U.S. $37,500,000
LOAN AGREEMENT
Dated as of August 2, 1996
Among
IBJ SCHRODER BANK & TRUST COMPANY,
HELLER FINANCIAL, INC., and
NATIONAL BANK OF CANADA,
individually, and in its capacity as Agent
and
HOMELAND STORES, INC.,
as Borrower,
and
HOMELAND HOLDING CORPORATION,
as Guarantor
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS 1
1.1. CERTAIN DEFINED TERMS 1
1.2. TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE 36
1.3. COMPUTATION OF TIME PERIODS 36
1.4. ACCOUNTING TERMS 36
1.5. OTHER PROVISIONS REGARDING DEFINITIONS 36
SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT FACILITY 37
2.1. REVOLVING CREDIT FACILITY ADVANCES 37
2.2. REVOLVING CREDIT FACILITY COMMITMENT AND
REVOLVING LOAN BORROWING LIMIT 37
2.3. REVOLVING NOTES 38
2.4. NOTICE OF BORROWING; BORROWER'S CERTIFICATE 38
2.5. TERMINATION OF REVOLVING CREDIT FACILITY
COMMITMENT 40
2.6. INTEREST ON REVOLVING LOAN 40
2.7. PAYMENTS OF PRINCIPAL 40
2.8. ESTABLISHMENT OF RESERVES 40
SECTION 3. AMOUNT AND TERMS OF TERM LOAN FACILITY 41
3.1. TERM LOAN FACILITY ADVANCES 41
3.2. TERM LOAN FACILITY COMMITMENT 41
3.3. TERM NOTES 41
3.4. INTEREST ON TERM LOAN 42
3.5. PRINCIPAL PAYMENTS 42
3.6. EXCESS CASH FLOW RECAPTURE 42
SECTION 4. TERMS AND FEES COMMON TO BOTH FACILITIES 42
4.1. INTEREST 42
4.2. CONVERSION OF BORROWINGS; RENEWALS 43
4.3. COMPUTATION OF INTEREST. 44
4.4. COLLECTIONS THROUGH LOCKBOX 44
4.5. INCREASED COSTS 44
4.6. CHANGE IN LAW RENDERING EURODOLLAR ADVANCES
UNLAWFUL 46
4.7. EURODOLLAR AVAILABILITY 47
4.8. INDEMNITIES 47
4.9. DISBURSEMENT 51
4.10. AGENT'S AVAILABILITY ASSUMPTION 51
4.11. PRO RATA TREATMENT AND PAYMENTS 52
4.12. SHARING OF PAYMENTS, ETC. 52
4.13. EXCESS OPERATING FUNDS 53
4.14. EURODOLLAR OFFICES 53
4.15. TELEPHONIC NOTICE 53
4.16. MAXIMUM INTEREST 53
4.17. COMPOSITION AND APPLICATION OF PAYMENTS AND
COLLECTIONS 54
SECTION 5. PAYMENTS, PREPAYMENTS AND REDUCTIONS 54
5.1. MANDATORY PAYMENTS AND REDUCTIONS 54
5.2. PAYMENT FROM INSURANCE PROCEEDS 55
5.3. OPTIONAL PREPAYMENTS 55
5.4. PROCEDURES FOR PAYMENT 56
5.5. COMMITMENT FEE 58
5.6. PREPAYMENT FEE 58
5.7. AGENCY FEE 59
5.8. CLOSING FEE 59
5.9. CONTINGENT FEE 59
5.10. PREPAYMENTS TO INCLUDE INTEREST 60
SECTION 6. LETTERS OF CREDIT 60
6.1. LETTERS OF CREDIT 60
6.2. LETTER OF CREDIT FEES 61
6.3. INDEMNITY 62
6.4. REIMBURSEMENT OF CERTAIN COSTS 62
6.5. PAYMENT OF DRAFTS 64
6.6. ISSUING LENDER'S ACTIONS 65
SECTION 7. SECURITY AND GUARANTY 65
7.1. SECURITY AGREEMENTS 65
7.2. MORTGAGES 66
7.3. FILING AND RECORDING 67
7.4. INTERPRETATION OF SECURITY DOCUMENTS AND
MORTGAGES 67
7.5. GUARANTEES 67
7.6. BANKRUPTCY COURT APPROVAL 68
7.7. RELEASE OF MORTGAGES 68
7.8. POWER OF ATTORNEY 68
SECTION 8. CONDITIONS PRECEDENT TO INITIAL BORROWING AND
ISSUANCE OF LETTERS OF CREDIT 69
8.1. OPINIONS OF COUNSEL 69
8.2. AUDIT RESULTS 69
8.3. MATERIAL ADVERSE CHANGE 69
8.4. QUALIFICATION 69
8.5. SECURITY DOCUMENTS AND INSTRUMENTS 69
8.6. EVIDENCE OF INSURANCE 70
8.7. EXAMINATION OF BOOKS 70
8.8. CORPORATE STRUCTURE 70
8.9. NOTES 70
8.10. FEES TO AGENT AND LENDERS 70
8.11. MANAGEMENT; OWNERSHIP 70
8.12. DISBURSEMENT AUTHORIZATION 70
8.13. LITIGATION 70
8.14. COMPLIANCE WITH LAW 71
8.15. PROCEEDINGS; RECEIPT OF DOCUMENTS 71
8.16. PROJECTIONS. 72
8.17. APPROVAL OF SUBORDINATED NOTES;CAPITALIZATION, ETC. 72
8.18. COLLECTION AND CONCENTRATION ACCOUNTS;
LOCK-BOX ACCOUNTS; CASH MANAGEMENT AGREEMENT. 72
8.19. NO MARKET DISRUPTION 73
8.20. LANDLORDS' LIENS 73
8.21. UCC SEARCH RESULTS 73
8.22. CLOSING DATE BORROWING BASE CERTIFICATE. 73
8.23. NO DEFAULT 74
8.24. BANKRUPTCY COURT ORDERS 74
8.25. MINIMUM BORROWING BASE AVAILABILITY 74
SECTION 9. CONDITIONS PRECEDENT TO EACH BORROWING AND
ISSUANCE OF LETTERS OF CREDIT 75
9.1. BORROWER'S CERTIFICATE; OTHERS 75
9.2. WRITTEN NOTICE 76
SECTION 10. USE OF PROCEEDS 76
SECTION 11. AFFIRMATIVE COVENANTS 77
11.1. FINANCIAL STATEMENTS AND OTHER INFORMATION 77
11.2. TAXES AND CLAIMS 82
11.3. INSURANCE 83
11.4. BOOKS AND RESERVES 84
11.5. PROPERTIES IN GOOD CONDITION 84
11.6. MAINTENANCE OF EXISTENCE, ETC. 84
11.7. INSPECTION BY THE AGENT 84
11.8. PAY INDEBTEDNESS TO LENDERS AND PERFORM OTHER
COVENANTS 85
11.9. NOTICE OF DEFAULT 85
11.10. REPORTING OF MISREPRESENTATIONS 85
11.11. COMPLIANCE WITH LAWS, ETC. 85
11.12. ERISA 86
11.13. FURTHER ASSURANCES 87
11.14. AUDITS AND APPRAISALS 87
11.15. ENVIRONMENTAL MATTERS, ETC. 88
11.16. FINANCIAL COVENANTS 89
11.17. COLLECTION AND CONCENTRATION ACCOUNTS;
LOCK-BOX ACCOUNTS 91
11.18. ENVIRONMENTAL REPORTS 94
11.19. SPECIAL COUNSEL FEES 94
11.20. LANDLORDS' LIENS 94
11.21. OVERDUE LEASE 94
11.22. COMPLIANCE WITH EQUIPMENT LEASES 94
SECTION 12. NEGATIVE COVENANTS 95
12.1. CAPITAL EXPENDITURES 95
12.2. LIENS 95
12.3. INDEBTEDNESS 98
12.4. LOANS, INVESTMENTS AND GUARANTEES 98
12.5. MERGER, SALE OF ASSETS, DISSOLUTION, ETC. 101
12.6. DIVIDENDS, REDEMPTIONS AND OTHER PAYMENTS 101
12.7. TRANSACTIONS WITH AFFILIATES 102
12.8. MANAGEMENT FEES AND OTHER PAYMENTS 102
12.9. COMPROMISE OF PLEDGED ACCOUNTS 102
12.10. NONCOMPLIANCE WITH ERISA 102
12.11. AMENDMENTS AND MODIFICATIONS 103
12.12. FISCAL YEAR 103
12.13. CHANGE OF BUSINESS 103
12.14. NO NEGATIVE PLEDGES 104
12.15. COLLECTION AND CONCENTRATION ACCOUNTS;
LOCK-BOX ACCOUNTS 104
12.16. TAX SHARING AGREEMENTS 105
12.17. COVENANT OF PARENT 105
12.18. MAXIMUM RETURNED INVENTORY 106
12.19. THIRD PARTY PAYORS 106
SECTION 13. DEFAULTS AND REMEDIES 107
13.1. EVENTS OF DEFAULT 107
13.2. SUITS FOR ENFORCEMENT 111
13.3. RIGHTS AND REMEDIES CUMULATIVE 111
13.4. RIGHTS AND REMEDIES NOT WAIVED 111
13.5. APPLICATION OF PROCEEDS 111
13.6. INVENTORY COUNTING AND APPRAISAL 113
SECTION 14. REPRESENTATIONS AND WARRANTIES 113
14.1. CORPORATE STATUS 113
14.2. POWER AND AUTHORITY 114
14.3. NO VIOLATION OF AGREEMENTS 114
14.4. NO LITIGATION 115
14.5. GOOD TITLE TO PROPERTIES 115
14.6. FINANCIAL STATEMENTS AND CONDITION 115
14.7. TRADEMARKS, PATENTS, ETC. 116
14.8. TAX LIABILITY 116
14.9. GOVERNMENTAL ACTION 116
14.10. DISCLOSURE 116
14.11. REGULATION U 117
14.12. INVESTMENT COMPANY 117
14.13. EMPLOYEE BENEFIT PLANS 117
14.14. PERMITS, ETC. 119
14.15. ENVIRONMENTAL STATUS 120
14.16. MEDICARE/MEDICAID AND THIRD PARTY PAYOR
AGREEMENTS 121
14.17. VALIDITY OF RECEIVABLES 121
14.18. COLLECTION AND CONCENTRATION ACCOUNTS;
LOCK-BOX ACCOUNTS 121
14.19. PARENT 122
14.20. VALIDITY OF PHARMACEUTICAL RECEIVABLES 122
SECTION 15. MISCELLANEOUS 122
15.1. COLLECTION COSTS 122
15.2. AMENDMENT, MODIFICATION AND WAIVER 122
15.3. NEW YORK LAW 124
15.4. NOTICES 124
15.5. FEES AND EXPENSES 124
15.6. STAMP OR OTHER TAX 125
15.7. WAIVER OF JURY TRIAL AND SET-OFF 125
15.8. TERMINATION OF AGREEMENT 125
15.9. CAPTIONS 126
15.10. LIEN; SETOFF BY LENDERS 126
15.11. PAYMENT DUE ON NON-BUSINESS DAY 127
15.12. SERVICE OF PROCESS 127
15.13. NATIONAL BANK OF CANADA, AS AGENT 127
15.14. SALE, ASSIGNMENT OR TRANSFER TO ADDITIONAL LENDERS 132
15.15. BENEFIT OF AGREEMENT 133
15.16. COUNTERPARTS; FACSIMILE SIGNATURE 134
15.17. INVALIDITY 134
15.18. LETTER OF CREDIT PARTICIPATIONS AND
CERTAIN PAYMENTS 135
15.19. DISCLOSURE OF FINANCIAL INFORMATION 136
15.20. AMENDMENT AND RESTATEMENT 136
SCHEDULES AND EXHIBITS
Schedule 1.1(A) - Lenders and Commitments
Schedule 1.1(B) - Loans and Advances to Officers and Directors
Schedule 1.1(C) - Excluded Properties
Schedule 4.1(f) - May 8, 1996 Homeland Stores, Inc. Financial
Projections for 1996
Schedule 8.15 - Jurisdictions
Schedule 11.14(a) - Inventory Categories
Schedule 11.17(c) - Special Account Stores
Schedule 11.18 - Environmental Report Stores
Schedule 12.2(c) - Existing Liens
Schedule 12.3(c) - Existing Indebtedness for Borrowed Money and
Contingent Obligations
Schedule 12.4 - Existing Investments
Schedule 12.6(b) - Permitted Prepayments
Schedule 14.1 - Subsidiaries
Schedule 14.4 - Description of Overtly Threatened or Pending
Litigation
Schedule 14.5(a) - Real Property
Schedule 14.5(c) - Lease payments 30 days past due
Schedule 14.13(a) - Reportable Events
Schedule 14.13(e) - Multiemployer Plans; Section 4204 of ERISA
Schedule 14.14(a) - Permits
Schedule 14.15 - Environmental Information
Schedule 14.16 - Medicare/Medicaid and Third Party Payor Agreements
Schedule 14.18(a) - Collection Account Agreement; Concentration Account
- Agreement; Lock-Box Agreement
Schedule 14.18(b) - Special Accounts
Exhibit 1.1 - Form of Lock-Box Account Agreement
Exhibit 2.3 - Form of Revolving Note
Exhibit 2.4 - Form of Borrower's Certificate
Exhibit 3.3 - Form of Term Note
Exhibit 7.1 - Form of Security Agreement
Exhibit 7.2 - Form of Mortgage
Exhibit 7.5 - Form of Guarantee
Exhibit 8.1 - Form of Opinion of Special Counsel for the Credit
Parties
Exhibit 8.12 - Form of Disbursement Authorization Letter
Exhibit 8.18(b) - Form of Concentration Account Agreement
Exhibit 8.18(d) - Form of Pharmaceutical Collection Account Agreement
Exhibit 11.1(j) - Form of Borrowing Base Certificate
Exhibit 11.1(k) - Form of Schedule of Receivables, Accounts Payable
and Inventory
Exhibit 11.1(p) - Form of Coupon Certificate
Exhibit 11.1(q) - Form of Pharmaceutical Receivable Certificate
Exhibit 11.17(b) - Form of Collection Account Agreement
Exhibit 11.20 - Form of Landlord's Lien Waiver
LOAN AGREEMENT, dated as of August 2, 1996 among HOMELAND
STORES, INC., a Delaware corporation (the "Borrower"), HOMELAND HOLDING
CORPORATION, a Delaware corporation ("Parent") (Borrower and Parent are
sometimes hereinafter collectively referred to as the"Companies" and
individually as a "Company"), IBJ SCHRODER BANK & TRUST COMPANY ("IBJ"),
HELLER FINANCIAL, INC. ("Heller"), NATIONAL BANK OF CANADA ("NBC"), and
other financial institutions which may hereafter become parties hereto
(such lenders and other financial institutions and their respective
successors and assigns, individually, a "Lender" and collectively, the
"Lenders"), and NBC, as agent for the Lenders (in such capacity, the "Agent").
WHEREAS, the Companies are parties to that certain Amended and
Restated Revolving Credit Agreement, dated as of April, 21 1995, as amended
by the Ratification and Amendment Agreement dated May 10, 1996 (together,
the "Existing Agreement"), by and among Borrower, Parent, NBC, Heller, and
NBC as agent; and
WHEREAS, the Companies, Lenders and the Agent desire to enter into
this Agreement to amend, modify and restate in its entirety the Existing
Agreement through the execution of this Agreement, which will supersede and
control all prior agreements among the parties hereto; and
WHEREAS, Borrower desires to borrow from the Lenders hereunder
from time to time certain sums on a revolving credit basis, the proceeds
of which shall be applied to its working capital needs and for other general
corporate purposes consistent with the terms of this Agreement; and
WHEREAS, Borrower desires to borrow from the Lenders hereunder
an amount up to $10,000,000 under a term loan, the proceeds of which shall
be applied consistent with the terms of this Agreement; and
WHEREAS, Borrower desires to cause each Issuing Lender (as
hereinafter defined) to issue one or more letters of credit (each a "Letter
of Credit") for the account of Borrower to secure the performance of certain
obligations that Borrower may have from time to time to third parties in the
normal conduct of its business; and
WHEREAS, the Lenders are willing, subject to and upon the terms
and conditions herein set forth, to extend such financial accommodations to
Borrower;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS.
1.1. CERTAIN DEFINED TERMS. For all purposes of this
Agreement, unless the context otherwise requires (the following meanings to
be equally applicable to both the singular and plural forms of the terms
defined):
"Additional Indebtedness" shall mean all Lender Debt other than
principal of the Revolving Loan and the Term Loan.
"Additional Lenders" shall have the meaning set forth in Section
15.14 hereof.
"Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for a Eurodollar Advance, the rate obtained by dividing (i)
the Eurodollar Rate for such Interest Period by (ii) a percentage equal to 1
minus the stated maximum rate (stated as a decimal) of all reserves required
to be maintained against "Eurocurrency liabilities" as specified in
Regulation D (or against any other category of liabilities which includes
deposits by reference to which the interest rate on Eurodollar Advances is
determined or any category of extensions of credit or other assets which
includes loans by a non-United States office of any Lender to United States
residents).
"Advance" shall mean each and any Revolving Credit Advance and Term
Loan Advance.
"Affiliate" of any specified Person shall mean any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or which is a director,
officer or partner (limited or general) of such specified Person. For the
purposes of this definition, (i) "control," when used with respect to any
specified Person, means the possession, direct or indirect, of the power to
vote five percent (5%) or more of the securities having ordinary voting power
for the election of directors or the power to direct or cause the direction
of the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing, and (ii) any full time employee of Borrower shall not, solely by
virtue of such employment, be deemed to be an Affiliate of Borrower, although
the degree of "control" possessed by such employee as a consequence of such
employment or otherwise can be taken into account in determining whether such
employee is an Affiliate of Borrower.
"Agent" shall have the meaning set forth in the preamble to this
Agreement and in Section 15.13(j) hereof.
"Agreement" shall mean this Loan Agreement, as amended, modified,
supplemented or restated from time to time.
"Approved Delegate" shall have the meaning set forth in Section
15.13(n) hereof.
"Asset Sale" shall mean any sale, lease, conveyance, transfer or
other disposition (including by way of merger or consolidation of a
Subsidiary or sale-leaseback transaction), whether in a single transaction or
in a group of transactions that are part of a common plan, other than any sale,
transfer or other disposition under paragraphs (a), (b), (c), (e) or (f) of
Section 12.5 hereof and other than any exchange of assets leased pursuant to
Capital Leases for other assets to be leased pursuant to such leases (or
other leases on substantially the same terms) to the extent such exchange is
permitted under paragraph (g) of Section 12.5 hereof.
"Authorized Representative" shall mean each Person designated
from time to time, as appropriate, in a Written Notice to the Agent for the
purposes of giving notices of borrowing, conversion or renewal of, Advances,
or requesting Letters of Credit, which designation shall continue in force
and effect until terminated in a Written Notice to the Agent.
"Avoidance Actions" shall mean all claims of the Companies for
recovery or avoidance, as the case may be, of obligations, transfers of
property, or interests in property, offsets, lawful currency or its
equivalents, and other types or kinds of property (or the value thereof)
recoverable or avoidable under Chapter 5 of the Federal Bankruptcy Code from
or in connection with the Companies' Bankruptcy Proceedings or under other
applicable law.
"AWG" shall mean Associated Wholesale Grocers, Inc., a Missouri
corporation.
"AWG Equity" shall mean all equity, deposits, credits, sums and
indebtedness of any kind or description, whatsoever, at any time owed by AWG
to Borrower or at any time standing in the name of or to the credit of
Borrower on the books and/or records of AWG, including, without limitation,
AWG Membership Stock, members deposit certificates, patronage refund
certificates, members savings, direct patronage or year-end patronage,
concentrated purchase allowance, quarterly payments and any other amounts due
from AWG to Borrower under the Supply Agreement.
"AWG Membership Stock" shall mean the Class A common Stock, par
value $100 per share, of AWG.
"AWG Purchase Agreement" shall mean that certain Asset Purchase
Agreement, dated as of February 6, 1995, by and between the Borrower and AWG.
"AWG Sale" shall mean the sale of assets pursuant to the AWG
Purchase Agreement.
"Bankruptcy Court" shall mean the United States Bankruptcy Court
for the District of Delaware.
"Bankruptcy Proceedings" shall mean the proceedings from the Cases.
"Base Rate" shall mean a fluctuating interest rate per annum as
shall be in effect from time to time, which rate per annum shall at all times
be equal to the rate of interest announced publicly by NBC in New York, New
York from time to time as its prime rate for U.S. dollar loans, such rate to
change when and as such announced rate changes:
"Base Rate Advance" shall mean any portion of an Advance which
is not a Eurodollar Advance.
"Board" shall mean the Board of Governors of the Federal Reserve
System or any successor agency or entity performing substantially the same
functions.
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower Case" shall mean the Chapter 11 case of Borrower under
the Federal Bankruptcy Code captioned In re: Homeland Stores, Inc., Case
No. 96-747-PJW (Chapter 11) in the Bankruptcy Court.
"Borrower's Certificate" shall have the meaning set forth in
Section 2.4 hereof.
"Borrowing Base" shall mean, as of any time, an amount equal to
the sum of the following:
(a) up to sixty-five percent (65%) of the Net Amount
of Eligible Inventory,
(b) up to sixty-five percent (65%) of the Net
Amount of Eligible Pharmaceutical Inventory,
(c) up to eighty-five percent (85%) of the
Net Amount of Eligible Coupons, and
(d) up to fifty percent (50%) of the Net Amount
of Eligible Pharmaceutical Receivables,
as determined by reference to and as set forth in the last
Borrowing Base Certificate required to be delivered to the Agent
and each Lender prior to such time pursuant to Section 11.1(j)
hereof.
"Borrowing Base Availability" shall mean the amount,determined
at any time and from time to time, of the Revolving Loan Borrowing Limit minus
the sum of (i) the aggregate unpaid principal amount of the Revolving Credit
Advances outstanding at any time plus (ii) the Letter of Credit Usage at such
time.
"Borrowing Base Certificate" shall have the meaning set forth in
Section 11.1(j) hereof.
"Business Day" shall mean:
(i) for Base Rate Advances and in any event for the purposes
of Section 13.1(b) hereof, any day other than a Saturday, Sunday or other
day on which banks in New York, New York are authorized or required to
close, and
(ii) for Eurodollar Advances on which interest accrues based upon
the Eurodollar Rate but in no event for the purposes of Section 13.1(b)
hereof, the days described in the immediately preceding subclause (i) for the
definition of Business Day, but excluding therefrom any day on which
commercial banks are not open for dealings in U.S. Dollar deposits in the
London (England, U.K.) interbank market.
"Calendar Month" or "calendar month" shall mean (i) except in the
case of Sections 11.1, 11.16 and 12.18 hereof, a calendar month, and (ii) for
the purposes of Sections 11.1, 11.16 and 12.18 one of Borrower's four-week or
five-week accounting periods, of which there are thirteen (13) in each
Fiscal Year.
"Capital Expenditures" shall mean, for any period, the capital
expenditures made by the Borrower and its Subsidiaries during such period,
determined in accordance with GAAP, less Capital Leases to the extent included
in the calculation of Capital Expenditures.
"Capital Lease" of any Person shall mean any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is, or is required to be, accounted for as a capital
lease on the balance sheet of such Person.
"Capitalized Lease Obligations" of any Person shall mean, at any
time, all obligations under Capital Leases of such Person in each case taken
at the amount thereof accounted for as liabilities at such time in
accordance with GAAP.
"Cases" shall mean, collectively, the Borrower Case and the Parent
Case.
"Certificate of Exemption" shall have the meaning set forth in
Section 5.4(b) hereof.
"Change of Control" shall mean such time as (i) Borrower or Parent
liquidates or dissolves, or (ii) Parent shall cease to own and control,
beneficially and of record, 100% of all capital stock of Borrower, or (iii) a
"Change of Control", as defined in the Indenture (as in effect from time to
time), shall occur.
"Claims" shall have the meaning set forth in Section 4.8(c) hereof.
"Closing Date" shall mean August 2, 1996.
"Code" shall mean, at any date, the Internal Revenue Code of
1986, as the same shall be in effect at such date.
"Collateral" shall mean all property of Borrower and Parent,
wherever located, of any kind or nature, in which a Lien has been granted to
Agent and Lenders as security for Lender Debt, or any guarantee thereof,
pursuant to the Loan Documents, and shall include, without limitation, the
following personal property of Borrower and Parent, and all products and
proceeds thereof (including, without limitation, claims of Borrower and Parent
against third parties for loss or damage to such property), including all
accessions thereto, substitutions and replacements thereof, and wherever
located:
(i) Inventory. All inventory in all of its forms, wherever
located, now or hereafter acquired by either of the Companies, now or
hereafter existing, including but not limited to:
(A) all inventory, raw materials, work in process and
finished products intended for sale or lease or to be furnished under
contracts of service in the ordinary course of business, of every kind and
description, including, without limitation, all Pharmaceutical Inventory;
(B) goods in which either of the Companies have or may
acquire an interest in mass or a joint or other interest or right of any kind
(including, without limitation, goods in which either of the Companies have
any interest or right as consignee); and
(C) goods which are returned to or repossessed by either of
the Companies, and all accessions thereto and products thereof and documents
(including without limitation, all warehouse receipts, negotiable documents,
bills of lading and other title documents) therefor (any and all such
inventory, accessions, products and documents being, for the purpose of this
definition of Collateral, the "Inventory");
(ii) Accounts. All accounts and contract rights and other
obligations of any kind, whether secured or unsecured, now or hereafter
acquired by either of the Companies, now or hereafter existing, and
including, without limitation, all Pharmaceutical Receivables, all Coupons
and coupon receivables, and any note or other document or instrument
evidencing any such account or contract right or other obligation (the
"Accounts");
(iii) Special Accounts. All of the Companies'lock-box
accounts, collection accounts and concentration accounts containing cash
proceeds of the Collateral, all funds now or hereafter held therein, all
present or future claims, demands and choses in action in respect thereof
and all certificates and instruments, if any, from time to time representing
or evidencing such accounts and all investments made therefrom and all
securities representing or evidencing such investments (for the purpose of
this definition of Collateral, the "Special Accounts");
(iv) Records. All of the Companies' cash registers,
scanning systems, books and records, including, without limitation,
computer records, disks, tapes and other media on which any information
relating to Inventory, inventory control systems or the Accounts is stored
or recorded and all computer software, management information systems
and other systems and copies of every kind thereof relating to Inventory,
inventory controls or the Accounts and all customer lists (for the purpose
of this definition of Collateral, collectively, the "Records and Other
Property");
(v) Avoidance Actions. All claims of either of
the
Companies for recovery or avoidance, as the case may be, of obligations,
transfers of property, or interests in property, offsets, lawful currency or
its equivalents, and other types or kinds of property (or the value thereof)
recoverable or avoidable under Chapter 5 of the Federal Bankruptcy Code
from or in connection with the Companies' Bankruptcy Proceedings or under
other applicable law (collectively, the "Avoidance Actions");
(vi) Intellectual Property. All of the Companies'
intellectual property, including, without limitation, patents, patent
applications, trademarks, trademark applications, service marks, service
mark applications, tradenames, technical knowledge and processes, formal
or informal licensing arrangements, blueprints, technical specifications,
computer software, copyrights, copyright applications and other trade
secrets, and all embodiments thereof and rights thereto and all of the
Companies' rights to use the patents, trademarks, service marks or other
property of the aforesaid nature of other persons now or hereafter licensed
to the Companies, together with the goodwill of the business symbolized
by or connected with the Companies' trademarks, service marks, licenses
and the other rights under this section;
(vii) General Intangibles. All of the Companies' general
intangibles, instruments, securities, credits, claims, demands, documents,
letters of credit and letter of credit proceeds, chattel paper, documents of
title, certificates of title, certificates of deposit, warehouse receipts,
bills of lading, leases which are permitted to be assigned or pledged, tax
refund claims, contract rights which are permitted to be assigned or pledged,
customer lists, books and records (including, without limitation, software,
data bases, materials, books, records, magnetic tapes and disks and other
storage media) and other rights (including all rights to the payment of
money);
(viii) Equipment. All of the Companies' equipment, including,
without limitation, machinery, equipment, office equipment and supplies,
computers and related equipment, cash registers, scanning systems, furniture,
furnishings, shelving, refrigeration equipment, fixtures, fork lifts, trucks,
trailers, motor vehicles, and other equipment (the foregoing being the
"Equipment");
(ix) Real Property. All real properties owned or leased
by either of the Companies, other than those real properties described on
Schedule 1.1(C) attached to this Agreement (the "Excluded Properties"), but
only so long as the Company that owns or leases an Excluded Property grants
the Agent and the Lenders a negative pledge on the Excluded Properties and
agrees that the net proceeds from any disposition of the Excluded Properties
will be applied to the Revolving Credit Facility upon receipt thereof by the
Companies; and
(x) Proceeds.
(A) All proceeds of every kind or nature of any
and all of the foregoing Collateral (including, without limitation, all
checks, money, drafts, instruments and other evidences of payment and all
proceeds of such property which constitute property of the types described
in clauses (i), (ii), (iii), (iv) (v), (vi), (vii), (viii) or (ix) above, and
property of such type or types acquired with any such proceeds), and
(B) to the extent not otherwise included, all (1)
payments under insurance or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the foregoing
Collateral, and (2) cash proceeds of the foregoing Collateral (collectively,
the "Proceeds").
"Collection Account" shall mean each deposit account of Borrower
established pursuant to Section 8.18(a) hereof (or as otherwise established
with the prior written consent of the Agent), maintained at a bank, into
which Borrower deposits cash proceeds of Inventory and Pledged Accounts, and, to
the extent required by Section 11.17(b) hereof, as to which all amounts
deposited in which and all claims arising under which have been pledged to
the Agent for the benefit of the Agent and the Lenders pursuant to a
Collection Account Agreement.
