 Increased Costs and Reduction of Return. (a) If any Lender determines
that, due to either (i) the introduction of or any change (other than (x) any
change by way of imposition of or increase in reserve requirements included in
the calculation of the Offshore Rate, (y) any introduction or change covered by
Section 4.1 or (z) any change with respect to a tax imposed on any Lender or
Agent as a result of a present, former or future connection between the
jurisdiction of the government or taxing authority imposing such tax or any
political subdivision or taxing authority thereof or therein and such Lender or
Agent (other than a connection arising solely from such Lender or Agent having
executed, delivered or performed its obligations or received a payment under, or
enforced, this Agreement)) in or in the interpretation of any law or regulation
or (ii) the
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compliance by such Lender with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), in each
case referred to in clause (i) or (ii) above occurring after the date of this
Agreement, there shall be any increase in the cost to such Lender of agreeing to
make or making, funding or maintaining any Offshore Rate Loan or participating
in Letters of Credit, or, in the case of any Issuing Lender, any increase in the
cost to such Issuing Lender of agreeing to issue, issuing or maintaining any
Letter of Credit or of agreeing to make or making, funding or maintaining any
unpaid drawing under any Letter of Credit, then the Borrowers shall be liable
for, and shall from time to time, upon demand (with a copy of such demand to be
sent to the Paying Agent), pay to the Paying Agent for the account of such
Lender, additional amounts as are sufficient to compensate such Lender for such
increased costs.
(b) If any Lender shall have determined that (i) the introduction of
any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, or (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, in each case
occurring after the date of this Agreement, affects or would affect the amount
of capital required or expected to be maintained by such Lender or any
corporation controlling such Lender and (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy) determines that
the amount of such capital is increased as a consequence of its Commitment,
loans, credits or obligations under this Agreement, then, upon demand of such
Lender to the Borrowers through the Paying Agent, the Borrowers shall pay to
such Lender, from time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender for such increase.
(c) The liability of the Borrowers under clauses (a) and (b) above
shall be joint and several.
(d) A Lender seeking compensation under clause (a) or (b) above
shall (except to the extent it is able to determine the actual amount thereof)
use reasonable allocation methods to determine the amount of such compensation.
No Lender may seek compensation under this Section 4.3 unless such Lender is
generally seeking compensation for increased costs from other borrowers in
similar circumstances.
4.4 Funding Losses. Each Borrower shall reimburse each Lender and hold
each Lender harmless from any loss or expense which such Lender may sustain or
incur as a consequence of:
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(a) the failure of such Borrower to borrow, continue or convert to
an Offshore Loan after such Borrower has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/Continuation;
(b) the failure of such Borrower to make any prepayment of an
Offshore Rate Loan in accordance with any notice delivered under Section 2.7;
(c) the prepayment (including pursuant to Section 2.8) or other
payment (including after acceleration thereof) or conversion (including pursuant
to Section 4.2) of an Offshore Rate Loan on a day that is not the last day of
the relevant Interest Period; or
(d) the automatic conversion under Section 2.4 of any Offshore Rate
Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained (but excluding any
lost profits). For purposes of calculating amounts payable by either Borrower to
the Lenders under this Section and under subsection 4.3(a), each Offshore Rate
Loan made by a Lender (and each related reserve, special deposit or similar
requirement) shall be conclusively deemed to have been funded at the IBOR used
in determining the Offshore Rate for such Offshore Rate Loan by a matching
deposit or other borrowing in the interbank eurodollar market for a comparable
amount and for a comparable period, whether or not such Offshore Rate Loan is in
fact so funded.
4.5 Inability to Determine Rates. If the Paying Agent determines in good
faith that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate for any requested Interest Period with respect to
a proposed Offshore Rate Loan, or the Majority Banks advise the Paying Agent
that the Offshore Rate applicable pursuant to subsection 2.10(a) for any
requested Interest Period with respect to a proposed Offshore Rate Borrowing
does not adequately and fairly reflect the cost to such Lenders of funding the
Loans included in such Borrowing, the Paying Agent will promptly so notify the
Borrowers and each Lender. Thereafter, the obligation of the Lenders to make or
maintain Offshore Rate Loans hereunder shall be suspended until the Paying Agent
or the Majority Lenders, as the case may be, revoke(s) such notice in writing.
Upon receipt of such notice, either Borrower may revoke any Notice of Borrowing
or Notice of Conversion/Continuation then submitted by it. If a Borrower does
not revoke such Notice, the Lenders shall make, convert or continue the Loans,
as proposed by such Borrower, in
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the amount specified in the applicable notice submitted by such Borrower, but
such Loans shall be made, converted or continued as Base Rate Loans instead of
Offshore Rate Loans.
4.6 Certificates of Lenders. Any Lender claiming reimbursement or
compensation under this Article IV shall deliver to the Borrowers (with a copy
to the Paying Agent), as soon as practicable after such Lender determines that
it has a basis for such claim, a certificate setting forth in reasonable detail
the basis for such claim, the amount payable to such Lender hereunder and a
reasonable calculation thereof, and such certificate shall be conclusive and
binding on the Borrowers in the absence of manifest error. If a Lender shall
fail to notify the Borrowers of the occurrence of any event or the existence of
any condition which would entitle such Lender to make a claim for reimbursement
or compensation under this Article IV within 90 days following the end of the
month during which such event occurred or such condition arose, then the
Borrowers' liability for any amounts incurred by such Lender as a result of such
event or condition shall be limited to those attributable to the period
occurring subsequent to the 90th day prior to the date upon which such Lender
actually notifies the Borrowers of the occurrence of such event or existence of
such condition.
4.7 Substitution of Lenders. If any Lender is an Affected Lender, the
Borrowers may: (i) request one more of the other Lenders to acquire and assume
all or part of such Affected Lender's Loans and Commitment; and/or (ii)
designate a replacement bank or financial institution satisfactory to the
Borrowers (a "Replacement Lender") to acquire and assume all or a ratable part
of all of such Affected Lender's Loans and Commitment. Any Replacement Lender
shall be an Eligible Assignee, and any designation of a Replacement Lender shall
be subject to the prior written consent of each of the Agents (which consent
shall not be unreasonably withheld or delayed). Each Lender agrees that if it is
an Affected Lender, it will, promptly upon request of the Borrowers, assign all
or the relevant part (as specified by the Borrowers) of its rights and
obligations hereunder to another Lender or a Replacement Lender, as contemplated
above, pursuant to an Assignment and Acceptance and otherwise in accordance with
subsections 12.8(a) and (b) (it being understood that (x) the purchase price for
any such assignment shall be equal to the principal amount of the Loans
assigned, all accrued and unpaid interest thereon and all (or the ratable
portion of) fees owed to such Affected Lender and (y) unless such Affected
Lender wrongfully failed to make any Loan, the Borrower shall reimburse such
Affected Lender for any amount payable under Section 4.4, computed on the
assumption that the Loans assigned by such Affected Lender were prepaid on the
date of such assignment).
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4.8 Survival. The agreements and obligations of the Borrowers in this
Article IV shall survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions of Effectiveness. This Agreement shall become effective
(and the Existing Agreement shall be deemed to have been amended and restated
hereby) on the date that (i) QFC shall have consummated (or shall concurrently
therewith consummate) the acquisition of HMI pursuant to the HMI Acquisition
Agreement; (ii) QFC shall have either issued (or concurrently therewith shall
issue) not less than $125,000,000 of Subordinated Notes or shall have received
(or concurrently therewith shall receive) gross cash proceeds of at least
$150,000,000 from the Contemplated Equity Issuance; (iii) QFC shall have
submitted evidence reasonably satisfactory to the Administrative Agents that all
Debt to be Repaid has been, or concurrently with the effectiveness of this
Agreement will be, paid in full (and that all Liens securing Debt to be Repaid
have been, or concurrently with the effectiveness of this Agreement will be,
released); (iv) the Effective Date shall have occurred on or before April 30,
1997; (v) there has been no material adverse change in, or a material adverse
effect upon, the actual or prospective operations, business properties or
condition (financial or otherwise) of HMI since March 3, 1996; (vi) the
conditions precedent to the making of a Credit Extension set forth in Section
5.2 shall be satisfied; and (vii) the Administrative Agents shall have received
all of the following, in form and substance satisfactory to each of the
Administrative Agents and each Lender, and (except for any Notes) in sufficient
copies for each Lender:
(a) Credit Agreement and Notes. This Agreement (and, if applicable,
any Notes) executed by each party thereto.
(b) Resolutions and Incumbency of the Credit Parties.
(i) Copies of resolutions of the board of directors of each
Credit Party authorizing the transactions contemplated hereby, certified
as of the Effective Date by the Secretary or an Assistant Secretary of
such Credit Party; and
(ii) A certificate of the Secretary or an Assistant Secretary
of each Credit Party certifying the names and true signatures of the
officers of such Credit Party authorized to execute and deliver (and
executing and
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delivering) the Loan Documents to which such Credit Party is a party.
(c) Organization Documents; Good Standing. Each of the following
documents:
(i) the articles or certificate of incorporation and the
bylaws of each Credit Party as in effect on the Effective Date, certified
by the Secretary or an Assistant Secretary of such Credit Party; and
(ii) a good standing and, if applicable, tax good standing
certificate as of a recent date for each Credit Party from the Secretaries
of State (or similar, applicable Governmental Authority) of its state of
incorporation.
(d) Legal Opinions.
(i) an opinion of Bogle & Gates P.L.L.C., Washington counsel
to the Credit Parties, substantially in the form of Exhibit D-1; an
opinion of Paul, Hastings, Janofsky & Walker LLP, California counsel to
HMI, substantially in the form of Exhibit D-2; and an opinion of Rosenberg
& Liebentritt, P.C., special Illinois counsel to the Credit Parties,
substantially in the form of Exhibit D-3; and
(ii) an opinion of Mayer, Brown & Platt, special counsel to
the Administrative Agents, substantially in the form of Exhibit E.
(e) Payment of Fees. Evidence of payment by QFC of all accrued and
unpaid fees, costs and expenses owing under or in connection with this Agreement
and the other Loan Documents to the extent then due and payable on the Effective
Date, together with Attorney Costs of the Administrative Agents payable pursuant
to Section 12.4 to the extent invoiced prior to or on the Effective Date, plus
such additional amounts of Attorney Costs as shall constitute the Administrative
Agents' reasonable estimate of Attorney Costs incurred or to be incurred by them
through the closing proceedings (provided that such estimate shall not
thereafter preclude final settling of accounts between QFC and the
Administrative Agents), including any such costs, fees and expenses arising
under or referenced in Sections 2.11 and 12.4.
(f) Certificate. A certificate signed by a Responsible Officer,
dated as of the Effective Date, stating that:
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(i) the representations and warranties contained in Article VI
are true and correct in all material respects on and as of such date, as
though made on and as of such date;
(ii) no Event of Default or Unmatured Event of Default exists
or would result from the requested Credit Extensions; and
(iii) no event or circumstance has occurred since December 30,
1995 that has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(g) Pledge Agreements. A pledge agreement, substantially in the form
of Exhibit H, issued by each of Parent and QFC (each such pledge agreement,
together with any pledge agreement delivered pursuant to Section 7.13, a "Pledge
Agreement"), together with, in each case, the stock certificates to be pledged
thereunder and stock powers executed in blank and the Intercompany Notes to be
pledged thereunder.
(h) Intercompany Guaranty (QFC). A guaranty, substantially in the
form of Exhibit I (the "Intercompany Guaranty (QFC)"), executed by each
Subsidiary of QFC (other than Parent and any Merger Subsidiary).
(i) Pricing Certificate. A certificate signed by the chief financial
officer of QFC setting forth the pro forma determination (after giving effect to
all transactions consummated on the Effective Date) of the Senior Leverage Ratio
as contemplated by Schedule 1.1(a).
(j) Other Documents. Such other approvals, documents or materials as
either of the Administrative Agents or any Lender may reasonably request.
5.2 Conditions to All Credit Extensions. The obligation of each Lender to
make any Loan (including any Loan to be made on the Effective Date), and the
obligation of the Issuing Lenders to Issue any Letter of Credit (including any
Letter of Credit to be issued on the Effective Date), is subject to the
satisfaction of the following conditions precedent on the relevant Borrowing
Date or Issuance Date:
(a) Notice, Application. In the case of any Loan (other than a
Revolving Loan made pursuant to subsection 2.5(e) or 3.3(c)), the Paying Agent
shall have received (with, in the case of the initial Loans only, a copy for
each Lender) a Notice of Borrowing; or in the case of any Issuance of any Letter
of Credit, the applicable Issuing Lender and the Paying Agent shall
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have received an L/C Application or L/C Amendment Application, as required under
Section 3.2.
(b) Continuation of Representations and Warranties. The
representations and warranties in Article VI shall be true and correct in all
material respects on and as of such Borrowing Date or Issuance Date with the
same effect as if made on and as of such Borrowing Date or Issuance Date (except
to the extent such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct as of such earlier date).
(c) No Existing Default. No Unmatured Event of Default or Event of
Default shall exist or shall result from such Borrowing or such Issuance.
(d) Availability. If any Santee Guaranty is outstanding, after
giving effect to such Credit Extension, the Borrower shall have availability for
additional Revolving Loans and/or Acquisition Loans in an amount at least equal
to the sum of the Liquidity Amount plus the maximum amount which could be
payable under the Santee Guaranty.
Each Notice of Borrowing and L/C Application or L/C Amendment Application
submitted by the Borrowers hereunder shall constitute a representation and
warranty by the applicable Borrower that, as of the date of each such notice and
as of the Borrowing Date or Issuance Date, as applicable, the conditions in this
Section 5.2 are satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants (and, in connection with each Credit
Extension made on or after the Restructuring Effective Date, Holdings represents
and warrants) to the Agents and each Lender that:
6.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets and to carry on its
business;
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(c) is duly qualified as a foreign corporation and is licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification or license; and
(d) is in compliance with all Requirements of Law;
except, in each case, to the extent that the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
6.2 Corporate Authorization; No Contravention. The execution, delivery and
performance by each Credit Party of each Loan Document to which it is party, the
borrowings hereunder by the Borrowers, and the grant of security interests
pursuant to the Pledge Agreements are within the corporate power and authority
of such Credit Party, have been duly authorized by all necessary corporate
action, and do not and will not:
(a) contravene the terms of such Credit Party's Organization
Documents;
(b) conflict with or result in any breach or contravention of, or
result in or require the creation of any Lien under, any document evidencing any
Contractual Obligation to which such Credit Party is a party or any order,
injunction, writ or decree of any Governmental Authority to which such Credit
Party, or any property of such Credit Party, is subject; or
(c) violate any Requirement of Law.
6.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, any Credit Party
of any Loan Document to which it is a party.
6.4 Binding Effect. Each of this Agreement and each other Loan Document to
which any Credit Party is a party constitutes the legal, valid and binding
obligation of such Credit Party, enforceable against such Credit Party in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
6.5 Litigation. Except as specifically disclosed in Schedule 6.5, there
are no actions, suits, proceedings, claims or disputes pending or, to the best
knowledge of the Company,
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threatened, at law, in equity, in arbitration or before any Governmental
Authority, against the Company or any of its Subsidiaries or any of their
respective properties which (a) purport to affect or pertain to this Agreement
or any other Loan Document, or any of the transactions contemplated hereby or
thereby; or (b) would reasonably be expected to have a Material Adverse Effect.
No injunction, writ, temporary restraining order or other order of any nature
has been issued by any court or other Governmental Authority purporting to
enjoin or restrain the execution, delivery or performance of this Agreement or
any other Loan Document, or directing that the transactions provided for herein
or therein not be consummated as herein or therein provided.
6.6 No Default. No Unmatured Event of Default or Event of Default exists
or would result from the incurring of any Obligations by the Borrowers. As of
the Effective Date, neither the Company nor any Subsidiary is in default under
or with respect to any Contractual Obligation in any respect which, individually
or together with all such defaults, could reasonably be expected to have a
Material Adverse Effect, or that would, if such default had occurred after the
Effective Date, create an Event of Default under subsection 9.1(e).
6.7 ERISA Compliance. Except as specifically disclosed in Schedule 6.7:
(a) (i) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law; (ii)
each Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS and, to the best
knowledge of the Company, nothing has occurred which would cause the loss of
such qualification; (iii) the Company and each ERISA Affiliate has made all
required contributions to any Plan subject to Section 412 of the Code; and (iv)
no application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) neither the Company nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any
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liability under Title IV of ERISA with respect to any Pension Plan (other than
premiums due and not delinquent under Section 4007 of ERISA); and (iii) neither
the Company nor any ERISA Affiliate has engaged in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA.
6.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans are to
be used solely for the purposes set forth in and permitted by Section 7.12 and
Section 8.6. Neither the Company nor any Subsidiary is generally engaged in the
business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
6.9 Title to Properties. The Company and each Subsidiary has good record
and marketable title in fee simple to, or valid leasehold interests in, all real
property necessary or used in the ordinary conduct of its businesses, except for
such defects in title or invalidity of leaseholds as could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect. As
of the Effective Date, the property of the Company and its Subsidiaries is
subject to no Liens, other than Permitted Liens.
6.10 Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. As of the date of this Agreement, the Company does not
have knowledge of any proposed tax assessment against the Company or any
Subsidiary that would, if made, have a Material Adverse Effect.
6.11 Financial Condition. (a) The audited consolidated financial
statements of QFC and its Subsidiaries dated December 31, 1995, and the
unaudited consolidated financial statements of QFC and its Subsidiaries dated
September 7, 1996, and the related consolidated statements of income or
operations, shareholders' equity and cash flows for the fiscal periods ended on
such dates:
(i) were prepared in accordance with GAAP consistently applied
throughout the periods covered thereby, except as otherwise expressly
noted therein;
(ii) fairly present the financial condition of QFC and its
Subsidiaries as of the dates thereof and results of operations for the
periods covered thereby (subject, in the case of such unaudited financial
statements, to the
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absence of footnotes and to normal year-end adjustments); and
(iii) except as specifically disclosed in Schedule 6.11, show
all material indebtedness and other liabilities, direct or contingent, of
QFC and its Subsidiaries as of the dates thereof, including liabilities
for taxes, material commitments and material Contingent Obligations.
(b) Since December 31, 1995, there has been no Material Adverse
Effect.
6.12 Environmental Matters. The Company conducts in the ordinary course of
business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof the Company has reasonably concluded that, except as specifically
disclosed in Schedule 6.12, such Environmental Laws and Environmental Claims
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
6.13 Regulated Entities. None of the Company, any Person controlling the
Company, or any Subsidiary is an "Investment Company" within the meaning of the
Investment Company Act of 1940. The Company is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting its ability to incur Indebtedness.
6.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary is
a party to or bound by any Contractual Obligation, or subject to any restriction
in any Organization Document, or any Requirement of Law, which could reasonably
be expected to have a Material Adverse Effect.
6.15 Copyrights, Patents, Trademarks and Licenses, etc. The Company or its
Subsidiaries own or are licensed or otherwise have the right to use all of the
patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person (except for any failure to own, license or otherwise have
the right to use any of the foregoing or any conflict which, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect). To the best knowledge of each of the Borrowers, no slogan or other
advertising device, product, process, method, substance, part or other material
now employed, or now contemplated to be employed, by the Company or any
Subsidiary
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infringes upon any rights held by any other Person (except for any infringement
which could not reasonably be expected to have a Material Adverse Effect).
6.16 Subsidiaries. As of the Effective Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
6.16 and has no equity investments in any other corporation or entity other than
those specifically disclosed in part (b) of Schedule 6.16.
6.17 Insurance. Except as specifically disclosed in Schedule 6.17, the
properties of the Company and each of its Subsidiaries are insured with
financially sound and reputable insurance companies, in such amounts, with such
deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities where
the Company or such Subsidiary operates.
6.18 Full Disclosure. None of the representations or warranties made by
the Company or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Company or any Subsidiary in connection with the Loan
Documents (including the offering and disclosure materials delivered by or on
behalf of the Company to the Lenders prior to the Effective Date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered (it being understood that any financial projections prepared by the
Company or any Subsidiary were based on good faith estimates and assumptions
which the officers of the Company or such Subsidiary believed, at the time of
preparation thereof, reasonable and attainable, but that projections as to
future events are not to be viewed as facts or as guaranties of future
performance and that actual results for the period or periods covered by any
projections may differ from projected results and such differences may be
material).
6.19 Solvency, etc. On the Effective Date (or, in the case of any Person
which becomes a Guarantor after the Effective Date, on the date such Person
becomes a Guarantor), and immediately prior to and after giving effect to the
issuance of each Letter of Credit and each borrowing hereunder and the use of
the proceeds thereof, (a) neither the Company nor any Guarantor will be
"insolvent" as such term is defined in each of the Bankruptcy Code, the Uniform
Fraudulent Transfers Act as in effect in the applicable jurisdiction and the
Uniform Fraudulent Conveyances Act as in effect in the applicable jurisdiction
and (b) each of the Company and each Guarantor, will be able to pay its debts as
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they mature and will have capital reasonably sufficient to carry on its business
as then constituted.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan or
other Obligation for the payment of money shall remain unpaid, or any Letter of
Credit shall remain outstanding, unless the Majority Lenders waive compliance in
writing, the Company agrees that:
7.1 Financial Statements. The Company shall deliver to the Paying Agent,
with sufficient copies for each Lender:
(a) as soon as available, but not later than 90 days after the end
of each fiscal year, a copy of the audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidated and consolidating statements of income or operations, shareholders'
equity and cash flows for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, and accompanied by the opinion of
Deloitte & Touche or another nationally-recognized independent public accounting
firm ("Independent Auditor"), which opinion (x) shall state that such
consolidated financial statements present fairly the financial position of the
Company and its Subsidiaries for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years and (y) shall not be qualified or
limited because of a restricted or limited examination by the Independent
Auditor of any material portion of the Company's or any Subsidiary's records;
and
(b) as soon as available, but not later than 45 days (or, in the
case of the fiscal quarter ending March 22, 1997, 60 days) after the end of each
of the first three fiscal quarters of each fiscal year, a copy of the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such quarter and the related consolidated and consolidating statements of
income, shareholders' equity and cash flows for the period commencing on the
first day and ending on the last day of such quarter, and certified by a
Responsible Officer as fairly presenting, in accordance with GAAP (subject to
normal year-end audit adjustments), the financial position and the results of
operations of the Company and its Subsidiaries.
7.2 Certificates; Other Information. The Company shall furnish to the
Paying Agent, with sufficient copies for each Lender:
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(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the Independent Auditor
stating that in making the examination necessary therefor, nothing came to its
attention that caused it to believe that an Event of Default had occurred with
respect to any of the covenants set forth in Sections 8.9, 8.10, 8.11, 8.12,
8.13 and 8.17 insofar as such covenants relate to accounting, matters, except as
specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a Compliance Certificate executed by
a Responsible Officer;
(c) promptly, copies of all financial statements and reports that
the Company sends to its shareholders, and copies of all financial statements
and regular, periodic or special reports (including Forms 10K, 10Q and 8K) that
the Company or any Subsidiary may make to, or file with, the SEC;
(d) as soon as available, and in any event within 30 days after the
commencement of each fiscal year, the budget for such year and projected income
statements, balance sheets and statements of cash flows as at the end of each
quarter of such fiscal year (including an explanation of the assumptions used in
preparing such budget and projections); and
(e) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as either
Administrative Agent, at the request of any Lender, may from time to time
reasonably request.
7.3 Notices. The Company shall promptly notify each of the Administrative
Agents (and the Paying Agent shall thereupon promptly notify each Lender):
(a) of the occurrence of any Unmatured Event of Default or Event of
Default;
(b) of any matter (including (i) breach or non-performance of, or
any default under, a Contractual Obligation of the Company or any Subsidiary;
(ii) any dispute, litigation, investigation or proceeding between the Company or
any Subsidiary and any Governmental Authority; or (iii) the commencement of, or
any material development in, any litigation or proceeding affecting the Company
or any Subsidiary, including pursuant to any applicable Environmental Laws) that
has resulted or could reasonably be expected to result in a Material Adverse
Effect;
(c) of the occurrence of any of the following events affecting the
Company or any ERISA Affiliate (but in no event
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more than 10 Business Days after such event), and deliver to each of the
Administrative Agents (with sufficient copies for each Lender to the Paying
Agent) a copy of any notice with respect to such event that is filed with a
Governmental Authority and any notice delivered by a Governmental Authority to
the Company or any ERISA Affiliate with respect to such event:
(i) an ERISA Event;
(ii) the adoption of, or the commencement of contributions to,
any Plan subject to Section 412 of the Code by the Company or any ERISA
Affiliate; or
(iii) the adoption of any amendment to a Plan subject to
Section 412 of the Code, if such amendment results in a material increase
in contributions or Unfunded Pension Liability;
(d) of any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated Subsidiaries; and
(e) any notice delivered pursuant to any Santee Agreement to the
effect that a financial covenant has been breached by Santee or a Santee Owner
or a price adjustment will be applicable as a result of a failure by Santee to
maintain the Santee Debt Service Coverage Ratio or the Santee Fixed Charge
Coverage Ratio.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary has taken or proposes to take with respect thereto. Each notice under
subsection 7.3(a) shall describe with particularity any and all clauses or
provisions of this Agreement or other Loan Document that have been breached or
violated. Without limiting any of the foregoing provisions of this Section 7.3,
the Company will promptly notify each Administrative Agent (and the Paying Agent
will thereupon promptly notify each Lender), and, to the extent possible, give
each Administrative Agent at least 10 days' prior written notice of any
contribution failure sufficient to give rise to a Lien under Section 302(f) of
ERISA.
7.4 Preservation of Corporate Existence, Etc. The Company shall, and shall
cause its Subsidiaries to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation (except the extent otherwise permitted herein);
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(b) preserve and maintain in full force and effect all material
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business except
in connection with transactions permitted by Section 8.2;
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill (except to the extent otherwise
permitted herein); and
(d) preserve or renew all of its registered patents, trademarks,
trade names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
7.5 Maintenance of Property. The Company shall, and shall cause its
Subsidiaries to, maintain, and preserve all its property which is used or useful
in its business in good working order and condition, ordinary wear and tear
excepted. The Company and each of its Subsidiaries shall use the standard of
care typical in the industry in the operation and maintenance of its facilities.
7.6 Insurance. The Company shall, and shall cause its Subsidiaries to,
maintain, with financially sound and reputable independent insurers, insurance
with respect to its properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar business,
of such types and in such amounts as are customarily carried under similar
circumstances by such other Persons.
7.7 Payment of Obligations. The Company shall, and shall cause its
Subsidiaries to, pay and discharge as the same shall become due and payable all
their respective material obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets; and
(b) all lawful material claims which, if unpaid, would by law become
a Lien upon its property;
unless, in each case, the same are being contested in good faith by appropriate
proceedings and adequate reserves in accordance with GAAP are being maintained
by the Company or such Subsidiary (it being understood that any failure to pay
any material Indebtedness shall not constitute a breach of this Section 7.7
unless such failure also constitutes an Event of Default under Section 9.1(e)).
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7.8 Compliance with Laws. The Company shall, and shall cause its
Subsidiaries to, comply, in all material respects with all Requirements of Law
of any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist.
7.9 Compliance with ERISA. The Company shall, and shall cause its ERISA
Affiliates to: (a) maintain each Pension Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; and (b) make all required contributions to any Plan subject to
Section 412 of the Code.
7.10 Inspection of Property and Books and Records. The Company shall, and
shall cause its Subsidiaries to, maintain, proper books of record and account,
in which full, true and correct entries in conformity with GAAP consistently
applied shall be made of all financial transactions and matters involving the
assets and business of the Company or each Subsidiary. The Company shall permit,
and shall cause each of its Subsidiaries to permit, agents or representatives of
any Agent or any Lender (at the expense of such Agent or such Lender) to visit
and inspect any of their respective properties, to examine their respective
corporate, financial and operating records, and receive copies thereof or
abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective officers and independent public accountants (it
being understood that the Company shall have the right to participate in any
discussions with such accountants), in each case at reasonable times during
normal business hours and upon reasonable advance notice to the Company;
provided, however, at any time an Event of Default exists, any Agent or any
Lender may do any of the foregoing at the expense of the Company at any time
during normal business hours and without advance notice.
7.11 Environmental Laws. The Company shall, and shall cause its
Subsidiaries to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws, except for any non-compliance which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
7.12 Use of Proceeds. QFC shall use the proceeds of the Loans made on the
Effective Date only for (a) refinancing Debt to be Repaid, (b) the payment of
fees and expenses in connection with this Agreement and (c) working capital and
other general corporate purposes (including the acquisition of HMI pursuant to
the HMI Acquisition Agreement) not in contravention of any Requirement of Law or
of any Loan Document. Thereafter, the applicable Borrower shall use the proceeds
of (i) the Revolving
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Loans and Swingline Loans for working capital and other general corporate
purposes (including Acquisitions permitted pursuant to subsection 8.3(e)) not in
contravention of any Requirement of Law or any Loan Document and (ii)
Acquisition Loans solely to consummate Acquisitions permitted pursuant to
subsection 8.3(e); provided that to the extent that either the Contemplated
Equity Issuance has not occurred or the Subordinated Notes have not been issued
on or prior to the Effective Date, QFC may use up to the Specified Portion (as
defined below) of the Acquisition Facility for the purposes set forth in the
first sentence of this Section 7.12. For purposes of the foregoing, "Specified
Portion" means the lesser of (x) $150,000,000 and (y) $275,000,000 minus the net
cash proceeds from the Contemplated Equity Issuance or the issuance of the
Subordinated Notes (whichever has occurred). Notwithstanding the foregoing,
proceeds of Revolving Loans and/or Acquisition Loans may be used to make
Permitted Santee Investments or to make payments under the Santee Guaranty.
7.13 Further Assurances. The Company shall, and shall cause its
Subsidiaries to, take such actions as may be necessary or as either
Administrative Agent or the Majority Lenders reasonably request from time to
time (including the execution and delivery of guaranties, pledge agreements and
other documents, and the delivery of stock certificates and Intercompany Notes)
in order to ensure that (a) each Subsidiary (other than a Canadian Subsidiary)
of the Company has unconditionally guaranteed the Obligations (except to the
extent it is the primary obligor thereof), (b) the Obligations of the Borrowers
hereunder and under the other Loan Documents are secured by the pledge by each
Borrower of each Intercompany Note issued in favor of such Borrower and (c) the
obligations of each Credit Party under the Loan Documents are secured by the
pledge of all of the capital stock of each Subsidiary of such Credit Party (to
the extent owned directly by such Credit Party); provided that (i) the pledge of
the capital stock of any Canadian Subsidiary shall be limited to 65% of the
outstanding capital stock of such Canadian Subsidiary and (ii) QFC shall not be
required to pledge the stock of Parent or any Merger Subsidiary so long as such
entities have no material assets and engage in no material business (other than
effectuating the Restructuring and, in the case of Parent, issuing the Parent
Guaranty). Notwithstanding anything to the contrary set forth above, with
respect to any Person that is the subject of a tender offer initiated by the
Company or any of its Subsidiaries with the intended result that the Company or
such Subsidiary, as applicable, acquire a sufficient interest in such Person to
effectuate a squeeze-out merger, such Person shall not be required to guaranty
the Obligations or pledge any capital stock until the earlier of (x) 30 days
after the acquisition of such sufficient interest and (y) the completion of such
squeeze-out merger. Contemporaneously with the execution and delivery of any
guaranty, pledge agreement or other document required to
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comply with the foregoing provisions of this Section 7.13, the Company shall, or
shall cause the applicable Subsidiary to, deliver all resolutions, opinions and
corporate documents as either Administrative Agent or the Majority Lenders may
reasonably request to confirm the enforceability of such document and the
perfection of the security interest created thereby, if applicable.
7.14 Interest Rate Protection. If Subordinated Notes in a principal amount
not less than $125,000,000 are not issued within 180 days after the Effective
Date, then no later than such 180th day the Company shall enter into one or more
interest rate protection agreements reasonably acceptable to the Administrative
Agents with respect to a notional principal amount of not less than $125,000,000
(less the sum of the amount of gross cash proceeds in excess of $150,000,000
received from any offering of Shares by the Company and the gross cash proceeds
of any issuance of Subordinated Notes, in either case, received on the Effective
Date or during the 180-day period thereafter).
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan or
other Obligation for the payment of money shall remain unpaid or any Letter of
Credit shall remain outstanding, unless the Majority Lenders waive compliance in
writing, the Company covenants as follows:
8.1 Limitation on Liens. The Company shall not, and shall not permit any
Subsidiary to, directly or indirectly, make, create, incur, assume or permit to
exist any Lien upon or with respect to any part of its property, whether now
owned or hereafter acquired, other than the following ("Permitted Liens"):
(a) any Lien existing on property of the Company or any Subsidiary
on the Effective Date and set forth on Schedule 8.1 securing Indebtedness
outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that non-payment thereof is permitted by Section 7.7, provided that no notice of
lien has been filed or recorded under the Code or any other Requirement of Law;
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(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which are not delinquent or remain payable without penalty or which
are being contested in good faith and by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the property
subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(f) Liens on property of the Company or its Subsidiaries securing
(i) the non-delinquent performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, (ii) contingent obligations on
surety bonds (other than appeal bonds or other bonds relating to litigation),
and (iii) other non-delinquent obligations of a like nature, in each case
incurred in the ordinary course of business, provided all such Liens in the
aggregate would not (even if enforced) reasonably be expected to have a Material
Adverse Effect;
(g) Liens consisting of judgment or judicial attachment liens and
Liens securing appeal bonds and other bonds relating to litigation, provided
that the enforcement of such Liens is effectively stayed and all such liens in
the aggregate at any time outstanding for the Company and its Subsidiaries do
not exceed $15,000,000;
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, do not materially interfere with the financial condition, properties,
prospects or ordinary conduct of the businesses of the Company and its
Subsidiaries taken as a whole;
(i) Liens on real property acquired after the Effective Date
securing Indebtedness permitted by subsection 8.4(e);
(j) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the FRB and (ii) such deposit account is not
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intended by the Company or any Subsidiary to provide collateral to such
depository institution;
(k) Liens on inventory (i) that is in the possession or control of a
wholesaler or supplier, (ii) has not been delivered to or paid for by the
Company or any Subsidiary and (iii) for which neither the Company nor any
Subsidiary has any obligation to make any payment until such delivery is made
and accepted;
(l) Liens on assets of Subsidiaries of the Company which become
Subsidiaries after the Effective Date or Liens on assets acquired by the Company
or any of its Subsidiaries after the Effective Date; provided that (i) such
Liens were in existence at the time such Subsidiary became a Subsidiary or at
the time such assets were acquired and (ii) such Liens were not created in
contemplation of the transaction pursuant to which such Subsidiary became a
Subsidiary or in contemplation of the acquisition of such assets;
(m) Liens on personal property of the Company and its Subsidiaries
(other than the capital stock of any Subsidiary or any Intercompany Note)
securing Indebtedness permitted by subsection 8.4(d);
(n) Liens on the capital stock of Santee or on the equity interest
in Santee Holdings granted to secure obligations of Santee under the Santee Debt
Placement Agreement;
(o) Liens arising in connection with the refinancing of Indebtedness
secured by Liens described in clauses (a) or (l) above, provided that there is
no increase in the principal amount of such Indebtedness and such Liens do not
extend to any additional property; and
(p) other Liens (other than Liens on the capital stock of any
Subsidiary or any Intercompany Note) securing obligations not in excess of
$1,000,000.