"Collection Account Agreement" shall mean a collection account
agreement substantially in the form of Exhibit 11.17(b) hereto (with such
modifications as are acceptable to the Agent and as amended, modified or
supplemented from time to time.
"Commitment Letter" shall mean the commitment letter dated
July 18, 1996, among the Companies, the Lenders and the Agent. "Company"
shall have the meaning set forth in the recitals to this
Agreement.
"Concentration Account" shall mean a deposit account of Borrower,
established pursuant to Section 8.18(b) hereof, into which only cash proceeds
of Inventory and Pledged Accounts shall be deposited, all amounts deposited
in which and all claims arising under which have been pledged to the Agent
for the benefit of the Agent and the Lenders pursuant to a Concentration
Account Agreement.
"Concentration Account Agreement" shall have the meaning set
forth in Section 8.18(b) hereof.
"Consolidated Current Ratio" of Parent and its Subsidiaries shall
mean the ratio of Consolidated Current Assets to Consolidated Current
Liabilities.
"Consolidated Current Assets" of Parent and its Subsidiaries
determined at any time, shall mean all assets of Parent and its Subsidiaries
that would, in accordance with GAAP, be classified as consolidated current
assets of a company conducting a business the same or similar to that of such
Person, after deducting adequate reserves in each case in which a reserve is
proper in accordance with GAAP, reduced by the amount of the accounts
receivable owing to Borrower by AWG.
"Consolidated Current Liabilities" of Parent and its Subsidiaries,
determined at any time, shall mean all liabilities of Parent and its
Subsidiaries which would, in accordance with GAAP, be classified as
consolidated current liabilities, except that the liabilities of Borrower
under the Revolving Loan and the Term Loan will be excluded from the
determination of consolidated current liabilities.
"Consolidated Fixed Charge Coverage Ratio" shall mean, for any
period, the ratio obtained by dividing (i) the aggregate EBITDAR of Parent
and its Subsidiaries on a consolidated basis for such period, by (ii) the
scheduled payments of Indebtedness for Borrowed Money of Borrower and its
Subsidiaries for such period plus the Consolidated Tax Expense, the
Consolidated Interest Expense (exclusive, however, of interest that accrued
prior to the Closing Date under the Old Indenture) and the Net Capital
Expenditures (after the Closing Date) of Borrower and its Subsidiaries on a
consolidated basis for such period.
"Consolidated Interest Expense" of any Person for any period shall
mean the amount by which (i) the aggregate amount of interest expense in
respect of Indebtedness of such Person and its Subsidiaries for such period,
on a consolidated basis, determined in accordance with GAAP (including,
without limitation, all net payments and receipts in respect of Hedge
Agreements and the interest component of Capitalized Lease Obligations,
excluding non-cash interest expense (other than for Funded Debt) and
amortization of financing costs), exceeds (ii) the aggregate interest income
of such Person (excluding any non-cash interest from securities which do not
have a rating of at least A-2 from Standard & Poor's Corporation or at least
P-2 from Moody's Investor Service, Inc.) for such period, all as determined
in accordance with GAAP.
"Consolidated Tax Expense" of any Person for any period shall
mean the amount of taxes upon or determined by reference to such Person's net
income, in each case, due and payable by such Person during such period.
"Contingent Obligations" of any Person shall mean any direct or
indirect liability, contingent or otherwise, of such Person:
(i) with respect to any indebtedness, lease, dividend,
letter of credit or other obligation of another if the primary purpose or
intent in creating such liability is to provide assurance to the obligee of
such obligation of another that such obligation of another will be paid or
discharged, or that any agreements relating thereto will be complied with,
or that the holders of such obligation will be protected (in whole or in part)
against loss in respect thereof;
(ii) under any letter of credit issued for the account of
such Person or for which such Person is otherwise liable for reimbursement
thereof;
(iii) under any Hedge Agreement; or
(iv) to advance or supply funds or otherwise to assure or
hold harmless the owner of such primary obligation against loss in respect
thereof.
Contingent Obligations shall include, without limitation:
(A) the direct or indirect guarantee, endorsement (other than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the
obligation of another, and
(B) any liability of such Person for the obligations of another
through any agreement (contingent or otherwise):
(1) to purchase, repurchase or otherwise acquire such obligation
or any security therefor, or to provide funds for the payment or discharge
of such obligation (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise);
(2) to maintain the Solvency or any balance sheet item, level of
income or financial condition of another; or
(3) to make take-or-pay or similar payments if required
regardless of non-performance by any other party or parties to an agreement,
if in the case of any agreement described under subclauses (1) or (2) of this
sentence the primary purpose or intent thereof is as described in the
immediately preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported.
"Coupons" of any Person shall mean any and all parts of an
advertisement entitling the bearer to certain stated benefits, at a minimum
consisting of a cash refund, now or hereafter acquired, intended for
redemption for cash, by the issuer of such coupons, in the ordinary course
of business of such Person, of every kind and description.
"Credit Parties" shall mean and include Borrower and each Guarantor.
"Default" shall mean an event, act or condition which with the
giving of notice or the lapse of time, or both, would constitute an Event of
Default.
"Disclosure Statement" shall mean the First Amended Disclosure
Statement for Joint Plan of Reorganization of Homeland Stores, Inc. and
Homeland Holding Corporation, filed by the Companies in the Bankruptcy
Proceedings.
"EBITDA" of any Person for any period shall mean the sum of:
(i) the net income (or net loss) from operations of such
Person and its Subsidiaries on a consolidated basis (determined in
accordance with GAAP) for such period, without giving effect to any
extraordinary or unusual gains (losses) or gains (losses) from the sale of
assets (other than the sale of Inventory in the ordinary course of business);
plus
(ii) to the extent that any of the items referred to in any
of clauses (A) through (C) below were deducted in calculating such net
income:
(A) Consolidated Interest Expense of such Person for such
period;
(B) income tax expense of such Person and its
Subsidiaries with respect to their operations for such period; and
(C) the amount of all non-cash charges (including,
without limitation, depreciation and amortization) of such Person and its
Subsidiaries for such period.
"EBITDAR" of any person for any period shall mean EBITDA of such
Person for such period, plus Reorganization Costs.
"EFS" shall have the meaning set forth in Section 11.17(d) hereof.
"Eligible Coupons" shall mean only such Coupons of Borrower as
the Agent, in its reasonable discretion, shall from time to time elect to
consider Eligible Coupons for purposes of this Agreement. The value of
such Coupons (the "Net Amount of Eligible Coupons" shall be determined at any
time by reference to the then most recent Borrowing Base Certificate
delivered under Section 11.1(j) hereof, which Borrowing Base Certificate shall
reflect the value of such Coupons at their book value determined in
accordance with GAAP (on a basis consistent with the accounting method used
by Borrower as of the Closing Date). Criteria for eligibility may be fixed
and revised from time to time by the Agent in its reasonable discretion. By
way of example only, and without limiting the discretion of the Agent to
consider any Coupons not to be Eligible Coupons, the Agent may consider any
of the following classes of Coupons not to be Eligible Coupons:
(i) Coupons subject to any Lien (whether or not any such lien is
permitted under this Agreement), other than those granted in favor of the
Agent;
(ii) Coupons which are obsolete, damaged, expired, unredeemable or
otherwise unfit for return to the issuer for redemption for cash in
accordance with the face and tenor thereof;
(iii) Coupons which are prohibited, restricted, void or taxed under
law of the jurisdiction that is applicable to the transaction that otherwise
would give rise to an Eligible Coupon;
(iv) Coupons not in the possession and control of Borrower or the
Processing Agent;
(v) Coupons in respect of which the relevant Security Agreement,
after giving effect to the related filings of financing statements that have
then been made, if any, does not or has ceased to create a valid and
perfected first priority Lien in favor of the Lenders securing the Lender
Debt; and
(vi) Coupons, to the extent such Coupons are subject to a
contractual or statutory Lien (whether or not such Lien is permitted under
this Agreement) in favor of any third person.
"Eligible Inventory" shall mean only such Inventory of Borrower
as the Agent, in its reasonable discretion, shall from time to time elect to
consider Eligible Inventory for purposes of this Agreement. The value of
such Inventory (the "Net Amount of Eligible Inventory") shall be determined at
any time by reference to the then most recent Borrowing Base Certificate
delivered under Section 11.1(j) hereof, which Borrowing Base Certificate shall
reflect the value of Inventory at its book value determined in accordance
with GAAP (on a basis consistent with the accounting method used by Borrower
as of the Closing Date, which includes, without limitation, first-in,
first-out inventory reporting). Criteria for eligibility may be fixed and
revised from time to time by the Agent in its reasonable discretion. By way
of example only, and without limiting the discretion of the Agent to consider
any Inventory not to be Eligible Inventory, the Agent may consider any of the
following classes of Inventory not to be Eligible Inventory:
(i) Inventory subject to any Lien (whether or not any such Lien is
permitted under this Agreement), other than those granted in favor of the
Agent;
(ii) Inventory financed by bankers' acceptances, but only until the
payment in full of the related bankers' acceptances by such Person;
(iii) Inventory which is obsolete, damaged, unsalable or otherwise
unfit for use;
(iv) Inventory located on any premises not owned or leased by
Borrower;
(v) Inventory in respect of which the relevant Security Agreement,
after giving effect to the related filings of financing statements that have
then been made, if any, does not or has ceased to create a valid and
perfected first priority Lien in favor of the Lenders securing the Lender
Debt;
(vi) Inventory on which a Lien has arisen or may arise (A) in favor
of agricultural producers under the Perishable Agricultural Commodities Act
of 1930, as amended (7 U.S.C. 499(e)), and the regulations thereunder, or
any comparable state or local laws or (B) in favor of a seller of livestock
under the Packer and Stockyards Act (7 U.S.C. 196) and the regulations
thereunder, or under any comparable state or local laws;
(vii) Inventory comprised of dairy products, eggs, perishable
merchandise (excluding cheese), fresh meat, prescription products, S & F
Beverages, delicatessen products, bakery products, produce and consigned
Inventory; and
(viii) Inventory at a location leased by Borrower (A) for which
Agent has not received a waiver substantially in the form and substance as
set forth in Exhibit 11.22 hereto, duly executed by the owner/landlord of
such location and, if applicable, the sub-lessor to Borrower at such
location, and (B) to the extent such Inventory is subject to a contractual
or statutory Lien (whether or not such Lien is permitted under this
Agreement) in favor of such landlord or sub-lessor.
"Eligible Pharmaceutical Inventory" shall mean only such
Pharmaceutical Inventory of the Borrower as the Agent, in its reasonable
discretion, shall from time to time elect to consider Eligible Pharmaceutical
Inventory for purposes of this Agreement. The value of such Pharmaceutical
Inventory (the "Net Amount of Eligible Pharmaceutical Inventory") shall be
determined at any time by reference to the then most recent Borrowing Base
Certificate delivered under Section 11.1(j) hereof, which Borrowing Base
Certificate shall reflect the value of Pharmaceutical Inventory at its book
value determined in accordance with GAAP (on a basis consistent with the
accounting method used by Borrower as of the Closing Date, which includes,
without limitation, first-in, first-out inventory reporting). Criteria
for eligibility may be fixed and revised from time to time by the Agent in its
reasonable discretion. By way of example only, and without limiting the
discretion of the Agent to consider any Pharmaceutical Inventory not to be
Eligible Pharmaceutical Inventory, the Agent may consider any of the
following classes of Pharmaceutical Inventory not to be Eligible
Pharmaceutical Inventory:
(i) Pharmaceutical Inventory subject to any Lien (whether or not
any such Lien is permitted under this Agreement), other than those granted
in favor of the Agent;
(ii) Pharmaceutical Inventory financed by banker's acceptances,
but only until the payment in full of the related bankers' acceptances by
such Person;
(iii) Pharmaceutical Inventory which is obsolete, damaged,
unsalable or otherwise unfit for use;
(iv) Pharmaceutical Inventory located on any premises not owned
or leased by Borrower;
(v) Pharmaceutical Inventory in respect of which the relevant
Security Agreement, after giving effect to the related filings of financing
statements that have then been made, if any, does not or has ceased to create
a valid and perfected first priority Lien in favor of the Lenders securing
the Lender Debt;
(vi) Pharmaceutical Inventory comprised of consigned
Pharmaceutical Inventory;
(vii) Pharmaceutical Inventory at a location leased by Borrower (A)
for which Agent has not received a waiver substantially in the form and
substance as set forth in Exhibit 11.22 hereto, duly executed by the landlord
of such location, and, if applicable, the sub-lessor to Borrower at such
location, and (B) to the extent such Pharmaceutical Inventory is subject to
a contractual or statutory Lien (whether or not such Lien is permitted under
this Agreement) in favor of such landlord; and
(viii) Pharmaceutical Inventory comprised of "narcotics," as such
term is defined in the regulation promulgated by the United States Food and
Drug Administration and codified at 21 C.F.R. 1308.02(f).
"Eligible Pharmaceutical Receivables" shall mean, at the time of
calculation, bona fide outstanding Pharmaceutical Receivables:
(i) upon which the Agent has a first priority perfected
security interest;
(ii) as to which the obligor thereof has been directed by
borrower (if so directed to do so by the Agent) to make payment to a
Pharmaceutical Collection Account;
(iii) which arose in the ordinary course of Borrower's
business; and
(iv) as to which all applicable services have been duly
performed or as to which all goods have been delivered to the account
debtor.
The term "Eligible Pharmaceutical Receivables" shall not include any
Pharmaceutical Receivable:
(a) with respect to which any of the representations and warranties
contained in Section 14.20 hereof are not or have ceased to be true, complete
and correct;
(b) with respect to which, in whole or in part, a check, promissory
note, draft, trade acceptance or other instrument for the payment of money
has been received, presented for payment and returned uncollected for any
reason;
(c) as to which Borrower has extended the time for payment without the
consent of the Agent;
(d) as to which any Third Party Payor has terminated, extended or
suspended the time for payment without the consent of the Agent;
(e) owed by an account debtor which:
(i) does not maintain its chief executive office in the United
States;
(ii) is not organized under the laws of the United States or any
State thereof; or
(iii) has taken any action, or suffered any event to occur, of the
type described in paragraph (f) or (g) of Section 13.1 hereof;
(f) owed by an account debtor which is (i) an affiliate of a Credit
Party, or (ii) except for a Pharmaceutical Receivable owing from a
Medicare/Medicaid Account Debtor, a federal or state government or any agency
of instrumentality thereof;
(g) except for a Pharmaceutical Receivable owing from a
Medicare/Medicaid Account Debtor, as to which either the perfection,
enforceability, or validity of the security interest in such Pharmaceutical
Receivables, is governed by any federal, state, or local statutory
requirements other than those of the UCC;
(h) except for a Pharmaceutical Receivable owing from a
Medicare/Medicaid Account Debtor, owed by an account debtor to which Borrower
is indebted in any way, or which is subject to any right of set-off by the
account debtor; or if the account debtor thereon has disputed liability or
acknowledged its inability to pay or made any claim with respect to any other
Pharmaceutical Receivable due from such account debtor, but in each such case
only to the extent of such indebtedness, set-off, dispute, or claim;
(i) if such Pharmaceutical Receivable or the sale or provision of goods
or services giving rise thereto contravenes any applicable law, rule or
regulation, including any law, rule or regulation relating to truth in
lending, fair credit billing, fair credit reporting, equal credit opportunity,
fair debt collection practices or privacy;
(j) owed by a Third Party Payor or a Medicare/Medicaid Account Debtor
if such Pharmaceutical Receivable:
(i) is subject to any limitation which would make payment by such
Third Party Payor or Medicare/Medicaid Account Debtor conditional, to the
extent the payment of such Pharmaceutical Receivable is conditional;
(ii) has not been billed or forwarded to such Third Party Payor or
Medicare/Medicaid Account Debtor for payment in accordance, in all material
respects, with applicable laws and in compliance, in all material respects,
with any and all requisite procedures, requirements and regulations governing
payment by such Third Party Payor or Medicare/Medicaid Account Debtor;
(iii) if payable by a Third Party Payor, is not properly payable
directly to Borrower or by such Third Party Payor in accordance with the
terms and conditions of a validly existing and legally binding certification,
participation agreement, provider agreement or other written contract;
(iv) if payable by a Medicare/Medicaid Account Debtor, is not
properly payable directly to Borrower or by such Medicare/Medicaid Account
Debtor in accordance with the terms and conditions of any applicable
certification, agreement, contract, law or regulation, if any; or
(v) remains unpaid for more than sixty (60) days from
the date a claim is properly made to the Third Party Payor or
Medicare/Medicaid Account Debtor;
(k) payable in part (but not in whole) by a Third Party Payor or
Medicare/Medicaid Account Debtor, to the extent such Pharmaceutical
Receivable exceeds the portion payable by such Third Party Payor or
Medicare/Medicaid Account Debtor;
(l) payable by any individual beneficiary and not a Third
Party Payor or Medicare/Medicaid Account Debtor, to the extent the
portion of such Pharmaceutical Receivable is payable by the individual
beneficiary; or
(m) if the Agent (A) believes in its reasonable discretion
that the prospect of payment of such Pharmaceutical Receivable is
impaired for any reason or that the Pharmaceutical Receivable may not be paid
by reason of the account debtor's financial inability to pay, or (B)
is not reasonably satisfied with the credit standing of the account
debtor with respect to the amount of Pharmaceutical Receivables payable to
Borrower by such account debtor.
"Employee Plan" shall mean an "employee benefit plan" as
defined in Section 3(3) of ERISA which is maintained for employees of any of
the Credit Parties or any ERISA Affiliate, other than a Multiemployer
Plan.
"Environmental Law" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, any "Superfund" or
"Superlien" law, the Hazardous Materials Transportation Act, as amended, and
any other Federal, state, or local statute, rule, regulation, ordinance,
interpretation, order, judgment, or decree, as now or at any time hereafter
amended or in effect and applicable to Borrower and its Subsidiaries,
regulating, relating to or imposing liability or standards of conduct
concerning the manufacture, processing, distribution, use, treatment, handling,
storage, disposal, or transportation of Hazardous Materials, or air
emissions, water discharges, noise emissions, or otherwise concerning the
protection of the outdoor or indoor environment, or health or safety of
persons or property.
"Equipment Lease" shall mean any lease, title retention agreement,
conditional sale agreement or similar agreement under which Parent, Borrower
or any Subsidiary of Parent or Borrower is the lessee, purchaser or similarly
situated contracting party, which agreement covers equipment or other
goods not held for sale or lease by Borrower in the ordinary course of
Borrower's business. The term "Equipment Lease" includes specifically, but
without limitation, leases covering "point-of-sale" computer equipment.
"ERISA" shall mean, at any date, the Employee Retirement Income
Security Act of 1974 and the regulations promulgated and rulings issued
thereunder, all as the same shall be in effect at such date.
"ERISA Affiliate" shall mean any Person that for purposes of Title
I or Title IV of ERISA is a member of any Credit Party's controlled group, or
under common control with any Credit Party, within the meaning of Section
414(b), (c) or (m) of the Code and the regulations promulgated and rulings
issued thereunder.
"Eurodollar Advance" shall mean that portion of any Advance
designated to bear interest based upon the Adjusted Eurodollar Rate as
provided in Section 2 hereof or in Section 3 hereof.
"Eurodollar Lending Office" shall mean, for any Lender, the
branch or Affiliate of such Lender designated as the Eurodollar Lending
Office of such Lender on the signature pages hereto.
"Eurodollar Rate" shall mean, for any Interest Period for any
Eurodollar Advance, an interest rate per annum equal to the offered
quotation, if any, to first-class banks in the London (England, U.K.)
interbank market by three reference banks selected by the Agent for U.S.
Dollar deposits of amounts in funds comparable to the principal amount of
such Eurodollar Advance requested by Borrower for which the Eurodollar Rate
is being determined with maturities comparable to the Interest Period for
which such Eurodollar Rate will apply as of approximately 11:00 A.M. (London
setting time) two (2) Business Days prior to the commencement of such
Interest Period, subject, however, to the provisions of Section 4.7 hereof.
"Eurodollar Rate Margin" shall mean the following, as applicable:
(A) in the case of principal outstanding under the Revolving
Credit Facility, the Revolving Credit Eurodollar Margin; and
(B) in the case of principal outstanding under the Term
Loan Facility, the Term Loan Eurodollar Margin.
"Event of Default" shall have the meaning set forth in
Section 13.1 hereof.
"Excess Cash Flow" shall mean, with respect to Borrower and its
Subsidiaries, on a consolidated basis, for any period, consolidated net
income for such period, plus (x) minus (y), where
(x) equals the sum of the following:
(i) the aggregate amounts deducted in determining such
consolidated net income in respect of all depreciation expenses and
amortization expenses and other non-cash expenses, and
(ii) all non-cash losses deducted in determining
such consolidated net income; and
(y) equals the sum of the following:
(i) scheduled payments or required prepayments of the principal
of Indebtedness (to the extent paid, and to the extent that Borrower was
permitted pursuant to the provisions hereof to make such payments
during such period), but only to the extent that such payment cannot be
reborrowed or redrawn or is not refinanced during such period,
(ii) the aggregate amount of Net Capital Expenditures of Borrower
made during such period,
(iii) repayments during such period of the portion of Capitalized
Lease Obligations of Borrower or any of its Subsidiaries not allocable to
Consolidated Interest Expense, and
(iv) all non-cash gains included in determining such consolidated
net income.
"Excess Funds" shall have the meaning set forth in Section 4.11
hereof.
"Excluded Claims" shall have the meaning set forth in Section
4.8(c) hereof.
"Excluded Properties" shall have the meaning given such term in
the definition of Collateral.
"Excluded Taxes" shall mean franchise taxes, taxes on doing
business or taxes measured by capital or net worth of any Lender and taxes
upon or determined by reference to any Lender's net income, in each
case, imposed:
(i) by the United States of America or any political subdivision
or taxing authority thereof or therein (including, without limitation,
branch taxes imposed by the United States or similar taxes
imposed by any subdivision thereof);
(ii) by any jurisdiction in which the Eurodollar Lending Office or
other branch of any Lender is located or in which any Lender is
organized or has its principal or registered office;
(iii) by reason of any connection, including, without
limitation, a present or former connection, between the jurisdiction
imposing such tax and such Lender other than a connection arising solely
from this Agreement or any related agreements or any transaction
contemplated hereby or thereby; or
(iv) by reason of the failure of any Lender to provide
documentation required to be provided by such Lender pursuant to Section
5.4(b) hereof.
"Existing Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"Federal Bankruptcy Code" shall mean the United States
Bankruptcy Code, 11 U.S.C. 101, et seq., in effect as of the date hereof,
together with all rules, regulations and interpretations thereunder or related
thereto, as amended, modified, supplemented or recodified from time to time.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day, provided that (i) if such day is not a Business
Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (ii) if no such rate is so published on such next
succeeding Business Day, the Federal Funds Rate for such day shall be the
average rate quoted to the Agent on such day on such transactions as
determined by the Agent.
"Final Financing Order" shall mean the Joint Stipulation and
Agreed Order Authorizing Final Financing, Granting Senior Liens
And Priority Administrative Expense Status, Providing For Adequate Protection,
Modifying The Automatic Stay, And Authorizing Debtors To Enter Into
Agreements With Lenders And Agent, entered by the Bankruptcy Court on June 7,
1996, as amended, modified, supplemented or extended from time to time.
"Financing Orders" shall mean the Interim Financing
Order and the Final Financing Order, as amended, modified, supplemented or
extended from time to time.
"First Offer Rights" shall mean (i) AWG's right of first offer with
respect to the stores owned or operated by Borrower listed on Exhibit B to
the Supply Agreement, as such agreement may be amended from time to time, and
(ii) any public recordation of such first offer rights, provided that any
such public recordation shall be terminable from time to time as set forth in
Section 7(f) of the Supply Agreement.
"Fiscal Quarter" shall mean, with respect to the Companies and
with respect to each of the first three (3) "Fiscal Quarters" of each Fiscal
Year, a period of twelve (12) consecutive weeks, beginning on the first
day after the last day of the preceding Fiscal Year of Borrower and ending
on the Saturday on or closest to the next Fiscal Quarter; and with respect
to the fourth and last "Fiscal Quarter" of each Fiscal Year, a period of
sixteen (16) or seventeen (17) weeks, as the case may be, beginning on the
first day after the last day of the third Fiscal Quarter of each Fiscal Year.
The fourth Fiscal Quarter for the Companies' Fiscal Year 1996 begins
September 8, 1996.
"Fiscal Year" shall mean, with respect to the Companies, a period
of fifty-two (52) or fifty-three (53) consecutive weeks beginning on the
first day after the last day of the preceding "Fiscal Year" of and ending
on the Saturday on or closest to the next December 31, beginning with the
fifty-two (52)-week period ending December 30, 1995.
"Floating Rate" shall mean a fluctuating interest rate per annum as
shall be in effect from time to time, which rate per annum shall at all times
be equal to the sum of (i) the Base Rate plus (ii) the following, as
applicable:
(A) in the case of principal outstanding under the Revolving
Credit Facility, the Revolving Credit Base Rate Margin; and
(B) in the case of principal outstanding under the Term Loan
Facility, the Term Loan Base Rate Margin.
"Foreign Lender" shall have the meaning set forth in Section 5.4(b)
hereof.
"Funded Debt" of any Person shall mean:
(i) all Indebtedness for Borrowed Money of such Person;
(ii) Capitalized Lease Obligations of such Person;
(iii) notes payable and drafts accepted representing
extensions of credit of such Person whether or not representing obligations
for borrowed money (other than any balance that constitutes an accrued
expense or trade payable);
(iv) any obligation owed by such Person for all or any
part of the deferred purchase price of property or services that have been
rendered, which purchase price is (y) due more than one year from the date
of incurrence of the obligation in respect thereof, or (z) evidenced by a
note or similar written instrument, in each case except any such obligation
that constitutes an accrued expense or trade payable;
(v) all indebtedness of such Person secured by any Lien
on any property or asset owned or held by that Person regardless of
whether the indebtedness secured thereby shall have been assumed by that
Person or is non-recourse to the credit of that Person;
(vi) all reimbursement obligations and other liabilities of
such Person with respect to letters of credit issued for such Person's
account; and
(vii) the guarantee or joint obligation of that Person of
items described in any of clauses (i)-(vi) above guaranteed by such Person;
provided, however, in the case of any of the
foregoing items (i) - (vi), the term "Funded Debt" shall include
any such item only to the extent such item would appear as a liability
upon a balance sheet of such Person prepared on a consolidated basis in
accordance with GAAP.
"Funded Debt-to-EBITDAR Ratio" shall mean, for any Fiscal
Quarter of the Companies, the ratio obtained by dividing (i) the Funded Debt
of the Parent and its Subsidiaries on a consolidated basis as of the
last day of such Fiscal Quarter, by (ii) the aggregate amount of EBITDAR of
the Parent and its Subsidiaries on a consolidated basis for the four (4)
Fiscal Quarter periods ending at the end of such Fiscal Quarter.
"GAAP" shall have the meaning specified in Section 1.4
hereof.
"Gross Proceeds" shall mean, as to any transaction, an amount
equal to the Net Proceeds, calculated, however, without the deductions set
forth in clauses (A) and (C) of clause (i) of the definition of Net
Proceeds.
"Guarantor" shall mean, at any time, the Parent and each of
Borrower's present or future Subsidiaries.
"Guaranty" shall mean any guaranty executed and delivered
pursuant to Section 7.5 hereof, as each may be amended, supplemented or
otherwise modified from time to time in accordance with its terms.
"Hazardous Material" shall mean any pollutant, contaminant,
chemical, or industrial or hazardous, toxic or dangerous waste, substance or
material, defined or regulated as such in (or for purposes of) any
Environmental Law and any other toxic, reactive, or flammable chemicals,
including (without limitation) any asbestos, any petroleum (including
crude oil or any fraction), any radioactive substance and any polychlorinated
biphenyls; provided, in the event that any Environmental Law is amended so as
to broaden the meaning of any term defined thereby, such broader meaning
shall apply subsequent to the effective date of such amendment; and provided,
further, to the extent that the applicable laws of any state establish a
meaning for "hazardous material," "hazardous substance," "hazardous waste,"
"solid waste" or "toxic substance" which is broader than that specified in
any Environmental Law, such broader meaning shall apply.
"Hedge Agreement" shall have the meaning specified in clause (v)
of the definition of Indebtedness.
"Indebtedness" of any Person shall mean all items which, in
accordance with GAAP, would be included in determining total liabilities of
such Person as shown on the liability side of a balance sheet as at
the date Indebtedness of such Person is to be determined and, in any event,
shall include (without limitation and without duplication):
(i) all Indebtedness for Borrowed Money of such Person;
(ii) any liability of such Person secured by any Lien on
property owned or acquired by such Person, whether or not such liability
shall have been assumed;
(iii) all Contingent Obligations of such Person;
(iv) letters of credit and all obligations of such Person
relating thereto; and
(v) all obligations (other than obligations to pay fees in
connection therewith) of such Person in respect of interest rate swap
agreements, currency swap agreements and other similar agreements designed to
hedge against fluctuations in interest rates or foreign exchange
rates (each, a "Hedge Agreement").
"Indebtedness for Borrowed Money" of any Person shall mean all
Indebtedness for borrowed money or evidenced by notes, bonds, debentures or
similar evidences of Indebtedness of such Person, all obligations of such
Person for the deferred and unpaid purchase price of any property,
service or business (other than trade accounts payable and similar current
accrued liabilities incurred in the ordinary course of business and
constituting Current Liabilities), and all obligations of such Person under
Capitalized Lease Obligations.
"Indemnified Party" shall have the meaning set forth in Section
4.8(c) hereof.
"Indenture" shall mean the indenture dated as of August 2, 1996
(as originally in effect or as amended in accordance with the terms of this
Agreement) among Borrower, as issuer, Parent, as guarantor, and the Trustee,
pursuant to which Borrower's 10% Senior Subordinated Notes due 2003 were
issued (collectively, the "Subordinated Notes").