8.2 Consolidations and Mergers. The Company shall not, and shall not
permit any Subsidiary to, merge, consolidate with or into, or convey, transfer,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to or in favor of any Person, or make any Acquisition
except:
(a) any Subsidiary may merge or consolidate with the Company,
provided that the Company shall be the continuing or surviving corporation, or
with any one or more Subsidiaries, provided that if any transaction shall be
between a Subsidiary
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and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be the
continuing or surviving corporation;
(b) any Subsidiary may sell all or substantially all of its assets
(upon voluntary liquidation or otherwise) to the Company or another Subsidiary;
(c) the Company or any Subsidiary may sell assets so long as the
proceeds thereof are, to the extent applicable, applied in accordance with
Sections 2.6 and 2.8;
(d) the Company and its Subsidiaries may enter into the transactions
described in clause (i) of the definition of Restructuring Effective Date; and
(e) the Company or any Subsidiary may make Acquisitions permitted by
subsection 8.3(e).
Notwithstanding anything to the contrary set forth above, neither QFC nor
HMI shall sell all or a substantial part of the assets owned by such entity on
the Effective Date (it being understood that each such entity may sell inventory
in the ordinary course of business).
8.3 Loans and Investments. The Company shall not, and shall not permit any
Subsidiary to, make or permit to exist any Investment in any Person, except for:
(a) any Investment existing on the Effective Date and listed on
Schedule 8.3;
(b) Investments in cash equivalents and short term marketable debt
securities;
(c) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business;
(d) subject to Section 7.13, Investments in Subsidiaries and
Investments by Subsidiaries in the Company;
(e) Investments incurred in order to consummate Acquisitions,
provided that (i) no Unmatured Event of Default or Event of Default exists or
will result therefrom, (ii) after giving effect to such Acquisition, the unused
portion of the Revolving Commitment Amount will be not less than the Liquidity
Amount, (iii) after giving effect to such Acquisition, (A) the Line of Business
Percentage for the most recently-ended Computation Period (calculated on a pro
forma basis as if such Acquisition had occurred at the beginning of such
Computation Period) shall be at least 80% and (B) the Company would have been
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in compliance on a pro forma basis, after giving effect to such Acquisition (as
if such Acquisition had occurred, and any related Indebtedness had been assumed
or incurred, on the first day of the most recently-ended Computation Period)
with Sections 8.10, 8.11 and 8.12 as of such most recently-ended Computation
Period; provided that for purposes of testing compliance herewith, the
"Permitted Ratio" for the applicable period as set forth in each of Sections
8.11 and 8.12, shall be reduced by 0.25, (iv) the aggregate total consideration
paid (including cash consideration paid, Indebtedness created or assumed and
equity issued) after the Effective Date in connection with (A) all Acquisitions
(including such proposed Acquisition) shall not exceed $750,000,000 and (B) all
Canadian Acquisitions (including, if applicable, such proposed Acquisition)
shall not exceed $75,000,000 (it being understood that Canadian Acquisitions
shall be the only permitted Foreign Acquisitions); (v) if Z/C and its Affiliates
do not own at least 10% of each class of Voting Stock of the Company, the board
of directors of any entity proposed to be acquired has not announced that it
will oppose such Acquisition and has not commenced any litigation which alleges
that such Acquisition violates, or will violate, any Requirement of Law or any
Contractual Obligation of such entity, and (vi) if the total consideration to be
paid in connection with such proposed Acquisition exceeds $25,000,000, the
Company shall have delivered to the Administrative Agents a certificate setting
forth calculations demonstrating compliance with the requirements set forth in
clauses (ii) and (iii) above;
(f) Permitted Santee Investments;
(g) Contingent Obligations permitted by Section 8.7;
(h) extensions of credit in connection with sales of assets outside
the ordinary course of business in an aggregate maximum amount not to exceed
$10,000,000 at any time outstanding; provided that such Investments may exceed
$10,000,000 so long as such excess would be permitted under clause (i) below;
and
(i) other Investments, in addition to those described in clauses (a)
through (h) above, (including Investments described in clause (h) above in
excess of $10,000,000) in and to other Persons in an aggregate maximum
outstanding amount not at any time to exceed $25,000,000; provided that no
Investments of the type described in clauses (e) or (f) above shall be permitted
pursuant to this clause (i).
8.4 Limitation on Funded Debt. The Company shall not, and shall not permit
any Subsidiary to, create, incur, assume, permit to exist, or otherwise become
or remain directly or indirectly liable with respect to, any Funded Debt,
except:
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(a) Funded Debt incurred pursuant to this Agreement and the other
Loan Documents;
(b) Subordinated Debt;
(c) Funded Debt set forth on Schedule 8.4; provided that all Debt to
be Repaid shall be paid in full on the Effective Date;
(d) Funded Debt not exceeding $15,000,000 in the aggregate at any
time outstanding secured by Liens on personal property;
(e) Funded Debt secured by mortgages on real property and Funded
Debt of the type described in clause (f) of the definition of Indebtedness, in
each case incurred after the Effective Date, not exceeding $125,000,000 in the
aggregate at any time outstanding; provided that not more than $25,000,000 of
the principal amount of all such Funded Debt shall be payable before the
scheduled Termination Date;
(f) Funded Debt assumed or created in connection with Acquisitions
permitted by subsection 8.3(e); provided that no more than $25,000,000 of Funded
Debt may be assumed or created in connection with any such Acquisition or series
of related Acquisitions unless approved by the Majority Lenders;
(g) Guaranty Obligations of the Company or any Subsidiary with
respect to Indebtedness incurred by Santee; provided that any such Guaranty
Obligations shall be on terms and conditions substantially consistent with those
set forth in Schedule 1.1(g) and the aggregate amount of such Guaranty
Obligations (including amounts previously paid thereunder) shall not exceed
$80,000,000 minus the amount of all Investments described in clause (z) of the
definition of Permitted Santee Investments and the amount of any Comfort Letter
Debt;
(h) Funded Debt owed to the Company or any Subsidiary (subject, if
applicable, to Section 7.13);
(i) Funded Debt which constitutes a Contingent Obligation permitted
by subsection 8.7(h); and
(j) renewals, extensions, refinancings and refundings of Funded Debt
permitted pursuant to this Section 8.4; provided that, in the case of capital
lease obligations referred to in clause (c) and other Funded Debt referred to in
clause (f), there is no increase in the outstanding principal thereof and the
terms and conditions thereof are no less favorable to the Lenders than the
existing terms and conditions of such original Funded Debt.
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Notwithstanding the foregoing provisions of this Section 8.4, neither the
Company nor any Subsidiary shall incur any Funded Debt (other than the
Subordinated Notes) of the type described in clause (b) or (e) if, after giving
effect to the incurrence of such Funded Debt, (A) an Unmatured Event of Default
or Event of Default would exist or (B) on a pro forma basis, after giving effect
to the incurrence of such Funded Debt (as if such Funded Debt had been incurred
on the first day of the most recently-ended Computation Period), the Company
would not have been in compliance with Sections 8.10 through 8.13 as of such
most recently-ended Computation Period.
8.5 Transactions with Affiliates. The Company shall not, and shall not
permit any Subsidiary to, enter into any transaction (other than the
transactions contemplated by the Santee Agreements) with any Affiliate of the
Company (other than the Company or a Subsidiary), except upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than would
obtain in a comparable arm's-length transaction with a Person not an Affiliate
of the Company or such Subsidiary.
8.6 Margin Stock. The Company shall not permit more than 25% of the value
of the assets of the Company and its Subsidiaries to constitute Margin Stock.
8.7 Contingent Obligations. The Company shall not, and shall not permit
any Subsidiary to, create, incur, assume or permit to exist any Contingent
Obligations except:
(a) endorsements for collection or deposit in the ordinary course of
business;
(b) Swap Contracts entered into in the ordinary course of business
as bona fide hedging transactions;
(c) Contingent Obligations of the Company and its Subsidiaries
existing as of the Effective Date and listed in Schedule 8.7;
(d) Guaranty Obligations to the extent permitted by Section 8.4;
(e) Contingent Obligations of HMI arising under the Product Purchase
Agreement;
(f) Contingent Obligations arising under any comfort letter
substantially in the form set forth on Schedule 1.1(h) issued by the Company or
any Subsidiary in favor of any working capital lender (or, prior to the issuance
of Indebtedness under the Santee Debt Placement Agreement, any lender) to
Santee, provided that the aggregate amount of Indebtedness of Santee
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benefitting from such comfort letters shall not at any time exceed (x) prior to
the issuance of Indebtedness under the Santee Debt Placement Agreement,
$30,000,000 minus the amount of all advance payments made to Santee for product
purchases in excess of $6,000,000, and (y) thereafter, $10,000,000;
(g) subordinated Guaranty Obligations arising under the Subordinated
Note Indenture or any supplement thereto; and
(h) other Contingent Obligations (other than letters of credit) not
at any time exceeding in the aggregate $15,000,000.
8.8 Amendments to Certain Documents. The Company will not, and will not
permit any Subsidiary to, make or agree to any amendment to or modification of,
or waive any of its rights under, the HMI Acquisition Agreement, the
Subordinated Note Indenture or any other instrument or document evidencing or
governing Subordinated Debt (other than any amendment or modification to cure
any ambiguity, to correct or supplement any provision thereof which may be
inconsistent with any other provision thereof or to make any other technical
amendment thereto which, in any such case, is not material and, in any event, is
not adverse to the interests of the Lenders or any other amendment or
modification which is not material or not adverse to the interests of the
Lenders).
8.9 Restricted Payments. The Company shall not, and not permit any
Subsidiary to, (a) declare or pay any dividends on any of its capital stock, (b)
purchase or redeem any such stock or any warrants, options or other rights in
respect of such stock, (c) make any other distribution to shareholders, (d)
prepay, purchase, defease or redeem any Subordinated Debt or (e) set aside funds
for any of the foregoing; provided that:
(i) any Subsidiary may declare and pay dividends to any Credit
Party;
(ii) the Company may declare and make dividend payments or other
distributions payable solely in Shares;
(iii) the Company may purchase, redeem or otherwise acquire Shares
or warrants or options to acquire Shares (A) with the proceeds received
from the substantially concurrent issue of new Shares and (B) so long as
no Event of Default exists and is continuing or would result therefrom,
from officers and other employees of the Company or any of its
Subsidiaries in connection with incentive and compensation programs in an
aggregate amount not exceeding $2,500,000 in any fiscal year; and
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(iv) so long as no Event of Default or Unmatured Event of Default
exists or would result therefrom, the Company may declare and pay cash
dividends to its stockholders or purchase, redeem or otherwise acquire
shares of its capital stock or warrants, rights or options to acquire such
shares, or prepay or redeem (or permit QFC or Holdings to prepay or
redeem) any Subordinated Debt, so long as immediately after giving effect
thereto, the aggregate amount of all payments made in connection with the
foregoing (excluding any payments permitted by clause (iii) above) will
not exceed the sum of (A) $15,000,000 plus (B) the Specified Percentage
(as defined below) of Net Income for each fiscal year ending on or after
December 27, 1997 plus (C) 100% of net cash proceeds received from any
issuance of common stock of the Company (other than proceeds from the
Contemplated Equity Issuance except to the extent the net cash proceeds
thereof exceed $144,000,000).
For purposes of clause (iv) above, "Specified Percentage" means, for any
fiscal year, (i) if the Leverage Ratio was greater than 3.0 to 1 as of the last
day of such fiscal year, 25% and (ii) if the Leverage Ratio was equal to or less
than 3.0 to 1 as of the last day of such fiscal year, 50%; provided that if
there was negative Net Income for such fiscal year, the "Specified Percentage"
shall be 100%.
8.10 Interest and Rental Expense Coverage Ratio. The Company shall not
permit the ratio of (a) EBITDA plus consolidated net rent expense of the Company
and its Subsidiaries for any Computation Period to (b) the sum of consolidated
gross interest expense of the Company and its Subsidiaries plus consolidated net
rent expense of the Company and its Subsidiaries for such Computation Period to
be less than the applicable ratio set forth below for such Computation Period:
Computation Permitted
Period Ending Ratio
------------- -----
Second, third and fourth fiscal quarters of
fiscal year 1997 and during fiscal
year 1998 1.75
During fiscal year 1999 2.00
During fiscal year 2000 2.25
Thereafter 2.50.
8.11 Leverage Ratio. The Company shall not permit the Leverage Ratio to be
greater than the applicable ratio set forth below at any time during any period
set forth below:
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Permitted
Period Ratio
------ -----
During fiscal years 1997 and 1998 5.00
During fiscal year 1999 4.75
During fiscal year 2000 4.50
During fiscal year 2001 4.25
Thereafter 4.00.
8.12 Senior Leverage Ratio. The Company shall not permit the Senior
Leverage Ratio to be greater than the applicable ratio set forth below at any
time during any period set forth below:
Permitted
Period Ratio
------ -----
During fiscal year 1997 4.00
During fiscal years 1998 and 1999 3.75
During fiscal year 2000 3.50
During fiscal year 2001 3.25
Thereafter 3.00.
8.13 Net Worth. The Company shall not at any time permit its consolidated
shareholders' equity to be less than the sum of (a) $65,000,000 plus (b) 75% of
the net proceeds of all issuances of equity by the Company after December 28,
1996, plus (c) the Specified Percentage (as defined below) of Net Income (but
not less than zero in any fiscal year) for each fiscal year ended on or after
December 27, 1997. For purposes of the foregoing, "Specified Percentage" means,
for any fiscal year, (i) if the Leverage Ratio was greater than 3.0 to 1 as of
the last day of such fiscal year, 75%; and (ii) otherwise, 50%.
8.14 ERISA. The Company shall not, and shall not permit any of its ERISA
Affiliates to, engage in a transaction that could be subject to Section 4069 or
4212(c) of ERISA.
8.15 Line of Business. The Company shall not, and shall not permit its
Subsidiaries to, engage in any business other than retail grocery operations,
the wholesale distribution of groceries, and other businesses reasonably related
thereto.
8.16 Restrictive Agreements. Except (in the case of clause (i) below) for
the Subordinated Note Indenture, the Company shall not, and shall not permit any
Subsidiary to, directly or indirectly enter into or become bound by any
agreement, instrument, indenture or other obligation (other than this Agreement,
the other Loan Documents and, for purposes of clause (i) below, the Santee
Agreements) which could (i) directly or indirectly restrict, prohibit or require
the consent of any Person with respect to the payment of dividends or
distributions
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or the making or repayment of intercompany loans by a Subsidiary of the Company
to the Company (or, to the extent applicable, another Subsidiary), (ii) prohibit
the creation or assumption of any Lien on its properties, revenues or assets,
whether now owned or hereafter acquired, to secure the Obligations (except that
if any property or asset is subject to a Permitted Lien, the documentation
giving rise to such Permitted Lien may restrict the creation or assumption of
another Lien on such property or asset), or (iii) restrict the ability of the
Company or any of its Subsidiaries to amend or modify this Agreement or any
other Loan Document.
8.17 Accounting Changes. The Company shall not, and shall not permit any
Subsidiary to, make any significant change in accounting treatment or reporting
practices, except as required by GAAP, or change the fiscal year of the Company.
8.18 Santee Agreements. The Company will not permit the execution of a
definitive Product Purchase Agreement, or any amendment to the Product Purchase
Agreement, which is substantially inconsistent with the terms and provisions set
forth on Schedule 1.1(d) in any manner which is adverse to the Company, HMI or
any other Subsidiary of the Company. The Company will not permit the execution
of a definitive Santee Debt Placement Agreement, or any amendment to the Santee
Debt Placement Agreement, which is substantially inconsistent with the terms and
provisions set forth on Schedule 1.1(e) in any manner which is adverse to
Santee.
ARTICLE IX
EVENTS OF DEFAULT
9.1 Event of Default. Any of the following shall constitute an "Event of
Default":
(a) Non-Payment. Either Borrower fails to pay, (i) when and as
required to be paid herein, any amount of principal of any Loan or (ii) within
five days after the same becomes due, any interest, fee or any other amount
payable to any Agent or any Lender hereunder or under any other Loan Document.
(b) Representation or Warranty. Any representation or warranty by
the Company or any Subsidiary made or deemed made herein, in any other Loan
Document, or which is contained in any certificate, document or financial or
other statement of the Company, any Subsidiary or any Responsible Officer,
furnished at any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the date made or
deemed made.
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(c) Specific Defaults. Either Borrower fails to perform or observe
any term, covenant or agreement contained in Article VIII (other than Sections
8.1 and 8.5).
(d) Other Defaults. The Company fails to perform or observe any
other term or covenant contained in this Agreement or any other Loan Document,
and such default shall continue unremedied for a period of 30 days (or, in the
case of Section 8.1 or 8.5, 15 days) after the earlier of (i) the date upon
which a Responsible Officer knew of such failure or (ii) the date upon which
written notice thereof is given to the Company by any Agent or any Lender.
(e) Cross-Default. The Company or any Subsidiary (i) fails to make
any payment of principal of or interest on any Indebtedness or Contingent
Obligation having an aggregate principal amount (including amounts owing to all
creditors under any combined or syndicated credit arrangement) of more than
$15,000,000 when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document on
the date of such failure; or (ii) fails to perform or observe any other
condition or covenant, or any other default by the Company or any Subsidiary
shall occur, under any agreement or instrument relating to any such Indebtedness
or Contingent Obligation (other than a Guaranty Obligation), if the effect of
such failure, event or condition is to cause, or to permit the holder or holders
of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, such Indebtedness or Contingent Obligation to be
declared to be due and payable prior to its stated maturity or cash collateral
in respect thereof to be demanded.