"Interest Payment Date" shall mean, with respect to each
Eurodollar Advance, the last day of the Interest Period for such Eurodollar
Advance; provided, however, that with respect to each Interest Period for any
Eurodollar Advance of a duration of three or more months, the Interest Payment
Date with respect to such Eurodollar Advance shall include, in addition to
the last day of such Interest Period, each day which occurs every three
months after the initial date of such Interest Period.
"Interest Period" shall mean, with respect to each Eurodollar
Advance, initially, the period commencing on, as the case may be, the
borrowing or conversion date with respect to such Eurodollar Advance and
ending one, two, three or six months thereafter, as selected by Borrower,
subject however, to Section 4.1(f) hereof; and thereafter, each period
commencing on the last day of the next preceding Interest Period applicable
to such Eurodollar Advance and ending one, two, three or six months
thereafter, as selected by Borrower subject, however, to Section 4.1(f)
hereof; provided, however, that no Interest Period may be selected for a
Eurodollar Advance which expires later than the Maturity Date, subject
however, to Section 4.1(f) hereof; and provided, further, that any Interest
Period in respect of a Eurodollar Advance which 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, subject to the foregoing proviso, end on the last Business Day of a
calendar month. Notwithstanding the above, all Interest Periods shall be
adjusted in accordance with Section 15.11 hereof.
"Interim Financing Order" shall mean the Joint Stipulation and
Agreed Order Authorizing Interim Financing, Granting Senior Liens
And Priority Administrative Expense Status, Providing For Adequate Protection,
Modifying The Automatic Stay, And Authorizing Debtors To Enter Into
Agreements With Lenders And Agent, entered by the Bankruptcy Court on or about
May 13, 1996, as amended, modified, supplemented or extended from time to time.
"Interim Period" shall mean the period beginning on the
46th day following the end of a Fiscal Quarter and ending on the 45th day
of the next following Fiscal Quarter.
"Inventory" of any Person shall mean any and all inventory, raw
materials, work-in-process and finished products of such Person, now or
hereafter acquired, intended for sale or lease or to be furnished under
contracts of service in the ordinary course of business of such Person, of
every kind and description.
"Investment" shall have the meaning set forth in Section 12.4
hereof.
"Issuing Lender" shall have the meaning set forth in Section 6.1
hereof.
"Lease" shall mean each lease or sublease of real property existing
on the Closing Date under which Parent, Borrower or any of its Subsidiaries
is the lessee or sublessee and each future lease or sublease of real
property under which Borrower or any of its Subsidiaries is the lessee or
sublessee.
"Lender" and "Lenders" shall have the meanings set forth in the
preamble to this Agreement.
"Lender Debt" shall mean and include all Advances and all other
Indebtedness owing at any time by Borrower, any one or more of its
Subsidiaries or any other Credit Party to Agent or any one or more of Lenders
(including, without limitation, all principal and interest, Letter of Credit
reimbursement obligations, fees, indemnities, costs, charges and other amounts
payable under the Letter of Credit Agreements or in respect of the Letters of
Credit or under any of the other Loan Documents), arising under or in
connection with this Agreement, the Notes, any Security Document, any of the
other Loan Documents, or any Guaranty in favor of the Agent or any one or
more of the Lenders, in each instance, whether absolute or contingent,
secured or unsecured, due or not, and whether arising by operation of law or
otherwise, and all interest and other charges thereon.
"Letter of Credit" shall have the meaning set forth in the preamble
to this Agreement, and any extension, modification, amendment, renewal or
replacement thereof.
"Letter of Credit Agreement" shall mean an application and
agreement, as amended, modified or supplemented from time to time, with
respect to the issuance and reimbursement of and otherwise with respect to a
Letter of Credit, in form and substance satisfactory to the Agent.
"Letter of Credit Cash Collateral" shall mean cash deposited by
Borrower with the Agent to secure obligations of Borrower under Letters of
Credit (contingent or otherwise) pursuant to agreements in form and substance
satisfactory to the Agent.
"Letter of Credit Fee" shall mean the percentage indicated below
that corresponds to the period of time and, where applicable, the EBITDAR of
the Companies for the Fiscal Year indicated below:
from the from May 1, 1997 through from May 1, 1998
Closing Date and including April 30, 1998 and thereafter
through and
including April
30, 1997
If Fiscal Year If Fiscal Year If Fiscal Year If Fiscal Year
1996 EBITDAR 1996 EBITDAR 1997 EBITDAR 1997 EBITDAR
is greater than is greater than is greater than is less than or
$17,000,000 or equal to $25,000,000 equal to
$17,000,000 $25,000,000
1.75% per 1.5% per annum 1.75% per 1.5% per annum 1.75% per annum
annum annum
"Letter of Credit Sublimit" shall mean the lesser of (i)
$18,000,000, and (ii) the Borrowing Base.
"Letter of Credit Usage" shall mean, at any time, (i) the aggregate
undrawn amount at such time of all outstanding Letters of Credit, plus (ii)
the aggregate amount of unreimbursed drawings at such time under
Letters of Credit.
"Lien" shall mean any lien, mortgage, pledge, security interest or
other type of charge or encumbrance of any kind, or any other type of
preferential arrangement, including, without limitation, the lien or retained
security title of a conditional vendor, any lien in favor of a landlord
(whether or not perfected and whether or not notice of any such lien has been
filed) and any easement, right of way or other encumbrance on title to real
property and any financing statement filed in respect of any of the
foregoing. For the purposes of this Agreement, a Credit Party shall be
deemed to be the owner of any property which it has placed in trust for the
benefit of the holder of Indebtedness of such Credit Party which Indebtedness
is deemed to be extinguished under GAAP but for which such Credit Party
remains legally liable, and such trust shall be deemed to be a Lien.
"Loan Documents" shall mean, collectively, the Agreement, each
Security Document, each Mortgage, each Guaranty, the Notes, each Letter of
Credit Agreement, each Borrower's Certificate, each Borrowing Base Certificate,
each Landlord's Certificate, each Collection Account Agreement, each
Concentration Account Agreement, each Lock-Box Agreement, each Pharmaceutical
Collection Account Agreement, and each other document or instrument now or
hereafter delivered to the Agent or any Lender by any Credit Party pursuant
to or in connection herewith or therewith and as each of the same
are further amended, modified, supplemented, extended, renewed, restated or
replaced from time to time.
"Local Bank Special Account" shall have the meaning set forth in
Section 11.17(c) hereof.
"Lock-Box Account" means an account maintained for the purpose
of receiving all cash collections and other cash proceeds of Pledged Accounts.
"Lock-Box Agreement" means an agreement in substantially the
form of Exhibit 1.1 hereto.
"Material Adverse Effect" shall mean a material adverse effect on
(i) the business, assets, prospects, operations or financial or other
condition of Parent, Borrower and Borrower's Subsidiaries, taken as a whole,
(ii) Borrower's ability to pay the Lender Debt in accordance with the terms
hereof, (iii) the Collateral, or (iv) the Agent's Liens on the Collateral or
the priority of any such Lien.
"Maturity Date" shall mean the date three (3) years from the
Closing Date.
"Maximum Lawful Rate" shall have the meaning set forth in
Section 4.16(a) hereof.
"Maximum Permissible Rate" shall have the meaning set forth in
Section 4.16(b) hereof.
"Medicare/Medicaid Account Debtor" shall mean the following
Persons who are or may become obligated for payment of any Pharmaceutical
Receivables: (i) the United States of America acting under the Medicare
Program established pursuant to the Social Security Act, (ii) any State
acting pursuant to a health plan adopted pursuant to Title XIX of the Social
Security Act, or (iii) any agent for any of the foregoing.
"Membership Sign-Up Documents" shall mean (i) the Application
for Membership by Homeland Stores, Inc., between Borrower and AWG and (ii)
the Stock Power of Attorney granted to AWG by Borrower with respect to the
AWG Membership Stock owned by Borrower.
"Mortgages" shall have the meaning specified in Section 7.2(a)
hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA to which any of the Credit Parties
or any ERISA Affiliate contributes.
"Net Amount of Eligible Coupons" shall have the meaning set
forth in the definition of Eligible Coupons.
"Net Amount of Eligible Inventory" shall have the meaning set
forth in the definition of Eligible Inventory.
"Net Amount of Eligible Pharmaceutical Inventory" shall have the
meaning set forth in the definition of Eligible Pharmaceutical Inventory.
"Net Amount of Eligible Pharmaceutical Receivables" shall have
the meaning set forth in the definition of Eligible Pharmaceutical Receivables.
"Net Capital Expenditures" shall mean for any period, the Capital
Expenditures made by Borrower and its Subsidiaries in such period, less net
cash proceeds from the sale of Excluded Properties.
"Net Proceeds" shall mean, with respect to any transaction,
(i) cash (freely convertible into U.S. dollars) received by any
Credit Party from such transaction (including cash received as consideration
for the assumption or incurrence of liabilities incurred in connection with
or in anticipation of such transaction), after
(A) provision for all income, title, recording or other
taxes measured by or resulting from such transaction after taking
into account all available deductions and credits,
(B) payment of all brokerage commissions, reasonable
investment banking and legal fees and other fees and expenses
related to such transaction,
(C) deduction of appropriate amounts to be provided by
such Credit Party as a reserve, in accordance with GAAP, against
any liabilities associated with the assets sold or disposed of in such
transaction and retained by such Credit Party after such
transaction, including, without limitation, pension and other post-employment
benefit liabilities and liabilities related to environmental
matters or against any indemnification obligations associated with the
assets sold or disposed of in such transaction,
(D) amounts paid to satisfy Indebtedness (other than the
Lender Debt and Subordinated Notes) which are required to be
repaid in connection with any such transaction, and
(E) so long as no Default or Event of Default is
continuing, payment of trade payables incurred as a result of the
purchase of Inventory sold in connection with such transaction;
and
(ii) promissory notes received by such Credit Party from such
transaction or such other disposition upon the liquidation or
conversion of such notes into cash.
"Note" and "Notes" shall mean the Revolving Notes and the Term
Notes.
"Old Indenture" shall mean the indenture of Borrower, as issuer,
Parent, as guarantor, and the United States Trust Company of New York, as
Trustee, dated as of March 4, 1992, providing for $120,000,000 Series A Senior
Secured Floating Rate Notes due 1997 and Series B Senior Secured Fixed Rate
Notes due 1999.
"Overadvance" shall have the meaning set forth in Section 2.2(c)
hereof.
"Parent" shall have the meaning set forth in the preamble hereto.
"Parent Case" shall mean the Chapter 11 case of Parent under the
Federal Bankruptcy Code captioned In re: Homeland Holding
Corporation, Case No. 96-748-PJW (Chapter 11) in the Bankruptcy Court.
"Payment Office" shall have the meaning set forth in Section
2.4(c) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or
any successor thereof under ERISA.
"Pension Benefit Plan" shall mean an "employee pension benefit
plan" as defined in Section 3(2) of ERISA which is maintained for employees of
any of the Credit Parties or any ERISA Affiliate, other than a Multiemployer
Plan.
"Permitted Transaction" shall mean:
(i) payments on behalf of Parent:
(A) to pay reasonable and necessary operating costs and
taxes incurred in the ordinary course of business
including, without limitation,
(1) the execution, delivery and performance by
Parent or Borrower of indemnification and contribution
agreements in favor of each Person who becomes a director
of Parent, Borrower or any of their respective Subsidiaries
in respect of liabilities
(a) arising under the Securities Act, the
Securities Exchange Act, and any other applicable
securities laws or otherwise in connection with any
offering of securities by Parent, Borrower or any of
their respective Subsidiaries,
(b) incurred to third parties for any
action or failure to act of Parent, Borrower or any of
their Subsidiaries or successors,
(c) arising out of the fact that any
indemnitee was or is a director of Holding,
Borrower, or any of their respective Subsidiaries, or
is or was serving at the request of any such
corporation as director, officer, employee or agent
of another corporation, partnership, joint venture,
trust or other enterprise, or
(d) to the fullest extent permitted by
Delaware law, out of any breach or alleged breach
by such an indemnitee of his or her fiduciary duty
as a director of Parent, Borrower or any of their
respective Subsidiaries,
(2) loans and advances to officers and directors
of Parent, Borrower or any of their respective Subsidiaries
(or employees thereof, if approved by an officer of
Borrower) existing on the Closing Date and set forth on
Schedule 1.1(B) hereto or made in the ordinary course of
business for reasonable travel, entertainment and relocation
expenses, or
(3) customary compensation and severance
arrangements with officers, directors, and employees of
Parent, and
(B) to permit Parent to cover its expenses (including all
reasonable professional fees and expenses) incurred in connection
with (1) the Parent Case, (2) so long as no Default or Event of
Default in payment of principal of or interest on Lender Debt has
occurred and is continuing, public offerings of its equity
securities or debt permitted by the Indenture, and its obligations to
register securities with the Securities and Exchange Commission (and any
government agency succeeding to its functions) and similar state
agencies or (3) to comply with its reporting obligations under
the federal and state securities laws; and
(ii) payments to any Affiliate of reasonable fees and
reasonable expenses incurred by any such Affiliate in connection with its
performance of services to Parent, Borrower and their respective
Subsidiaries.
"Person" shall mean an individual, a corporation, an
association, a joint stock company, a business trust, a partnership, a trust, a
joint venture, an unincorporated organization or other entity, or a
government or any agency or political subdivision thereof.
"Pharmaceutical Collection Account" shall mean a deposit account
of Borrower, established pursuant to Section 8.18(e) hereof, into which only
cash proceeds of Pharmaceutical Receivables shall be deposited, all
amounts deposited in which and all claims arising under which have been
pledged to the Agent for the benefit of the Agent and the Lenders pursuant to a
Pharmaceutical Collection Account Agreement; provided, however, that Borrower
shall have access to such account.
"Pharmaceutical Collection Account Agreement" shall have the
meaning set forth in Section 8.18(e) hereof.
"Pharmaceutical Inventory" of any Person shall mean any and all
inventory and stock of prescription products, now or hereafter acquired,
intended for sale or lease or to be furnish under contracts of service in
the ordinary course of business of such Person, of every kind and description.
"Pharmaceutical Receivables" shall mean and include all accounts,
contract rights, instruments, documents, chattel paper and general intangibles,
whether secured or unsecured, now existing and hereafter created, of the
Credit Parties, whether or not specifically sold or assigned to the
Agent or the Lenders, and arising form a sale or other disposition of
Pharmaceutical Inventory by Borrower in the ordinary course of Borrower's
business including, without limitation, all rights to receive payments from
Third Party Payors and Medicare/Medicaid Account Debtors and any and all
contracts related to payment by such Third Party Payors and Medicare/Medicaid
Account Debtors.
"Plan" shall mean that certain First Amended Joint Plan Of
Reorganization Of Homeland Stores, Inc. And Homeland Holding Corporation,
dated June 13, 1996 and filed June 13, 1996, as amended, in the Bankruptcy
Proceedings.
"Pledged Accounts" shall have the meaning set forth in Section
7.1(a) hereof.
"Processing Agent" shall mean International Data, L.L.C., an
Indiana limited liability company, Borrower's agent for processing of Coupons
pursuant to the terms of the Processing Agreement and any successor agent for
processing of coupons that is approved by the Lenders and that has entered
into a coupon processing service agreement acceptable to Lenders.
"Processing Agreement" shall mean that certain Coupon Processing
Service Agreement (Cash Advance Program) dated as of September 18, 1995,
between the Processing Agent and Borrower, as amended, modified, supplemented
or restated from time to time.
"Real Property" shall have the meaning set forth in the definition
of Collateral.
"pro rata" shall mean, with respect to each Lender, a percentage
equal to the ratio that (x) the sum of the Revolving Commitment and the Term
Loan Commitment of such Lender bears (y) to the sum of the Revolving Credit
Facility Commitment and the Term Loan Facility Commitment.
"Receivables" shall mean and include all accounts,
contract rights, instruments, documents, chattel paper and general intangibles,
whether secured or unsecured, now existing or hereafter created, of the Credit
Parties, and whether or not specifically sold or assigned to the Agent or the
Lenders.
"Records and Other Property" shall have the meaning set forth in
Section 7.1(a) hereof.
"Regulation D" shall mean Regulation D of the Board as from time
to time in effect and any successor to all or a portion thereof establishing
reserve requirements.
"Release" shall mean any releasing, spilling, escaping, leaking,
seepage, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping. The meaning of the term shall
also include any threatened Release.
"Reorganization Costs" shall mean the sum of the following:
(a) legal, professional and bank facility fees associated with the
reorganization of the Companies incurred in connection with the Bankruptcy
Proceedings,
(b) severance expenses for the Employee Buyout Offer not to
exceed $6,600,000,
(c) expenses, up to $750,000, in the aggregate, paid to establish the
Health and Welfare Benefit Plan, as described in section XIV(B) of the
Disclosure Statement,
(d) expenses incurred in discontinuing operations at Borrower's
stores numbered 488 and 602, not to exceed $1,806,250 in the aggregate,
of which total, the cash expenses will not exceed $400,000 and the non-
cash expenses will not exceed $1,406,250, and
(e) to the extent actually incurred and not reimbursed from any
source, the net transition expenses incurred in connection with termination
of Borrower's prior Health and Welfare Benefit Plan, such expenses not to
exceed, in the aggregate, $900,000.
(f) cure items.
"Reportable Event" shall mean any reportable event described in
Section 4043(b) of ERISA or the regulations thereunder, as to which the PBGC
has not by regulation waived the notice requirement of Section 4043(a) of
ERISA.
"Required Lenders" shall mean, at any time, Lenders
having more than sixty-six and two-thirds percent (66 2/3%) of the sum of (i)
the aggregate outstanding principal balance of the Revolving Loan, (ii) the
Letter of Credit Usage (which shall be deemed to be held by the Lenders in
accordance with their exposure under Section 15.18 hereof), (iii) the
aggregate outstanding principal balance of the Term Loan, and (iv) the
aggregate amount of unutilized Revolving Commitments of the Lenders, in each
case, at such time.
"Revolving Commitment", as to any Lender, shall have the meaning
set forth in Section 2.2(b) hereof. For purposes of Sections 4.5, 4.8 and
6.4 hereof, the Revolving Commitment of any Lender shall include the
participation interest of such Lender in Letters of Credit as provided in
Section 15.18 hereof.
"Revolving Credit Advance" shall have the meaning set forth in
Section 2.1(a) hereof.
"Revolving Credit Base Rate Margin" shall mean the percentage
indicated below that corresponds to the period of time and, where applicable,
the EBITDAR of Borrower for the Fiscal Year indicated below:
from the
Closing Date
through April from May 1,1997 through
30, 1997 and including April 30, 1998 From May 1, 1998 and thereafter
If Fiscal Year If Fiscal Year If Fiscal Year If Fiscal Year
1996 EBITDAR 1996 EBITDAR 1997 EBITDAR 1997 EBITDAR
is greater than is less than or is greater than is less than or
$17,000,000 equal to $25,000,000 equal to
$17,000,000 $25,000,000
0.75% 0.50% 0.75% 0.50% 0.75%
"Revolving Credit Eurodollar Margin" shall mean the
percentage indicated below that corresponds to the period of time and, where
applicable, the EBITDAR of Borrower for the Fiscal Year indicated below:
from the
Closing Date
through April from May 1, 1997 through and
30,1997 including April 30, 1998 from May 1,1998 and thereafter
If Fiscal Year If Fiscal Year If Fiscal Year If Fiscal Year
1996 EBITDAR 1996 EBITDAR 1997 EBITDAR 1997 EBITDAR
is greater than is less than or is greater than is less than or
$17,000,000 equal to $25,000,000 equal to
$17,000,000 $25,000,000
3.00% 2.75% 3.00% 2.75% 3.00%
"Revolving Credit Facility Commitment" shall mean Twenty-
Seven Million Five Hundred Thousand Dollars ($27,500,000).
"Revolving Loan" shall have the meaning set forth in Section
2.1(a) hereof.
"Revolving Loan Borrowing Limit" shall have the meaning set
forth in Section 2.2(a) hereof.
"Revolving Note" and "Revolving Notes" shall have the meanings
set forth in Section 2.3(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
"Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended from time to time.
"Security Agreement" shall have the meaning specified in Section
7.1(a) hereof.
"Security Documents" shall have the meaning specified in Section
7.1(a) hereof.
"Settlement Date" shall have the meaning set forth in Section
2.4(c).
"Settlement Notice" shall have the meaning set forth in Section
2.4(c).
"Sight Draft Special Account" shall have the meaning set forth in
Section 11.17(c) hereof.
"Solvent" and "Solvency" shall mean, with respect to any Person
on a particular date, that on such date,
(i) the fair value of the property of such Person is greater than
the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person; and
(ii) the present fair salable value of the assets of such
Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured; and
(iii) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay as such
debts and liabilities mature; and
(iv) such Person is not engaged in business or a transaction, and
is not about to engage in business or a transaction, for which such Person's
property would constitute an unreasonably small capital.
"Special Account" shall have the meaning set forth in Section
11.17(c) hereof.
"Store Deposit" shall have the meaning set forth in Section
11.17(c) hereof.
"Subordinated Note Documents" shall mean the Indenture and
each instrument, document and agreement evidencing, securing, creating,
guaranteeing or governing the Indebtedness evidenced by the Subordinated Notes
or entered into in connection therewith, in each case as originally in effect
or as amended in accordance with the terms of this Agreement.
"Subordinated Notes" shall have the meaning specified in the
definition of the term "Indenture".
"Subsidiary" of any Person shall mean (i) any corporation of which
more than fifty percent (50%) of the issued and outstanding securities having
ordinary voting power for the election of directors is owned or controlled,
directly or indirectly, by such Person and/or one or more of its
Subsidiaries, and (ii) any partnership in which a Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than
fifty percent (50%).
"Supply Agreement" shall mean the Supply Agreement, dated as
of April 21, 1995, by and between AWG and Borrower.
"Term Commitment", as to any Lender, shall have the meaning set
forth in Section 3.2(b) hereof.
"Term Loan Facility Commitment" shall mean Ten Million Dollars
($10,000,000).
"Term Loan" shall have the meaning set forth in Section 3.1(a)
hereof.
"Term Loan Advance" shall have the meaning set forth in Section
3.1(a) hereof.
"Term Loan Base Rate Margin" shall mean the percentage
indicated below that corresponds to the period of time and, where
applicable, the EBITDAR of Borrower for the Fiscal Year indicated below:
from the
Closing Date
through April from May 1,1997 through and
30, 1997 including April 30,1998 from May 1, 1998 and thereafter
If Fiscal Year If Fiscal Year If Fiscal Year If Fiscal Year
1996 EBITDAR 1996 EBITDAR 1997 EBITDAR 1997 EBITDAR
is greater than is lessthan or is greater than is less than or
$17,000,000 equal to $25,000,000 equal to
$17,000,000 $25,000,000
1.0% 0.75% 1.0% 0.75% 1.0%
"Term Loan Eurodollar Margin" shall mean the percentage indicated
below that corresponds to the period of time and, where applicable, the
EBITDAR of Borrower for the Fiscal Year indicated below:
from the
Closing Date
through April from May 1, 1997 through and
30,1997 including April 30, 1998 from May 1, 1998 and thereafter
If Fiscal Year If Fiscal Year If Fiscal Year If Fiscal Year
1996 EBITDAR 1996 EBITDAR 1997 EBITDAR 1997 EBITDAR
is greater than is less than or is greater than is less than or
$17,000,000 equal to $25,000,000 equal to
$17,000,000 $25,000,000
3.25% 3.00% 3.25% 3.00% 3.25%
"Term Note" and "Term Notes" shall have the meanings set forth
in Section 3.3(a) hereof.
"Total Commitment" shall mean the total amount available to
Borrower under the Revolving Credit Facility Commitment and the Term Loan
Facility Commitment.
"Third Party Payor" shall mean any insurance company third-party
payor or managed care payor that makes payment for the provision of goods or
services related to medical treatment provided to an individual, including,
but not limited to, any commercial payor, hospital or pharmacy.
"Trustee" shall mean Fleet National Bank, as trustee under the
Indenture, and any successor trustee appointed pursuant to the applicable
provisions of the Indenture.
"UCC" shall mean the Uniform Commercial Code (or any
successor statute) of the State of New York or of any other state
the laws of which are required by Section 9-103 of the UCC of New York to be
applied in connection with the perfection of a security interest in favor of
the Agent hereunder or under any Security Document.
"U.S. Dollars" and "$" shall mean lawful currency of the United
States of America.
"Use Restrictions" shall mean (i) Borrower's agreement under
Section 8(b) of the Supply Agreement to dedicate (to the extent of its
interest therein (including leasehold interests)) certain real property
and the improvements thereon to the exclusive use of a retail grocery facility
(including all activities which from time to time are commonly associated
with the operation of a grocery facility) which is owned by a retail member
of AWG and (ii) any public recordations of such agreement, provided that any
such public recordation shall be terminable from time to time as set forth in
Section 8(b) of the Supply Agreement.
"Written Notice" and "in writing" shall mean any form of written
communication or a communication by means of telex, telecopier device,
telegraph or cable.
1.2. TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE. Each term
defined in the UCC of the State of New York and used herein shall have the
meaning given therein unless otherwise defined herein.
1.3. COMPUTATION OF TIME PERIODS. In this Agreement
in the computation of periods of time from a specified date to a later
specified date, the word "from" shall mean "from and including" and the
words "to" and "until" each shall mean "to but excluding."
1.4. ACCOUNTING TERMS. (a) All accounting terms not
specifically defined herein shall be construed, as to a specified Person, in
accordance with generally accepted accounting principles in the United States,
consistent with those applied in the preparation of the financial statements
of such Person ("GAAP").
(b) If any change in accounting principles from those used in the
preparation of any financial statements previously delivered to Lenders under
the Existing Agreement are hereafter occasioned by promulgation of rules,
regulations, pronouncements or opinions by or are otherwise required by the
Financial Accounting Standards Board or the American Institute of Certified
Public Accountants (or successors thereto or agencies with similar functions),
Borrower shall cause its independent auditors promptly to report such change
and the effect thereof on Borrower (and Parent) and its financial
reporting to the Agent in writing. If Parent and Borrower do not adopt such
change and the Agent determines that such change is material to the Parent,
Borrower and their Subsidiaries and requests that Parent, Borrower and their
respective Subsidiaries adopt such change, then Parent, Borrower and their
Subsidiaries shall adopt such change (but not prior to the date that such
Credit Party is required to adopt such change by such authorities). If such
change results in a change in the method of calculation of, or affects the
results of such calculation of, any of the financial covenants, standards or
terms found in any Loan Document, then the parties hereto agree to enter into
and diligently pursue negotiations in order to amend such financial covenants,
standards or terms so as to equitably reflect such change, with the desired
result that the criteria for evaluating a Credit Party's financial condition
and results of operations shall be the same after such change as
if such change had not been made.
1.5. OTHER PROVISIONS REGARDING DEFINITIONS. (a)
The words "hereof," "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
(b) The terms defined in this Section 1, unless the context requires
otherwise, will have the meanings applied to them in this Section 1,
references to an "Exhibit," "exhibit," "Schedule" or "schedule"
are, unless otherwise specified, to one of the exhibits or schedules attached
to this Agreement and references to a "section" or "Section" are, unless
otherwise specified, to one of the sections of this Agreement.
(c) The term "or" is not exclusive.
SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT FACILITY.
2.1. REVOLVING CREDIT FACILITY ADVANCES. (a) Each of the
Lenders severally, but not jointly, agrees to lend to Borrower, subject
to and upon the terms and conditions herein set forth, at any time or from
time to time on or after the Closing Date and before the Maturity Date,
such Lender's pro rata share of such amounts as may be requested or be deemed
requested by Borrower in accordance with the terms of this Agreement (each
such borrowing, a "Revolving Credit Advance" and the outstanding principal
balance of all Revolving Credit Advances from time to time, the "Revolving
Loan"), subject to the limitations contained in Section 2.2 hereof.
(b) Each Revolving Credit Advance shall be made on the date
specified in the Written Notice or telephonic notice confirmed in writing as
described in Section 2.4; provided, however, that if Borrower shall be deemed
to request a Revolving Credit Advance under Section 6.1(c) hereof, no notice
of a borrowing shall be necessary and such Advance shall be in an amount
equal to the reimbursement obligation of Borrower for the drawing made under
the Letter of Credit for which such Advance is deemed requested.
2.2. REVOLVING CREDIT FACILITY COMMITMENT AND REVOLVING LOAN
BORROWING LIMIT. (a) The aggregate unpaid principal amount of the Revolving
Credit Advances outstanding at any time shall not exceed an amount equal to
the lesser of (i) the Revolving Credit Facility Commitment minus the Letter
of Credit Usage at such time (after giving effect to any concurrent
reimbursement of a Letter of Credit with the proceeds of an Advance pursuant
to Section 6.1(c) hereof), and (ii) the Borrowing Base as of such time minus
the Letter of Credit Usage at such time (after giving effect to any
concurrent reimbursement of a Letter of Credit with the proceeds of an Advance
pursuant to Section 6.1(c) hereof) (the lesser of (i) and (ii) being the
"Revolving Loan Borrowing Limit").
(b) Subject to the limitations of Sections 2 and 4 hereof,
Borrower may borrow, repay and reborrow the Revolving Loan. The portion of
the Revolving Loan to be funded by each Lender shall not exceed in aggregate
principal amount at any one time outstanding, and no Lender shall have any
obligation to make its pro rata share of the Revolving Loan outstanding at
any one time in the aggregate in excess of, the revolving commitment
amount set forth opposite such Lender's name on Schedule 1.1(A) hereto for the
Revolving Credit Facility Commitment (for each Lender, its "Revolving
Commitment").