(f) Insolvency; Voluntary Proceedings. The Company or any Subsidiary
(i) ceases or fails to be solvent, or generally fails to pay, or admits in
writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing.
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process, is issued
or levied against a substantial part of the Company's or any Subsidiary's
properties, and such proceeding or petition shall not be dismissed, or such
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writ, judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded, within 60 days after commencement, filing or
levy; (ii) the Company or any Subsidiary admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) the Company or any Subsidiary acquiesces in the appointment of a receiver,
trustee, custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its
property or business.
(h) ERISA. (i) An ERISA Event shall occur with respect to a Pension
Plan or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of the Company under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $15,000,000
(or, in the case of a contribution failure sufficient to give rise to a Lien
under Section 302(f) of ERISA, in any amount); or (ii) the Company or any ERISA
Affiliate shall fail to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in
excess of $5,000,000.
(i) Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Company or any Subsidiary involving in the aggregate a liability (to the extent
not covered by independent third-party insurance as to which the insurer does
not dispute coverage) as to any single or related series of transactions,
incidents or conditions, of $15,000,000 or more, and the same shall remain
unsatisfied, unvacated and unstayed pending appeal for a period of 30 days after
the entry thereof.
(j) Non-Monetary Judgments. Any non-monetary judgment, order or
decree is entered against the Company or any Subsidiary which does or would
reasonably be expected to have a Material Adverse Effect, and there shall be any
period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect.
(k) Change of Control. (i) A majority of the Board of Directors of
the Company shall not be Continuing Directors (as defined below), (ii) any
Person or group of Persons (within the meaning of Section 13 or 14 of the
Exchange Act shall acquire beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of the
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outstanding shares of Voting Stock of the Company and, at any time, the
beneficial ownership interest of such Person or group of Persons shall be
greater than the beneficial ownership interest of Z/C and its Affiliates or
(iii) a "Change in Control" as defined in the Subordinated Note Indenture shall
have occurred. For purposes of clause (i) above, "Continuing Directors" means,
as of any date, (A) individuals who on the date one year prior to such date were
members of the Company's (or, during the first year after the Restructuring
Effective Date, QFC's) Board of Directors and (B) any new Directors whose
nomination for election by the Company's shareholders was approved by a vote of
at least a majority of the Directors on the date of such nomination who either
were Directors of the Company (or, during the first year after the Restructuring
Effective Date, of QFC) on the date one year prior to the date of such
nomination or whose nomination for election was previously so approved.
(l) Ownership of Certain Subsidiaries. Prior to the Restructuring
Effective Date, HMI shall fail to be a direct or indirect Wholly-Owned
Subsidiary of QFC; or on and after the Restructuring Effective Date, (i)
Holdings shall fail to be a direct or indirect Wholly-Owned Subsidiary of Parent
or (ii) QFC and HMI shall fail to be direct or indirect Wholly-Owned
Subsidiaries of Holdings.
(m) Guaranties. Any Guaranty shall cease to be in full force and
effect with respect to any applicable Guarantor (other than as a result of a
transaction expressly permitted herein), any Guarantor shall fail to comply with
or to perform any applicable provision of any Guaranty, or any applicable
Guarantor (or any person by, through or on behalf of any applicable Guarantor)
shall contest in any manner the validity, binding nature or enforceability of
any Guaranty.
(n) Collateral Documents, etc. Any Collateral Document shall cease
to be in full force and effect with respect to any applicable Credit Party, any
applicable Credit Party shall fail to comply with or to perform any applicable
provision of any Collateral Document, or any applicable Credit Party (or any
Person by, through or on behalf of any applicable Credit Party) shall contest in
any manner the validity, binding nature or enforceability of any Collateral
Document.
9.2 Remedies. If any Event of Default occurs, the Paying Agent shall, at
the request of, or may, with the consent of, the Majority Lenders do any or all
of the following:
(a) declare the commitment of each Lender to make Loans and any
obligation of the Issuing Lenders to Issue Letters
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of Credit to be terminated, whereupon such commitments and obligation shall be
terminated;
(b) declare an amount equal to the maximum aggregate amount that is
or at any time thereafter may become available for drawing under any outstanding
Letter of Credit (whether or not any beneficiary shall have presented, or shall
be entitled at such time to present, the drafts or other documents required to
draw under such Letter of Credit) to be immediately due and payable, and declare
the unpaid principal amount of all outstanding Loans, all interest accrued and
unpaid thereon, and all other amounts owing or payable hereunder or under any
other Loan Document to be immediately due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Borrowers; and
(c) exercise on behalf of itself and the Lenders all rights and
remedies available to it and the Lenders under the Loan Documents or applicable
law;
provided, however, that upon the occurrence of any event specified in subsection
(f) or (g) of Section 9.1 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each
Lender to make Loans and any obligation of the Issuing Lenders to Issue Letters
of Credit shall automatically terminate and the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Paying Agent,
any Issuing Lender or any Lender.
9.3 Rights Not Exclusive. The rights provided for in this Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
right, power, privilege or remedy provided by law or in equity, or under any
other instrument, document or agreement now existing or hereafter arising.
ARTICLE X
PARENT GUARANTY PROVISIONS
10.1 Parent Guaranty. Parent hereby absolutely, unconditionally and
irrevocably, as primary obligor and not merely as surety, guarantees the full
and prompt payment when due, whether by acceleration or otherwise, and at all
times thereafter, of all obligations (monetary or otherwise) of the Borrowers to
each of the Lenders and the Agents, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due, including (without limitation) all obligations which
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arise out of or in connection with this Agreement, the Notes, the Letters of
Credit or any other Loan Document, in each case as the same may be amended,
modified, extended or renewed from time to time (all such obligations being
herein collectively called the "Guaranteed Obligations").
This Parent Guaranty constitutes a guaranty by Parent of payment when due
and not of collection, and Parent specifically agrees that it shall not be
necessary or required that the Agents or any Lender exercise any right, assert
any claim or demand or enforce any remedy whatsoever against the Borrowers (or
any other Person) before or as a condition to the obligations of Parent
hereunder.
10.2 Acceleration of Parent Guaranty. Parent agrees that, in the event of
any Event of Default under subsection 9.1(f) or (g) of this Agreement, and if
such event shall occur at a time when any of the Guaranteed Obligations are not
then due and payable, Parent shall pay to the Paying Agent for the account of
the Agents and the Lenders forthwith the full amount which would be payable
hereunder by Parent if all Obligations (including contingent obligations with
respect to Letters of Credit) were then due and payable.
10.3 Parent Guaranty Absolute, etc. This Parent Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment by Parent, and shall remain in full force and effect until all
Guaranteed Obligations have been paid in full, finally and indefeasibly, all
other obligations of Parent hereunder shall have been paid in full, finally and
indefeasibly, and the Commitments, the Letters of Credit and any other
commitments by the Lenders or the Agents to the Borrowers shall have terminated.
Parent guarantees that the Guaranteed Obligations shall be paid strictly in
accordance with the terms of this Agreement and each other Loan Document under
which they arise, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of any
Agent or any Lender with respect thereto. The creation or existence from time to
time of additional Guaranteed Obligations to the Agents or the Lenders or any of
them is hereby authorized, without notice to Parent, and shall in no way impair
the rights of the Agents or the Lenders or the obligations of Parent under this
Parent Guaranty, including Parent's guaranty of such additional Guaranteed
Obligations. The liability of Parent under this Parent Guaranty shall be
absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of this
Agreement, any Note or any other Loan Document;
(b) the failure of any Agent or any Lender
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(i) to assert any claim or demand or to enforce any right or
remedy against the Borrowers or any other Person (including any
other guarantor) under the provisions of this Agreement, any Note,
any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other
guarantor of, or collateral securing, any Guaranteed Obligations;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other
extension, compromise or renewal of any Guaranteed Obligation;
(d) any reduction, limitation, impairment or termination of any
Guaranteed Obligations for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to
(and Parent hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Guaranteed Obligations;
(e) any amendment to, rescission, waiver, or other modification of,
or any consent to departure from, any of the terms of this Agreement, any
Note or any other Loan Document;
(f) (i) any addition, exchange, release, surrender or non-perfection
of any collateral or (ii) any amendment to or waiver or release or
addition of, or consent to departure from, any other guaranty held by any
Agent or any Lender, securing or supporting any of the Guaranteed
Obligations; or
(g) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, Parent, the
Borrowers, any surety or any guarantor (other than the defense of
payment).
10.4 Reinstatement, etc. Parent agrees that this Parent Guaranty shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment (in whole or in part) of any of the Guaranteed Obligations is
rescinded or must otherwise be restored by any Agent or any Lender, upon the
insolvency, bankruptcy or reorganization of either Borrower, any other Person or
otherwise, as though such payment had not been made.
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10.5 Waiver, etc. Parent hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Parent Guaranty and any requirement that any Agent or any
Lender protect, secure, perfect or insure any security interest or Lien, or any
property subject thereto, or exhaust any right or take any action against the
Borrowers or any other Person (including any other guarantor) or entity or any
collateral securing any Guaranteed Obligations.
10.6 Delay of Subrogation. Notwithstanding any payment made by or for the
account of Parent pursuant to this Parent Guaranty, Parent shall not be
subrogated to any right of the Agent or any Lender until such time as the Agents
and the Lenders have received final payment in cash of the full amount of all
Guaranteed Obligations and all other obligations of Parent hereunder.
10.7 Binding on Successors, Transferees and Assigns; Assignment of Parent
Guaranty. This Parent Guaranty shall be binding upon Parent and its successors,
transferees and assigns, and all references herein to a Borrower or to Parent
shall be deemed to include any of such Person's successor or successors, whether
intermediate or remote. Any Lender may from time to time, to the extent and in
the manner provided in Section 12.8 of this Agreement, without notice to Parent,
assign or transfer any or all of the Guaranteed Obligations or any interest
therein; and, notwithstanding any such assignment or transfer or any subsequent
assignment or transfer thereof, such Guaranteed Obligations shall be and remain
Guaranteed Obligations for purposes of this Parent Guaranty, and each and every
immediate and successive assignee or transferee of any of the Guaranteed
Obligations or of any interest therein shall, to the extent of the interest of
such assignee or transferee in the Guaranteed Obligations, be entitled to the
benefits of this Parent Guaranty and shall be protected to the same extent as if
such assignee or transferee were an original Lender.
10.8 No Waiver; Remedies; Security. In addition to, and not in limitation
of, Section 10.3 and Section 10.5, no failure on the part of any Agent or any
Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
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ARTICLE XI
THE AGENTS
11.1 Appointment and Authorization. (a) Each Lender hereby irrevocably
(subject to Section 11.9) appoints, designates and authorizes each Agent to take
such action on its behalf under the provisions of this Agreement and each other
Loan Document and to exercise such powers and perform such duties as are
expressly delegated to such Agent by the terms of this Agreement or any other
Loan Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, no Agent shall have any duties or
responsibilities, except those expressly set forth herein, nor shall any Agent
have or be deemed to have any fiduciary relationship with any Lender or any
other Agent, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against any Agent.
(b) Each Issuing Lender shall act on behalf of the Lenders with
respect to any Letter of Credit Issued by it and the documents associated
therewith until such time and except for so long as the Paying Agent may agree
at the request of the Majority Lenders to act for such Issuing Lender with
respect thereto; provided, however, that each Issuing Lender shall have all of
the benefits and immunities (i) provided to the Agents in this Article XI with
respect to any act taken or omission suffered by such Issuing Lender in
connection with the Letters of Credit Issued by it or proposed to be Issued by
it and the application and agreements for letters of credit pertaining to the
Letters of Credit as fully as if the term "Agent", as used in this Article XI,
included such Issuing Lender with respect to such act or omission, and (ii) as
additionally provided in this Agreement with respect to such Issuing Lender.
11.2 Delegation of Duties. Each Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. No Agent shall be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
11.3 Liability of Agents. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the
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Lenders for any recital, statement, representation or warranty made by the
Company or any Subsidiary or Affiliate of the Company, or any officer thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by any Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document, or for any failure
of the Company or either Borrower or any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent-Related Person shall
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Company or any of the Company's Subsidiaries or
Affiliates.
11.4 Reliance by Agents. (a) Each Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to any Credit Party), independent accountants and other experts selected by such
Agent. Each Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Lenders (or, if expressly
required by the provisions hereof, the Supermajority Lenders or all Lenders) as
it deems appropriate and, if it so requests, it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
As between the Agent and the Lenders, each Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of the Majority
Lenders (or, if expressly required by the provisions hereof, the Supermajority
Lenders or all Lenders), and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Section 5.1, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by any Agent to such Lender for consent,
approval, acceptance or satisfaction, or required thereunder to
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be consented to or approved by or acceptable or satisfactory to such Lender.
11.5 Notice of Default. No Agent shall be deemed to have knowledge or
notice of the occurrence of any Unmatured Event of Default or Event of Default
(except in the case of the Paying Agent, with respect to defaults in the payment
of principal, interest and fees required to be paid to the Paying Agent for the
account of the Lenders) unless such Agent shall have received written notice
from a Lender, another Agent or a Credit Party referring to this Agreement,
describing such Unmatured Event of Default or Event of Default and stating that
such notice is a "notice of default". Each Agent will notify the other Agents
and the Lenders of its receipt of any such notice. The Agents shall take such
action with respect to such Unmatured Event of Default or Event of Default as
may be requested by the Majority Lenders in accordance with Article IX;
provided, however, that unless and until the Agents have received any such
request, each Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Unmatured Event of Default
or Event of Default as it shall deem advisable or in the best interest of the
Lenders.
11.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by any Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Lender. Each Lender represents to
each Agent that it has, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Borrowers
hereunder. Each Lender also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company and
the other Credit Parties. Except for notices, reports and other documents
expressly herein required to be furnished to the Lenders by an Agent, no Agent
shall have any duty or responsibility to provide any Lender with any credit or
other information concerning the business,
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prospects, operations, property, financial and other condition or
creditworthiness of the Company or any other Credit Party which may come into
the possession of any of the Agent-Related Persons.
11.7 Indemnification of Agents. Whether or not the transactions
contemplated hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Borrowers and without limiting the obligation of the Borrowers to do so), pro
rata, from and against any and all Indemnified Liabilities; provided, however,
that no Lender shall be liable for the payment to any Agent-Related Person of
any portion of the Indemnified Liabilities resulting from such Person's bad
faith, gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender shall reimburse each Agent upon demand for its ratable
share of any costs or out-of-pocket expenses (including Attorney Costs) incurred
by such Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that such
Agent is not reimbursed for such expenses by or on behalf of the Borrowers. The
undertaking in this Section shall survive the payment of all Obligations
hereunder and the resignation or replacement of any Agent.
11.8 Agents in Individual Capacity. BofA, Chase and each of their
respective Affiliates may make loans to, issue letters of credit for the account
of, accept deposits from, acquire equity interests in and generally engage in
any kind of banking, trust, financial advisory, underwriting or other business
with the Company and its Subsidiaries and Affiliates as though BofA or Chase, as
the case may be, were not an Agent hereunder, without notice to or consent of
the Lenders. The Lenders acknowledge that, pursuant to such activities, BofA,
Chase or any of their respective Affiliates may receive information regarding
the Company or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such Subsidiary) and
acknowledge that no Agent shall be under any obligation to provide such
information to them. With respect to its Loans, each of BofA and Chase and any
of their respective Affiliates shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not an
Agent-Related Person.
11.9 Successor Agent. Each Agent may, and at the request of the Majority
Lenders shall, resign as an Agent upon 30 days' notice to the Lenders. If the
Paying Agent resigns under this Agreement, then Chase (so long as it is still an
Administrative
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Agent) shall be deemed to have been appointed the successor paying agent;
provided that if Chase declines to serve as successor paying agent or Chase is
the resigning Paying Agent, then the Majority Lenders shall appoint from among
the Lenders a successor paying agent. If no successor paying agent is appointed
prior to the effective date of the resignation of the retiring Paying Agent, the
retiring Paying Agent may appoint, after consulting with the Lenders and the
other Agent (if any), a successor agent from among the Lenders. Any appointment
of a successor paying agent by the Majority Lenders or the retiring Paying Agent
pursuant to either of the two preceeding sentences shall, so long as no Event of
Default or Unmatured Event of Default exists, be subject to the approval of the
Company (which approval shall not be unreasonably withheld or delayed). Upon the
acceptance of its appointment as successor paying agent hereunder, such
successor paying agent shall succeed to all the rights, powers and duties of the
retiring Paying Agent and shall become (unless it already is) an "Administrative
Agent" hereunder, the terms "Paying Agent" and "Administrative Agent" shall mean
and include such successor paying agent and the retiring Paying Agent's
appointment, powers and duties as Paying Agent and Administrative Agent shall be
terminated. After any retiring Agent's resignation hereunder as an Agent, the
provisions of this Article XI and Sections 12.4 and 12.5 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was an
Agent under this Agreement. If the Paying Agent resigns and no successor paying
agent has accepted appointment as the Paying Agent by the date which is 30 days
following the retiring Paying Agent's notice of resignation, the retiring Paying
Agent's resignation shall nevertheless thereupon become effective and the
Lenders shall perform all of the duties of the Paying Agent hereunder until such
time, if any, as the Majority Lenders appoint a successor paying agent as
provided for above. Notwithstanding anything to the contrary set forth above,
BofA may not be removed as an Agent at the request of the Majority Lenders
unless BofA is simultaneously replaced as an Issuing Lender and as Swingline
Lender pursuant to documentation in form and substance reasonably satisfactory
to BofA.
11.10 Withholding Tax. (a) If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Section 1441 or
1442 of the Code, such Lender shall deliver to the Paying Agent and the
Borrowers:
(i) if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly completed
IRS Forms 1001 and W-8 before the payment of any interest in the first
calendar year and (except to the extent it is unable to do so as a result
of a change in law after the date hereof) before the payment of
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any interest in each third succeeding calendar year during which interest
may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form 4224 before
the payment of any interest is due in the first taxable year of such
Lender and (except to the extent it is unable to do so as a result of a
change in law after the date hereof) in each succeeding taxable year of
such Lender during which interest may be paid under this Agreement, and
IRS Form W-9; and
(iii) such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption from,
or reduction of, United States withholding tax.
Each such Lender agrees to notify the Paying Agent and the Borrowers promptly of
any change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of either Borrower to such Lender, such Lender
agrees to notify the Paying Agent and such Borrower of the percentage amount in
which it is no longer the beneficial owner of Obligations of such Borrower to
such Lender. To the extent of such percentage amount, the Paying Agent and the
applicable Borrower will treat such Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claims exemption from United States withholding
tax by filing IRS Form 4224 with the Paying Agent and either Borrower and such
Lender sells, assigns, grants a participation in, or otherwise transfers all or
part of the Obligations of such Borrower to such Lender, such Lender agrees to
undertake sole responsibility for complying with the withholding tax
requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Paying Agent or the applicable Borrower may withhold from
any interest payment to such Lender an amount equivalent to the applicable
withholding tax after taking into account such reduction. If the forms or other
documentation required by subsection (a) of this Section are not delivered to
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the Paying Agent or the applicable Borrower, then the Paying Agent or such
Borrower may withhold from any interest payment to such Lender not providing
such forms or other documentation an amount equivalent to the applicable
withholding tax.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Paying Agent or either
Borrower did not properly withhold tax from amounts paid to or for the account
of any Lender (because the appropriate form was not delivered or was not
properly executed, or because such Lender failed to notify the Paying Agent of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason), such Lender shall
indemnify the Paying Agent or such Borrower fully for all amounts paid, directly
or indirectly, by the Paying Agent or such Borrower as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Paying Agent or such Borrower under
this Section, together with all costs and expenses (including Attorney Costs).
The obligation of the Lenders under this subsection shall survive the payment of
all Obligations and the resignation or replacement of the Paying Agent.
11.11 Collateral Matters.
(a) The Paying Agent is authorized on behalf of all the Lenders,
without the necessity of any notice to or further consent from the Lenders, from
time to time to take any action with respect to any collateral or the Collateral
Documents which may be necessary to perfect and maintain perfected the security
interest in and Liens upon the collateral granted pursuant to the Collateral
Documents.
(b) The Lenders irrevocably authorize the Paying Agent, at its
option and in its discretion, (i) to release any Guarantor (other than the
Company, either Borrower, QFC or HMI) from its obligations under the applicable
Guaranty if such Guarantor ceases to be a Subsidiary as a result of a
transaction permitted by this Agreement and (ii) to release any Lien granted to
or held by the Paying Agent upon any collateral (A) upon termination of the
commitments of the Lenders hereunder and payment in full of all Loans and all
other obligations known to the Paying Agent and payable under this Agreement or
any other Loan Document; (B) constituting property sold or to be sold or
disposed of as part of or in connection with any disposition permitted
hereunder; (C) consisting of an Intercompany Note which has been paid in full;
or (D) if approved, authorized or ratified in writing by the Majority Lenders
or, if required by Section 12.1(e), all the Lenders. Upon request by the Paying
Agent at any time, the Lenders will confirm in writing the Paying Agent's
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authority to release any Guarantor or any particular type or item of Collateral
pursuant to this subsection 11.11(b).
11.12 Other Agents. None of the Lenders identified on the signature pages
of this Agreement or otherwise herein as being a "managing agent" or a
"co-agent" (collectively, the "Other Agents") shall have any right, power,
obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Lenders. Each Lender acknowledges that it has not
relied, and will not rely, on any of the Other Agents in deciding to enter into
this Agreement or in taking or refraining from taking any action hereunder or
pursuant hereto.
ARTICLE XII
MISCELLANEOUS
12.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company or either Borrower therefrom, shall be effective unless
the same shall be in writing and signed by the Majority Lenders (or by the
Administrative Agents at the written request of the Majority Lenders), the
Company and the Borrowers and acknowledged by the Agents, and then any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided that no such waiver, amendment or
consent, unless in writing and signed by the Supermajority Lenders and the
Borrowers and acknowledged by the Agents, shall modify Schedule 2.9 or the terms
of any scheduled reduction of the Acquisition Facility Commitment Amount as set
forth in Section 2.6(b); provided, further, that no such waiver, amendment or
consent shall, unless in writing and signed by all of the Lenders, the Company
and the Borrowers (or the other applicable Credit Parties) and acknowledged by
each Agent, do any of the following:
(a) increase or extend the Commitment of any Lender (or reinstate
any Commitment terminated pursuant to Section 9.2);
(b) extend the final maturity of the Term Loans or, except as set
forth in the first proviso set forth above, postpone or delay any date fixed by
this Agreement or any other Loan Document for any other payment of principal,
interest, fees or other amounts due to the Lenders (or any of them) hereunder or
under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified
herein on, any Loan, or (subject to clause (iv) below) reduce any fees or other
amounts payable hereunder or under any other Loan Document;
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(d) change the aggregate Pro Rata Share which is required for the
Lenders or any of them to take any action hereunder;
(e) release any Guaranty or release all or substantially all of the
collateral granted under any Pledge Agreement; or
(f) amend this Section, or Section 2.15, or any provision herein
providing for consent or other action by all Lenders;
and provided, further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the applicable Issuing Lender in addition to the Majority
Lenders or all the Lenders, as the case may be, affect the rights or duties of
such Issuing Lender under this Agreement or any L/C-Related Document relating to
any Letter of Credit Issued or to be Issued by it, (ii) no amendment, waiver or
consent shall, unless in writing and signed by the Swingline Lender in addition
to the Majority Lenders or all Lenders, as the case may be, affect the rights
and duties of the Swingline Lender under this Agreement, (iii) no amendment,
waiver or consent shall, unless in writing and signed by each Agent in addition
to the Majority Lenders or all the Lenders, as the case may be, affect the
rights or duties of any Agent under this Agreement or any other Loan Document,
and (iv) the Fee Letter may be amended, or rights or privileges thereunder
waived, in a writing executed by the parties thereto.
12.2 Notices. (a) All notices, requests and other communications hereunder
shall be in writing (including, unless the context expressly otherwise provides,
by facsimile transmission, provided that any matter transmitted by the Company
by facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on Schedule 12.2 and (ii) shall be followed
promptly by delivery of a hard copy original thereof) and mailed, faxed or
delivered to the address or facsimile number specified for notices on Schedule
12.2; or, as directed to the Company, either Borrower or the applicable Agent,
to such other address as shall be designated by such party in a written notice
to the other parties, and as directed to any other party, at such other address
as shall be designated by such party in a written notice to the Company, the
Borrowers and each Agent.
(b) All such notices, requests and communications shall, if sent by
overnight delivery, hand delivery or registered or certified mail, be effective
when delivered (or when delivery is refused), and, if faxed, be effective when
received in legible form by facsimile machine; except that notices pursuant to
Article II, III or XI to any Agent shall not be effective until
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actually received by such Agent, and notices pursuant to Article III to any
Issuing Lender shall not be effective until actually received by such Issuing
Lender at the address specified for such Issuing Lender on Schedule 12.2.
(c) Any agreement of any Agent and the Lenders herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Borrowers. The Agents and the Lenders shall be entitled to
rely on the authority of any Person purporting to be a Person authorized by
either Borrower to give such notice, and the Agents and the Lenders shall not
have any liability to such Borrower or any other Person on account of any action
taken or not taken by the Agents or the Lenders in reliance upon such telephonic
or facsimile notice. The obligation of the Borrowers to repay the Loans and L/C
Obligations shall not be affected in any way or to any extent by any failure of
any Agent or any Lender to receive written confirmation of any telephonic or
facsimile notice or the receipt by any Agent or any Lender of a confirmation
which is at variance with the terms understood by such Agent or such Lender to
be contained in the telephonic or facsimile notice.
12.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of any Agent or any Lender, any right, remedy, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.
12.4 Costs and Expenses.
(a) Whether or not the transactions contemplated hereby are
consummated, the Borrowers shall pay or reimburse each of the Agents and the
Arrangers within five Business Days after demand (subject to subsection 5.1(e))
for all reasonable out-of-pocket costs and expenses incurred by such Agent or
Arranger in connection with the development, preparation, syndication,
execution, delivery and administration of, and any amendment, supplement, waiver
or modification to (in each case, whether or not consummated), this Agreement,
any other Loan Document and any other document prepared in connection herewith
or therewith, and the consummation of the transactions contemplated hereby and
thereby, including Attorney Costs incurred by the Agents and the Arrangers with
respect thereto.
(b) The Borrowers shall pay or reimburse each Agent, each Arranger
and each Lender within five Business Days after demand (subject to subsection
5.1(e)) for all costs and expenses (including Attorney Costs) incurred by them
in connection with the enforcement, attempted enforcement or preservation of any
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right or remedy under this Agreement or any other Loan Document during the
existence of an Event of Default or after acceleration of the Loans (including
in connection with any "workout" or restructuring regarding the Loans, and
including in any Insolvency Proceeding or appellate proceeding).
(c) The agreements in this Section shall survive the termination of
the Agreement and payment of all other Obligations.
12.5 Indemnification by Borrowers. Whether or not the transactions
contemplated hereby are consummated, the Borrowers shall indemnify and hold the
Agent-Related Persons and each Lender and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each an
"Indemnified Person") harmless from and against any and all claims, liabilities,
losses, damages (or actions or other proceedings commenced or threatened in
respect thereof) and related expenses (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans, the termination of the Letters of Credit and the
termination, resignation or replacement of any Agent or replacement of any
Lender) be imposed on, incurred by or asserted against any such Person that
arise out of, result from or in any way relate to this Agreement or any other
Loan Document, including with respect to any investigation, litigation or
proceeding (including any Insolvency Proceeding or appellate proceeding) related
to or arising out of this Agreement or the Loans or Letters of Credit or the use
of the proceeds thereof, whether or not any Indemnified Person is a party
thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided that the Borrowers shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities to the extent
resulting from the (x) bad faith, gross negligence or willful misconduct of an
Indemnified Person or (y) in connection with a claim brought by a Credit Party
against such Indemnified Person that has been resolved in favor of such Credit
Party by a final, non-appealable judgment of a court of competent jurisdiction.
The agreements in this Section shall survive the termination of this Agreement
and payment of all other Obligations.
12.6 Payments Set Aside. To the extent that either Borrower makes a
payment to the Agents or the Lenders, or the Agents or the Lenders exercise
their right of set-off, and such payment or the proceeds of such set-off or any
part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by such Agent or such Lender in its discretion) to be repaid to a
trustee, receiver or any other party, in connection with any Insolvency
Proceeding or otherwise,
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then (a) to the extent of such recovery the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such set-off had not
occurred, and (b) each Lender severally agrees to pay to the applicable Agent
upon demand its pro rata share of any amount so recovered from or repaid by such
Agent. The agreements in this Section shall survive the termination of this
Agreement and payment of all other Obligations.
12.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except that neither the Company nor either
Borrower may assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of each Agent and each Lender.
12.8 Assignments, Participations, etc. (a) Any Lender may, subject to the
last sentence of this subsection 12.8(a), with the written consent of the Agents
(which consents shall not be unreasonably withheld or delayed) and, unless an
Event of Default exists under subsection (a), (f) or (g) of Section 9.1 or any
other Event of Default exists which has been continuing for 90 consecutive days,
the Company (which consent of the Company shall not be unreasonably withheld or
delayed), at any time assign and delegate to one or more Eligible Assignees
(provided that no written consent of the Company or the Agents shall be required
in connection with any assignment and delegation by a Lender to an Eligible
Assignee that is an Affiliate of such Lender or to another Lender) (each an
"Assignee") all, or any ratable part of all, of the Loans, the Commitment, the
L/C Obligations and the other rights and obligations of such Lender hereunder,
in a minimum amount of $10,000,000 (or, if less, the amount of such Lender's
Commitment); provided that after giving effect to such assignment, the assigning
Lender retains a Commitment of at least $10,000,000 (unless such Lender's
Commitment is reduced to $0 in connection with such assignment); provided,
further, that the Borrowers and the Agents may continue to deal solely and
directly with such Lender in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee,
shall have been given to the Company and the Agents by such Lender and the
Assignee; (ii) such Lender and the Assignee shall have delivered to the Company
and the Agents an Assignment and Acceptance in the form of Exhibit F
("Assignment and Acceptance") together with any Note or Notes subject to such
assignment and (iii) the assignor Lender or the Assignee shall have paid to the
Paying Agent a processing fee in the amount of $3,500. So long as no Event of
Default exists under subsection (a), (f) or (g) of Section 9.1 or
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any other Event of Default exists which has been continuing for 90 consecutive
days, upon disclosing any non-public information relating to the Company or any
Subsidiary to any prospective assignee (and at least three Business Days before
the date any Lender gives notice of any assignment or delivers any Assignment
and Acceptance referred to above), such Lender shall notify the Company of its
intention to make an assignment (it being understood that failure of a Lender to
comply with its obligations under this sentence shall not, in and of itself,
constitute a reasonable basis to withhold consent to an assignment).
(b) From and after the date that the Paying Agent notifies the
assignor Lender that it has received (and, to the extent required by subsection
12.8(a), the Administrative Agents have given their consent, and have received
the consents of the Borrowers with respect to) an executed Assignment and
Acceptance and payment of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents.
(c) Any Lender may, subject to giving prior written notice to the
Company, at any time sell to one or more Persons not Affiliates of the Company
(a "Participant") participating interests in any Loan, the Commitment of such
Lender and the other interests of such Lender (the "originating Lender")
hereunder and under the other Loan Documents; provided that (i) the originating
Lender's obligations under this Agreement shall remain unchanged, (ii) the
originating Lender shall remain solely responsible for the performance of such
obligations, (iii) the Borrowers and the Agents shall continue to deal solely
and directly with the originating Lender in connection with the originating
Lender's rights and obligations under this Agreement and the other Loan
Documents, and (iv) no Lender shall transfer or grant any participating interest
under which the Participant has rights to approve any amendment to, or any
consent or waiver with respect to, this Agreement or any other Loan Document,
except to the extent such amendment, consent or waiver would be required to be
signed by all Lenders pursuant to Section 12.1. In the case of any such
participation, the Participant shall be entitled to the benefit of Sections 4.1,
4.3, 4.4 and 12.5 as though it were also a Lender hereunder, and if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the
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occurrence of an Event of Default, the Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement.
(d) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and any Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
12.9 Confidentiality. Each Lender agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information provided to such Lender by the
Company or any Subsidiary, or by any Agent on the Company's or such Subsidiary's
behalf, under this Agreement or any other Loan Document, and neither such Lender
nor any of its Affiliates shall use any such information other than in
connection with or in enforcement of this Agreement and the other Loan Documents
or in connection with other business now or hereafter existing or contemplated
with the Company or any Subsidiary, except to the extent such information (i)
was or becomes generally available to the public other than as a result of
disclosure by such Lender or (ii) was or becomes available on a non-confidential
basis from a source other than the Company or a Subsidiary, provided that such
source is not bound by a confidentiality agreement with the Company or any
Subsidiary known to the Lender; provided, however, that any Lender may disclose
such information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Lender is subject or in connection with an
examination of such Lender by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which any Agent or
any Lender, or their respective Affiliates, may be party; (E) to the extent
reasonably required in connection with the exercise of any remedy hereunder or
under any other Loan Document; (F) to such Lender's independent auditors and, to
the extent reasonably necessary in connection with this Agreement, other
professional advisors (subject in each case to the confidentiality restrictions
set forth in this Section 12.9); (G) to any Participant or Assignee, actual or
potential, provided that such Person agrees in writing to keep such information
confidential to the same extent required of the Lenders hereunder; (H) as to any
Lender or its Affiliates, as expressly permitted under the terms of any other
document or
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agreement regarding confidentiality to which the Company or any Subsidiary is
party or is deemed party with such Lender or such Affiliate; and (I) to its
Affiliates (to the extent permitted by applicable law).
12.10 Set-off. In addition to any right or remedy of the Lenders provided
by law, if any amount is due and payable to any Lender hereunder, such Lender is
authorized at any time and from time to time, without prior notice to the
Company or either Borrower, any such notice being waived by the Company and each
Borrower to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, such Lender to or for
the credit or the account of the Company or such Borrower against any amount
owed by the Company or such Borrower, irrespective of whether or not such Agent
or such Lender shall have made demand under this Agreement or any Loan Document.
Each Lender agrees promptly to notify the Company or the applicable Borrower, as
the case may be, and the Paying Agent after any such set-off and application
made by such Lender; provided, however, that the failure to give such notice
shall not affect the validity of such set-off and application.
12.11 Automatic Debits of Fees. With respect to any commitment fee,
arrangement fee, agency fee, letter of credit fee or other fee due and payable
to any Agent, any Issuing Lender, any Lender, the Swingline Lender or the
Arrangers under the Loan Documents, each Borrower hereby irrevocably authorizes
BofA to debit any deposit account of such Borrower with BofA in an amount such
that the aggregate amount debited from all such deposit accounts does not exceed
such fee or other cost or expense. If there are insufficient funds in such
deposit accounts to cover the amount of the fee or other cost or expense then
due, such debits will be reversed (in whole or in part, in BofA's sole
discretion) and such amount not debited shall be deemed to be unpaid. No such
debit under this Section shall be deemed a set-off.
12.12 Notification of Addresses, Lending Offices, Etc. Each Lender shall
notify each Agent in writing of any changes in the address to which notices to
such Lender should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as any Agent shall reasonably request.