(c) Insofar as Borrower may request and Lenders may be willing at
their option to make Revolving Credit Advances to Borrower at a time
when the aggregate unpaid principal amount of the Revolving Credit Advances
exceeds, or would exceed with the making of any such Revolving Credit
Advance, the Borrowing Base minus the Letter of Credit Usage at such time (but
not exceed the Revolving Credit Facility Commitment minus Letter of Credit
Usage at such time) by no more than ten percent (10%) of the Borrowing Base
minus the Letter of Credit Usage (any such Advance or Advances being herein
referred to individually as an "Overadvance" and collectively as
"Overadvances") Agent may, at its own option, make such Overadvance or
Overadvances. All Overadvances shall be secured by the Collateral and shall
bear interest at an annual rate equal to the lesser of (i) the rate then
applicable to such Revolving Credit Advance, plus one percent (1%), or (ii)
the Maximum Lawful Rate. The principal amount of all Overadvances shall be
paid on demand, and interest thereon shall be paid as provided in Section 2.6
hereof.
2.3. REVOLVING NOTES. (a) The pro rata portion of the
Revolving Credit Advances made by each Lender to Borrower shall be evidenced
by, and be repayable with interest in accordance with the terms of, a
promissory note issued by Borrower, in each case payable to the order of
such Lender, and in the maximum principal amount of such Lender's Revolving
Commitment, in the form of Exhibit 2.3 hereto (together with any replacement,
modification, renewal or substitution thereof, individually, a "Revolving
Note" and collectively, the "Revolving Notes").
(b) Each Revolving Note shall be dated the Closing Date and
be duly completed, executed and delivered by Borrower.
(c) Each Lender shall endorse that portion of the amount of
each Revolving Credit Advance which it has made to Borrower and the amount of
each payment or prepayment of principal thereon in the appropriate space on the
grid sheet attached to its Revolving Note (or so note the same in its records);
provided, however, that the failure of any Lender to make any such endorsement
or recordation shall not in any manner affect the obligation of Borrower to
repay to such Lender the portion of the Revolving Credit Advance advanced by
such Lender under the Revolving Note held by such Lender. Any such
endorsement or recordation shall represent conclusive evidence of the date and
amount of such Lender's pro rata share of any Revolving Credit Advance or
payment or prepayment of principal thereon, absent manifest error.
(d) Each of the Revolving Notes shall mature on the Maturity
Date (or earlier as hereinafter provided), and shall be subject to payment and
prepayment as provided in Sections 2 and 4 hereof.
2.4. NOTICE OF BORROWING; BORROWER'S CERTIFICATE. (a) Except
as provided in Section 6.1(c) hereof, whenever Borrower desires to make a
borrowing of a Revolving Credit Advance, it shall give the Agent, at its
address designated in Section 15.4 hereof, prior Written Notice or telephonic
notice from an Authorized Representative confirmed promptly in writing (which
notice shall be irrevocable) of its desire to make a borrowing of a Revolving
Credit Advance (i) not later than 12:00 noon (New York time) on the proposed
borrowing date of each Revolving Credit Advance that is a Base Rate Advance,
and (ii) not later than 11:00 a.m. (New York time) three (3) Business Days
prior to the proposed borrowing date of each Revolving Credit Advance that is
a Eurodollar Advance. Each notice of borrowing under this Section 2.4 shall
be substantially in the form of Exhibit 2.4 hereto (each, together with each
Written Notice delivered under Section 6.1(a) hereto, a "Borrower's
Certificate"), shall be dated the date of such notice (which notice
shall be deemed repeated on the date of such borrowing), and specify the date
on which Borrower desires to make a borrowing of a Revolving Credit Advance
(which in each instance shall be a Business Day), the amount of such borrowing,
whether such borrowing shall be a Base Rate Advance or a Eurodollar Advance or
a combination thereof, and, in the case of the selection of a Eurodollar
Advance, the proposed Interest Period therefor, and shall refer to the
most recent Borrowing Base Certificate delivered by Borrower to the Agent and
each Lender pursuant to Section 11.1(j) hereof, and set forth the Borrowing
Base provided therein. If such notice shall be with respect to a borrowing
of a Eurodollar Advance but fails to state an applicable Interest Period
therefor, then such notice shall be deemed to be a request for a one-month
Interest Period. If (x) Borrower shall fail to state in any such notice
whether such Revolving Credit Advance shall be a Base Rate Advance or a
Eurodollar Advance, or (y) Borrower shall be deemed to have made a borrowing
of a Revolving Credit Advance pursuant to Section 6.1(c) hereof, then
Borrower shall be deemed to have selected a Base Rate Advance. Subject to
the other provisions of this Agreement, Base Rate Advances and Eurodollar
Advances of more than one type may be outstanding at the same time; provided,
however, that Eurodollar Advances shall be available for election by Borrower
only for (1) advances of $1,000,000 or any integral multiple of $100,000 in
excess of $1,000,000 and, (2) one, two, three and six month interest
periods, subject, however, to Section 4.1(f) hereof.
(b) Borrower shall not be permitted to select a borrowing of a
Eurodollar Advance in any Borrower's Certificate (i) to the extent such
selection would be prohibited by Section 4.1(f), Section 4.6, or Section
4.7 hereof, or (ii) if
a Default or an Event of Default shall be in existence as of the
date of selection of
the applicable Interest Period.
(c) On or before 12:00 noon (New York time) on Wednesday
of each week (or at such other time or on such other day as the
Agent determines) prior to the expiration of the Revolving Credit Facility
Commitment (or, if any such Wednesday is not a Business Day, the next
preceding Business Day (each a "Settlement Date")), Agent shall notify
each Lender by telephone (confirmed immediately by Written Notice) of the
terms of Revolving Credit Advances outstanding at the time of such notice and
the amount of such Lender's pro rata portion of such Revolving Credit
Advances (each a "Settlement Notice"). If the Revolving Credit Advances
outstanding at the time of such Settlement Notice exceed the Revolving Credit
Advances outstanding at the time of the immediately preceding Settlement
Notice, then each Lender shall, before 3:00 p.m. (New York time) on such
Settlement Date, deposit with Agent the amount of such Lender's pro rata
portion of the increase to the Revolving Credit Advances in U.S. dollars
in immediately available funds at the office of the Agent located at 125 West
55th, New York, New York 10019 or such other office as the Agent may from
time to time direct (the "Payment Office"). If the Revolving Credit Advances
at the time of such Settlement Notice are less than the Advances outstanding
at the time of the immediately preceding Settlement Notice, Agent will
distribute to each Lender such Lender's pro rata portion of such difference
before 3:00 p.m. (New York time) on such Settlement Date.
(d) Except for Revolving Credit Advances made pursuant to
Section 6.1(c) hereof (which Revolving Credit Advances shall be applied to the
reimbursement of drawings under the Letter of Credit for which such Revolving
Credit Advance was made in accordance with such Section 6.1(c) hereof),
subject to satisfaction of closing conditions, proceeds of a Revolving
Credit Advance received by the Agent shall be made available to Borrower by
the Agent at its Payment Office (or such other office of the Agent in New York
State as Agent may from time to time specify in writing to the Borrower).
2.5. TERMINATION OF REVOLVING CREDIT FACILITY COMMITMENT.
Borrower shall have the right, upon not less than five (5) Business Days'
prior Written Notice to the Agent (which shall promptly notify
each Lender thereof in writing or by telephone confirmed promptly
in writing), to terminate the Revolving Credit Facility Commitment; provided,
however, that any such termination of the Revolving Credit Facility Commitment
shall be accompanied by prepayment in full of the Revolving Loan then
outstanding and the Term Loan then outstanding, together with the payment of any
unpaid fees owing with respect to the Revolving Credit Facility Commitment or
the Term Loan Facility Commitment, any fees, premiums, costs and charges
required to be paid by Borrower pursuant to Section 4.8 and Section 5.6 hereof,
and accrued interest on the amount so prepaid to the date of such prepayment;
provided, further, that Borrower may not cancel the Revolving Credit
Facility Commitment while any Letter of Credit Usage is outstanding.
2.6. INTEREST ON REVOLVING LOAN. Borrower shall
pay interest on the unpaid principal amount of each Revolving Credit
Advance madeto it which is outstanding from time to time in accordance with
the terms and conditions of Section 4 hereof.
2.7. PAYMENTS OF PRINCIPAL. Principal on the Revolving
Credit Facility shall be due in full at maturity of the Revolving
Credit Facility.
2.8. ESTABLISHMENT OF RESERVES. The Agent may at
any time and from time to time in its discretion establish reserves against
the Receivables or the Inventory of Borrower. The amount of such reserves
shall be subtracted from the Borrowing Base Availability, when calculating
the amount of the Revolving Loan Borrowing Limit. Without limiting the
foregoing, the Credit Parties specifically agree that the Agent may establish
reserves against the Inventory of Borrower with respect to any leased store
location of Borrower that constitutes a Real Property where the Agent has not
received a waiver of landlord's lien, substantially in the form and substance
of the form of Landlord's Waiver attached as Exhibit 11.20 hereto or such
other form as approved by Agent. Borrower specifically acknowledges that the
existing landlord's waivers received in conjunction with the Existing
Agreement are not satisfactory for purposes of satisfying Borrower's
obligations under Sections 8.20 or 11.20 of this Agreement, that Agent and
Lenders nevertheless shall be entitled to enjoy the benefits of such
existing landlord's waivers, and that Agent's and Lenders' enjoyment of the
benefits of such existing landlord's waivers shall not constitute approval
thereof for purposes of this Section 2.8. The amount of the reserve
established as a result of the failure of Agent to receive a Landlord's
Waiver will be equal to the amount of rent payable with respect to the
applicable store and Real Property for a period of ninety (90) days.
SECTION 3. AMOUNT AND TERMS OF TERM LOAN FACILITY
3.1. TERM LOAN FACILITY ADVANCES. (a) Each of the
Lenders severally, but not jointly, agrees to lend to Borrower, subject to
and upon the terms and conditions herein set forth, at any time in a
single Advance on or after the Closing Date and before the Maturity Date, such
Lender's pro rata share of such amounts as may be requested or be deemed
requested by Borrower in accordance with the terms of this Agreement (each
such borrowing, a "Term Loan Advance" and the outstanding principal balance
of all Term Loan Advances from time to time, the "Term Loan"), subject to the
limitations contained in Section 3.2 hereof.
(b) Each Term Loan Advance shall be made on the date specified in
the Written Notice or telephonic notice confirmed in writing as described in
Section 3.4.
3.2 TERM LOAN FACILITY COMMITMENT.
(a) The maximum amount available under the Term Loan Facility
shall be the Term Loan Facility Commitment.
(b) The portion of the Term Loan to be funded by each Lender
shall not exceed in aggregate principal amount at any one time outstanding,
and no Lender shall have any obligation to make its pro rata share of
the Term Loan outstanding at any one time in the aggregate in excess of, the
term loan commitment amount set forth opposite such Lender's name on
Schedule 1.1(A) hereto for the Term Loan Facility Commitment (for each Lender
its "Term Commitment").
3.3. TERM NOTES. (a) The pro rata portion of the Term Loan
Advances made by each Lender to Borrower shall be evidenced by, and be
repayable with interest in accordance with the terms of, a promissory note
issued by Borrower, in each case payable to the order of such Lender, and in
the maximum principal amount of such Lender's Term Commitment, in the form of
Exhibit 3.3 hereto (together with any replacement, modification, renewal or
substitution thereof, individually, a "Term Note" and collectively, the "Term
Notes").
(b) Each Term Note shall be dated the Closing Date and be duly
completed, executed and delivered by Borrower.
(c) Each Lender shall endorse that portion of the amount of
each Term Loan Advance which it has made to Borrower and the amount of each
payment or prepayment of principal thereon in the appropriate space on the
grid sheet attached to its Term Note (or so note the same in its
records); provided, however, that the failure of any Lender to make any such
endorsement or recordation shall not in any manner affect the obligation of
Borrower to repay to such Lender the portion of the Term Loan Advance
advanced by such Lender under the Term Note held by such Lender. Any such
endorsement or recordation shall represent conclusive evidence of the date
and amount of such Lender's pro rata share of any Term Loan Advance or
payment or prepayment of principal thereon, absent manifest error.
(d) Each of the Term Notes shall mature on the Maturity Date
(or earlier as hereinafter provided), and shall be subject to payment and
prepayment as provided in Sections 3 and 4 hereof.
3.4. INTEREST ON TERM LOAN. Borrower shall pay interest on
the unpaid principal amount of each Term Loan Advance made to it which is
outstanding from time to time in accordance with the terms and
conditions of Section 4 hereof.
3.5. PRINCIPAL PAYMENTS. Principal payments, each in the
amount of one twenty-fourth of the original amount used and advanced under
the Term Loan (i.e., a six-year amortization, based on quarterly payments),
shall be paid on the last day of March, June, September, and December
of each calendar year, commencing September 30, 1997.
3.6. EXCESS CASH FLOW RECAPTURE. Borrower shall pay, on an
annual basis, an amount equal to fifty percent (50%) of Excess Cash Flow.
Such payments shall be applied to payments due under the Term Loan in inverse
order of maturity. Each payment of Excess Cash Flow shall be paid on
the earlier of (a) fifteen (15) days after the Agent receives the financial
statements of Parent and its Subsidiaries required to be furnished by
Section 11.1(b) hereof, or (b) one hundred thirty-five days after the close
of each Fiscal Year of Parent. The first payment of Excess Cash Flow shall be
due with respect to Borrower's Excess Cash Flow determined for Fiscal Year
1997.
SECTION 4. TERMS AND FEES COMMON TO BOTH FACILITIES
4.1. INTEREST. (a) Interest on Eurodollar Advances. Except
as provided in Section 4.1(c) hereof, Borrower shall pay interest on the
unpaid principal amount of each Eurodollar Advance made to it which is
outstanding from time to time, on each Interest Payment Date with respect to
such Eurodollar Advance, at the date of conversion of such Eurodollar Advance
(or portion thereof) to a Base Rate Advance, at maturity of such Eurodollar
Advance and, after maturity of such Eurodollar Advance (whether by
acceleration or otherwise) upon demand, at an interest rate per annum equal
during the Interest Period for such Eurodollar Advance to the Adjusted
Eurodollar Rate for the Interest Period in effect for such Eurodollar Advance
plus the applicable Eurodollar Rate Margin.
(b) Interest on Base Rate Advances. Except as provided in
Section 4.1(c) hereof, Borrower shall pay interest on the unpaid principal
amount of the Base Rate Advances made to it hereunder, and, to the
extent due and payable, Additional Indebtedness incurred by it, in each case,
which is outstanding from time to time at an interest rate per annum equal
to the Floating Rate in effect from time to time. Interest on Base Rate
Advances shall be paid quarterly in arrears on the last day of each March,
June, September and December of each calendar year commencing with September
30, 1996, upon conversion thereof to a Eurodollar Advance and at maturity
(whether by acceleration or otherwise) and thereafter on demand. Interest on
Additional Indebtedness shall be paid upon demand.
(c) Default Interest. Notwithstanding anything to the contrary
contained herein, while any Event of Default is continuing, interest on the
Base Rate Advances, Eurodollar Advances, Additional Indebtedness and
interest thereon (to the extent such interest is in default) shall be
payable at a rate per annum equal to two percentage points (2%) in excess of
the rate then otherwise applicable thereto under this Agreement (or in the
case of interest in default, otherwise applicable to the principal in respect
of which such interest accrued).
(d) Eurodollar Rate Determination. The Agent, upon determining
the Eurodollar Rate and the Adjusted Eurodollar Rate for any Interest
Period, shall promptly notify by telephone (confirmed promptly in
writing) or in writing Borrower and the Lenders of such rates. Such
determination shall, in the absence of manifest error, be conclusive and
binding upon Borrower and the Lenders.
(e) Changes in Base Rate. After each change in the Base Rate,
the Agent shall promptly notify Borrower and each Lender of the date of such
change and the new Floating Rate; provided, however, that the failure of the
Agent to so notify Borrower or any Lender shall not affect the effectiveness
of such change.
(f) Availability of Six Month Interest Period. Borrower may
not select a six-month Interest Period for any Eurodollar Advance during
Fiscal Year 1996. Borrower's ability to select a six-month Interest
Period for a Eurodollar Advance for any period after Fiscal Year 1996 will be
subject to Borrower having met its EBITDAR projections (as set forth in the
May 8, 1996 Homeland Stores, Inc. EBITDAR Projections for 1996) during Fiscal
Year 1996 (a copy of which is attached as Schedule 4.1(f) to this
Agreement), as certified to the Agent and the Lenders in the financial
statements required to be delivered by Borrower by Section 11.1 hereof.
4.2. CONVERSION OF BORROWINGS; RENEWALS. (a)
Unless otherwise prohibited under Section 4.1(f), Section 4.5 or Section 4.6
hereof, Borrower may, from time to time prior to the Maturity Date, convert
(i) all or a portion of outstanding Base Rate Advances made to Borrower
to one or more Eurodollar Advances, except as provided in Section 4.5 or 4.6
hereof, and only in aggregate amounts of $1,000,000 or any integral multiple
of $100,000 excess of $1,000,000, or (ii) all or a portion of outstanding
Eurodollar Advances made to Borrower to one or more Base Rate Advances so
long as the aggregate principal balance of the portion of the Eurodollar
Advances made to Borrower not being converted, if any, is $1,000,000 or an
integral multiple of $100,000 in excess thereof; provided, however, that
Borrower shall not be entitled to convert any Base Rate Advance, or portion
thereof, to a Eurodollar Advance or any Eurodollar Advance, or portion
thereof, to a Base Rate Advance unless all accrued interest on the Base Rate
Advance, or portion thereof, or Eurodollar Advance or portion thereof, as the
case may be, to be converted through the date of such conversion shall have
been paid in full; and provided, further, that only four (4) Interest
Periods for a Eurodollar Advance shall be in effect at any one time. Each
conversion by Borrower of any Advance or portion thereof (other than a
conversion pursuant to Section 4.5 or 4.6 hereof) shall be made on a Business
Day on at least three (3) Business Days' prior Written Notice or telephonic
notice from an Authorized Representative confirmed promptly in writing to the
Agent from Borrower. Each such notice (which notice shall be irrevocable)
shall specify (i) the date of the conversion and the amount to be converted,
(ii) the particular Advance, or portion thereof, to be converted, and (iii)
in the case of conversion of any Advance, or portion thereof, to a Eurodollar
Advance, the duration of the Interest Period for such Eurodollar Advance.
Notwithstanding the above, Borrower shall not be entitled to convert any
Advance, or portion thereof, to a Eurodollar Advance if a Default or Event of
Default shall have occurred and be continuing. Except as provided in Section
4.5, any conversion of a Eurodollar Advance, or portion thereof, to a Base
Rate Advance shall be made only on the last day of the Interest Period with
respect to such Eurodollar Advance.
(b) Each renewal by Borrower of an outstanding Eurodollar Advance
or portion thereof shall be made on notice to the Agent given not later
than 11:00 a.m. (New York time) on the third Business Day prior to the last
day of the Interest Period just ending for such Eurodollar Advance.
Each notice (which notice shall be irrevocable) by Borrower of the renewal of
a Eurodollar Advance or portion thereof, shall be in writing or by telephone
from an Authorized Representative confirmed promptly in writing and shall
specify (i) the amount of such renewal of the Eurodollar Advance or portion
thereof and (ii) the duration of the Interest Period for such renewal; provided,
however, that if Borrower fails to select the duration of any Interest Period
for the renewal of such Eurodollar Advance or portion thereof, the duration
of such Interest Period shall be one month. Notwithstanding the above,
Borrower shall not be entitled to renew a Eurodollar Advance or a portion
thereof, (x) if at the time of the selection of such renewal there shall
exist a Default or an Event of Default, or (y) to the extent such renewal
would be prohibited by Section 4.5 or 4.6 hereof.
(c) Any Eurodollar Advance or portion thereof as to which the
Agent shall not have received a proper notice of conversion or renewal as
provided in Section 4.2(a) or 4.2(b) hereof or notice of payment or
prepayment by 11:00 a.m. (New York time) at least three (3) Business Days
prior to the last day of the Interest Period just ending for such Eurodollar
Advance shall (whether or not any Default or Event of Default has occurred)
automatically be converted to a Base Rate Advance on the last day of the
Interest Period for such Eurodollar Advance.
4.3. COMPUTATION OF INTEREST. Interest on all Advances and
Additional Indebtedness calculated on the basis of a rate per annum shall be
computed on the basis of actual days elapsed over a 360-day year. Any rate
of interest on the Revolving Loan, the Term Loan and Additional Indebtedness
which is computed on the basis of the Base Rate shall change when
and as the Floating Rate changes.
4.4 COLLECTIONS THROUGH LOCKBOX. Borrower shall collect
daily all receivables, cash, checks, monies, drafts and other proceeds of the
Collateral through the lockbox and collection accounts set forth in Section
11.17. Borrower shall pledge to the Agent and Lenders a lien on all
deposit and disbursement accounts and any other account maintained by
Borrower at any bank or financial institution, except for Borrower's payroll
and medical disbursement accounts.
4.5. INCREASED COSTS. In the case of the pro rata share of
any Lender in any Eurodollar Advance, in the event of any change in conditions
or the introduction or change in any applicable law, regulation, treaty,
order or directive or condition or interpretation thereof (including,
without limitation, any request, guideline or policy whether or not having
the force of law with which such Lender must reasonably comply), including,
without limitation, Regulation D, by any authority charged with the
administration or interpretation thereof, shall occur, which:
(i) subjects such Lender or any branch or Affiliate of such Lender
to any tax, duty or other charge with respect to such share of
such Eurodollar Advance (other than Excluded Taxes); or
(ii) changes the basis of taxation of payments to any Lender or any
branch or Affiliate of such Lender of principal of and/or interest on such
share of such Eurodollar Advance and/or other fees and amounts payable
hereunder with respect thereto (other than Excluded Taxes); or
(iii) imposes, modifies or deems applicable any reserve,
deposit or similar requirement against any assets held by, deposits with or
for the account of, or loans or commitments by, an office of any Lender or
any branch or Affiliate of such Lender; or
(iv) imposes upon such Lender or any branch or Affiliate of such
Lender any other condition with respect to such share of such Eurodollar
Advance or this Agreement; and the result of any of the foregoing is to
increase the actual cost by an amount such Lender deems to be material to
such Lender or any branch or Affiliate of such Lender of making, funding or
maintaining such share of such Eurodollar Advance hereunder (except to the
extent such Lender has determined that such amount has been already included
in the determination of the applicable Adjusted Eurodollar Rate for
Eurodollar Advances), or to reduce the amount of any payment (whether of
principal, interest, or otherwise) received or receivable by such Lender or
any branch or Affiliate of such Lender, or to require such Lender or any
branch or Affiliate of such Lender to make any payment, in each case by or
in an amount which such Lender in its sole judgment deems material, then and
in any such case:
(x) such Lender shall promptly notify Borrower, the Agent and the
other Lenders in writing of the happening of such event;
(y) such Lender shall promptly deliver to Borrower, the
Agent and the other Lenders a certificate stating the change which has
occurred, or the reserve requirements or other conditions which have been
imposed on such Lender or branch or Affiliate of such Lender, or the
request, directive or requirement with which it has complied, together with
the date thereof, the amount of such increased cost, reduction or payment
and the way in which such amount has been calculated; and
(z) Borrower hereby agrees to pay such Lender within five (5)
Business Days following demand such an amount or amounts as will compensate
such Lender or its branch or Affiliate for such additional cost, reduction
or payment. The certificate of such Lender as to the additional amounts
payable pursuant to this Section 4.5 delivered to Borrower shall in the
absence of manifest error be conclusive of the amount thereof. Each Lender
agrees to use reasonable efforts to avoid or minimize the payment by Borrower
of any additional amounts under this Section 4.5, including, without
limitation, by the designation of another branch or Affiliate of such Lender
from which such Lender could make such Lender's pro rata share of Eurodollar
Advances so long as such designation is not disadvantageous to such Lender as
reasonably determined by such Lender. The protection of this Section 4.5
shall be available to such Lender regardless of any possible contention of
invalidity or inapplicability of the law, regulation, treaty, order,
directive, interpretation or condition which has been imposed. In the event
that after Borrower shall have paid any additional amount under this Section
4.5 a Lender shall have successfully contested such law, regulation,
treaty, order, directive, interpretation or condition, then to the extent that
such Lender does not incur any increased cost or amount payable or reduction
in an amount receivable, such Lender shall refund, on an after-tax basis, to
Borrower such additional amount.
4.6. CHANGE IN LAW RENDERING EURODOLLAR ADVANCES UNLAWFUL.
(a) Notwithstanding anything to the contrary herein contained, in the event
that any new law, treaty, order, directive, rule or regulation or any change
in any existing law, treaty, order, directive, rule or regulation or in
the interpretation thereof by any governmental or other regulatory authority
charged with the administration thereof, makes it unlawful for any Lender to
fund any portion of a Eurodollar Advance or to give effect to its obligations
as contemplated hereby with respect to Eurodollar Advances, such Lender
shall, upon the happening of such event, notify the Agent, the other Lenders
and Borrower thereof in writing stating the reason therefor, and the
obligation of such Lender to allow conversion to or selection or renewal with
respect to its pro rata share of any Eurodollar Advance by Borrower shall,
upon the happening of such event, forthwith be suspended for the duration of
such illegality and during such illegality such Lender shall fund its share
of all Advances as Base Rate Advances and there shall be no renewal of, or
conversion to, any share of such Lender in any Eurodollar Advance. If and
when such illegality ceases to exist, such suspension shall cease and such
affected Lender shall similarly notify the Agent, the other
Lenders and Borrower.
(b) Notwithstanding anything to the contrary contained herein,
in the event that any new law, treaty, order, directive, rule or regulation
or any change in any existing law, treaty, order, directive, rule or
regulation or in the interpretation thereof by any governmental or other
regulatory authority charged with the administration thereof shall make it
commercially impracticable or unlawful for any Lender to continue in effect
the funding of any portion of a Eurodollar Advance previously made by it
hereunder and then outstanding, such Lender shall, upon the happening of such
event, notify the Agent, the other Lenders and Borrower thereof in writing
stating the reasons therefor, and such Lender's pro rata share of such
Eurodollar Advance shall automatically be converted to a Base Rate Advance.
Borrower shall pay to the Agent for the benefit of such Lender accrued
interest owing on such converted portion of such Eurodollar Advance made to
Borrower through the date of such conversion, together with any amounts
payable under Section 4.8 hereof with respect to such prepayment. After such
notice shall have been given and until the circumstances giving rise to such
notice no longer exist, each request for such Lender's pro rata share of a
Eurodollar Advance or for conversion to or renewal of such Lender's pro rata
share of a Eurodollar Advance shall be deemed a request by Borrower for
a Base Rate Advance. If and when such impracticability or illegality ceases
to exist, such suspension shall cease and such affected Lender shall
similarly notify the Agent, the other Lenders and Borrower.
4.7. EURODOLLAR AVAILABILITY. (a) In the event, and
on each occasion, that on the day two (2) Business Days prior to the
commencement of any Interest Period for a Eurodollar Advance, the Agent shall
have determined in good faith (which determination shall, in the absence of
manifest error, be conclusive and binding upon Borrower) that dollar deposits
in the amount of the principal amount of such Eurodollar Advance are not
generally available in the London (England, U.K.) interbank market, or that
the rate at which such dollar deposits are being offered will not accurately
reflect the cost to one or more Lenders of making or funding the principal
amount of their portions of such Eurodollar Advance during such Interest
Period, or that reasonable means do not exist for ascertaining the Eurodollar
Rate, the Agent shall, as soon as practicable thereafter, give Written Notice
or telephonic notice of such determination to the Lenders and Borrower and
any request by Borrower for a Eurodollar Advance pursuant to Section 2.4
hereof or for conversion to or renewal of a Eurodollar Advance pursuant to
Section 4.2 hereof shall thereupon, and until the circumstances giving rise
to such notice no longer exist (as notified by the Agent to Borrower and the
Lenders), be deemed a request by Borrower for the making of or conversion
to a Base Rate Advance.
(b) If, at any time, the Agent shall have determined (which
determination shall, in the absence of manifest error, be conclusive and
binding upon Borrower) that any contingency has occurred which adversely
affects the London (England, U.K.) interbank market or that any new law,
treaty, order, directive, rule or regulation or any change in any existing law,
treaty, order, directive, rule or regulation or in the interpretation thereof or
other circumstance affecting one or more Lenders, in the London (England, U.K.)
interbank market makes the funding of any portion of a Eurodollar Advance
impracticable, the Agent shall, as soon as practicable thereafter, give
Written Notice or telephonic notice of such determination to the Lenders and
Borrower and any request by Borrower for a Eurodollar Advance pursuant to
Section 2.4 hereof or for conversion to or renewal of a Eurodollar Advance
pursuant to Section 4.2 hereof shall thereupon, and until the circumstances
giving rise to such notice no longer exist (as notified by the Agent to
Borrower and the Lenders), be deemed a request by Borrower for the making of
or conversion to a Base Rate Advance.
4.8. INDEMNITIES. (a) Borrower hereby agrees to indemnify
each Lender on demand against any loss or expense which such Lender or its
branch or Affiliate may sustain or incur as a consequence of:
(i) any default in payment or prepayment of the principal amount
of any Eurodollar Advance made to it or any portion thereof or interest
accrued thereon, as and when due and payable (at the due date thereof, by
irrevocable notice of payment or prepayment, or otherwise),
(ii) the effect of the occurrence of any Event of Default
upon any Eurodollar Advance made to it,
(iii) the payment or prepayment of the principal amount
of any Eurodollar Advance made to it or any portion thereof, pursuant to
Sections 2, 3 or 4 hereof, or otherwise, on any day other than the last day
of an Interest Period or the payment of any interest on any Eurodollar
Advance made to it, or portion thereof, on a day other than an Interest
Payment Date for such Eurodollar Advance, or
(iv) the failure by Borrower to accept or make a borrowing of a
Eurodollar Advance or a conversion to or renewal of a Eurodollar Advance
after it has requested such borrowing, conversion or renewal, in each case
including, but not limited to, any loss or expense sustained or incurred in
liquidating or employing deposits from third parties acquired to effect
or maintain such Eurodollar Advance or any portion thereof. Each Lender shall
provide to Borrower, the Agent and the other Lenders a statement, supported
where applicable by documentary evidence, explaining the amount of any such
loss or expense it incurs, which statement shall be conclusive absent manifest
error.