12.13 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of which taken together shall be deemed to constitute but one
and the same instrument.
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12.14 Severability. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or such instrument or agreement.
12.15 No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of the Company, the Borrowers, the
Lenders, the Agents and the Agent-Related Persons, and their permitted
successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.
12.16 Subsidiary References. The provisions of this Agreement relating to
Subsidiaries of the Company shall apply only at such times as the Company has
one or more Subsidiaries; and the provision of this Agreement regarding
consolidated financial statements and covenants shall apply only at such times
as the Company has one or more consolidated subsidiaries.
12.17 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND ANY NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
ILLINOIS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR
OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.
EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY ILLINOIS LAW.
12.18 Waiver of Jury Trial. EACH OF THE PARTIES HERETO WAIVES ITS RIGHT TO
A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF
ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY
AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE PARTIES HERETO AGREES THAT ANY
SUCH CLAIM OR CAUSE OF ACTION
107
<PAGE>
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING,
THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENT, RENEWAL,
SUPPLEMENT OR MODIFICATION TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
12.19 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the parties
hereto, and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
12.20 Restructuring Effective Date. All of the parties hereto agree that,
effective upon the Restructuring Effective Date without further act or deed of
any of the parties hereto, (x) Holdings will assume all liabilities and
obligations of QFC with respect to the Revolving Loans, the Swingline Loans, the
Letters of Credit, the L/C Obligations and Acquisition Loans and under the Notes
with respect thereto (and, except to the extent provided in the Intercompany
Guaranty (Holdings), QFC will be released from its obligations with respect
thereto), (y) the commitments of the Lenders to make Revolving Loans, Issue
Letters of Credit and make Acquisition Loans shall be deemed to be extended to
Holdings rather than QFC, and (z) Holdings shall (and hereby agrees that it will
be) the "Borrower" for purposes of all Revolving Loans, Swingline Loans, Letters
of Credit, L/C Obligations, Acquisition Loans and other matters related to or
arising in respect of the commitments to extend credit in the amount of the
Revolving Commitment Amount and the Acquisition Facility Commitment Amount.
12.21 Amendment and Restatement. This Agreement is an amendment and
restatement of the Existing Agreement and, upon the effectiveness hereof
pursuant to Section 5.1, shall replace the Existing Agreement in its entirety
(except that any provision of the Existing Agreement which by its terms survives
the termination thereof shall survive such replacement).
108
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Chicago, Illinois by their proper and duly
authorized officers as of the day and year first above written.
QUALITY FOOD CENTERS, INC.
By: /s/ Marc Evanger
--------------------------------
Title: Vice President, Chief
Financial Officer and
Secretary/Treasurer
QUALITY FOOD HOLDINGS, INC.
By: /s/ Marc Evanger
--------------------------------
Title: Vice President and Chief
Financial Officer
QUALITY FOOD, INC.
By: /s/ Marc Evanger
--------------------------------
Title: Vice President and Chief
Financial Officer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent and Paying
Agent
By: /s/ Eric A. Schubert
--------------------------------
Title:__________________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Issuing Lender and Lender
By: /s/ Eric A. Schubert
--------------------------------
Title:__________________________________
<PAGE>
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: /s/
--------------------------------
Title:__________________________________
THE CHASE MANHATTAN BANK,
as Issuing Lender and Lender
By: /s/
--------------------------------
Title:__________________________________
NATIONSBANK OF TEXAS, N.A., as
Managing Agent and as a Lender
By: /s/
--------------------------------
Title:__________________________________
BANQUE PARIBAS, as Co-Agent and as
a Lender
By: /s/ Gerarld E. O'Keefe
--------------------------------
Title:__________________________________
By: /s/ Clark King III
--------------------------------
Title:__________________________________
CAISSE NATIONALE DE CREDIT
AGRICOLE, S.A., as Co-Agent and as
a Lender
By: /s/ Dean Balice
--------------------------------
Title:__________________________________
FIRST BANK NATIONAL ASSOCIATION, as
Co-Agent and as a Lender
By: /s/ Robert W. Miller
--------------------------------
Title:__________________________________
<PAGE>
PNC BANK, NATIONAL ASSOCIATION, as
Co-Agent and as a Lender
By: /s/
--------------------------------
Title:__________________________________
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Co-Agent and as a
Lender
By: /s/ Adam J. Silver
--------------------------------
Title:__________________________________
THE BANK OF NEW YORK, as Co-Agent
and as a Lender
By: /s/ R. Was Towns
--------------------------------
Title:__________________________________
UNION BANK OF CALIFORNIA, N.A. as
Co-Agent, Issuing Lender and as a
Lender
By: /s/ Richard A. Sutter
--------------------------------
Title:__________________________________
ABN-AMRO BANK N.V.
By: /s/ Christian H. Sievers
--------------------------------
Title:__________________________________
By: /s/ James J. Rice
--------------------------------
Title:__________________________________
THE BANK OF NOVA SCOTIA
By: /s/
--------------------------------
Title:__________________________________
By: /s/
--------------------------------
Title:__________________________________
<PAGE>
CIBC INC.
By: /s/
--------------------------------
Title:__________________________________
DRESDNER BANK AG NEW YORK AND GRAND
CAYMAN ISLAND BRANCHES
By: /s/
--------------------------------
Title:__________________________________
By: /s/
--------------------------------
Title:__________________________________
CREDIT LYONNAIS CHICAGO BRANCH
By: /s/
--------------------------------
Title:__________________________________
KEYBANK NATIONAL ASSOCIATION
By: /s/
--------------------------------
Title:__________________________________
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/
--------------------------------
Title:__________________________________
HARRIS TRUST & SAVINGS BANK
By: /s/
--------------------------------
Title:__________________________________
THE LONG-TERM CREDIT BANK OF JAPAN
LTD. LOS ANGELES AGENCY
By: /s/
--------------------------------
Title:__________________________________
<PAGE>
US BANK OF WASHINGTON, NATIONAL
ASSOCIATION
By: /s/
--------------------------------
Title:__________________________________
<PAGE>
SCHEDULES AND EXHIBITS OMITTED
GUARANTY
THIS GUARANTY dated as of March 19, 1997 is executed in favor of BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, in its capacity as Paying Agent
under the Credit Agreement referred to below (in such capacity, together with
any successor in such capacity, the "Paying Agent"), and the other Agents and
the Lenders under such Credit Agreement.
W I T N E S E T H:
WHEREAS, Quality Food Centers, Inc. ("QFC") is a party to the Amended and
Restated Credit Agreement dated as of March 14, 1997 (as amended or otherwise
modified from time to time, the "Credit Agreement"; terms used but not defined
herein are used as defined in the Credit Agreement) among QFC, Quality Food
Holdings, Inc.("Holdings"), Quality Food, Inc., various financial institutions
(together with their respective successors and assigns, the "Lenders"), Bank of
America National Trust and Savings Association, as Administrative Agent and
Paying Agent, and The Chase Manhattan Bank, as Administrative Agent, pursuant to
which the Lenders have agreed to make loans to, and issue or participate in
letters of credit for the account of, the Borrowers; and
WHEREAS, each of the undersigned will benefit directly or indirectly from
the making of loans to QFC, and the issuance of letters of credit for the
account of QFC, pursuant to the Credit Agreement and, accordingly, is willing to
guaranty the Liabilities (as defined below) as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the undersigned hereby
jointly and severally, unconditionally and irrevocably, as primary obligor and
not merely as surety, guarantees the full and prompt payment when due, whether
by acceleration or otherwise, and at all times thereafter, of all obligations
(monetary or otherwise) of QFC to each Lender and each Agent under or in
connection with the Credit Agreement, the Notes, any other Loan Document, any
other document or instrument executed in connection therewith and any Swap
Contract entered into with any Lender, in each case howsoever created, arising
or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due or to become due (all such obligations being herein
collectively called the "Liabilities"); provided, however, that the liability of
each of the undersigned hereunder, other than Holdings after the Restructuring
Effective Date, shall be limited to the maximum amount of the Liabilities which
such undersigned may guaranty without violating any
<PAGE>
fraudulent conveyance or fraudulent transfer law (plus all costs and expenses
paid or incurred by any Agent or any Lender in enforcing this Guaranty against
such undersigned).
Each of the undersigned agrees that, in the event of the dissolution or
insolvency of QFC or any undersigned, or the inability or failure of QFC or any
undersigned to pay debts as they become due, or an assignment by QFC or any
undersigned for the benefit of creditors, or the occurrence of any other Event
of Default under subsection (f) or (g) of Section 9.1 of the Credit Agreement,
and if such event shall occur at a time when any of the Liabilities may not then
be due and payable, such undersigned will pay to the Paying Agent for the
account of the Lenders forthwith the full amount which would be payable
hereunder by such undersigned if all Liabilities were then due and payable.
This Guaranty shall in all respects be a continuing, irrevocable, absolute
and unconditional guaranty, and shall remain in full force and effect
(notwithstanding, without limitation, the dissolution of any of the undersigned
or that at any time or from time to time no Liabilities are outstanding) until
all Commitments have terminated and all Liabilities have been paid in full.
The undersigned further agree that if at any time all or any part of any
payment theretofore applied by any Agent or any Lender to any of the Liabilities
is or must be rescinded or returned by such Agent or such Lender for any reason
whatsoever (including the insolvency, bankruptcy or reorganization of QFC or any
of the undersigned), such Liabilities shall, for the purposes of this Guaranty,
to the extent that such payment is or must be rescinded or returned, be deemed
to have continued in existence, notwithstanding such application by such Agent
or such Lender, and this Guaranty shall continue to be effective or be
reinstated, as the case may be, as to such Liabilities, all as though such
application by such Agent or such Lender had not been made.
Any Agent or any Lender may, from time to time, at its sole discretion and
without notice to the undersigned (or any of them), take any or all of the
following actions without affecting in any manner the obligations of the
undersigned hereunder: (a) retain or obtain a security interest in any property
to secure any of the Liabilities or any obligation hereunder, (b) retain or
obtain the primary or secondary obligation of any obligor or obligors, in
addition to the undersigned, with respect to any of the Liabilities, (c) extend
or renew any of the Liabilities for one or more periods (whether or not longer
than the original period), alter (subject to agreement with QFC) or exchange any
of the Liabilities, or release or compromise any obligation of any of the
undersigned hereunder or any obligation of any nature of
-2-
<PAGE>
any other obligor with respect to any of the Liabilities, (d) release its
security interest in, or surrender, release or permit any substitution or
exchange for, all or any part of any property securing any of the Liabilities or
any obligation hereunder, or extend or renew for one or more periods (whether or
not longer than the original period) or release, compromise, alter or exchange
any obligations of any nature of any obligor with respect to any such property,
and (e) resort to the undersigned (or any of them) for payment of any of the
Liabilities when due, whether or not such Agent or such Lender shall have
resorted to any property securing any of the Liabilities or any obligation
hereunder or shall have proceeded against any other of the undersigned or any
other obligor primarily or secondarily obligated with respect to any of the
Liabilities.
Each of the undersigned hereby expressly waives: (a) notice of the
acceptance by any Agent or any Lender of this Guaranty, (b) notice of the
existence or creation or non-payment of all or any of the Liabilities, (c)
presentment, demand, notice of dishonor, protest, and all other notices
whatsoever, and (d) all diligence in collection or protection of or realization
upon any Liabilities or any security for or guaranty of any Liabilities.
Notwithstanding any payment made by or for the account of any of the
undersigned pursuant to this Guaranty, the undersigned shall not be subrogated
to any right of any Agent or any Lender until such time as the Agents and the
Lenders shall have received final payment in cash of the full amount of all
Liabilities.
Each of the undersigned further agrees to pay all reasonable expenses
(including the reasonable attorneys' fees and charges) paid or incurred by any
Agent or any Lender in endeavoring to collect the liabilities of such
undersigned hereunder, or any part thereof, and in enforcing this Guaranty
against such undersigned.
The creation or existence from time to time of additional Liabilities to
the Agents or the Lenders or any of them is hereby authorized, without notice to
the undersigned (or any of them), and shall in no way affect or impair the
rights of the Agents or the Lenders or the obligations of the undersigned under
this Guaranty, including each of the undersigned's guaranty of such additional
Liabilities.
Subject to any limitations set forth in the Credit Agreement, any Agent
and any Lender may from time to time, without notice to the undersigned (or any
of them), assign or transfer any or all of the Liabilities or any interest
therein; and, notwithstanding any such assignment or transfer or any subsequent
assignment or transfer thereof, such Liabilities shall be and remain Liabilities
for the purposes of this Guaranty, and
-3-
<PAGE>
each and every such immediate and successive assignee or transferee of any of
the Liabilities or of any interest therein shall, to the extent of the interest
of such assignee or transferee in the Liabilities, be entitled to the benefits
of this Guaranty to the same extent as if such assignee or transferee were an
original Agent or Lender (as the case may be).
No delay on the part of any Agent or any Lender in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by any Agent or any Lender of any right or remedy shall preclude other
or further exercise thereof or the exercise of any other right or remedy; nor
shall any modification or waiver of any provision of this Guaranty be binding
upon the Agents or the Lenders, except as expressly set forth in a writing duly
signed and delivered on behalf of the Paying Agent. No action of any Agent or
any Lender permitted hereunder shall in any way affect or impair the rights of
any Agent or any Lender or the obligations of the undersigned under this
Guaranty. For purposes of this Guaranty, Liabilities shall include all
obligations of QFC to any Agent or any Lender arising under or in connection
with the Credit Agreement, any Note, any other Loan Document, any other document
or instrument executed in connection therewith or any Swap Contract entered into
with any Lender, notwithstanding any right or power of QFC or anyone else to
assert any claim or defense as to the invalidity or unenforceability of any such
obligation, and no such claim or defense shall affect or impair the obligations
of any of the undersigned hereunder.
Pursuant to the Credit Agreement, (a) this Guaranty has been delivered to
the Paying Agent and (b) the Paying Agent has been authorized to enforce this
Guaranty on behalf of itself, each of the other Agents and each of the Lenders.
All payments by the undersigned pursuant to this Guaranty shall be made to the
Paying Agent for the benefit of the Agents and the Lenders.
This Guaranty shall be binding upon the undersigned and the successors and
assigns of the undersigned; and all references herein to QFC and to the
undersigned, respectively, shall be deemed to include any successor or
successors, whether immediate or remote, to such entity. The term "undersigned"
as used herein shall mean all parties executing a counterpart of this Guaranty
and each of them, and all such parties shall be jointly and severally obligated
hereunder.
This Guaranty shall be governed by and construed in accordance with and
governed by the laws of the State of Illinois applicable to contracts made and
to be fully performed in such State. Wherever possible, each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be
-4-
<PAGE>
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Guaranty.
This Guaranty may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed to be an original but all such counterparts shall together
constitute one and the same Guaranty. At any time after the date of this
Guaranty, one or more additional Persons may become parties hereto by executing
and delivering to the Paying Agent a counterpart of this Guaranty. Immediately
upon such execution and delivery (and without any further action), each such
additional Person will become a party to, and will be bound by all of the terms
of, this Guaranty.
This Guaranty may be secured by one or more security agreements, pledge
agreements, mortgages, deeds of trust or other similar documents.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS GUARANTY, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF
THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE PAYING AGENT'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. EACH OF THE UNDERSIGNED HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH OF THE UNDERSIGNED
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, TO THE ADDRESS SET FORTH OPPOSITE ITS SIGNATURE HERETO (OR SUCH
OTHER ADDRESS AS IT SHALL HAVE SPECIFIED IN WRITING TO THE PAYING AGENT AS ITS
ADDRESS FOR NOTICES HEREUNDER) OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF ILLINOIS. EACH OF THE UNDERSIGNED HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE UNDERSIGNED, AND (BY ACCEPTING THE BENEFITS HEREOF) EACH OF THE
AGENTS AND EACH OF THE LENDERS, HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS GUARANTY AND
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING
-5-
<PAGE>
FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
IN WITNESS WHEREOF, this Guaranty has been duly executed and delivered as
of the day and year first above written.
Address: QUALITY FOOD HOLDINGS, INC.
10116 N.E. 8th Street By: /s/ Marc W. Evanger
Bellevue, WA 98009 --------------------------------
Name: Marc W. Evanger
Title: Vice President and Chief
Financial Officer
Address: HUGHES MARKETS, INC.
10116 N.E. 8th Street By: /s/ Marc W. Evanger
Bellevue, WA 98009 --------------------------------
Name: Marc W. Evanger
Title: Vice President
Address: KU ACQUISITION CORPORATION
10116 N.E. 8th Street By: /s/ Marc W. Evanger
Bellevue, WA 98009 --------------------------------
Bellevue, WA 98009 Name: Marc W. Evanger
Title: Vice President
-6-
<PAGE>
Signature page for the Guaranty dated as of March 19,
1997 issued in favor of Bank of America National Trust
and Savings Association, as Paying Agent under the
Amended and Restated Credit Agreement dated as of March
14, 1997 among Quality Food Centers, Inc., Quality Food
Holdings, Inc., Quality Food, Inc., various financial
institutions, Bank of America National Trust and Savings
Association, as Administrative Agent and Paying Agent,
and The Chase Manhattan Bank, as Administrative Agent,
and in favor of the other Agents and the Lenders under
and as defined in such Credit Agreements.