(b) If any law, regulation or change in any law or regulation or in the
interpretation thereof or any ruling, decree, judgment or recommendation, or
any guideline or directive (whether or not giving the force of law) in any
case adopted, issued or effective after the Closing Date (and including in any
event all risk based capital guidelines heretofore adopted by the Comptroller of
the Currency, the Board or any other banking regulatory agency, domestic or
foreign, to the extent that any provision contained therein does not have to
be complied with as of the Closing Date), by any regulatory body, court or any
administrative or governmental authority charged or claiming to be charged
with the administration thereof, shall:
(i) impose upon, modify, require, make or deem applicable to any
one or more Lenders, or any of their Affiliates or branches, any reserve
requirement, special deposit requirement, insurance assessment or similar
requirement against or affecting the Revolving Commitment or Term Commitment
of such Lender or Lenders or such Affiliates or branches, or
(ii) impose any condition upon or cause in any manner the addition
of, any supplement to or any increase of any kind to the capital or cost base
of such Lender or Lenders, or such Affiliates or branches thereof, for
extending or maintaining the Revolving Commitment or Term Commitment of such
Lender, which results in an increase in the capital requirement supporting
such Revolving Commitment or Term Commitment, or
(iii) impose upon, modify, require, make or deem applicable to
such Lender or Lenders or any such Affiliates or branches any capital
requirement, increased capital requirement or similar requirement, and the
result of any events referred to in clause (i), (ii) or (iii) above shall be
to (x) increase the amount of capital required or expected to be required to
be maintained by such Lender or any such Affiliate or branch and such Lender
determines that the amount of such capital requirement is incurred by or
based on such Revolving Commitment, Term Commitment or other commitments of
this type or (y) increase the costs or decrease the benefit in any way to such
Lender or Lenders, or any such Affiliate or branch, of extending or
maintaining such Revolving Commitment, Term Commitment or extending or
maintaining such Lender's or Lenders' portion of the Loans or holding any
Collateral;
then and in such event Borrower shall, on or prior to the tenth (10th)
Business Day after the giving of Written Notice of such increased costs
and/or decreased benefits to Borrower and the Agent by such Lender or Lenders
(or any such Affiliate or branch), pay to such Lender or Lenders all such
additional amounts (other than those which, in the reasonable and good faith
judgment of such Lender or Lenders, are reflected in the interest rates
charged on the Revolving Loan or the Term Loan, as applicable,) which in the
sole good faith calculation of such Lender or Lenders are properly allocable
to the Revolving Commitment or the Term Commitment of such Lender, such
Lender's or Lenders' portion of the Revolving Loan, the Term Loan and/or the
Collateral, as the case may be, and which:
(1) in the case of events referred to in clause (i) above,
shall be sufficient to compensate it for all such increased costs and/or
decreased benefits, and/or
(2) in the case of events referred to in clauses (ii) and
(iii) above, shall be an amount equal to the reduction, as reasonably
determined by such Lender, in the after-tax rate of return on such Lender's
capital resulting from any such capital or increased capital or similar
requirement (including, without limitation, any such Lender's or Lender's
Affiliates' or branches' cost of taking action in anticipation of the
effectiveness of any event described in clause (ii) or (iii) in order to
enable such Lender, Lenders, Affiliate or branch to be in compliance
therewith upon such effectiveness), all as certified by such Lender or
Lenders in said Written Notice to Borrower. Such certification shall be
conclusive and binding on Borrower absent manifest error.
(c) Borrower hereby agrees to indemnify and hold harmless the
Agent and each Lender and their respective Affiliates, directors, officers,
agents, representatives, counsel and employees and each other Person, if
any, controlling them or any of their Affiliates within the meaning of either
Section 15 of the Securities Act or Section 20(a) of the Securities Exchange
Act (each an "Indemnified Party"), from and against any and all losses,
claims, damages, costs, expenses (including reasonable counsel fees and
disbursements) and liabilities which may be incurred by or asserted against
such Indemnified Party with respect to or arising out of the commitments
hereunder to make the Advances or to issue Letters of Credit, or the
financings contemplated hereby, the other Loan Documents, the Collateral
(including, without limitation, the use thereof by any of such Persons or any
other Person, the exercise by the Agent or any Lender of rights and remedies
or any power of attorney with respect thereto, and any action or inaction of
the Agent or any Lender under any Security Document), the use of proceeds of
any financial accommodations provided hereunder, any investigation,
litigation or other proceeding brought or threatened relating to the role of
any such Person or Persons in connection with the foregoing whether or not
they or any other Indemnified Party is named as a party to any legal action
or proceeding ("Claims"). Borrower will not, however, be responsible to any
Indemnified Party hereunder for any Claims to the extent that a court having
jurisdiction shall have determined by a final judgment that any such Claim
shall have arisen out of or resulted from actions taken or omitted to be
taken by such Indemnified Party which constitute the gross negligence or
willful misconduct of such Indemnified Party ("Excluded Claims"). Further,
should any of the Agent's or any of the Lenders' employees be involved in any
legal action or proceeding in connection with the transactions contemplated
hereby (other than relating to an Excluded Claim), Borrower hereby agrees to
pay to the Agent and each Lender such per diem compensation as the Agent or
such Lender shall request for each employee for each day or portion thereof
that such employee is involved in preparation and testimony pertaining to any
such legal action or proceeding. The Indemnified Party shall give Borrower
prompt Written Notice of any Claim setting forth a description of those
elements of the Claim of which such Indemnified Party has knowledge.
Borrower shall have the right at any time during which a Claim is pending to
select counsel to defend and settle any Claims so long as in any such
event Borrower shall have stated in a writing delivered to the applicable
Indemnified Party that, as between Borrower and such Indemnified Party,
Borrower is responsible to such Indemnified Party with respect to such Claim;
provided, however, that Borrower shall not be entitled to control the defense
of any Claim in the event that there are defenses available to the
Indemnified Party which are not available to Borrower. In any other case, the
Indemnified Party shall have the right to select counsel and control the
defense of any Claims; provided, however, that no Indemnified Party shall
settle any Claim as to which it is controlling the defense without the
consent of Borrower, which consent shall not be unreasonably withheld or
delayed. With respect to any Claim for which Borrower is entitled to select
counsel, each Indemnified Party shall have the right, at its expense, to
participate in the defense of such Claim. In the event that, with respect to
any Claim, more than one Indemnified Party shall be permitted hereunder to
select counsel to defend such Claim at the expense of Borrower and shall
decide to do so, then all such Indemnified Parties shall select the same
counsel to defend such Indemnified Parties with respect to such Claim;
provided, however, that if any such Indemnified Party shall in its reasonable
opinion consider that the retention of one joint counsel as aforesaid
shall result in a conflict of interest adverse to it, such Indemnified Party
may, at the expense of Borrower, select its own counsel to defend such
Indemnified Party with respect to such Claim. The Indemnified Parties and
Borrower shall cooperate with each other in all reasonable respects and their
respective counsel in any investigation, trial and defense of any such Claim
and any appeal arising therefrom.
(d) If for any reason the foregoing indemnity is unavailable to
any Indemnified Party or insufficient to hold it free and harmless as
contemplated by the preceding paragraph (c), then Borrower shall contribute to
the amount paid or payable by the Indemnified Party as a result of any Claim
in such proportion as is appropriate to reflect, not only the relative benefits
received by Borrower on the one hand and such Indemnified Party on the other
hand, but also the relative fault of Borrower and such Indemnified Party, as
well as any other relevant equitable considerations.
4.9. DISBURSEMENT. Each Advance shall be disbursed by
the Agent from the Payment Office, shall be charged, together with interest,
fees and other amounts payable by Borrower hereunder, to the account of
Borrower on the books of the Agent from time to time, and shall be payable at
such office.
4.10. AGENT'S AVAILABILITY ASSUMPTION. (a) The Agent may
assume that each Lender will make such Lender's pro rata portion of
the Advances available to the Agent on the date set forth in Section 2.4(c)
hereof and the Agent may, in reliance upon such assumption, make available to
Borrower the amount of each requested Advance. If Lender's pro rata portion
of the Advances is not in fact made available to the Agent by such Lender in
accordance with Section 2.4(c) hereof, the Agent shall be entitled to
recover such amount on demand from such Lender, which demand shall be made in a
reasonably prompt manner. If such Lender does not pay such amount forthwith
upon the Agent's demand therefor, the Agent shall promptly notify the other
Lenders and Borrower, and Borrower shall pay such amount to the Agent.
(b) The Agent shall also be entitled to recover from such
Lender or Borrower interest on such corresponding amount in respect of each
day from the date such corresponding amount was made available by the
Agent to Borrower to the date such corresponding amount is recovered by
the Agent, at a rate per annum equal to (i) if paid by such Lender, the cost
to the Agent of funding such amount as notified in writing by the Agent to
such Lender, or (ii) if paid by Borrower, the applicable rate for Base Rate
Advances or Eurodollar Advances, as the case may be.
(c) In the event that any Lender shall fail to fund its pro rata
share of any Advance made pursuant to Section 6.1(c) hereof or to purchase its
letter of credit participation under Section 15.18 hereof, the Agent on
behalf of the relevant Issuing Lender shall be entitled to recover such amount
on demand from such Lender. If such Lender does not pay such amount forthwith
upon the Agent's demand therefor, the Agent shall promptly notify Borrower
and the other Lenders thereof and Borrower shall pay such amount to the Agent.
The Agent on behalf of such Issuing Lender shall also be entitled to recover
from such Lender or Borrower, as the case may be, interest on such amount in
respect of each day from the date such Advance was made or the date such
purchase was to have been made, as the case may be, to the date such amount
is recovered by the Agent, at a rate per annum equal to (i) if paid by such
Lender, the cost to the relevant Issuing Lender of the payment of the drawing
under the Letter of Credit for which the Advance was (or was to have been)
made in the case of an Advance made pursuant to Section 6.1(c) hereof or a
participation under Section 15.18 hereof, as the case may be, or (ii) if paid
by Borrower, the applicable rate for Base Rate Advances.
(d) Nothing herein shall be deemed to relieve any Lender from
its obligation to fund its pro rata share of any Advance or purchase any
participation as required hereunder, or to prejudice any rights which Borrower
may have against any Lender as a result of any default by such Lender
hereunder. No Lender shall be responsible for any default of any other
Lender in respect of any other Lender's obligation to make its pro rata share
of any Advances hereunder, nor shall the Revolving Commitment of any Lender
hereunder be increased as a result of such default of any other Lender. Each
Lender shall be obligated to the extent provided herein regardless of the
failure of any other Lender to fulfill its obligations hereunder.
4.11. PRO RATA TREATMENT AND PAYMENTS. (a) Except as
contemplated by this Agreement, including, without limitation, Sections
2.5, 4.5, 4.6, 4.8, 5.5, 6, 15.1, 15.5, 15.13(h) and 15.14 hereof, each
borrowing by Borrower from the Lenders and each payment (including each
prepayment) on account of the principal of and interest on the Advances and
fees described in this Agreement shall be made to or by, as the case may be,
each Lender according to their respective pro rata percentage. Other than
payments to be applied to principal, payment of which is addressed in Section
2.4(c) hereof, the Agent will distribute each payment to the Lenders promptly
following receipt thereof (and in any event on the same Business Day as the
date when received, if such payment is received at or prior to 12:00 noon
(New York time)). Unless Agent shall have received notice from Borrower
prior to the date on which any payment is due to Lenders hereunder that
Borrower will not make such payment in full, Agent may assume that Borrower
has made such payment in full to Agent on such date and Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
date or any date thereafter an amount equal to the amount then due such
Lender. If and to the extent Borrower shall not have so made such payment
in full to Agent, each Lender shall repay to Agent forthwith on demand
such amount distributed to such Lender, together with interest thereon for
each day from the date such amount is distributed to such Lender until
the date such Lender repays such amount to Agent, at the Federal Funds Rate.
(b) Pursuant to the Concentration Account Agreement, Borrower has
agreed that all amounts deposited into the Concentration Account shall be
transferred to the Payment Office or as otherwise directed by the Agent
on a daily basis. Subject to Section 13.5 hereof, all amounts so transferred
shall be applied to the Lender Debt as mandatory prepayments thereof as
follows: first, to Base Rate Advances until all Base Rate Advances are paid in
full; and second, to the payment of all other Lender Debt that is then due and
payable until such Lender Debt is paid in full.
4.12. SHARING OF PAYMENTS, ETC. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of such Lender's percentage of payments
shared pro rata by all Lenders, such Lender shall forthwith purchase from the
other Lenders such participations in the Advances made by them as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each of them; provided, however, if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, such purchase
from the other Lenders shall be rescinded and each other Lender shall
repay to the purchasing Lender the purchase price to the extent of such
recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such 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 recovered. Borrower agrees that any Lender
purchasing a participation from another Lender pursuant to this Section 4.12
may, to the fullest extent permitted by law, exercise all of its rights of
payment (including the right of set-off) with respect to such participation
as fully as if such Lender were the direct creditor of Borrower in the
amount of such participation.
4.13. EXCESS OPERATING FUNDS. If, at any time and from
time to time during the term hereof, the balance of the Advances has been
reduced to zero and Borrower then has funds in its account at NBC in
excess of the aggregate face amount of all undrawn Letters of Credit ("Excess
Funds"), Borrower may, if it so elects, upon at least one (1) Business
Day's notice to Agent and NBC, invest such Excess Funds in an
interest-bearing account at NBC, or acquire with such Excess Funds
certificates of deposit maturing within one year from the date of acquisition
and issued by NBC.
4.14. EURODOLLAR OFFICES. Each Lender intends to initially
fulfill its commitment with respect to such Lender's pro rata share of any
Eurodollar Advance by causing the Eurodollar Lending Office of such Lender to
make such Lender's pro rata share of such Eurodollar Advance; provided,
however, that each Lender may, at its option fulfill such commitment by
causing another branch or an Affiliate of such Lender to make such Lender's
pro rata share of such Eurodollar Advance; and provided, further, that the
selection by such Lender of the Eurodollar Lending Office of such Lender or
any other such branch or Affiliate shall not affect the obligations of
Borrower to repay such Lender's pro rata share of the Eurodollar Advances in
accordance with the terms of this Agreement.
4.15. TELEPHONIC NOTICE. Without in any way limiting
Borrower's obligation to confirm in writing any telephonic notice of a
borrowing, conversion or renewal, the Agent may act without liability upon
the basis of telephonic notice believed by the Agent in good faith to be from
an Authorized Representative of Borrower prior to receipt of written
confirmation.
4.16. MAXIMUM INTEREST. (a) No provision of this Agreement or
any Note shall require the payment to any Lender or permit the collection by
any Lender of interest in excess of the maximum rate permitted by any
applicable law (the "Maximum Lawful Rate").
(b) If the amount of interest computed without giving effect to
this Section 4.16 and payable on any interest payment date in respect of the
preceding interest computation period would exceed the amount of interest
computed in respect of such period at the maximum rate of interest from time
to time permitted (after taking into account all consideration which
constitute interest) by laws applicable to any Lender (such maximum rate
being such Lender's "Maximum Permissible Rate"), the amount of interest
payable to such Lender on such date in respect of such period shall be
computed at such Lender's Maximum Permissible Rate.
(c) If at any time and from time to time (i) the amount of
interest payable to any Lender on any interest payment date shall be computed
at such Lender's Maximum Permissible Rate pursuant to the preceding
subsection (b) and (ii) in respect of any subsequent interest computation
period the amount of interest otherwise payable to such Lender would be less
than the amount of interest payable to such Lender computed at such Lender's
Maximum Permissible Rate, then the amount of interest payable to such Lender
in respect of such subsequent interest computation period shall continue to be
computed at such Lender's Maximum Permissible Rate until the amount of
interest payable to such Lender shall equal the total amount of interest
which would have been payable to such Lender if the total amount of interest
had been computed without giving effect to the preceding clause (b).
4.17. COMPOSITION AND APPLICATION OF PAYMENTS
AND COLLECTIONS. Subject to Section 13.5 hereof, Borrower does
hereby
irrevocably agree that Agent shall have the continuing exclusive
right to apply and
reapply any and all payments and collections at any time or times
hereafter
received by Agent or Lenders against the Lender Debt, in such
manner as Agent
may determine.
SECTION 5. PAYMENTS, PREPAYMENTS AND REDUCTIONS.
5.1. MANDATORY PAYMENTS AND REDUCTIONS. (a) Except as
otherwise provided in Section 2.2(c) hereof, if at any time the sum of
the then aggregate outstanding principal amount of the Revolving Loan plus
the Letter of Credit Usage at such time shall exceed the Revolving Loan
Borrowing Limit at such time, Borrower shall immediately eliminate such
excess by paying the Revolving Loan until the Revolving Loan is paid in full
and, to the extent then necessary to eliminate any remaining excess after
payment in full of the Revolving Loan, by depositing cash in an amount equal
to the remaining excess in a cash collateral account established with the
Agent as security for outstanding Letters of Credit pursuant to agreements
in form, scope and substance satisfactory to the Agent.
(b) Borrower shall, on each date that any Credit Party receives
Gross Proceeds of an Asset Sale (other than the sale of an Excluded Property)
by any Credit Party, prepay the outstanding principal of the Advances and
unreimbursed Letters of Credit (or, if no Advance or unreimbursed Letter of
Credit is then outstanding, to provide Letter of Credit Cash Collateral until
an amount equal to the undrawn amount of all outstanding Letters of Credit
has been secured by Letter of Credit Cash Collateral, and thereafter to
Borrower) in an amount equal to 100% of the Net Proceeds of such Asset Sale
(other than the sale of an Excluded Property) of such Net Proceeds to be
applied to prepay first, the outstanding principal of the Term Loan Advances,
in inverse order of maturity, and then to prepay the outstanding principal of
the Advances and unreimbursed Letters of Credit (or, if no Revolving Credit
Advance or unreimbursed Letter of Credit is then outstanding, to provide
Letter of Credit Cash Collateral until an amount equal to the undrawn amount
of all outstanding Letters of Credit has been secured by Letter of Credit
Cash Collateral, and thereafter to Borrower).
(c) Borrower shall, on each date that any Credit Party receives
Gross Proceeds of an Asset Sale of an Excluded Property by any Credit Party,
prepay the outstanding principal of the Revolving Credit Advances and
unreimbursed Letters of Credit (or, if no Revolving Credit Advance or
unreimbursed Letter of Credit is then outstanding, to provide Letter of Credit
Cash Collateral until an amount equal to the undrawn amount of all outstanding
Letters of Credit has been secured by Letter of Credit Cash Collateral, and
thereafter to Borrower) in an amount equal to 100% of the Net Proceeds of such
Asset Sale of an Excluded Property.
(d) All prepayments under this Section 5.1 that are to be applied
to Term Loan Advances shall be made together with accrued interest to the
date of such prepayment on the principal amount prepaid.
5.2. PAYMENT FROM INSURANCE PROCEEDS. Not later than the
fifteenth (15th) calendar day following the receipt by the Agent or any
Credit Party or Subsidiary of any Credit Party of any proceeds of any
insurance required to be maintained pursuant to Section 11.3(a) on account
of each separate loss, damage or injury in excess of $250,000 (or, if there
shall be continuing an Event of Default, of any amount of Net Proceeds) to any
Collateral of such Credit Party or such Subsidiary, such Credit Party or
Subsidiary shall notify the Agent of such receipt in writing or by telephone
promptly confirmed in writing, and not later than the fifteenth (15th)
calendar day following receipt by the Agent or such Credit Party or
Subsidiary of $250,000 or more of such Net Proceeds (or, if there shall be
continuing an Event of Default, of any amount of Net Proceeds), there
shall become due and payable a prepayment of principal in an amount equal to
such Net Proceeds. Prepayments from such Net Proceeds shall be applied as
follows:
FIRST, to the outstanding principal of the Term Loan,
until the Term Loan has been paid in full,
SECOND, to the outstanding principal of the Revolving Loan, until
the Revolving Loan has been paid in full,
THIRD, to repay the amount of all unreimbursed Letters of
Credit until reimbursed in full, and then to provide cash collateral (on
terms reasonably satisfactory to the Agent) for any outstanding Letters of
Credit, until there shall have been provided cash collateral equal to the
undrawn amount of all Letters of Credit (which cash collateral shall
constitute part of the Collateral), and
FOURTH, to the Credit Party or Subsidiary thereof, as the
case may be, whose property was lost, damaged or injured or whoever else
shall be legally entitled thereto. Any such prepayment on the Revolving
Loan shall be made without penalty or premium but shall be subject to
payment of any applicable indemnity obligations pursuant to Section 4.8
hereof.
5.3. OPTIONAL PREPAYMENTS. (a) Upon not less than
three (3) Business Days' prior Written Notice to the Agent with respect to
Advances constituting Eurodollar Advances and not less than one (1)
Business Day's prior Written Notice to the Agent with respect to Advances
constituting Base Rate Advances, Borrower shall have the right from time to
time to prepay in part, without premium, fee or charge (except as provided in
Sections 4.8 and 5.6 hereof), any Advances, so long as each such prepayment
is in the amount of $1,000,000 or an integral multiple of $100,000 in excess
thereof or, if less, the then aggregate outstanding principal balance of the
Revolving Loan or the Term Loan, as the case may be, and so long as,
concurrently with the making of any such prepayment, Borrower pays any fees,
premiums, charges or costs provided for under Sections 4.8 and 5.6 hereof.
(b) No Eurodollar Advance or portion thereof may be prepaid
under this Section 5.3 until the last day of the Interest Period therefor.
Upon the giving of notice of prepayment, the amount therein specified to
be prepaid shall be due and payable on the date therein specified for such
prepayment, together with all accrued interest thereon to such date plus any
fees, premiums, charges or costs provided for under Sections 4.8 and 5.6
hereof. The Agent shall, promptly after receipt of any notice of prepayment
of any Advance as provided in this Section 5.3, notify each Lender in writing
or by telephone confirmed promptly in writing of Borrower's intention so to
prepay all or part of such Advance.
5.4. PROCEDURES FOR PAYMENT. (a) Each payment or prepayment
hereunder and under the Notes shall be made not later than 12:00 noon
(New York City time) on the day when due in lawful money of the United
States of America to the Agent at the Payment Office in immediately available
funds, without counterclaim, offset, claim or recoupment of any kind. Each
payment or prepayment hereunder and under the Notes shall be made without
setoff or counterclaim and free and clear of, and without deduction for, any
present or future withholding or other taxes, duties or charges of any nature
imposed on such payments or prepayments by or on behalf of any government or
any political subdivision or agency thereof or therein, except for Excluded
Taxes. If any such taxes, duties or charges (other than any Excluded
Taxes) are so levied or imposed on any payment or prepayment to any Lender,
Borrower will make additional payments in such amounts as may be necessary so
that the net amount received by such Lender, after withholding or deduction
for or on account of all taxes, duties or charges, including deductions
applicable to additional sums payable under this Section 5.4(a) (other than
Excluded Taxes), will be equal to the amount provided for herein or in such
Lender's Note or Notes. Whenever any taxes, duties or charges (other than
Excluded Taxes) are payable by Borrower with respect to any payments or
prepayments hereunder or under any of the Notes, Borrower shall furnish
promptly to the Agent for the account of the applicable Lender official
receipts (to the extent that the relevant governmental authority delivers
such receipts) evidencing payment of any such taxes, duties or charges so
withheld or deducted. If Borrower fails to pay any such taxes, duties or
charges when due to the appropriate taxing authority or fails to remit to
the Agent for the account of the applicable Lender the required receipts
evidencing payment of any such taxes, duties or charges so withheld or
deducted, Borrower shall indemnify the affected Lender for any incremental
taxes, duties, charges, interest or penalties that may become payable by such
Lender as a result of any such failure.
(b) (i) Each Lender organized under the laws of a jurisdiction outside
of the United States (a "Foreign Lender") shall provide to Borrower and the
Agent a properly completed and executed Internal Revenue Service Form 4224 or
Form 1001 or other applicable form, certificate or document prescribed by the
Internal Revenue Service of the United States certifying as to such Foreign
Lender's entitlement to complete exemption from United States withholding tax (a
"Certificate of Exemption"). Each Foreign Lender, if a party to this
Agreement on the Closing Date, shall provide such a Certificate of Exemption
on or before the Closing Date and, assuming that it is proper, under then
existing United States withholding tax statutes and applicable tax treaties,
to issue such Certificate of Exemption from time to time thereafter upon
the reasonable request of Borrower or the Agent. Each Foreign Lender
that becomes a Lender pursuant to Section 15.14 or 15.15 hereof after
the Closing Date shall provide a Certificate of Exemption on or before the
date such Foreign Lender becomes a Lender and, assuming that it is proper,
under then existing United States withholding tax statutes and applicable tax
treaties, to issue such Certificate of Exemption from time to time thereafter
upon the reasonable request of Borrower or the Agent.
(ii) Each Foreign Lender shall provide to Borrower (x) in the case
of a Foreign Lender which is a party to this Agreement on the Closing Date,
on or before the Closing Date, and (y) in the case of a Foreign Lender that
becomes a Lender pursuant to Section 15.14 or 15.15 hereof, on or before such
Foreign Lender becomes a Lender, a statement describing all taxes, duties or
charges that are in effect and applicable on the Closing Date or the date
that such Foreign Lender becomes a Lender hereunder, as the case may be, with
respect to which Borrower would be required to make additional payments to
such Foreign Lender under the third sentence of Section 5.4(a) hereof.
(iii) Within thirty (30) days after the written reasonable
request of Borrower, each Foreign Lender shall execute and deliver to
Borrower such certificates, forms or other documents which can be
furnished consistent with the facts and which are reasonably necessary to
assist Borrower in applying for refunds of taxes paid by Borrower hereunder
or making payment of taxes hereunder; provided, however, that no Foreign
Lender shall be required to furnish to Borrower any financial information
with respect to itself or other information which it considers confidential.
(iv) If a Foreign Lender that originally provided a Certificate of
Exemption indicating that such Foreign Lender was exempt from United States
withholding tax thereafter ceases to qualify for such exemption, Borrower
shall have the right to require such Foreign Lender to assign its Revolving
Commitment, its Term Commitment and its pro rata share of the Advances
(including its pro rata share of the interest accrued thereon) to one or more
banks or financial institutions identified by Borrower at a purchase price
equal to the principal of and accrued but unpaid interest and fees (to the
date of purchase) on such Foreign Lender's pro rata share of the Advances.
(c) Notwithstanding anything contained in Section 5.1(b) or
5.2 hereof, the Agent shall not, to the extent requested in writing by
Borrower, apply any mandatory prepayment under such Sections to any portion
of the Revolving Loan or the Term Loan which constitutes a Eurodollar
Advance until the last day of the respective Interest Period therefor or the
earlier maturity of such portion of such Revolving Loan or such Term Loan, as
the case may be, by acceleration or otherwise, such mandatory prepayment,
until it can be so applied, to be applied to the prepayment of such portion
of the Loan comprising Base Rate Advances. If there shall remain any portion
of such mandatory prepayment after payment in full of such portion of the
Revolving Loan or the Term Loan constituting Base Rate Advances, then until
such remaining portion of the mandatory prepayment can be applied to the
Eurodollar Advances as aforesaid, such remaining portion of such mandatory
prepayment shall be invested and reinvested by and in the name of the Agent
in investments of the type permitted under Section 12.4(b) hereof with the
type and maturity of such investments to be mutually agreed to by the Agent
and Borrower. All interest earned on such investments shall be for the
account and risk of Borrower. Interest earned on any portion of principal
applied to a Eurodollar Advance shall be, so long as no Default or Event of
Default shall have occurred and be continuing, and to the extent received by
the Agent, turned over to Borrower promptly following application of such
principal to such Eurodollar Advance. As additional collateral security for
the Lender Debt, Borrower hereby grants to the Agent a security interest in
(i) any such mandatory prepayments and any investments thereof, including,
without limitation, any certificates or instruments evidencing any such
investments, and all claims and choses in action in respect of the foregoing,
(ii) any interest or other payment made in respect of such investments
and (iii) any and all proceeds of any of the above and all claims and causes
in action in respect of the foregoing (all of the foregoing constituting
part of the Collateral). To the extent the Agent makes any such investments,
Borrower hereby authorizes the Agent to hold any certificate or instrument
evidencing such investments.
5.5. COMMITMENT FEE. Borrower shall pay to the Agent for
the account of the Lenders a fee which shall accrue from and after the Closing
Date until the date of the expiration, termination or cancellation of the
Revolving Credit Facility Commitment payable quarterly in arrears beginning
on September 30, 1996, and on each December 31, March 31, June 30 and
September 30 occurring thereafter (and on the date of maturity or earlier
expiration, termination or cancellation of the Revolving Credit Facility
Commitment), of the percent per annum indicated below that corresponds to the
time and, where applicable, the EBITDAR of Borrower for the Fiscal Year
indicated below on the amount by which $27,500,000 (as such amount may be
reduced upon any permanent reduction in the Revolving Credit Facility
Commitment) exceeds the aggregate outstanding principal amount of the
Revolving Loan (plus the Letter of Credit Usage) (calculated daily):
from the Closing
Date through from May 1, 1997 through and from May 1, 1998
April 30, 1997 including April 30, 1998 and thereafter
If Fiscal Year If Fiscal Year 1996 If Fiscal Year If Fiscal Year
1996 EBITDAR EBITDAR is less 1997 EBITDAR 1997 EBITDAR
is greater than than or equal to is greater than is less than or
$17,000,000 &17,000,000 $25,000,000 $25,000,000
0.5% per 0.375% per 0.5% per annum 0.375% per 0.5% per annum
annum annum annum
5.6. PREPAYMENT FEE. In the event the Revolving Credit
Facility Commitment is terminated pursuant to Section 2.5 hereof on or prior
to the first anniversary of the Closing Date, such termination shall be
accompanied by a prepayment fee equal to one percent (1.0%) of the amount of
the Revolving Credit Facility Commitment as of the date of such termination.