The undersigned is executing a counterpart
hereof for purposes of becoming a party
hereto:
[ADDITIONAL GUARANTOR]
Address: By:_________________________________________
Title:__________________________________
-7-
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT dated as of March 19, 1997 is between QUALITY FOOD,
INC., a Delaware corporation (the "Pledgor"), and BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, in its capacity as Paying Agent under the Credit
Agreement referred to below (in such capacity, the "Paying Agent"):
W I T N E S S E T H:
WHEREAS, Quality Food Centers, Inc., Quality Food Holdings, Inc. and the
Pledgor are parties to an Amended and Restated Credit Agreement dated as of
March 14, 1997 (as amended or otherwise modified from time to time, the "Credit
Agreement"; terms defined in the Credit Agreement are, unless otherwise defined
herein, used herein as defined therein) with various financial institutions,
Bank of America National Trust and Savings Association and The Chase Manhattan
Bank, as Administrative Agents, and the Paying Agent, pursuant to which the
Lenders have agreed to make loans to, and issue letters of credit for the
account of, the Borrowers;
WHEREAS, pursuant to the Credit Agreement, the Pledgor has guaranteed all
obligations of the Borrowers under the Credit Agreement;
WHEREAS, the obligations of the Pledgor under the Credit Agreement are to
be secured pursuant to this Agreement;
NOW, THEREFORE, for and in consideration of any loan, advance or other
financial accommodation heretofore or hereafter made to the Borrowers under or
in connection with the Credit Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. Pledge. To secure the due and punctual payment of the
Liabilities (as hereinafter defined), the Pledgor hereby pledges and assigns to
the Paying Agent for the benefit of the Agents and the Lenders, and hereby
grants to the Paying Agent for the benefit of the Agents and the Lenders a
security interest in, the following:
(i) all of the shares of stock described on Schedule I hereto (all
such shares, together with other shares delivered or required to be
delivered hereunder are herein called the "Pledged Shares") and the
certificates representing the Pledged Shares, and all cash, securities,
dividends, rights and other property at any time and from
<PAGE>
time to time received, receivable or otherwise distributed in respect of
or in exchange for any or all of the Pledged Shares;
(ii) all additional shares of stock of any Subsidiary of the Pledgor
at any time and from time to time acquired by the Pledgor, and the
certificates representing such additional shares, and all cash,
securities, dividends, rights and other property at any time and from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares;
(iii) all Intercompany Notes at any time and from time to time
issued to the Pledgor, all indebtedness evidenced thereby, all interest
thereon, and all other property at any time and from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any Intercompany Note;
(iv) all other property hereafter delivered to the Paying Agent in
substitution for or in addition to any of the foregoing, all certificates
and instruments representing or evidencing such property and all cash,
securities, interest, dividends, rights and other property at any time and
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all thereof; and
(v) all proceeds of any of the foregoing.
(all such Pledged Shares, Intercompany Notes, additional shares, certificates,
notes, instruments, cash, securities, interest, dividends, rights and other
property, and all proceeds thereof, being herein collectively called the
"Collateral"); provided, however, that the "Collateral" shall not include (and
there shall be excluded from the pledge hereunder notwithstanding any delivery
to the Paying Agent thereof) any shares of stock of any Canadian Subsidiary in
excess of 65% of all of the stock of such Canadian Subsidiary.
The term "Liabilities", as used herein, means all obligations (monetary or
otherwise) of the Pledgor under the Credit Agreement, any document or instrument
executed in connection therewith and any Swap Contract entered into by the
Pledgor with any Lender, in each case howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due.
2
<PAGE>
SECTION 2. Warranties and Further Assurances.
(a) The Pledgor agrees that it will, promptly upon receipt thereof,
deliver to the Paying Agent any Collateral which may come into the
possession of the Pledgor after the date hereof (other than any
dividends or payments which the Pledgor is entitled to receive and
retain pursuant to Section 5(a)(ii) below), accompanied by
appropriate stock powers duly endorsed to the Paying Agent.
(b) The Pledgor warrants to the Paying Agent that the Pledgor is, or at
the time of any future delivery and pledge thereof will be, the
lawful owner of the Collateral, free of all claims and liens other
than the security interest hereunder, with full right to deliver,
pledge, and assign the Collateral to the Paying Agent as Collateral
hereunder.
(c) The Pledgor agrees to deliver to the Paying Agent from time to time
upon request of the Paying Agent such stock powers and similar
documents, satisfactory in form and substance to the Paying Agent,
with respect to the Collateral as the Paying Agent may reasonably
request. The Pledgor agrees not to grant any Lien on or otherwise
encumber any of its rights to any of the Collateral.
SECTION 3. Care of Collateral. The Paying Agent shall exercise reasonable
care in the custody and preservation of Collateral. The Paying Agent shall be
deemed to have exercised reasonable care if it takes such action as the Pledgor
shall request in a written notice which specifies that such notice is being
given pursuant to this Section 3, but failure of the Paying Agent to comply with
any such request shall not of itself be deemed a failure to exercise reasonable
care, and no failure of the Paying Agent to preserve or protect any right with
respect to the Collateral against any prior party shall be deemed a failure to
exercise reasonable care in the custody or preservation of the Collateral.
SECTION 4. Certain Rights Regarding the Collateral and the Liabilities.
(a) The Paying Agent may from time to time, after any of the Liabilities
shall become due and payable, without notice to the Pledgor, take all or any of
the following actions:
(i) transfer all or any part of the Collateral into the name of the
Paying Agent or its nominee, with or without
3
<PAGE>
disclosing that such Collateral is subject to the lien and security
interest hereunder,
(ii) notify the parties obligated on any of the Collateral to make
payment to the Paying Agent of any amounts due or to become due
thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof or
compromise or extend or renew for any period (whether or not longer than
the original period) any obligations of any nature of any party with
respect thereto, and
(iv) take control of any proceeds of the Collateral.
(b) The Paying Agent, any other Agent or any Lender may, furthermore, from
time to time, whether before or after any of the Liabilities shall become due
and payable, without notice to the Pledgor and without affecting the liability
of the Pledgor hereunder, take all or any of the following actions:
(i) retain or obtain a security interest in any property, in
addition to the Collateral, to secure any of the Liabilities,
(ii) retain or obtain the primary or secondary liability of any
party or parties, in addition to the Pledgor, with respect to any of the
Liabilities,
(iii) extend or renew for any period (whether or not longer than the
original period) any of the Liabilities or release or compromise any
obligation of any nature of any party with respect thereto,
(iv) surrender, release or exchange all or any part of any property,
in addition to the Collateral, securing any of the Liabilities, or
compromise or extend or renew for any period any obligations of any nature
of any party with respect to any such property, and
(v) resort to the Collateral for payment of any of the Liabilities
whether or not it shall have resorted to any other property securing the
Liabilities or shall have proceeded against any party primarily or
secondarily liable on any of the Liabilities.
SECTION 5. Dividends, Voting Rights, etc.
(a) So long as no Default (as hereinafter defined) shall have
occurred and be continuing:
4
<PAGE>
(i) The Pledgor shall have the right to vote the Pledged Shares;
(ii) The Pledgor shall be entitled to receive and retain any and all
dividends and distributions on the Pledged Shares and any and all payments
of principal of or interest on the Intercompany Notes, provided that any
and all stock dividends, and any and all returns of capital or other
distributions made in shares of capital stock or warrants, options or
other rights in respect thereof, whether resulting from a subdivision,
combination or reclassification of the outstanding capital stock of any
issuer thereof or received in exchange for the Pledged Shares or any part
thereof or as a result of any merger, consolidation, acquisition or other
exchange of assets to which any issuer may be a party or otherwise, shall
be and become part of the Collateral pledged hereunder and, if received by
the Pledgor, shall forthwith be delivered to the Paying Agent or its
designated nominee (accompanied, if appropriate, by proper instruments of
assignment and/or stock powers executed by the Pledgor in accordance with
the Paying Agent's instructions) to be held subject to the terms of this
Pledge Agreement; and
(iii) If the Pledged Shares shall have been registered in the name
of the Paying Agent or its subagent, the Paying Agent shall execute and
deliver (or cause to be executed and delivered) to the Pledgor all such
dividend orders and other instruments as the Pledgor may request for the
purpose of enabling the Pledgor to receive the dividends or other payments
which it is authorized to receive and retain pursuant to subparagraph (i)
above.
(b) Upon the occurrence and during the continuance of a Default: (i) after
written notice from the Paying Agent to the Pledgor, all rights of the Pledgor
pursuant to Section 5(a)(i) to vote the Pledged Shares shall cease, (ii) all
rights of the Pledgor pursuant to Section 5(a)(ii) and 5(a)(iii) shall cease,
and (iii) the Paying Agent shall have the sole and exclusive right and authority
to vote the Pledged Shares and to receive and retain the dividends on the
Pledged Shares and the payments of principal of and interest on the Intercompany
Notes which the Pledgor would otherwise be authorized to receive and retain
pursuant to Section 5(a)(ii). Any and all money and other property paid over to
or received by the Paying Agent pursuant to the provisions of this paragraph (b)
shall be retained by the Paying Agent as additional Collateral hereunder and be
applied in accordance with the provisions hereof.
5
<PAGE>
SECTION 6. Default.
(a) The occurrence of any of the following shall constitute a Default
hereunder: nonpayment, when due, whether by acceleration or otherwise, of any
amount payable on any of the Liabilities; an Event of Default; an Unmatured
Event of Default under Section 9.1(g) of the Credit Agreement; or the Pledgor
shall default in any agreement contained herein (and, so long as no material
portion of the Collateral is unperfected as a result of such default,
continuation of such default for five Business Days after notice from any Agent
or any Lender). Upon a Default, the Paying Agent may exercise from time to time
any rights and remedies available to it under the Uniform Commercial Code as in
effect from time to time in Illinois or otherwise available to it. If any
notification of intended disposition of any of the Collateral is required by
law, such notification, if mailed, shall be deemed reasonably and properly given
if mailed at least ten days before such disposition, postage prepaid, addressed
to the Pledgor, either at the address of the Pledgor shown below, or at any
other address of the Pledgor appearing on the records of the Paying Agent. Any
proceeds of any disposition of Collateral may be applied by the Paying Agent to
the payment of expenses in connection with the Collateral, including Attorney
Costs and legal expenses, and any balance of such proceeds may be applied by the
Paying Agent toward the payment of such of the Liabilities, and in such order of
application, as the Paying Agent may from time to time elect. All rights and
remedies of the Paying Agent expressed herein are in addition to all other
rights and remedies possessed by it, including those under any other agreement
or instrument relating to any of the Liabilities or any security therefor. No
delay on the part of the Paying Agent in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by the
Paying Agent of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy. No action of the Paying
Agent permitted hereunder shall impair or affect the rights of the Paying Agent
in and to the Collateral.
(b) The Pledgor agrees that in any sale of any of the Collateral whenever
a Default hereunder shall have occurred and be continuing, the Paying Agent is
hereby authorized to comply with any limitation or restriction in connection
with such sale as it may be advised by counsel is necessary in order to avoid
any violation of applicable law (including, without limitation, compliance with
such procedures as may restrict the number of prospective bidders and
purchasers, require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and purchasers to persons
who will represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required
6
<PAGE>
approval of the sale or of the purchaser by any Governmental Authority, and the
Pledgor further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Paying Agent be liable or accountable to the Pledgor for any
discount allowed by the reason of the fact that such Collateral is sold in
compliance with any such limitation or restriction.
SECTION 7. Application of Proceeds of Sale or Cash Held as Collateral. The
proceeds of sale of Collateral sold pursuant to Section 6 hereof and/or, after a
Default, any cash held as Collateral hereunder, shall be applied by the Paying
Agent to such of the Liabilities, and in such order of application, as the
Paying Agent shall determine until the Liabilities are paid in full in cash, and
the balance, if any, of such proceeds shall be paid to the Pledgor, its
successors and assigns, or as a court of competent jurisdiction may direct.
SECTION 8. Authority of Paying Agent. The Paying Agent shall have and be
entitled to exercise all such powers hereunder as are specifically delegated to
the Paying Agent by the terms hereof, together with such powers as are
incidental thereto. The Paying Agent may execute any of its duties hereunder by
or through agents or employees and shall be entitled to retain counsel and to
act in reliance upon the advice of such counsel concerning all matters
pertaining to its duties hereunder. Neither the Paying Agent, nor any director,
officer or employee of the Paying Agent, shall be liable nor any action taken or
omitted to be taken by it or them hereunder or in connection herewith, except
for its or their own bad faith, gross negligence or willful misconduct. The
Pledgor hereby agrees to reimburse the Paying Agent, on demand, for all
reasonable out-of-pocket expenses incurred by the Paying Agent in connection
with the administration and enforcement of this Agreement (including expenses
incurred by any sub-agent employed by the Paying Agent) and agrees to indemnify
and hold harmless the Paying Agent (and any such sub-agent) from and against any
and all liability incurred by the Paying Agent (or such sub-agent) hereunder or
in connection herewith, unless such liability shall be due to bad faith, willful
misconduct or gross negligence on the part of the Paying Agent (or such
sub-agent).
SECTION 9. Termination. This Pledge Agreement shall terminate when all
Liabilities and all obligations of the Pledgor hereunder have been fully and
finally paid, and all commitments of the Lenders to make Credit Extensions under
Credit Agreement have been terminated, at which time the Paying Agent shall
reassign and redeliver (or cause to be reassigned and redelivered) to the
Pledgor, or to such Person as the Pledgor shall designate, against receipt, such
of the Collateral (if any) as shall not have been sold or otherwise applied by
the
7
<PAGE>
Paying Agent pursuant to the terms hereof and shall still be held by it
hereunder, together with appropriate instruments of reassignment and release.
Any such reassignment shall be without recourse upon or warranty by the Paying
Agent and at the expense of the Pledgor.
SECTION 10. Notices. Any notice from the Paying Agent to the Pledgor shall
be addressed to the Pledgor either at the Pledgor's address shown on the
signature page hereof or at such other address as the Pledgor may, by written
notice received by the Paying Agent, have designated as its address for notices.
Any such notice shall, if sent by overnight delivery, hand delivery or
registered or certified mail, be effective when delivered (or when delivery is
refused), and, if faxed, be effective when received in legible form by facsimile
machine.
SECTION 11. Binding Agreement; Assignment. This Pledge Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto, and their respective successors and assigns,
except that the Pledgor shall not be permitted to assign this Pledge Agreement
or any interest herein or in the Collateral, or any part thereof, or otherwise
pledge, encumber or grant any option with respect to the Collateral, or any part
thereof, or any cash or property held by the Paying Agent as Collateral under
this Pledge Agreement.
SECTION 12. Miscellaneous. Neither this Pledge Agreement nor any provision
hereof may be amended, modified, waived, discharged or terminated orally nor may
any of the Collateral be released except by an instrument in writing duly signed
by or on behalf of the Paying Agent. The section headings used herein are for
convenience of reference only and shall not limit the provisions of this Pledge
Agreement.
SECTION 13. Governing Law; Interpretation. This Pledge Agreement has been
made and delivered at Chicago, Illinois, and shall be governed by the laws of
the State of Illinois applicable to contracts made and to be fully performed in
such State. Wherever possible each provision of this Pledge Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of the Pledge Agreement shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Pledge Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement
to be duly executed by their respective officers thereunto duly authorized as of
the date first above written.
QUALITY FOOD, INC.
By /s/ Marc Evanger
--------------------------------
Title: Vice President and Chief
Financial Officer
Address:
10116 N.E. 8th Street
Bellevue, Washington 98009
Attention: Marc Evanger
Facsimile number: (206) 462-2217
with a copy to:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza, Suite 1515
Chicago, Illinois 60606
Attention: James M. Phipps, Esq.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Paying Agent
By /s/ Eric A. Schubert
------------------------------
Title: Managing Director
Address:
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Eric A. Schubert
Facsimile number: (312) 828-3555
9
<PAGE>
SCHEDULE I
TO
PLEDGE AGREEMENT
STOCK
Pledged Shares
No. of as % of Total Total Shares of
Certificate Pledged Shares Issued Issuer
Issuer No. Shares and Outstanding Outstanding
- ------ ----------- ------ --------------- -----------
Quality Food
Holdings, Inc. 1 100 100% 100
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT dated as of March 19, 1997 is between QUALITY FOOD
CENTERS, INC., a Washington corporation (the "Pledgor"), and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, in its capacity as Paying Agent under
the Credit Agreement referred to below (in such capacity, the "Paying Agent"):
W I T N E S S E T H:
WHEREAS, the Pledgor, Quality Food Holdings, Inc. and Quality Food, Inc.
are parties to an Amended and Restated Credit Agreement dated as of March 14,
1997 (as amended or otherwise modified from time to time, the "Credit
Agreement"; terms defined in the Credit Agreement are, unless otherwise defined
herein, used herein as defined therein) with various financial institutions,
Bank of America National Trust and Savings Association and The Chase Manhattan
Bank, as Administrative Agents, and the Paying Agent, pursuant to which the
Lenders have agreed to make loans to, and issue letters of credit for the
account of, the Borrowers;
WHEREAS, pursuant to the Credit Agreement, the Pledgor has agreed to
guaranty all obligations of the other Borrower under the Credit Agreement
pursuant to a Guaranty which will be executed on the Restructuring Effective
Date (such Guaranty, the "Intercompany Guaranty (Holdings)"); and
WHEREAS, the obligations of the Pledgor under the Credit Agreement and the
Intercompany Guaranty (Holdings) are to be secured pursuant to this Agreement;
NOW, THEREFORE, for and in consideration of any loan, advance or other
financial accommodation heretofore or hereafter made to the Borrowers under or
in connection with the Credit Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. Pledge. To secure the due and punctual payment of the
Liabilities (as hereinafter defined), the Pledgor hereby pledges and assigns to
the Paying Agent for the benefit of the Agents and the Lenders, and hereby
grants to the Paying Agent for the benefit of the Agents and the Lenders a
security interest in, the following:
(i) all of the shares of stock described on Schedule I hereto (all
such shares, together with other shares delivered or required to be
delivered hereunder are herein called the "Pledged Shares") and the
certificates representing the
<PAGE>
Pledged Shares, and all cash, securities, dividends, rights and other
property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Pledged Shares;
(ii) all additional shares of stock of any Subsidiary of the Pledgor
at any time and from time to time acquired by the Pledgor, and the
certificates representing such additional shares, and all cash,
securities, dividends, rights and other property at any time and from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares;
(iii) all Intercompany Notes at any time and from time to time
issued to the Pledgor, all indebtedness evidenced thereby, all interest
thereon, and all other property at any time and from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any Intercompany Note;
(iv) all other property hereafter delivered to the Paying Agent in
substitution for or in addition to any of the foregoing, all certificates
and instruments representing or evidencing such property and all cash,
securities, interest, dividends, rights and other property at any time and
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all thereof; and
(v) all proceeds of any of the foregoing.
(all such Pledged Shares, Intercompany Notes, additional shares, certificates,
notes, instruments, cash, securities, interest, dividends, rights and other
property, and all proceeds thereof, being herein collectively called the
"Collateral"); provided, however, that the "Collateral" shall not include (and
there shall be excluded from the pledge hereunder notwithstanding any delivery
to the Paying Agent thereof) any shares of stock of any Canadian Subsidiary in
excess of 65% of all of the stock of such Canadian Subsidiary.
The term "Liabilities", as used herein, means all obligations (monetary or
otherwise) of the Pledgor under the Credit Agreement, any Note, any L/C-Related
Document, any other Loan Document, any document or instrument executed in
connection therewith, any Swap Contract entered into by the Pledgor with any
Lender and the Intercompany Guaranty (Holdings), in each case howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due or to become due.
2
<PAGE>
SECTION 2. Warranties and Further Assurances.
(a) The Pledgor agrees that it will, promptly upon receipt thereof,
deliver to the Paying Agent any Collateral which may come into the
possession of the Pledgor after the date hereof (other than any
dividends or payments which the Pledgor is entitled to receive and
retain pursuant to Section 5(a)(ii) below), accompanied by
appropriate stock powers duly endorsed to the Paying Agent.
(b) The Pledgor warrants to the Paying Agent that the Pledgor is, or at
the time of any future delivery and pledge thereof will be, the
lawful owner of the Collateral, free of all claims and liens other
than the security interest hereunder, with full right to deliver,
pledge, and assign the Collateral to the Paying Agent as Collateral
hereunder.
(c) The Pledgor agrees to deliver to the Paying Agent from time to time
upon request of the Paying Agent such stock powers and similar
documents, satisfactory in form and substance to the Paying Agent,
with respect to the Collateral as the Paying Agent may reasonably
request. The Pledgor agrees not to grant any Lien on or otherwise
encumber any of its rights to any of the Collateral.
SECTION 3. Care of Collateral. The Paying Agent shall exercise reasonable
care in the custody and preservation of Collateral. The Paying Agent shall be
deemed to have exercised reasonable care if it takes such action as the Pledgor
shall request in a written notice which specifies that such notice is being
given pursuant to this Section 3, but failure of the Paying Agent to comply with
any such request shall not of itself be deemed a failure to exercise reasonable
care, and no failure of the Paying Agent to preserve or protect any right with
respect to the Collateral against any prior party shall be deemed a failure to
exercise reasonable care in the custody or preservation of the Collateral.
SECTION 4. Certain Rights Regarding the Collateral and the Liabilities.
(a) The Paying Agent may from time to time, after any of the Liabilities
shall become due and payable, without notice to the Pledgor, take all or any of
the following actions:
(i) transfer all or any part of the Collateral into the name of the
Paying Agent or its nominee, with or without disclosing that such
Collateral is subject to the lien and security interest hereunder,
3
<PAGE>
(ii) notify the parties obligated on any of the Collateral to make
payment to the Paying Agent of any amounts due or to become due
thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof or
compromise or extend or renew for any period (whether or not longer than
the original period) any obligations of any nature of any party with
respect thereto, and
(iv) take control of any proceeds of the Collateral.
(b) The Paying Agent, any other Agent or any Lender may, furthermore, from
time to time, whether before or after any of the Liabilities shall become due
and payable, without notice to the Pledgor and without affecting the liability
of the Pledgor hereunder, take all or any of the following actions:
(i) retain or obtain a security interest in any property, in
addition to the Collateral, to secure any of the Liabilities,
(ii) retain or obtain the primary or secondary liability of any
party or parties, in addition to the Pledgor, with respect to any of the
Liabilities,
(iii) extend or renew for any period (whether or not longer than the
original period) any of the Liabilities or release or compromise any
obligation of any nature of any party with respect thereto,
(iv) surrender, release or exchange all or any part of any property,
in addition to the Collateral, securing any of the Liabilities, or
compromise or extend or renew for any period any obligations of any nature
of any party with respect to any such property, and
(v) resort to the Collateral for payment of any of the Liabilities
whether or not it shall have resorted to any other property securing the
Liabilities or shall have proceeded against any party primarily or
secondarily liable on any of the Liabilities.
SECTION 5. Dividends, Voting Rights, etc.
(a) So long as no Default (as hereinafter defined) shall have occurred and
be continuing:
(i) The Pledgor shall have the right to vote the Pledged Shares;
4
<PAGE>
(ii) The Pledgor shall be entitled to receive and retain any and all
dividends and distributions on the Pledged Shares and any and all payments
of principal of or interest on the Intercompany Notes, provided that any
and all stock dividends, and any and all returns of capital or other
distributions made in shares of capital stock or warrants, options or
other rights in respect thereof, whether resulting from a subdivision,
combination or reclassification of the outstanding capital stock of any
issuer thereof or received in exchange for the Pledged Shares or any part
thereof or as a result of any merger, consolidation, acquisition or other
exchange of assets to which any issuer may be a party or otherwise, shall
be and become part of the Collateral pledged hereunder and, if received by
the Pledgor, shall forthwith be delivered to the Paying Agent or its
designated nominee (accompanied, if appropriate, by proper instruments of
assignment and/or stock powers executed by the Pledgor in accordance with
the Paying Agent's instructions) to be held subject to the terms of this
Pledge Agreement; and
(iii) If the Pledged Shares shall have been registered in the name
of the Paying Agent or its subagent, the Paying Agent shall execute and
deliver (or cause to be executed and delivered) to the Pledgor all such
dividend orders and other instruments as the Pledgor may request for the
purpose of enabling the Pledgor to receive the dividends or other payments
which it is authorized to receive and retain pursuant to subparagraph (i)
above.
(b) Upon the occurrence and during the continuance of a Default: (i) after
written notice from the Paying Agent to the Pledgor, all rights of the Pledgor
pursuant to Section 5(a)(i) to vote the Pledged Shares shall cease, (ii) all
rights of the Pledgor pursuant to Section 5(a)(ii) and 5(a)(iii) shall cease,
and (iii) the Paying Agent shall have the sole and exclusive right and authority
to vote the Pledged Shares and to receive and retain the dividends on the
Pledged Shares and the payments of principal of and interest on the Intercompany
Notes which the Pledgor would otherwise be authorized to receive and retain
pursuant to Section 5(a)(ii). Any and all money and other property paid over to
or received by the Paying Agent pursuant to the provisions of this paragraph (b)
shall be retained by the Paying Agent as additional Collateral hereunder and be
applied in accordance with the provisions hereof.
5
<PAGE>
SECTION 6. Default.
(a) The occurrence of any of the following shall constitute a Default
hereunder: nonpayment, when due, whether by acceleration or otherwise, of any
amount payable on any of the Liabilities; an Event of Default; an Unmatured
Event of Default under Section 9.1(g) of the Credit Agreement; or the Pledgor
shall default in any agreement contained herein (and, so long as no material
portion of the Collateral is unperfected as a result of such default,
continuation of such default for five Business Days after notice from any Agent
or any Lender). Upon a Default, the Paying Agent may exercise from time to time
any rights and remedies available to it under the Uniform Commercial Code as in
effect from time to time in Illinois or otherwise available to it. If any
notification of intended disposition of any of the Collateral is required by
law, such notification, if mailed, shall be deemed reasonably and properly given
if mailed at least ten days before such disposition, postage prepaid, addressed
to the Pledgor, either at the address of the Pledgor shown below, or at any
other address of the Pledgor appearing on the records of the Paying Agent. Any
proceeds of any disposition of Collateral may be applied by the Paying Agent to
the payment of expenses in connection with the Collateral, including Attorney
Costs and legal expenses, and any balance of such proceeds may be applied by the
Paying Agent toward the payment of such of the Liabilities, and in such order of
application, as the Paying Agent may from time to time elect. All rights and
remedies of the Paying Agent expressed herein are in addition to all other
rights and remedies possessed by it, including those under any other agreement
or instrument relating to any of the Liabilities or any security therefor. No
delay on the part of the Paying Agent in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by the
Paying Agent of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy. No action of the Paying
Agent permitted hereunder shall impair or affect the rights of the Paying Agent
in and to the Collateral.
(b) The Pledgor agrees that in any sale of any of the Collateral whenever
a Default hereunder shall have occurred and be continuing, the Paying Agent is
hereby authorized to comply with any limitation or restriction in connection
with such sale as it may be advised by counsel is necessary in order to avoid
any violation of applicable law (including, without limitation, compliance with
such procedures as may restrict the number of prospective bidders and
purchasers, require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and purchasers to persons
who will represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or of the
purchaser by any Governmental Authority, and the
6
<PAGE>
Pledgor further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Paying Agent be liable or accountable to the Pledgor for any
discount allowed by the reason of the fact that such Collateral is sold in
compliance with any such limitation or restriction.
SECTION 7. Application of Proceeds of Sale or Cash Held as Collateral. The
proceeds of sale of Collateral sold pursuant to Section 6 hereof and/or, after a
Default, any cash held as Collateral hereunder, shall be applied by the Paying
Agent to such of the Liabilities, and in such order of application, as the
Paying Agent shall determine until the Liabilities are paid in full in cash, and
the balance, if any, of such proceeds shall be paid to the Pledgor, its
successors and assigns, or as a court of competent jurisdiction may direct.
SECTION 8. Authority of Paying Agent. The Paying Agent shall have and be
entitled to exercise all such powers hereunder as are specifically delegated to
the Paying Agent by the terms hereof, together with such powers as are
incidental thereto. The Paying Agent may execute any of its duties hereunder by
or through agents or employees and shall be entitled to retain counsel and to
act in reliance upon the advice of such counsel concerning all matters
pertaining to its duties hereunder. Neither the Paying Agent, nor any director,
officer or employee of the Paying Agent, shall be liable nor any action taken or
omitted to be taken by it or them hereunder or in connection herewith, except
for its or their own bad faith, gross negligence or willful misconduct. The
Pledgor hereby agrees to reimburse the Paying Agent, on demand, for all
reasonable out-of-pocket expenses incurred by the Paying Agent in connection
with the administration and enforcement of this Agreement (including expenses
incurred by any sub-agent employed by the Paying Agent) and agrees to indemnify
and hold harmless the Paying Agent (and any such sub-agent) from and against any
and all liability incurred by the Paying Agent (or such sub-agent) hereunder or
in connection herewith, unless such liability shall be due to bad faith, willful
misconduct or gross negligence on the part of the Paying Agent (or such
sub-agent).
SECTION 9. Termination. This Pledge Agreement shall terminate when all
Liabilities and all obligations of the Pledgor hereunder have been fully and
finally paid, and all commitments of the Lenders to make Credit Extensions under
Credit Agreement have been terminated, at which time the Paying Agent shall
reassign and redeliver (or cause to be reassigned and redelivered) to the
Pledgor, or to such Person as the Pledgor shall designate, against receipt, such
of the Collateral (if any) as shall not have been sold or otherwise applied by
the Paying Agent pursuant to the terms hereof and shall still be held by it
hereunder, together with
7
<PAGE>
appropriate instruments of reassignment and release. Any such reassignment shall
be without recourse upon or warranty by the Paying Agent and at the expense of
the Pledgor.
SECTION 10. Notices. Any notice from the Paying Agent to the Pledgor shall
be addressed to the Pledgor either at the Pledgor's address shown on the
signature page hereof or at such other address as the Pledgor may, by written
notice received by the Paying Agent, have designated as its address for notices.
Any such notice shall, if sent by overnight delivery, hand delivery or
registered or certified mail, be effective when delivered (or when delivery is
refused), and, if faxed, be effective when received in legible form by facsimile
machine.
SECTION 11. Binding Agreement; Assignment. This Pledge Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto, and their respective successors and assigns,
except that the Pledgor shall not be permitted to assign this Pledge Agreement
or any interest herein or in the Collateral, or any part thereof, or otherwise
pledge, encumber or grant any option with respect to the Collateral, or any part
thereof, or any cash or property held by the Paying Agent as Collateral under
this Pledge Agreement.
SECTION 12. Miscellaneous. Neither this Pledge Agreement nor any provision
hereof may be amended, modified, waived, discharged or terminated orally nor may
any of the Collateral be released except by an instrument in writing duly signed
by or on behalf of the Paying Agent. The section headings used herein are for
convenience of reference only and shall not limit the provisions of this Pledge
Agreement.
SECTION 13. Governing Law; Interpretation. This Pledge Agreement has been
made and delivered at Chicago, Illinois, and shall be governed by the laws of
the State of Illinois applicable to contracts made and to be fully performed in
such State. Wherever possible each provision of this Pledge Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of the Pledge Agreement shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Pledge Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement
to be duly executed by their respective officers thereunto duly authorized as of
the date first above written.
QUALITY FOOD CENTERS, INC.
By /s/ Marc Evanger
---------------------------------------
Title: Vice President, Chief Financial
Officer and Secretary/Treasurer
Address:
10116 N.E. 8th Street
Bellevue, Washington 98009
Attention: Marc Evanger
Facsimile number: (206) 462-2217
with a copy to:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza, Suite 1515
Chicago, Illinois 60606
Attention: James M. Phipps, Esq.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Paying Agent
By /s/ Eric A. Schubert
---------------------------------------
Title: Managing Director
Address:
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Eric A. Schubert
Facsimile number: (312) 828-3555
9
<PAGE>
SCHEDULE I
TO
PLEDGE AGREEMENT
STOCK
Pledged Shares
No. of as % of Total Total Shares of
Certificate Pledged Shares Issued Issuer
Issuer No. Shares and Outstanding Outstanding
- ------ ----------- ------ --------------- -----------
KU Acquisition
Corporation 1 100 100% 100
QHI Acquisition
Corporation 1 1 100% 1
[Letterhead of Quality Food Centers]
News
Release
- --------------------------------------------------------------------------------
For Immediate Release
ANALYST CONTACT: MEDIA CONTACT:
Marc Evanger MWW/Savitt
Vice President and CFO Rosanne Marks
(206) 462-2177 (206) 588-8505
----------------------------------------------------------------------
QFC COMPLETES ACQUISITION OF HUGHES
MARKETS, INC. AND RELATED FINANCINGS
BELLEVUE, WA - March 25, 1997 - Quality Food Centers, Inc. ("QFC" or the
"Company") (NYSE:XQ) today announced that on March 19, 1997 it closed its merger
with Hughes Markets, Inc. (Hughes) and related financings.
Hughes operates 57 supermarkets in Southern California averaging 37,000
square feet in the counties of Los Angeles, Orange, Riverside, San Bernardino,
and Ventura. Hughes, founded in 1952, is headquartered in Irwindale and employs
more than 5,000 people. Hughes shares QFC's focus on providing a broad selection
of high-quality perishables and superior customer service as well as competitive
pricing. Hughes supplies the majority of its stores through a modern 600,000
square foot distribution center which it owns and operates.
Christopher A. Sinclair, QFC president and chief executive officer said,
"The merger of these two companies provides us with a great opportunity to
design and build a well-positioned, multi-regional business - one that utilizes
the best of both companies to achieve distinction in product offerings and
customer service, and improving operating practices, systems and buying at each
company. We view Hughes, our first out-of-market acquisition, as an excellent
strategic fit and a great platform for future growth in the attractive Southern
California market. We look forward to working with the entire Hughes team to
build on the momentum of two outstanding operations."
The terms of the financings included: (i) the public sale of 5,175,000
shares of the Company's common stock at a public offering price of $39.00 per
share for net proceeds to the Company of $193.2 million; (ii) the private
placement of $150 million aggregate principal amount of 8.70% Senior
Subordinated Notes for net proceeds to the Company of $146.25 million and (iii)
borrowings of $250 million under a new credit facility (initial interest rate of
IBOR plus 0.875%). The new $600 million credit facility consists of a $250
million
<PAGE>
term loan facility, a $125 million revolving credit facility and a $225 million
acquisition reducing revolving credit facility. The combined proceeds were used
to pay the $358.8 million cash purchase price for Hughes, refinance the $197.5
million outstanding under the Company's prior credit facility and pay expenses
associated with the financings. Approximately $30 million of the proceeds will
be used for general corporate purposes.
According to Marc Evanger, vice president and chief financial officer, "We are
very pleased with the results of our financing. This leaves the Company well
capitalized with a comfortable level of leverage, and significant available
capital as we continue to pursue our growth strategies."
The Company's first quarter of 1997 ended on March 22, 1997 and will include
five weeks of results of Keith Uddenberg, Inc. (KUI), four days of Hughes'
results and the new capital structure. The Company plans to announce its first
quarter results on April 15, 1997.
QFC is the second largest supermarket chain in the Seattle/Puget Sound region of
Washington State. QFC has served this area for 41 years. With the Hughes and KUI
acquisitions, QFC now operates 145 stores and employs more than 10,000 people.
QFC's and Hughes' top priority is satisfying the needs of its customers by
providing superior service, high-quality perishables and competitive prices at
convenient store locations.
Quality Food Centers, Inc. press releases are available at no charge through PR
Newswire's Company News On-Call fax service and on PR Newswire's Web site. For a
menu of QFC's press releases or to retreive a specific release, call
800-756-5804, extension 134257, or use the Internet at
http://www.prnewswire.com/cgi-bin/IIststory?134257^1