In the event the Revolving Credit Facility Commitment is terminated pursuant
to Section 2.5 hereof after the first anniversary of the Closing Date and on
or prior to the second anniversary of the Closing Date, such termination
shall be accompanied by a prepayment fee equal to one-half percent (0.5%) of
the amount of the Revolving Credit Facility Commitment as of the date of such
termination. Borrower may prepay all of the amount advanced under the Term
Loan (but not less than all), including prepayments from Excess Cash Flow,
without any prepayment fee, subject, however, to Section 5.3 hereof..
5.7. AGENCY FEE. On the Closing Date and quarterly in
advance on the first Business Day of each calendar quarter thereafter, so
long as any Advance, any portion of the Revolving Credit Facility Commitment
or any Letter of Credit remains outstanding, Borrower shall pay to the
Agent for its own account an agency fee of $10,000 per quarter. Borrower
will be entitled to a credit to the agency fee due on the Closing Date in an
amount calculated on the basis of the pro-rata portion of the unexpired
period of the existing month for which the agency fee was paid under the
Existing Agreement.
5.8. CLOSING FEE. Borrower shall pay to the Agent for the
account of the Lenders in the amounts indicated below, a closing fee equal to
$186,060:
(i) NBC $ 63,924
(ii) Heller $ 45,386
(iii) IBJ $ 76,750
Total: $186,060
Borrower shall be entitled to a credit to the closing fee for the portion of
the closing fee paid to Agent for the account of Lenders in connection with
Borrower's acceptance of the commitment letter dated July 18, 1996 among the
Agent, the Lenders and the Companies, issued for the Revolving Loan and the
Term Loan.
5.9. CONTINGENT FEE. Borrower shall pay to the Agent for
the account of the Lenders in the amount indicated below respectively for
each Lender on the first and second anniversaries of the Closing Date
in the event that the annual risk rating of the Exit Financing Facility, as
assigned by the Federal banking examiners under the Shared National Credit
Review Program, results in either the Revolving Loan or the Term Loan being
classified or criticized on the basis of its evaluated ability to be repaid,
as of the first or second anniversary of the Closing Date, as applicable:
Lender Annual
Contingent Fee
NBC $26,424
Heller $18,761
IBJ $20,875
Total : $66,060
To the extent that applicable Federal law requires the confidentiality of the
results of such examinations or otherwise prohibits or restricts disclosures
of such examinations, neither the Agent nor the Lenders shall be required
to disclose to the Companies the results of any such examinations or risk
ratings.
5.10. PREPAYMENTS TO INCLUDE INTEREST. All prepayments
pursuant to this Section 5, except optional prepayments on Advances, shall be
made together with accrued interest to the date of such prepayment on the
principal amount prepaid.
SECTION 6. LETTERS OF CREDIT.
6.1. LETTERS OF CREDIT. (a) Borrower may request, subject to
the terms and conditions herein set forth (including, without limitation,
the conditions set forth in Section 9 hereof and the definitions contained in
Section 1 hereof), from time to time prior to the termination of the Revolving
Credit Facility Commitment and upon five (5) Business Days' Written Notice
(which Written Notice shall be deemed repeated on the date of issuance of each
Letter of Credit issued in response thereto), that NBC (or any other Lender
approved by NBC) issue, and NBC (or any such other Lender) shall, subject to
such conditions, issue (each such Lender, upon issuance of a Letter of Credit,
being an "Issuing Lender" in respect of such Letter of Credit) Letters of
Credit; provided, however, that (i) the aggregate undrawn amount of all
Letters of Credit at any time outstanding, together with the amount of
unreimbursed drawings thereunder, shall not exceed the Letter of Credit
Sublimit; and (ii) the aggregate undrawn amount of all Letters of Credit at
any time outstanding, together with the amount of unreimbursed drawings
thereunder and the then aggregate unpaid principal amount of the Revolving
Loan, shall not exceed the Revolving Loan Borrowing Limit; provided, further,
that in no event shall NBC or any other Lender issue any Letter of Credit if
the sum of the original undrawn amount thereof (less amounts in respect of
which any Lender is obligated to NBC or such other Lender under Section 15.18
hereof), plus the aggregate undrawn and unreimbursed amounts immediately
prior to the time of such issuance of all other Letters of Credit issued by
such Lender (less amounts in respect of which any Lender is obligated to NBC
or such other Lender under Section 15.18 hereof) plus such Lender's pro rata
portion of the aggregate unpaid principal amount of the Revolving Loan,
exceeds such Lender's Revolving Commitment. For purposes of determining the
aggregate amount of undrawn and unreimbursed Letters of Credit as at any
date, the undrawn and unreimbursed amounts under Letters of Credit that are
denominated in foreign currency shall be converted into U.S. Dollars at
the rate of exchange for cable transfers (as determined by the Agent) in
effect on the date of determination.
(b) Each Letter of Credit shall be a standby Letter of Credit or
a documentary Letter of Credit, shall be in form, scope and substance
satisfactory to the Agent, and shall be issued pursuant to a Letter of Credit
Agreement. Each Letter of Credit that is a standby Letter of Credit shall
expire no later than the earlier of the Maturity Date and the date one year
following the date of issuance thereof. Each Letter of Credit that is a
documentary Letter of Credit shall expire no later than the earlier of the
Maturity Date and the date ninety (90) days following the date of issuance
thereof.
(c) Borrower shall reimburse the Issuing Lender of each Letter
of Credit issued hereunder for any draft paid under such Letter of Credit
within one (1) Business Day following the date of such payment. Borrower
shall, to the extent of availability under the Revolving Credit Facility
Commitment, effect such payment with the proceeds of a Revolving Credit
Advance (which shall be entirely a Base Rate Advance) made to Borrower in the
amount of such payment (whether or not any request therefor has been made by
Borrower), which Revolving Credit Advance shall at such time be made and
applied to payment of reimbursement of such drawing without any notice by or
consent of Borrower (except that no such Revolving Credit Advance shall be
required to be made by the Lenders to the extent prevented by applicable law
or following any Event of Default of the type described in Section 13.1(f) or
13.1(g) hereof), and shall be repayable, together with interest thereon, in
accordance with the provisions of Section 2 hereof. The Issuing Lender shall
promptly notify the Agent, the other Lenders and Borrower in writing or by
telephone confirmed promptly in writing of any such drawing under a Letter of
Credit and the making of such Revolving Credit Advance. Any payments by an
Issuing Lender of drawings under any Letter of Credit in foreign currency
shall be reimbursed by Borrower in U.S. Dollars at the rate of exchange for
cable transfers in effect on the date of payment by such Issuing Lender.
(d) Notwithstanding anything contained in Section 6.1(c)
hereof, the obligation of Borrower to reimburse a drawing under a Letter of
Credit shall not be affected or impaired by any failure of any Lender to
fund a Revolving Credit Advance under Section 6.1(c) hereof unless Borrower
shall have satisfied all conditions to the making of such Revolving Credit
Advance (other than notice requirements and the delivery of a Borrower's
Certificate).
(e) Upon not less than one (1) Business Day's prior Written
Notice to the Agent, the Borrower may terminate or cause to be terminated any
Letter of Credit, provided that the Borrower has obtained the prior written
consent of each beneficiary of such Letter of Credit to such termination.
(f) The face amounts of issued and outstanding documentary
and standby letters of credit issued for the account of Borrower shall be 100%
reserved against availability on the Revolving Loan Borrowing Limit.
6.2. LETTER OF CREDIT FEES. Borrower shall pay to Agent,
for the account of Lenders, a fee on the average face amount of each standby
and documentary Letter of Credit issued by an Issuing Lender in an
amount equal to the applicable Letter of Credit Fee, payable quarterly in
advance on the first Business Day of each calendar quarter. In addition,
Borrower shall pay to each Issuing Lender, in respect of each standby and
documentary Letter of Credit issued by such Issuing Lender hereunder, on
demand, all standard fees and other charges charged by such Issuing Lender
with respect to the issuance and maintenance of any Letter of Credit
including, without limitation, in the case of each standby Letter of Credit,
an amount equal to one-fourth of one percent (0.25%) of the face amount of
such standby Letter of Credit.
6.3. INDEMNITY. Borrower agrees to indemnify each Issuing
Lender, each of its correspondents and the Lenders and hold them harmless from
and against any and all claims, damages, losses, liabilities, costs and
expenses whatsoever which they may incur or suffer by reason of or in
connection with the execution and delivery or assignment of or payment or
presentation under or in respect of any Letter of Credit issued by such
Issuing Lender or any action taken or omitted to be taken with respect to any
Letter of Credit issued by such Issuing Lender, except only if and to the
extent that any such claims, damages, losses, liabilities, costs or expenses
shall be caused by the willful misconduct or gross negligence of such Issuing
Lender or such correspondent in making payment against any draft presented
under any Letter of Credit which does not substantially comply with the terms
thereof, or in failing to make payment against any such draft which strictly
complies with the terms of such Letter of Credit, it being understood that
(a) in making such payment, such Issuing Lender's or such correspondent's
exclusive reliance in good faith on the documents presented to and believed
to be genuine by it in accordance with the terms of such Letter of Credit as
to any and all matters set forth therein, including, without limitation,
reliance in good faith on any affidavit presented pursuant to such Letter of
Credit and on the amount of any sight draft presented pursuant to any
Letter of Credit whether or not any statement or any other document presented
pursuant to such Letter of Credit proves to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein proves to be untrue or
inaccurate in any respect whatsoever, and (b) any such noncompliance in a
non-material respect shall, in each case, not be deemed willful misconduct or
gross negligence of such Issuing Lender or such correspondent. Upon demand
by any Issuing Lender, such correspondent or any Lender at any time, Borrower
shall reimburse such Issuing Lender, such correspondent or such Lender for
any legal or other expenses incurred in connection with investigating or
defending against any of the foregoing, except if the same is due to such
Issuing Lender's or such correspondent's gross negligence or willful
misconduct as aforesaid. The indemnities contained herein shall survive the
expiration or termination of the Letters of Credit and this Agreement and
shall be payable upon demand.
6.4. REIMBURSEMENT OF CERTAIN COSTS. (a) Unless at the time
prohibited by an order of a court of competent jurisdiction, the obligations
of Borrower hereunder with regard to Letters of Credit are absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which Borrower may have against any
Person, including, without limitation, the beneficiary of such Letter of
Credit and any Issuing Lender, and all sums payable by Borrower hereunder
with respect to any such Letter of Credit, whether of principal, interest, fees,
expenses or otherwise, shall be paid in full, without any deduction or
withholding whatsoever. In the event that Borrower is compelled by
applicable law to make any such deduction or withholding, then, unless
prohibited by applicable law, it shall pay to each Issuing Lender such
additional amount as will result in the receipt by each Issuing Lender of a
net sum equal to the sum it would have received if no such deduction or
withholding had been required to be made.
(b) In the event that any change in conditions or the adoption
of any law, regulation or directive or any change in applicable law,
regulation or directive, or interpretation thereof (including any request,
guideline or policy whether or not having the force of law and including,
without limitation, Regulation D promulgated by the Board as now and from
time to time hereafter in effect) by any authority charged with the
administration or interpretation thereof, occurs which:
(i) subjects any Issuing Lender to any tax with respect to any
amount paid or to be paid by such Issuing Lender as the issuer of any
Letter of Credit (other than any Excluded Tax) or its commitment under
any Letter of Credit; or
(ii) changes the basis of taxation of payments to any Issuing
Lender with respect to any Letter of Credit or such commitment (other
than any Excluded Tax); or
(iii) imposes, modifies, requires, makes or deems applicable any
reserve, deposit, insurance assessment or similar requirements against any
assets held by, deposits with or for the account of, or loans or commitments
by, an office of any Issuing Lender in connection with payments by such
Issuing Lender under any Letter of Credit or commitments under any Letter
of Credit; or
(iv) imposes any condition upon or causes in any manner the addition of
any supplement to or an increase of any kind to any Issuing Lender's capital
or cost base for issuing any Letter of Credit which results in an increase
in the capital requirement supporting such Letter of Credit; or
(v) imposes, modifies, requires, makes or deems applicable to any
Issuing Lender any capital requirement, increased capital requirement
or similar requirement such as, without limitation, the deeming of any
Letter of Credit to be an asset held by such Issuing Lender for capital
calculation or other purposes;
and the result of any of the foregoing is to reduce the after-tax rate of
return on such Issuing Lender's capital, increase the cost to any Issuing
Lender of making any payment under, or maintaining its commitment under, any
Letter of Credit, or to reduce the amount of any payment (whether of principal,
interest or otherwise) or benefit received or receivable by such Issuing
Lender with respect to any Letter of Credit or to require such Issuing Lender
to make any payment on or calculated by reference to the gross amount of any
sum received by it with respect to any Letter of Credit, in each case by an
amount which such Issuing Lender in its sole judgment deems material
(including, without limitation, such Issuing Lender's cost of taking action
in anticipation of the effectiveness of any event referred to above in order
to enable such Issuing Lender to be in compliance therewith upon
effectiveness), then and in any such case:
(x) such Issuing Lender shall promptly notify Borrower, the Agent and
the other Lenders in writing of the happening of such event;
(y) such Issuing Lender shall promptly deliver to Borrower, the
Agent and the other Lenders a certificate stating the change which has
occurred or the reserve requirements or other conditions which have been
imposed on such Issuing Lender or the request, directive or requirement
with which it has complied, together with the date thereof and the amount
of such increased cost, reduction or payment; and
(z) Borrower shall pay to such Issuing Lender, upon demand, after
delivery of the notice referred to in clause (x) above, such amount or
amounts as will compensate for such additional cost, reduction or
payment, to the extent permitted by law.
A certificate delivered by an Issuing Lender pursuant to clause (y) above as
to the additional amounts payable pursuant to this paragraph shall, in
the absence of manifest error, be conclusive evidence of the amount thereof.
The protection of this Section 6.4 shall be available to each Issuing Lender
regardless of any possible contention of invalidity or inapplicability of the
law, regulation, directive or condition which has been imposed. In the event
that after Borrower shall have paid any additional amount under this Section
6.4 with respect to any Letter of Credit, an Issuing Lender shall have
successfully contested such law, regulation, treaty, directive or condition
then, to the extent that such Issuing Lender does not incur any increased
cost or reduction in payment (as to which such Issuing Lender is entitled to
indemnification hereunder) with respect to any Letter of Credit for
which Borrower has paid such additional amount, such Issuing Lender shall
refund, on an after-tax basis, to Borrower such additional amount.
6.5. PAYMENT OF DRAFTS. Delivery to the Agent, any
Issuing Lender or their correspondents of any documents purporting to comply
with the requirements of any Letter of Credit shall be sufficient evidence of
the validity, genuineness, and sufficiency thereof and of the good faith and
proper performance of the drawers and/or users of any Letter of Credit,
their agents and assignees, and the Agent, such Issuing Lender and their
correspondents may rely and act thereon without liability or responsibility
with respect thereto or with respect to the correctness or condition of any
shipment of merchandise to which the same may relate. Upon receipt by the
Agent or any Issuing Lender of written approval thereof from Borrower, the
Agent or any such Issuing Lender, as the case may be, may (but shall not be
required to) accept or pay overdrafts or irregular drafts or drafts with
irregular documents attached or with respect to which time limits have been
extended, and no such acceptance or payment shall impair any rights of the
Agent or any Issuing Lender under this Agreement. In case of any variation
between the documents called for by any Letter of Credit and the documents
accepted by the Agent, an Issuing Lender or their correspondents, Borrower
shall be conclusively deemed to have waived any right to object to such
variation with respect to any action of the Agent, such Issuing Lender or
such correspondents relating to such documents and to have ratified and
approved such action as having been taken on the direction of Borrower, unless
Borrower within ten (10) Business Days of the receipt of such documents or
acquisition of knowledge of such variation files an objection with the Agent
or such Issuing Lender in writing. No Issuing Lender (nor the Agent) shall
be liable for any delay in giving, or failing to give, notice of the
arrival of any goods or any other notice, or for any error, neglect or
default of any of its correspondents; nor shall any Issuing Lender (or the
Agent) be responsible for the non-fulfillment of any requirement of any
Letter of Credit that (a) drafts bear appropriate reference to any Letter of
Credit, (b) the amount of any draft be noted on the reverse of any
Letter of Credit, (c) any Letter of Credit be surrendered or taken up or (d)
documents be forwarded apart from any drafts; and the Agent, each Issuing
Lender and their correspondents may, if they see fit, waive any such
requirements.
6.6. ISSUING LENDER'S ACTIONS. Any Letter of Credit
may, in the discretion of the Issuing Lender thereof or such Issuing Lender's
correspondents, be interpreted by it or any such correspondent (to the extent
not inconsistent with such Letter of Credit) in accordance with the
Uniform Customs and Practice for Documentary Credits of the International
Chamber of Commerce, as adopted or amended from time to time, or any other
rules, regulations and customs prevailing at the place where any Letter of
Credit is available or the drafts are drawn or negotiated. An Issuing Lender
and its correspondents may accept and act upon the name, signature or act of
any party purporting to be the executor, administrator, receiver, trustee in
bankruptcy or other legal representative of any party designated in any
Letter of Credit issued by such Issuing Lender in the place of the name,
signature or act of such party.
SECTION 7. SECURITY AND GUARANTY.
As security for the full and timely payment and performance of the
Lender Debt, whether now existing or hereafter arising:
7.1. SECURITY AGREEMENTS. (a) Each of the Credit Parties
shall duly execute and deliver to the Agent one or more security agreements,
pledges or assignments, substantially in the form of Exhibit 7.1 hereto (each
as amended, supplemented or otherwise modified from time to time
in accordance with its terms, a "Security Agreement" and, together with the
Mortgages, the Collection Account Agreements, the Concentration Account
Agreement, the Lock-Box Agreements, and any other agreement now existing or
hereafter created providing collateral security for the payment or
performance of any Lender Debt, in each case, as amended, modified or
supplemented from time to time, collectively referred to as the "Security
Documents"), and all consents of third parties necessary to permit the
effective granting of the Liens created in such security agreements, in form
and substance satisfactory to the Agent, as may be required by the Agent to
grant to the Agent for the benefit of the Agent and the Lenders, except to
the extent otherwise permitted under Section 12.2 hereof, a valid, perfected
and enforceable first priority lien on and security interest in all present
and future Collateral, including but not limited to, Inventory, accounts (to
the extent arising from the sale or lease of Inventory or the providing of
services) ("Pledged Accounts"), in each case, of such Credit Party or such
Credit Party's Subsidiaries, wherever located, and all proceeds thereof, and a
valid perfected second priority security interest in all cash registers and
scanning systems, and all books and records, including, without limitation,
computer records, disks, tapes and other media in which any information
relating to Inventory, inventory control systems or such accounts is stored
or recorded and all computer software, management information systems and
other systems and copies of every kind thereof relating to Inventory,
inventory controls or such accounts and all customer lists ("Records and
Other Property"), in each case, of such Credit Party or such Credit Party's
Subsidiaries, wherever located, and all proceeds thereof, in each
case to the extent a Lien therein is granted in such Security Documents,
together with:
(i) evidence of the completion of all recordings and filings of
or with respect to the Security Documents that the Agent may deem necessary
or desirable in order to perfect and protect the Liens created thereby,
(ii) evidence of the insurance required by the terms of any
Security Document,
(iii) copies of each assigned agreement, if any, referred
to in any Security Document, together with a consent to such assignment
in form and substance satisfactory to the Lenders, duly executed by each
party to such assigned agreements other than Borrower, and
(iv) evidence that all other action that the Agent may deem
necessary or desirable in order to perfect and protect the Liens
created by the Security Documents has been taken.
(b) The Agent shall have received acknowledgment copies or
stamped receipt copies of proper financing statements, duly filed on or
before the day of the initial borrowing hereunder under the UCC of all
jurisdictions that the Agent may deem necessary or desirable in order to
perfect and protect the Liens created by the Security Documents, covering the
collateral described in the Security Documents.
7.2. MORTGAGES. (a) Each of the Credit Parties shall duly
execute and deliver to the Agent one or more mortgages or deeds of trust, as
appropriate for the applicable jurisdiction in which the real property
encumbered thereby is located, substantially in the form of Exhibit 7.2
hereto (each as amended, supplemented or otherwise modified from time to time in
accordance with its terms, a "Mortgage" and, as amended, modified or
supplemented from time to time, collectively referred to as the "Mortgages"),
and all consents of third parties necessary to permit the effective granting
of the Liens created in such mortgages and deeds of trust, in form and
substance satisfactory to the Agent, as may be required by the Agent to grant
to the Agent for the benefit of the Agent and the Lenders, except to the
extent otherwise permitted under Section 12.2 hereof, a valid, perfected
and enforceable first priority lien on and security interest in all present
and future Real Property of such Credit Party or such Credit Party's
Subsidiaries, wherever located, and all proceeds thereof, together with:
(i) evidence of the insurance required by the terms of any Mortgage,
(ii) copies of each assigned agreement, if any, referred to in any
Mortgage, together with a consent to such assignment in form and substance
satisfactory to the Lenders, duly executed by each party to such assigned
agreements other than Borrower, and
(iii) evidence that all other action that the Agent may deem
necessary or desirable in order to perfect and protect the Liens
created by the Mortgages has been taken.
(b) Each of the Credit Parties shall provide, at the Credit
Parties' expense, such additional documentation as the Agent and the Lenders'
would ordinarily require in connection with real estate collateral, including
without limitation, the following for each parcel of Real Property owned by a
Credit Party (other than Excluded Properties): (i) an appraisal performed in
accordance with applicable law; (ii) a mortgagee's policy of title insurance
naming Agent for the benefit of the Lenders as insured; (iii) an environmental
audit or such other due diligence or investigation as may be acceptable to the
Agent and Lenders; and (iv) additionally with respect to all Real Properties
(other than Excluded Properties), whether owned or leased by a Credit
Party, such other certificates, consents, estoppel letters and third party
documents as the Agent and Lenders may request.
7.3. FILING AND RECORDING. (a) Borrower shall, at its
cost and expense (except where otherwise prohibited by applicable law), cause
all instruments and documents given as security pursuant to this Agreement to
be duly recorded and/or filed or otherwise perfected in all places necessary,
in the opinion of the Agent, to perfect and protect the Lien of the Agent in
the property covered thereby.
(b) Each of the Credit Parties hereby authorizes the Agent to
file one or more financing statements or continuation statements or amendments
thereto or assignments thereof in respect of any Lien created pursuant to this
Agreement and the Security Documents which may at any time be required or
which, in the opinion of the Agent, may at any time be desirable without the
signature of such Credit Party where permitted by law.
(c) In the event that any re-recording or refiling of any
financing statement (or the filing of any statements of continuation or
amendment or assignment of any financing statement) or Mortgage is required
to protect and preserve such Lien, Borrower shall, at its cost and expense,
cause the same to be recorded and/or refiled at the time and in the manner
requested by the Agent (except where otherwise prohibited by applicable law).
7.4. INTERPRETATION OF SECURITY DOCUMENTS AND MORTGAGES.
In the case of any conflict between the terms and provisions of a Security
Document and this Agreement, the terms and provisions of this Agreement shall
control, unless the terms of such Security Document expressly provide
otherwise.
7.5. GUARANTEES. (a) On or prior to the Closing Date,
Parent and each Subsidiary of Borrower in existence on the Closing Date shall
execute and deliver to the Agent an amended and restated guaranty,
substantially in the form of Exhibit 7.5 hereto, of all present and future
Lender Debt. Parent's obligations under the guaranty will be secured by a
pledge of 100% of the issued and outstanding capital stock of Borrower.
(b) Upon the formation or acquisition, after the Closing Date,
of any Subsidiary of Borrower, such Subsidiary shall execute and deliver to
the Agent a guaranty, substantially in the form of Exhibit 7.5 hereto, of all
then existing or thereafter incurred Lender Debt. Nothing contained
in this Section 7.5 shall permit Borrower or any Subsidiary thereof to form or
acquire any Subsidiarywhich is otherwise prohibited by this Agreement.
7.6. BANKRUPTCY COURT APPROVAL. The security interests and
liens of the Agent and the Lenders shall be authorized and approved by the
Bankruptcy Court by entry of a Final Order confirming the Plan. For
purposes of this Agreement, the term "Final Order" means an order issued by
the Bankruptcy Court or another court of competent jurisdiction:
(a) which has not been reversed, vacated, stayed or amended
(unless otherwise consented to by the Agent, and the Lenders); and
(b) as to which the time to appeal or to seek certiorari has
expired and no appeal or petition for certiorari has been timely taken or as
to which any appeal that has been or may be taken or any petition for
certiorari that has been or may be filed has been resolved by the highest
court to which the order was appealed or from which certiorari was sought.
The Agent may, in its sole discretion and at the Companies' cost,
take whatever further action it deems necessary or desirable to perfect the
security interests of Agent and the Lenders, including, without limitation,
the filing or recording of liens and financing statements or other instruments,
and the Companies will execute any such documents upon the Lenders' and
the Agent's request. The Companies will obtain all required regulatory and
judicial consents and approvals for the granting of such security interests.
7.7. RELEASE OF MORTGAGES. Upon any full and final
payment of the Term Loan arising from a re-financing of the Term Loan, the
Agent and the Lenders will release the Liens on the Real Properties, so long
as satisfactory third-party agreements covering each of the Real Properties
(e.g., landlord's waivers, mortgagee waivers, etc.) have been delivered
to the Agent and no Default or Event of Default has occurred and is
continuing at the time of such payment. If Borrower repays the Term Loan in
the ordinary course of payments and pre-payments with Borrower's own assets,
exclusive of sources other than a re-financing of the Term Loan, then the
Liens on the Real Properties will remain in favor of the Agent and the
Lenders. Nothing in this Section 7.7 shall be construed to modify or waive
the provisions of Section 12.3 of this Agreement; and any re-financing of the
Term Loan, along with any obligation of the Agent and the Lenders to release
the Liens on any of the Real Properties, will be subject to compliance with
the other provisions of this Agreement, in general, and Section
12, in particular.
7.8. POWER OF ATTORNEY. Borrower hereby appoints the
Agent or any other Person whom the Agent may designate as Borrower's attorney,
with power to: (i) endorse Borrower's name on any checks, notes, acceptances,
money orders, drafts or other forms of payment or security that may come into
the Agent's or any Lender's possession; (ii) sign Borrower's name on
any invoice or bill of lading relating to any Receivables and drafts against
customers; (iii) verify the validity, amount or any other matter relating to any
Receivable by mail, telephone, telegraph or otherwise with account debtors;
(iv) do all things necessary to carry out this Agreement and any Security
Documents; and (v) on or after the occurrence and during the continuation of
an Event of Default, notify the post office authorities to change the address
for delivery of Borrower's mail to an address designated by the Agent, and to
receive, open and dispose of all mail addressed to Borrower. Borrower hereby
ratifies and approves all acts of the attorney. Neither the Agent nor the
attorney will be liable for any acts or omissions or for any error of
judgment or mistake of fact or law. This power, being coupled with an
interest, is irrevocable so long as any Receivable which is assigned to the
Bank or in which the Bank has a security interest remains unpaid
and until the Lender Debt has been fully satisfied.
SECTION 8. CONDITIONS PRECEDENT TO INITIAL BORROWING AND
ISSUANCE OF LETTERS OF CREDIT.
No Advance shall be made and no Letter of Credit shall be issued
hereunder until the fulfillment (or waiver in writing by the Required
Lenders) of the following conditions precedent on or prior to the Closing
Date:
8.1. OPINIONS OF COUNSEL. The Agent shall have received
on or before the day of such initial borrowing, from Messrs. Crowe & Dunlevy, a
professional corporation, special counsel to the Credit Parties, in
sufficient copies for each Lender, opinions addressed to the Lenders and
the Agent and dated the Closing Date, substantially in the form of
Exhibit 8.1 hereto.
8.2. AUDIT RESULTS. The Agent and the Lenders shall have
performed such audits of Borrower's Receivables and Inventory as the Agent and
the Lenders shall have required, and the results thereof shall have been
satisfactory to the Agent and the Lenders.
8.3. MATERIAL ADVERSE CHANGE. In the judgment of the
Agent, (a) no material adverse change shall have occurred in the business,
operations, liabilities, assets, properties, prospects or condition
(financial or otherwise) of Borrower since June 15, 1996, as reflected in the
unaudited financial information contained in the June 15, 1996 financial
statements of Borrower, and (b) the Agent shall not have become aware of
any previously undisclosed materially adverse information with respect to
Borrower and there shall not have occurred any disruption or adverse change
in the financial or capital markets generally which the Agent, in its
reasonable discretion, deems material.
8.4. QUALIFICATION. Each Credit Party shall be duly
qualified and in good standing in each jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so qualify,
except where the failure to so qualify could not reasonably be expected
to have a Material Adverse Effect.
8.5. SECURITY DOCUMENTS AND INSTRUMENTS. The Agent shall
have received, in sufficient copies for each Lender, all the instruments
and documents then required to be delivered pursuant to Section 7 hereof or any
other provision of this Agreement or pursuant to the instruments and documents
referred to in Section 7 hereof and the same shall be in full force and
effect and shall grant, create or perfect the Liens, rights, powers,
priorities, remedies and benefits contemplated herein or therein, as the
case may be.
8.6. EVIDENCE OF INSURANCE. The Agent shall have received,
in sufficient copies for each Lender, evidence, in form, scope and
substance and with such insurance carriers reasonably satisfactory to the
Agent, of all insurance policies required pursuant to Section 11.3(a)
hereof.
8.7. EXAMINATION OF BOOKS. The Agent and all Lenders
shall have had the opportunity to examine the material contracts, properties,
books of account, records, leases, Leases, contracts, pension plans,
insurance coverage and properties of Borrower and of each Credit Party, and to
perform such other due diligence regarding Borrower and each Credit Party as
the Agent or any Lender shall have requested, the results of all of which
shall have been satisfactory to the Agent and all Lenders in all material
respects.
8.8. CORPORATE STRUCTURE. The Lenders shall be satisfied with
the corporate structure and capitalization of each of the Credit Parties and
all documentation relating thereto, including without limitation, the
ownership of assets thereby and the terms and conditions of each charter,
bylaws and each class of capital stock of each Credit Party.
8.9. NOTES. Each Lender shall have received its Note, each
duly completed, executed and delivered in accordance with Section 2.3 and 3.2
hereof.
8.10. FEES TO AGENT AND LENDERS. All fees payable to the Agent
and the Lenders with respect to the financing hereunder on or prior to the
Closing Date shall have been paid in full in immediately available funds.
8.11. MANAGEMENT; OWNERSHIP. The Agent and all Lenders shall
be reasonably satisfied with the management and board of directors of each of
the Credit Parties, and the arrangements and agreements by and among
each of the Credit Parties and such management.
8.12. DISBURSEMENT AUTHORIZATION. The Agent shall have
received a disbursement authorization letter, substantially in the form of
Exhibit 8.12 hereto, duly executed and delivered by Borrower as to the
disbursement on the Closing Date of the proceeds of the initial Advance.
8.13. LITIGATION. There shall be no pending or, to the
knowledge of any Credit Party, threatened litigation with respect to any
of the Credit Parties or any of their Subsidiaries or (relating to the
transactions contemplated herein) with respect to the Agent or any of the
Lenders, which challenges or relates to the financing arrangements to be
provided hereunder, or to the business, operations, liabilities, assets,
properties, prospects or condition (financial or otherwise) of any of the
Credit Parties or their Subsidiaries, which pending or threatened litigation
could, in the Agent's reasonable judgment, be expected to have a Material
Adverse Effect. There shall exist no judgment, order, injunction or other
similar restraint prohibiting any transaction contemplated hereby.
8.14. COMPLIANCE WITH LAW. The Agent shall be satisfied that
each Credit Party (a) has obtained all authorizations and approvals of any
governmental authority or regulatory body required for the due execution,
delivery and performance by such Credit Party of each Loan Document to which
it is or will be a party and for the perfection of or the exercise by the
Agent and each Lender of their respective rights and remedies under the
Loan Documents, and (b) shall be in compliance with, and shall have obtained
appropriate approvals pertaining to, all applicable laws, rules, regulations
and orders, including, without limitation, all governmental, environmental,
ERISA and other requirements, regulations and laws, the violation or
failure to obtain approvals for which could reasonably be expected to have
a Material Adverse Effect.
8.15. PROCEEDINGS; RECEIPT OF DOCUMENTS. All requisite
corporate and/or partnership action and proceedings in connection with
the borrowings and the execution and delivery of the Loan Documents and the
issuance of the Letters of Credit shall be satisfactory in form and substance
to the Agent and the Agent shall have received, on or before Closing
Date, all information and copies of all documents, including, without
limitation, records of requisite corporate and/or partnership action and
proceedings, which the Agent may have requested in connection therewith, such
documents where requested by the Agent to be certified by appropriate
corporate Persons or governmental authorities. Without limiting the
generality of the foregoing, the Agent shall have received on or before the
Closing Date the following, each dated such day (unless otherwise specified),
in form and substance satisfactory to the Agent (unless otherwise specified)
and, except for the Notes, in sufficient copies for each Lender:
(a) a copy of the certificate of incorporation of Borrower, and
all amendments thereto, certified (as of a date reasonably near the date of
the initial borrowing), by the Secretary of State of the State of Delaware
as being a true and correct copy thereof;
(b) a copy of the articles or certificate of incorporation,
as the case may be, of each other Credit Party and all amendments thereto,
in each case certified (as of a date reasonably near the date of the initial
borrowing), by the Secretary of State of the state of formation or
incorporation of each such Credit Party;
(c) certified copies of the resolutions of the Board of Directors
of each of Borrower and each Credit Party approving this Agreement, the
Notes, and each other Loan Document to which it is a party or by which it
is bound, and of all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to this Agreement, the
Notes, and each other Loan Document;
(d) a copy of a certificate of the Secretary of State of each
State listed on Schedule 8.15 hereto, dated a date reasonably near the
date of the initial Advance, stating that Borrower and each Credit Party, as
the case may be, is duly qualified and in good standing as a foreign entity
in such State;
(e) a certificate of each Credit Party signed on behalf of
such Person by an appropriate officer of such Person, certifying as to (i)
the absence of any amendments to the charter of such Person since the
date of the Secretary of State's certificate for such Person referred to
above, (ii) a true and correct copy of the bylaws of such Person as in effect
on the date of the initial borrowing;
(f) a certificate of the Secretary or an Assistant Secretary of
each Credit Party certifying the names and true signatures of the officers
of such Person authorized to sign, on behalf of such Person, this Agreement,
the Notes and each other Loan Document, to which such Person is a party or
by which it is bound; and
(g) copies of the Subordinated Note Documents to be entered into
on or about the Closing Date, which shall be satisfactory in form, scope and
substance to the Agent, which shall be certified by an appropriate officer
of Borrower to be true and complete in all respects.
8.16. PROJECTIONS. The Agent and the Lenders shall have
received, not later than ten (10) days prior to the Closing Date, projections
of the operations and financial affairs of the Companies, after giving effect
to the Employee Buyout Offer, in form, substance and detail satisfactory
to the Agent and Lenders; and the Agent and the Lenders shall have reviewed
and approved such projections.
8.17. APPROVAL OF SUBORDINATED NOTES; CAPITALIZATION, ETC.
The Agent and all Lenders shall have approved (which approval shall not be
unreasonably withheld) all terms and conditions of the Subordinated Notes and
the Subordinated Note Documents, including, without limitation, any and all
amendments and other modifications thereto entered into as of the Closing
Date, and, without in any way limiting the scope and generality of the
foregoing approval requirement (which applies to all terms and conditions),
in any event, there shall be no prepayment required under the terms of any
Subordinated Note Document from cash flow, excess cash flow or the like while
any Advance or Letter of Credit Usage (other than fully cash collateralized
undrawn Letters of Credit) is outstanding, provided that prepayment from such
sources may be required to effect a prepayment of Subordinated Notes if on the
date when notice of such prepayment is first mailed to holders of the
Subordinated Notes as contemplated by the Indenture (so long as such notice is
mailed within five (5) Business Days following the earliest date that such
notice can be mailed under the Indenture and provides the earliest date for
prepayment which can be set under the Indenture, in each case as such
Indenture is in effect on the Closing Date) a prepayment could be made in
compliance with this Section 8.17.
8.18. COLLECTION AND CONCENTRATION ACCOUNTS; LOCK-BOX
ACCOUNTS; CASH MANAGEMENT AGREEMENT. (a) Prior to the Closing Date, Borrower
shall have established one or more Collection Accounts into which the cash
receipts for each store operated by Borrower or a Subsidiary of Borrower (to
the extent such cash receipts constitute proceeds of any Collateral) shall
be deposited.
(b) Borrower shall have established a Concentration Account at
NBC or another financial institution acceptable to the Agent and shall have
delivered to the Agent on or before the day of such initial borrowing, with
respect to such Concentration Account, a concentration account agreement
in the form of Exhibit 8.18(b) hereto (as amended, modified or supplemented
from time to time, a "Concentration Account Agreement"), duly executed and
delivered by Borrower and duly acknowledged by the bank at which such
Concentration Account is established.
(c) Borrower shall have established one or more Lock-Box Accounts
and shall have delivered to the Agent on or before the day of such initial
borrowing, with respect to each such Lock-Box Account, an executed Lock-Box
Agreement duly executed and delivered by Borrower and duly acknowledged by
the bank at which such Lock-Box Account is established.
(d) Borrower shall have established one or more Pharmaceutical
Collection Accounts and shall have delivered to the Agent on or before the
day of the initial borrowing following the Closing Date, with respect to
each such Pharmaceutical Collection Account, an executed pharmaceutical
collection account agreement in the form of Exhibit 8.18(d) hereto (as amended,
modified or supplemented from time to time, a "Pharmaceutical Collection
Account Agreement") duly executed and delivered by Borrower and duly
acknowledged by the bank at which such Pharmaceutical Collection Account is
established.
(e) Borrower shall have established its general disbursements
account with the Agent on or before the day of the initial borrowing.
8.19. NO MARKET DISRUPTION. There shall have occurred
no disruption or adverse change in the financial or capital markets generally
which the Agent, in its reasonable discretion, deems material.
8.20. LANDLORDS' LIENS. None of the Collateral shall be
subject to any contractual or statutory Lien or Liens in favor of any lessor
under any Lease, except such Liens as the Agent, in its sole discretion,
shall deem not material, and except such Liens that have been waived or
subordinated to the Liens in favor of Agent and the Lenders in a manner
satisfactory to the Agent, in its sole discretion.
8.21. UCC SEARCH RESULTS. The Agent shall have received
the completed requests for information referred to and in compliance with the
requirements of Section 11.20 hereof.
8.22. CLOSING DATE BORROWING BASE CERTIFICATE. The Agent shall
have received a completed Borrowing Base Certificate dated prior to the
Closing Date, certified by an authorized officer of Borrower, evidencing the
actual amount of the Borrowing Base as of a date that is acceptable to the
Agent and the Lenders as being satisfactorily close to the Closing Date.
8.23 NO DEFAULT. There shall exist no material default or
Event of Default in any of the Companies' obligations to the Agent and the
Lenders under (a) any applicable legal requirements, (b) the Financing Orders
entered in the Bankruptcy Proceedings, or (c) the Existing Agreement, except
for those defaults as contemplated by and disclosed in the Existing Agreement.
8.24 BANKRUPTCY COURT ORDERS. The Agent and the Lenders shall
have received, in form and substance satisfactory to the Agent and the
Lenders, the Companies' Plan and a Final Order confirming such Plan, which
shall include, among other things,
(a) approval of the Exit Financing Agreement (as defined below)
and the Loan Documents;
(b) a finding that the Exit Financing Agreement and the Exit
Financing Loan Documents are in the best interests of the debtors, their
respective estates, the Companies, the Reorganized Companies, have been
negotiated in good faith and at arm's length (and without intent to hinder,
delay or defraud any creditor of the debtors, the Companies or the Reorganized
Companies) and the transactions contemplated thereunder shall be deemed to
have been entered into in good faith and for good and valuable consideration;
(c) a finding that the terms and conditions of this Agreement
and the Loan Documents and the form thereof as may be finalized, upon
execution thereof by the Companies, shall constitute the legal, valid and
binding obligations of the Companies, enforceable against the Companies
in accordance with their terms;
(d) the discharge of the Companies' pre-confirmation liabilities,
except as otherwise provided under the Plan;
(e) an injunction against any creditor of the Companies from
enforcing, attaching, collecting or recovering in any manner any judgment,
award, decree or order against the Companies, or their respective
property post-confirmation, except as otherwise provided under the Plan;
(f) an injunction against any creditor of the Companies' from
creating, perfecting or enforcing any lien or encumbrance against the
Companies post-confirmation, except as otherwise provided under the Plan; and
(g) a finding that the liens and security interests granted by the
Companies in favor of Agent and the Lenders are perfected.
8.25 MINIMUM BORROWING BASE AVAILABILITY. The amount available
to Borrower under the Revolving Loan Borrowing Limit on the Closing Date, as
calculated according to the Borrowing Base as of a date that is no more than
fifteen (15) days prior to the Closing Date, shall be at least the sum of
(a) $8,000,000 plus (b) accrued and unpaid professional fees relating to the
restructuring of Borrower and Parent in accordance with the Plan in an amount
not to exceed $1,350,000. The Borrower shall submit a Borrowing Base
Certificate to the Agent and the Lenders, prior to the Closing Date,
certified by an authorized officer of Borrower, evidencing the actual amount
of the Borrowing Base as of a date that is acceptable to the Agent and the
Lenders as being satisfactorily close to the Closing Date.
SECTION 9. CONDITIONS PRECEDENT TO EACH BORROWING AND ISSUANCE
OF LETTERS OF CREDIT.
The obligation of the Lenders to make any Advance and issue any
Letter of Credit is subject to fulfillment (or prior waiver in writing by the
Required Lenders) of the following conditions precedent to the satisfaction
of the Agent:
9.1. BORROWER'S CERTIFICATE; OTHERS. (a) Except in the case
of Advances for reimbursement of Letters of Credit described in Section
6.1(c) hereof, Borrower delivers to the Agent a Borrower's Certificate.
(b) (i) All representations and warranties made by each of the Credit
Parties contained herein or otherwise made in any Loan Document (including,
without limitation, each Borrower's Certificate), officer's certificate or
any agreement, instrument, certificate, document or other writing delivered
to the Agent or any Lender in connection herewith or therewith, shall be true
and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
borrowing or issuance of such Letter of Credit (unless any such
representation or warranty speaks as of a particular date, in which case it
shall be deemed repeated as of such date);
(ii) on the date of such borrowing or issuance there shall exist
no Default or Event of Default;
(iii) if Borrower is requesting a Letter of Credit, the
Agent on behalf of any Issuing Lender shall have (to the extent requested
by any Issuing Lender) received a duly executed and delivered Letter of
Credit Agreement with respect thereto;
(iv) Borrower shall have complied with all procedures and given
all certificates, notices and other documents required hereunder
for such advance or issuance;
(v) the Agent shall have received such other approvals,
opinions or documents as any Lender through the Agent may reasonably
request; and
(vi) the making of such Advance or issuance of such Letter of
Credit shall not cause the Revolving Loan, Letter of Credit Usage or any
combination thereof to exceed the Revolving Loan Borrowing Limit, the
Revolving Credit Facility Commitment or any other limit on availability
contained in this Agreement.
9.2. WRITTEN NOTICE. Except as otherwise provided in
Section 6.1 hereof, prior to the time of each Advance or the renewal or
conversion of any Advance, or portion thereof, the Agent shall have received
Written Notice of such Advance or the renewal or conversion of such Advance,
or portion thereof, as the case may be, in accordance with Sections 2, 3 and
4 hereof.
SECTION 10. USE OF PROCEEDS.
(a) The proceeds of the Revolving Credit Facility shall be used
solely to fund Borrower's working capital needs and other general
corporate purposes.
(b) The proceeds of the Term Loan, subject to the Term Commitment,
will be used solely as follows:
(i) up to $93,030 to pay the balance of the closing fee provided
for in Section 5.8 hereof;
(ii) up to the outstanding principal balance of the revolving
credit facility under the Existing Agreement, which was funding the
Companies as debtors-in-possession in the Bankruptcy Proceedings, to make
a partial reduction (or full reduction, in the event that the amount
available exceeds the outstanding balance) under such facility;
(iii) up to $6,600,000 to fund the Employee Buyout Offer,
as described in section XIV(C) of the Disclosure Statement;
(iv) $750,000 to establish the Health and Welfare Benefit Plan,
as described in section XIV(B) of the Disclosure Statement;
(v) up to $1,350,000 to pay projected accrued and unpaid
professional fees relating to the restructuring of the Companies; and
(vi) to pay "cure amounts" associated with (A) executory contracts,
(B) other secured financings and (C) unexpired leases, all consistent with
the provisions of the Plan and as disclosed to Agent and Lenders in writing.
Any funds that would otherwise be available and which are not used as provided
above, will reduce the actual amount advanced under the Term Loan. The final
amounts of funds allocated to the uses specified above will be determined and
certified on the Closing Date and, subject to the general limits and ranges
stated above, will be subject to review and approval by the Agent and
the Lenders.
SECTION 11. AFFIRMATIVE COVENANTS.
Each of Borrower and Parent hereby covenants and agrees that, so
long as any Advance or any Letter of Credit is outstanding or any Lender has
any Revolving Commitment or Term Commitment hereunder, unless specifically
waived by the Required Lenders in writing:
11.1. FINANCIAL STATEMENTS AND OTHER INFORMATION. Borrower
shall furnish or cause to be furnished to the Agent and each Lender:
(a) as soon as practicable and in any event within forty-five
(45) days after the close of each Fiscal Quarter of each Fiscal Year of
Borrower:
(i) a consolidated balance sheet of Parent and its Subsidiaries;
(ii) from and after the formation of any Subsidiary of Borrower,
a consolidating balance sheet of Parent and its Subsidiaries;
(iii) a consolidated statement of income of Parent and its
Subsidiaries;
(iv) from and after the formation of any Subsidiary of Borrower, a
consolidating statement of income of Parent and its Subsidiaries;
(v) a consolidated statement of cash flows of Parent and its
Subsidiaries; and
(vi) from and after the formation of any Subsidiary of Borrower, a
consolidating statement of cash flows of Parent and its Subsidiaries;
in each case, as at the end of and for the period commencing at the
end of the previous Fiscal Year and ending with such quarter just
closed and for the period commencing at the end of the previous quarter
and ending with such quarter just closed, setting forth for each such period
in comparative form, (x) the corresponding figures for the applicable quarter
and year to date of the preceding Fiscal Year and (y) budgets of Parent and
its Subsidiaries for such quarter and year to date previously delivered under
Section 11.1(l) hereof, all in reasonable detail and certified by the chief
executive or financial officer of Parent to have been prepared in accordance
with GAAP, subject to normal recurring year-end audit adjustments, together
with a schedule in form satisfactory to the Agent, (1) setting forth the
Companies' EBITDA and EBITDAR for such quarter, actual Net Capital
Expenditures made by Parent and its Subsidiaries during such quarter and
indicating that such capital expenditures were made in compliance with
Section 12.1 hereof, and (2) showing the computations used by Parent in
determining compliance with the covenants contained in Section
11.16 hereof;
(b) as soon as practicable and in any event within one hundred
twenty (120) days after the close of each Fiscal Year of Parent:
(i) an audited consolidated balance sheet of Parent and its
Subsidiaries;
(ii) from and after the formation of a Subsidiary of Borrower, an
audited consolidated balance sheet of Parent and its Subsidiaries;
(iii) an audited consolidated statement of operations of Parent
and its Subsidiaries;
(iv) from and after the formation of a Subsidiary of Borrower, an
audited consolidated statement of operations of Parent and its Subsidiaries;
(v) an audited consolidated statement of cash flows of Parent and its
Subsidiaries; and
(vi) from and after the formation of a Subsidiary of Borrower, an
audited consolidating statement of cash flows of Parent and its Subsidiaries;
in each case, as at the end of and for the Fiscal Year just closed, (x)
setting forth in comparative form the corresponding figures for the preceding
Fiscal Year and (y) accompanied by a separate report certified by the chief
financial officer of Parent, which shall not be subject to the certification
or statement of the accountants set forth below, setting forth the budgets
of Parent and its Subsidiaries for such Fiscal Year previously delivered
under Section 11.1(l) hereof, all in reasonable detail and (except for
such budgets and comparisons with such budgets) certified (with
qualifications or exceptions deemed acceptable to the Agent) by independent
public accountants selected by Parent and satisfactory to the Agent; and
concurrently with such financial statements, a certificate, in form
satisfactory to the Agent, signed by such independent accountants (1) stating
that in making the examination necessary for their certification of such
financial statements, they have not obtained any knowledge of the existence
of any Default or Event of Default or, if such independent accountants shall
have obtained from such examination any such knowledge, they shall disclose
in such written statement the Default or Event of Default and the nature
thereof, it being understood that such independent accountant shall
be under no liability, directly or indirectly, to anyone for failure to
obtain knowledge of any such Default or Event of Default and (2) showing in
detail the calculations supporting such certificate in respect of compliance
with the covenants set forth in Sections 11.16 and 12.1 hereof and setting
forth the calculations (in detail acceptable to the Agent) underlying such
compliance.
(c) as soon as practicable and in any event within forty-five
(45) days after the close of each calendar month:
(i) a consolidated balance sheet of Parent and its Subsidiaries;
(ii) from and after the formation of a Subsidiary of Borrower, a
consolidated balance sheet of Parent and its Subsidiaries;
(iii) a consolidated statement of income of Parent and its
Subsidiaries;
(iv) from and after the formation of a Subsidiary of Borrower, a
consolidated statement of income of Parent and its Subsidiaries;
(v) a consolidated statement of cash flows of Parent and its
Subsidiaries; and
(vi) from and after the formation of a Subsidiary of Borrower, a
consolidating statement of cash flows of Parent and its Subsidiaries as at
the end of and for the period commencing at the end of the previous Fiscal
Year and ending with such month just closed and for the period commencing
at the end of the previous month and ending with such month just closed;
in each case prepared by management of Parent, setting forth in comparative
form (x) the corresponding figures for the appropriate month and year to date
of the previous Fiscal Year and (y) the budgets of Parent and its
Subsidiaries for such month and year to date previously delivered
under Section 11.1(l) hereof, all in reasonable detail (including, without
limitation, stating the amount of interest expensed on each of the
Revolving Loan, the Letters of Credit, the Term Loan and all other
Indebtedness for Borrowed Money of Parent and its Subsidiaries for such
calendar month and the depreciation and amortization and the rental
expense of Parent and its Subsidiaries for such calendar month) and
certified by the chief executive or financial officer of Parent to have been
prepared in accordance with GAAP, subject to normal year-end adjustments;
(d) as soon as practicable and in any event within forty-five
(45) days after the close of each calendar month, a statement of cash
balances for the Concentration Account (unless any such account is
maintained at NBC) and, upon the request of the Agent, a statement of
cash balances for any one or more of the Special Accounts permitted
pursuant to Section 11.17(c) hereof, together, in each case, if requested by
the Agent, with a copy of the bank statements in respect thereof and all
canceled checks and advances of credit and debits in respect of the
Concentration Account or such Special Account (except to the extent that
any such account is maintained at NBC);
(e) promptly upon receipt thereof, copies of all financial
reports (including, without limitation, management letters), if any,
submitted to Parent or any of its Subsidiaries by its auditors, in connection
with each annual or interim audit or review of its books by such auditors,
to the extent reasonably requested by the Agent;
(f) promptly upon the issuance thereof, copies of all reports, if
any, to or other documents filed by Parent or any of its Subsidiaries with
the Securities and Exchange Commission under the Securities Act or the
Securities Exchange Act (other than on Form S-8 or 8-A or similar forms),
and all reports, notices or statements sent or received by Parent or any of
its Subsidiaries to or from the holders of any Indebtedness for Borrowed
Money of Parent or any such Subsidiary or to or from the trustee under
any indenture under which the same is issued;
(g) (i) concurrently with the delivery of the financial
statements required to be furnished by Sections 11.1(a), 11.1(b), and
11.1(c) hereof, a certificate signed by the chief executive or financial
officer of Parent, (x) stating that a review of the activities of Parent and
its Subsidiaries during such quarter or Fiscal Year, as the case may be, has
been made under his immediate supervision with a view to determining
whether Parent and its Subsidiaries have observed, performed and fulfilled
all of its respective obligations under each Loan Document to which it is a
party, and (y) demonstrating, in a format satisfactory to the Agent, the
compliance by Parent and its Subsidiaries with the financial covenants
contained herein and stating that there existed during such month, quarter
or Fiscal Year no Default, or Event of Default or if any such Default or
Event of Default existed, specifying the nature thereof, the period of
existence thereof and what action Parent or any of its Subsidiary proposes
to take, or has taken, with respect thereto, and (ii) promptly upon the
occurrence of any Event of Default, a certificate signed by the chief
executive or financial officer of Parent, specifying the nature thereof and
the action Parent or any of its Subsidiaries proposes to take or has taken
with respect thereto;
(h) promptly upon the commencement thereof, Written Notice
of any litigation, including arbitrations, and of any proceedings before any
governmental agency which could, if successful, reasonably be expected
to have a Material Adverse Effect or where the amount involved exceeds
$250,000;
(i) with reasonable promptness, such other information
respecting the business, operations and financial condition of Parent or any
of its Subsidiaries as any Lender may from time to time reasonably
request;
(j) not later than fifteen (15) Business Days after (i) the 14th
day of each such calendar month, and (ii) the end of each such calendar
month, a certificate dated the 14th day or the last day of such calendar
month just ended, as applicable, from Parent, in each case substantially in
the form of Exhibit 11.1(j) hereto (except that each Borrowing Base
Certificate dated as of the 14th day of any calendar month may utilize (A)
the total for exclusions of milk, eggs and other perishable items in grocery,
excluding cheese, and (B) the calculation of month-end adjustments for
Eligible Inventory established in the Borrowing Base Certificate dated as
the last day of the immediately prior calendar month) and signed by the
chief executive officer, chief financial officer or chief accounting officer
of Parent (each such certificate, a "Borrowing Base Certificate");
(k) not later than fifteen (15) Business Days after the end of
each fiscal month, a certificate dated as of the last day of such fiscal month
just ended from Borrower substantially in the form of Exhibit 11.1(k)
hereto and signed by the chief executive officer, chief financial officer or
chief accounting officer of Parent setting forth (i) a schedule of
Receivables and a detail aging of such Receivables as of the date of such
certificate, (ii) a schedule of Borrower's accounts payable and a detail
aging of such accounts payable, and (iii) a listing of Inventory as of the
date of such certificate;
(l) not later than forty-five (45) days after the commencement
of each Fiscal Year of Parent beginning with the Fiscal Year commencing
on December 29, 1996, a one Fiscal-Year budget of the financial condition
and results of operations of Parent and its Subsidiaries for such Fiscal
Year (covering in any event balance sheets, statements of cash flow and of
income for each quarter and calendar month); in all instances in form,
scope and substance reasonably satisfactory to the Agent; and Borrower
shall cause such budget to be updated from time to time as material
changes in the financial condition and results of operations of Parent and
its Subsidiaries necessitate and shall promptly furnish or cause to be
furnished to the Agent and each Lender a copy of any such updated budget;
(m) promptly, and in any event within ten (10) Business Days
of the date that Borrower obtains knowledge thereof, notice of any of the
following events, to the extent that any of such events is reasonably
expected to cause cost and expense to Borrower and its Subsidiaries of
$500,000 or more:
(i) receipt by a Credit Party or any Subsidiary
thereof, or any tenant or other occupant of any property of a Credit
Party or Subsidiary thereof, of any claim, complaint, charge or
notice of a violation or potential violation of any Environmental Law;
(ii) the occurrence of a spill or other Release of
a Hazardous Material upon, under or about or affecting any of the
properties of a Credit Party or Subsidiary thereof, or Hazardous
Materials at levels or in amounts that may have to be reported,
remedied or responded to under any Environmental Law are
detected on or in the soil or groundwater;
(iii) that a Credit Party or Subsidiary thereof is or
may be liable for any costs of cleaning up or otherwise responding
to a Release of Hazardous Materials;
(iv) that any part of the properties of a Credit
Party or any Subsidiary thereof is or may be subject to a Lien
under any Environmental Law; and
(v) that a Credit Party or Subsidiary will
undertake or has undertaken any cleanup or other response action
with respect to any Hazardous Material; and
(n) within ten (10) days following the occurrence thereof, any
loss, damage or other event which can reasonably be expected to result in
an insurance claim by Borrower or any Subsidiary of $250,000 or more;
(o) promptly upon receipt thereof, copies of any
correspondence received from Medicare/Medicaid Account Debtors or
their agents or any other governmental entity or any Third Party Payor
relating to any audit, investigation or statutorily-authorized inquiry
relating to Borrower and any Pharmaceutical Receivable;
(p) not later than fifteen (15) Business Days after (i) the 14th
day of each such calendar month, and (ii) the end of each such calendar
month,, a certificate dated the 14th day or the last day of such calendar
month just ended, as applicable, from Borrower, substantially in the form
of Exhibit 11.1(p) hereto and signed by the chief executive officer, chief
financial officer or chief accounting officer of Borrower, setting forth (i)
the aggregate redemption value of Coupons forwarded to the Processing
Agent during such period, as applicable, and (ii) the amount of payments
actually received by Borrower from the Processing Agent during such
period, as applicable for redemption of Coupons; Borrower hereby agrees
to forward all Coupons to the Processing Agent for processing, on a
weekly basis, in accordance with the terms of the Processing Agreement
and to deposit or cause to be deposited all proceeds of Coupons in a
Collection Account established pursuant to Section 8.18(a) hereof or
otherwise in accordance with Agent's written instructions; and
(q) not later than fifteen (15) Business Days after (i) the 14th
day of each such calendar month, and (ii) the end of each such calendar
month, 14th day or the last day of such calendar month just ended, as
applicable, from the Borrower, substantially in the form such calendar
month a certificate dated as of the of Exhibit 11.1(q) hereto and signed by
the chief executive officer, chief financial officer or chief accounting
officer of Borrower, setting forth (i) the amount of outstanding
Pharmaceutical Receivables as of the beginning of period as applicable,
(ii) the amount of new Pharmaceutical Receivables generated during such
period, as applicable (iii) the amount of payments received on outstanding
Pharmaceutical Receivables during such period, as applicable, and
(iv) a reconciliation of the foregoing.
(r) with reasonable promptness, information regarding
Inventory as Agent may from time to time reasonably request.
11.2. TAXES AND CLAIMS. Each of Parent and Borrower
shall, and shall cause each of Borrower's Subsidiaries, to, pay and discharge
when due (except to the extent that (a) any such taxes, assessments,
governmental charges or claims are diligently contested in good faith by
appropriate proceedings and proper reserves are established on the books of
Parent, Borrower or any such Subsidiary, and (b) any Liens arising from the
non-payment thereof when due have not attached to any of the Collateral in a
manner which could have priority over the Lien of the Agent thereon or risk
the sale of or foreclosure on such Collateral, or (c) Parent and Borrower are
permitted to defer paying any such taxes, assessments, governmental charges
or claims by applicable provisions of the Federal Bankruptcy Code or pursuant
to the Plan) (i) all taxes, assessments and governmental charges upon or
against it or its properties or assets prior to the date on which penalties
attach thereto and (ii) all lawful claims, whether for labor, materials,
supplies, services or anything else, which might or could, if unpaid,
become a Lien or charge upon its properties or assets.
11.3. INSURANCE. (a) Borrower shall, and shall cause each of
its Subsidiaries to, (i) keep all its properties, including Real Properties,
Inventory and Equipment, adequately insured at all times with responsible
insurance carriers, in amounts and pursuant to insurance policies
reasonably acceptable to the Agent, against loss or damage by fire and other
hazards and, (ii) maintain adequate insurance at all times with responsible
insurance carriers, in amounts and pursuant to insurance policies reasonably
acceptable to the Agent, against liability on account of damage to Persons
and property and under all applicable workers' compensation laws and (iii)
maintain adequate insurance covering such other risks as the Agent may
reasonably request. For purposes of complying with this Section 11.3(a),
adequate insurance shall in any event prevent Borrower and its Subsidiaries
from becoming a co-insurer (excluding any deductibles thereunder
reasonably acceptable to the Agent).
(b) Except as otherwise agreed in writing by the Agent, each
liability policy and each hazard policy on Collateral required pursuant to
this Section 11.3 shall name the Agent and each Lender as additional
insured or first loss payee, as appropriate, and shall be primary without
right of contribution from any other insurance which is carried by the
Lenders or the Agent to the extent that such other insurance provides it
with contingent and/or excess liability insurance with respect to its
interest as such in the Collateral and shall expressly provide
that all of the provisions thereof, except the limits of liability (which
shall be applicable to all insureds as a group) and except liability for
premiums (which shall be solely a liability of Borrower or its Subsidiaries,
as the case may be), shall operate in the same manner as if there were a
separate policy covering each insured.
(c) Borrower shall, and shall cause each of its Subsidiaries to,
from time to time upon request of the Agent, promptly furnish or cause to be
furnished to the Agent (1) evidence, in form and substance reasonably
satisfactory to the Agent, of the maintenance of all insurance required to be
maintained by this Section 11.3, including, but not limited to, such copies
as the Agent may request of policies, certificates of insurance, riders and
endorsements relating to such insurance and proof of premium payments, and,
(2) a written report, satisfactory to Agent in form and substance, from an
insurance broker acceptable to the Agent confirming that the amount of
insurance obtained under such policies, and the terms and conditions thereof,
are substantially similar to policies customarily maintained by companies
similarly situated to Borrower and engaged in the same
in similar business as Borrower.
11.4. BOOKS AND RESERVES. Each of Parent and Borrower
shall and shall cause each of Borrower's Subsidiaries to:
(a) maintain, at all times, true and complete books, records and
accounts in which true and correct entries shall be made of its transactions,
all in accordance with GAAP; and
(b) by means of appropriate entries, reflect in its accounts and
in all financial statements furnished pursuant to Section 11.1 proper
liabilities and reserves for all taxes and proper provision for depreciation
and amortization of its properties and bad debts, all in accordance with
GAAP.
11.5. PROPERTIES IN GOOD CONDITION. Borrower shall
keep, and shall cause each of its Subsidiaries to keep, its properties
(including properties subject to Equipment Leases) in good repair, working
order and condition, ordinary wear and tear excepted, and, from time to
time, make all necessary and proper repairs, renewals, replacements, additions
and improvements thereto, so that the business carried on may be properly and
advantageously conducted at all times in accordance with prudent business
management.
11.6. MAINTENANCE OF EXISTENCE, ETC. Each of Parent
and Borrower shall preserve and maintain, and cause each of Borrower's
Subsidiaries, to preserve and maintain, their respective statutory existence,
rights and franchises.
11.7. INSPECTION BY THE AGENT. Each of Parent and
Borrower shall allow, and shall cause each of Borrower's Subsidiaries to
allow, any representative of the Agent or Lenders, in conjunction with
the Agent, to visit and inspect any of Borrower's properties, to examine its
books of account and other records and files, to make copies thereof and to
discuss its affairs, business, finances and accounts with its officers and
employees and independent accountants (and each of Parent and Borrower hereby
irrevocably authorizes its independent accountants to discuss with the Agent
the financial affairs of each of Parent and Borrower and Borrower's
Subsidiaries), all at such reasonable times during normal business hours and
as often as the Agent or Lenders, in conjunction with Agent, may reasonably
request upon reasonable notice (or, during the continuance of a Default or
Event of Default, at such times and as often as the Agent or Lenders, in
conjunction with the Agent, may request). Any representative of the Agent or
Lenders, in conjunction with the Agent may at any time verify Borrower's
Receivables utilizing an audit control company or any other agent of the
Agent or Lenders, which verification may include direct requests for
verifications from Borrower's customers and account debtors. At any
time following the occurrence and continuance of an Event of Default, the
Agent or the Agent's designee may notify customers or account debtors
of the Agent's and the Lenders' security interest in Receivables, collect them
directly and charge the collection costs and expenses to Borrower's account,
but, unless and until the Agent does so or gives Borrower other instructions,
Borrower shall collect all Receivables for the Lenders, receive all payments
thereon for the Lenders' benefit in trust as the Lenders' trustee and
immediately deliver them to the Bank in the original form with all necessary
endorsements or, as directed by the Bank, deposit such payments as directed
by the Lenders. Borrower shall furnish, at the Agent's request, copies of
contracts, invoices or the equivalent, and any original shipping and delivery
receipts for all merchandise sold or services rendered and such other
documents and information as the Agent may require. Borrower agrees to bear
the cost of, and reimburse Agent for any and all reasonable expenses
incurred by Agent, prior to the occurrence of a Default, in connection with
the inspections, examinations, verifications and discussions referred to in
this Section 11.7. Borrower agrees to bear the cost of, and reimburse Agent and
Lenders for any and all reasonable expenses incurred by Agent and Lenders,
after the occurrence and during the continuance of a Default or an Event of
Default, in connection with, the inspections, examinations, verifications and
discussions referred to in this Section 11.7.
11.8. PAY INDEBTEDNESS TO LENDERS AND PERFORM OTHER COVENANTS.
Borrower shall (a) make full and timely payment of all
payments required to be made by Borrower in respect of the Lender Debt,
including without limitation, the Revolving Loan and the Term Loan, whether
now existing or hereafter arising, (b) strictly comply, and cause each of its
Subsidiaries to strictly comply, with all the terms and covenants contained
in each Loan Document to which it is a party, all at the times and places
and in the manner set forth therein, and (c) except for the filing of
continuation statements and the making of other filings by the Agent as
secured party or assignee, at all times take all action necessary to maintain
the Liens provided for under or pursuant to this Agreement or any Security
Document as valid and perfected Liens on the property intended to be covered
thereby (subject to no other Liens except those liens expressly permitted
under Section 12.2) and supply all information to the Agent or the Lenders
necessary for such maintenance.
11.9. NOTICE OF DEFAULT. Borrower shall promptly (and in
any event within five (5) Business Days) notify the Agent in writing of any
Default or Event of Default or a default under any other agreement (other
than any Capitalized Lease involving an aggregate notional principal amount
of less than $500,000) in respect of Indebtedness for Borrowed Money to which
Borrower or any of its Subsidiaries is a party (other than any such Defaults,
Events of Default or defaults resulting solely from the filing of the Cases and
which are cured in accordance with the Plan), in each case describing the
nature thereof and the action Borrower proposes to take with respect thereto.
11.10. REPORTING OF MISREPRESENTATIONS. In the event that
Borrower or any Subsidiary of Borrower discovers that any
representation or warranty made in any Loan Document by any Credit Party was
incorrect in any material respect when made and such incorrectness is
continuing and remains material, Borrower shall promptly report, or shall
cause such Subsidiary promptly to report, the same to the Agent and take, or
cause to be taken, all available steps to correct such misrepresentation or
breach of warranty.
11.11. COMPLIANCE WITH LAWS, ETC. Each of Parent and
Borrower shall comply, and shall cause each of Borrower's Subsidiaries to
comply, in all material respects, with all applicable laws, rules,
regulations and orders, and each of Parent and Borrower shall duly observe, and
cause each of Borrower's Subsidiaries to duly observe, in all material
respects, all valid requirements of applicable governmental authorities and all
applicable statutes, rules and regulations, including, without limitation, all
applicable statutes, rules and regulations relating to public and employee
health and safety in any case, the non-observance of which could reasonably be
expected to have a Material Adverse Effect, involves criminal penalties or
could expose the Agent or any Lender to any civil or criminal penalties.
11.12. ERISA. (a) Each of Parent and Borrower shall pay and
discharge, and shall cause each of Borrower's Subsidiaries to pay and
discharge, when due any material liability which is imposed upon it pursuant
to the provisions of Title IV of ERISA, unless the amount, applicability
or validity of such liability is being diligently contested in good faith by
appropriate proceedings and proper reserves are established on its books in
accordance with GAAP.
(b) Borrower shall deliver to the Agent promptly, and in any
event within ten (10) days in the case of clauses (ii), (iii), (vi) and
(viii) below, or twenty (20) days in the case of clauses (i), (iv), (v) and
(vii) below, after
(i) Borrower knows, or has reason to know, of the
occurrence of any Reportable Event with respect to any Pension Benefit
Plan, a copy of the materials that are filed by the applicable plan
administrator with the PBGC;
(ii) a Credit Party or an ERISA Affiliate thereof or an
administrator of any Pension Benefit Plan files with participants,
beneficiaries or the PBGC a notice of intent to terminate any Pension
Benefit Plan under Section 4041 of ERISA, a copy of any such notice;
(iii) the receipt of notice by a Credit Party or any ERISA
Affiliate thereof or an administrator of any Pension Benefit Plan from the
PBGC of the PBGC's intention to terminate such Plan or to appoint a
trustee to administer such Plan, a copy of such notice;
(iv) the filing thereof with the Internal Revenue Service,
copies of each annual report that is filed on Treasury Form 5500 with
respect to any Pension Benefit Plan subject to Title IV, together with any
actuarial statements on Schedule B to such Form 5500;
(v) a Credit Party or any ERISA Affiliate thereof
knows or has reason to know of any event or condition which could
reasonably be expected to constitute grounds under the provisions of
Section 4042 of ERISA for the termination of (or the appointment of a
trustee to administer) any Pension Benefit Plan, an explanation of such
event or condition;
(vi) the receipt by a Credit Party or any ERISA Affiliate
thereof of an assessment of withdrawal liability under Section 4201 of
ERISA from a Multiemployer Plan, a copy of such assessment;
(vii) a Credit Party or any ERISA Affiliate knows or has
reason to know of the termination or insolvency (under Sections 4241 or
4245 of ERISA) of any Multiemployer Plan, a notice of such event; or
(viii) an application has been made to the Secretary of the
Treasury for a waiver of the minimum funding standard under the
provisions of Section 412 of the Code with respect to any Pension Benefit
Plan, a copy of such application; and
in each case described above, together with a statement signed by an
appropriate officer of such Credit Party setting forth details as to such
reportable event, notice event or condition and the action that will be taken
with respect thereto.
11.13. FURTHER ASSURANCES. (a) Each of Parent and Borrower
shall, and shall cause each of Borrower's Subsidiaries to, at its cost and
expense, upon request of the Agent from time to time, duly execute and
deliver, or cause to be duly executed and delivered, to the Agent such
further instruments and do and cause to be done such further acts as may be
necessary or proper in the reasonable opinion of the Agent to carry out more
effectually the provisions and purposes of this Agreement or any other Loan
Document or to enable the Agent and the Lenders to exercise and enforce their
rights and remedies hereunder with respect to any Collateral. Without
limiting the generality of the foregoing, Borrower will: (i) at the request
of the Agent, mark conspicuously each chattel paper included in the
Collateral and each of its records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Agent, indicating that
such chattel paper is subject to the security interest granted hereby; (ii)
if any account shall be evidenced by a promissory note or other instrument or
chattel paper, deliver and pledge to the Agent hereunder such note,
instrument or chattel paper duly endorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance satisfactory
to the Agent; and (iii) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as
may be necessary or desirable, or as the Agent may request, in order to
create, evidence perfect or preserve the security interests granted or
purported to be granted hereby.
(b) Each of Borrower and Parent hereby authorizes the Agent to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of
Borrower or Parent where permitted by law. Borrower and Parent hereby agree
that a carbon, photographic, photostatic or other reproduction of any Security
Document or of a financing statement is sufficient as a financing statement
where permitted by law.
(c) Borrower and Parent will furnish to the Agent from time to time, in
addition to the information required to be delivered to the Agent by the other
provisions of this Agreement, such statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request, all in reasonable detail.
11.14. AUDITS AND APPRAISALS. (a) Borrower shall, at its
expense, cause its auditors to supervise and review a physical inventory of
Inventory and Pledged Accounts of Borrower and its Subsidiaries once each
Fiscal Year, to be conducted in the normal course of Borrower's audit process,
and shall deliver to the Agent promptly, and in any event within thirty (30)
days after the same becomes available, the results of such audit. Borrower
shall, at Agent's request not more than once each Fiscal Year, engage
auditors to confirm and report inventory classifications and other information
reasonably requested by Agent, based upon inventory procedures agreed upon by
Agent and the auditors.
(b) In addition to audits referred to in paragraph (a) of this
Section 11.14, each of Parent and Borrower shall allow, and shall cause each of
Borrower's Subsidiaries to allow, the Agent or Lenders, in conjunction with the
Agent, or their designees to enter any locations of Borrower, at any reasonable
time or times during regular business hours, to inspect the Collateral and to
inspect, audit and to make copies or extractions from the books, records,
journals, orders, receipts, correspondence and other data relating to the
Collateral.
(c) At Agent's request at any time, on no more than one
occasion per calendar year prior to the occurrence of a Default and as
frequently as Agent may desire so long as a Default or an Event of Default
has occurred and is continuing, allow a third-party appraiser acceptable to
Agent to perform an appraisal of the Inventory, copies of which shall be made
available to Borrower, Agent and Lenders.
(d) Borrower agrees to bear the cost of, and reimburse Agent
for any and all reasonable expenses incurred by Agent, prior to the
occurrence of a Default, in connection with, the audits and appraisals referred
to in this Section 11.14. Borrower agrees to bear the cost of, and reimburse
Agent and Lenders for any and all reasonable expenses incurred by Agent and
Lenders, after the occurrence and during the continuance of a Default or an
Event of Default, in connection with, the audits and appraisals referred to
in this Section 11.14. For informational purposes and not in limitation
thereof, Agent's auditor expenses as of the Closing Date are $450.00 per
auditor per day, plus any and all out-of-pocket expenses.
11.15. ENVIRONMENTAL MATTERS, ETC. (a) Each of
Parent and Borrower shall, and shall cause each of Borrower's Subsidiaries to,
comply, in all material respects, with the provisions of all Environmental Laws
and all applicable Federal, state and local occupational health, safety and
sanitation laws, ordinances, codes, rules and regulations, permits, licenses
and interpretations and orders of regulatory and administrative authorities
with respect thereto in any case, the non-compliance with which could
reasonably be expected to have a Material Adverse Effect, involves criminal
penalties or could expose the Agent or any Lender to any civil or criminal
penalties, and shall keep its properties and the properties of its
Subsidiaries free of any Lien imposed pursuant to any Environmental Law other
than any Lien which will not attach to any of the Collateral in a manner
which would (or could) have priority over the Lien of the Agent thereon or
risk the sale or foreclosure on such Collateral or is in an amount material
to Borrower. Neither Parent nor Borrower shall, nor shall Parent or Borrower
suffer or permit, any of Borrower's Subsidiaries to cause or suffer or
permit, the property of Parent, Borrower or such Subsidiary, to be used for
the generation, production, processing, handling, storage, transporting or
disposal of any Hazardous Material except the removal or the taking of
remedial action in response to Hazardous Materials on or about the properties of
Parent, Borrower or any of Borrower's Subsidiaries and except in the ordinary
course of Borrower's business as conducted as of the Closing Date.
(b) Each of Parent and Borrower shall supply to the Agent
copies of all submissions by Parent or Borrower or any of Borrower's
Subsidiaries to any governmental authority and of the reports of all
environmental audits and of all other environmental tests, studies or
assessments (including the data derived from any sampling or survey of
asbestos, soil, or subsurface or other materials or conditions) that may be
conducted or performed (by or on behalf of Parent, Borrower or any of
Borrower's Subsidiaries) on or regarding the properties of Parent, Borrower
or any of Borrower's Subsidiaries or regarding any conditions that might have
been affected by Hazardous Materials on or Released or removed from such
properties. Each of Parent and Borrower shall also permit and authorize,
and shall cause Borrower's Subsidiaries to permit and authorize, the
consultants, attorneys or other persons that prepare such submissions or
reports or perform such audits, tests, studies or assessments to discuss
non-privileged portions of such submissions or reports with the Agent and the
Lenders.
(c) Borrower shall timely undertake and complete any cleanup
or other response actions required by (i) any governmental authority, or (ii)
any Environmental Law if, in the case of this clause (ii) only, failure so to
undertake or complete could have a Material Adverse Effect, involves
criminal penalties or could expose the Agent or any Lender to any civil or
criminal penalties or is required under such Environmental Law to safeguard
the health of any persons.
(d) Without in any way limiting the scope of Section 4.8 hereof
and in addition to any obligations thereunder, Borrower hereby indemnifies and
agrees to hold the Agent and the Lenders harmless from and against any
liability, loss, damage, suit, action or proceeding arising out of its
business or the business of its Subsidiaries pertaining to Hazardous
Materials, including, but not limited to claims of any Federal, state or
municipal government or quasi-governmental agency or any third person,
whether arising under CERCLA, RCRA, or any other Environmental Law, or tort,
contract or common law.
11.16. FINANCIAL COVENANTS. The Companies covenant and agree
to the following financial covenants:
a. Minimum EBITDAR. The Companies shall not permit their
EBITDAR, for the four (4) Fiscal Quarter period ending at the end of the
Fiscal Quarter indicated below to be less than the amount indicated below
for such Fiscal Quarter:
Minimum
Fiscal Quarter EBITDAR
Fiscal Year-to-date through
November 2, 1996: $ 12,000,000
Fiscal Quarter-4, 1996: $ 15,500,000
Fiscal Quarter-1, 1997: $ 16,000,000
Fiscal Quarter-2, 1997: $ 17,500,000
Fiscal Quarter-3, 1997: $ 19,000,000
Fiscal Quarter-4, 1997: $ 22,000,000
Fiscal Quarter-1, 1998: $ 22,000,000
Fiscal Quarter-2, 1998: $ 22,500,000
Fiscal Quarter-3, 1998: $ 22,500,000
Fiscal Quarter-4, 1998 and thereafter: $ 22,500,000
The Companies will also disclose to Agent and Lenders, in writing, its EBITDA
with each calculation of EBITDAR, and will also provide an itemization of the
Reorganization Costs, in detail reasonably satisfactory to the Agent and the
Lenders. The calculation of EBITDA and of EBITDAR for Fiscal Quarter-4 of
each Fiscal Year will be made on the basis of the audited financial statements
required to be furnished pursuant to Section 11.1(b) hereof.
b. Minimum Fixed Charge Coverage. Borrower shall not permit its
Consolidated Fixed Charge Coverage Ratio for the four (4) Fiscal Quarter
period ending at the end of each Fiscal Quarter indicated below to be less
than the ratio indicated below for such Fiscal Quarter:
Minimum Consolidated
Fixed Charge
Fiscal Quarter: Coverage Ratio:
Fiscal Year-to-date through
November 2, 1996: N/A
Fiscal Quarter 4, 1996: 1.00 to 1.0
Fiscal Quarter-1, 1997: 0.95 to 1.0
Fiscal Quarter-2, 1997: 0.90 to 1.0
Fiscal Quarter-3, 1997: 0.95 to 1.0
Fiscal Quarter-4, 1997: 1.00 to 1.0
Fiscal Quarter-1, 1998: 1.00 to 1.0
Fiscal Quarter-2, 1998: 1.00 to 1.0
Fiscal Quarter-3, 1998: 1.00 to 1.0
Fiscal Quarter-4, 1998 and thereafter: 1.00 to 1.0
The calculation of the Consolidated Fixed Charge Coverage Ratio for Fiscal
Quarter-4 of each Fiscal Year will be made on the basis of the audited
financial statements required to be furnished pursuant to Section 11.1(b)
hereof.
c. Minimum Borrowing Base Availability. The Companies
shall not permit the Borrowing Base Availability to be less than $3,000,000
during any Interim Period which occurs following a Fiscal Quarter where the
Consolidated Fixed Charge Coverage Ratio, as calculated at the end of such
Fiscal Quarter, based on the financial statements submitted to the Agent
and the Lenders pursuant to Section 11.1(a) hereof, is less than 1.00 to 1.0.
The calculation of the Borrowing Base Availability for Fiscal Quarter-4 of
each Fiscal Year will be made on the basis of the unaudited financial
statements required to be furnished pursuant to Section 11.1(a) hereof.
d. Funded Debt-to-EBITDAR Ratio. The Companies shall not permit
their Funded Debt-to-EBITDAR Ratio ending at the end of the Fiscal Quarter
indicated below to be greater than the ratio indicated below for such
Fiscal Quarter:
Maximum Debt-to-
Fiscal Quarter: EBITDAR Ratio
Fiscal Year-to-date through
November 2, 1996: 5.75 to 1.0
Fiscal Quarter-4, 1996: 5.50 to 1.0
Fiscal Quarter-1, 1997: 5.50 to 1.0
Fiscal Quarter-2, 1997: 5.00 to 1.0
Fiscal Quarter-3, 1997: 4.50 to 1.0
Fiscal Quarter-4, 1997: 4.25 to 1.0
Fiscal Quarter-1, 1998: 4.25 to 1.0
Fiscal Quarter-2, 1998: 4.25 to 1.0
Fiscal Quarter-3, 1998: 4.25 to 1.0
Fiscal Quarter-4, 1998 and thereafter: 4.00 to 1.0
For purposes of the calculation of the Funded Debt-to-EBITDAR Ratio for the
Fiscal Year-to-date through November 2, 1996, EBITDAR will be determined on
an annualized basis. The calculation of the Funded Debt-to-EBITDAR Ratio for
Fiscal Quarter-4 of each Fiscal Year will be made on the basis of the audited
financial statements required to be furnished pursuant to Section 11.1(b)
hereof.
e. Minimum Current Ratio. The Companies shall not permit
their Consolidated Current Ratio at the end of each Fiscal Quarter, beginning
with Fiscal Quarter 4, 1996, to be less than 1.25 to 1.0. The calculation of
the Consolidated Current Ratio for Fiscal Quarter-4 of each Fiscal Year will
be made on the basis of the audited financial statements required to be
furnished pursuant to Section 11.1(b) hereof.
11.17. COLLECTION AND CONCENTRATION ACCOUNTS; LOCK-BOX ACCOUNTS.
(a) Borrower shall (i) cause all cash proceeds (as defined in Article 9 of
the UCC) of Pledged Accounts to be deposited directly by the account debtor
thereof into a Lock-Box Account, (ii) except as otherwise permitted under
subsection (d) or subsection (e) of this Section 11.17, deposit or cause to
be deposited all cash proceeds (as defined in Article 9 of the UCC) of
Inventory and Pledged Accounts into a Collection Account, (iii) deposit or
cause to be deposited all Gross Proceeds of an Asset Sale into a Collection
Account, (iv) deposit or cause to be deposited all cash proceeds (as defined in
Article 9 of the UCC) of Coupons into a Collection Account, (v) deposit or cause
to be deposited all cash proceeds (as defined in Article 9 of the UCC) of
Pharmaceutical Receivables into a Pharmaceutical Collection Account, and (vi) on
each Business Day, except as otherwise permitted under subsection (f) of this
Section 11.17, transfer all collected balances from all Collection Accounts and
Lock-Box Accounts to the Concentration Account.
(b) Borrower shall, except as otherwise permitted under
subsection (d) or subsection (e) of this Section 11.17, cause all cash
receipts of all stores operated by Borrower and its Subsidiaries (to the extent
such cash receipts constitute proceeds of any Collateral) to be deposited daily
(except Sundays, holidays, and Saturdays, but only if the bank into which
Borrower would otherwise deposit cash proceeds of Inventory and Pledged Accounts
is closed on Saturdays) into a Collection Account; provided that the failure
to cause such cash receipts to be so deposited shall not constitute a default
hereunder if such late deposit results solely from good faith human error
and is made promptly following discovery of such error.
(c) Notwithstanding the provisions of subsections (a)(ii) and
(b) of this Section 11.17, the Borrower may:
(i) cause a portion of the cash proceeds of Pledged Accounts or of
Inventory generated by one of the stores listed on Schedule 11.17(c) hereto,
as may be amended from time to time with the prior written consent of the
Agent, to be deposited directly to a deposit account maintained at a local
bank for such store which is not a Collection Account (each, a "Local Bank
Special Account"); provided that:
(A) except as permitted in this Section 11.17(c),
the Borrower shall not be permitted to write checks or
otherwise draw funds from such Local Bank Special
Account, except that the Borrower may debit such Local
Bank Special Account for change orders and it may agree
with the bank at which such Local Bank Special Account is
maintained that such bank may debit the Local Bank
Special Account for such bank's servicing fees and charges
for return items;
(B) an amount (the "Store Deposit") equal to the
amount deposited in such Local Bank Special Account (less
change orders, servicing fees and charges for return items)
for each store's business day (as reasonably determined by
the Borrower) is transferred to a Collection Account on the
same day or the relevant banks' next business day after
such deposit;
(C) the failure to make a Store Deposit for each
store's business day shall not constitute a default hereunder
if such late Store Deposit results solely from good faith
human error and is made promptly following discovery of
such error; and
(D) the transfer of any Store Deposit to a
Collection Account on a day other than the same day or the
relevant banks' next business day after such Store Deposit
shall not constitute a default hereunder if such late transfer
results solely from good faith human error and is made
promptly following discovery of such error;
(ii) cause a portion of the cash proceeds of Pledged Accounts or of
Inventory to be deposited directly to a checking account at Liberty Bank and
Trust Company of Oklahoma City, N.A., or another financial institution
acceptable to the Agent, that is not a Collection Account, for the sole
purpose of having access to funds for sight drafts to purchase alcoholic
beverages for resale or to cover returned checks (each such checking account
being a "Sight Draft Special Account", and together with each Local Bank
Special Account, being a "Special Account"); provided that no more than
$70,000 may be on deposit in any Sight Draft Special Account and no more
than $70,000 may be on deposit in all Sight Draft Special Accounts at the
end of any relevant bank's business day (after deducting all offsetting
debits for sight drafts and returned checks at the end of the relevant
banks' business day);
(iii) permit such debits to a Collection Account as may
be specified in a Collection Account Agreement; and
(iv) maintain, at store number 145, located in Dodge
City, Kansas, a portion of the cash proceeds of Pledged Accounts
or of Inventory in an amount not to exceed $150,000 solely for the
purpose of providing funds for check-cashing services to customers
and potential customers of Borrower.
The Borrower shall, at the request of the Agent, use its best efforts
to cause each bank at which one or more Special Accounts are
maintained to execute and deliver to the Agent an agreement, in
form and substance satisfactory to the Agent, pursuant to which
such bank expressly waives any right of set-off such bank may
have against such account and covering such other matters as may
be required by the Agent; provided, however, that the Agent and
the Lenders agree that such efforts shall not require the Borrower
to confer any economic benefit upon any such bank in order to
cause such bank to execute such agreement.
(d) Notwithstanding the provisions of subsections (a)(ii) and
(c) of this Section 11.17, the Borrower may make payments to (i) EFS, Inc.
("EFS") pursuant to the Supermarket Industry Merchant Agreement, Electronic
Authorization and Payment, dated as of May 1, 1992 between EFS and the
Borrower, and the related letter dated May 6, 1992 from the Borrower to Mr. Ed
Labry of EFS and (ii) one or more other credit or charge card service
providers in connection with arrangements enabling the Borrower to accept
payment for merchandise by credit or charge card, including, without
limitation, deductions by EFS or such other credit or charge card service
providers from amounts otherwise payable to the Borrower under their
servicing arrangements with the Borrower; provided, that on and after the
Closing Date, all documentation with respect to such arrangements mentioned
in clause (ii) above shall be in form and substance reasonably satisfactory
to the Agent.
(e) Notwithstanding anything to the contrary in subsection
(a)(iv) of this Section 11.17, the Borrower shall be permitted to exempt
from the transfers required by such subsection on any day a maximum of (i)
$100,000 of collected balances on deposit in the Collection Account
maintained by the Borrower with Liberty Bank and Trust Company of Oklahoma City,
N.A., or another financial institution acceptable to the Agent, (ii)
$5,000 of collected balances on deposit in the Collection Account maintained
by the Borrower with Bank of Oklahoma, N.A., or another financial institution
acceptable to the Agent, and (iii) $5,000 of collected balances on deposit in
the Collection Account maintained by the Borrower with Amarillo National
Bank, or another financial institution acceptable to the Agent.
11.18. ENVIRONMENTAL REPORTS. If so requested, Borrower shall
deliver to the Agent an environmental report of a qualified third party
engineer in form and substance satisfactory to the Agent (a) on any one or
more of the stores listed on Schedule 11.18 hereto or (b) with respect to
any event for which Borrower supplied a notice under Section 11.1(m) hereof.
11.19. SPECIAL COUNSEL FEES. Borrower shall pay in full,
within ten (10) days following the Closing Date, all reasonable fees, costs and
expenses of Hughes & Luce, L.L.P., special counsel to the Agent, billed on or
prior to the Closing Date.
11.20. LANDLORDS' LIENS. Borrower shall provide to Lenders a
waiver of landlord lien for all Real Properties leased by Borrower,
substantially in the form and substance of the form of Landlord's Waiver
attached as Exhibit 11.20 hereto.
11.21. OVERDUE LEASE. Borrower shall disclose to the Lenders all
leases with regard to which the payments are or become, at any time and from
time to time, more than thirty (30) days past due. Such disclosure shall
include the name of the lessor, the store number, the location of the store,
the amount of the monthly lease payments and the total amount of past
due payments with respect to each such lease. The leases with regard to which
the payments are more than thirty (30) days past due as of the Closing Date are
set forth in Schedule 14.5(c) to this Agreement.
11.22. COMPLIANCE WITH EQUIPMENT LEASES. Each of Parent and
Borrower shall comply, and shall cause each of Borrower's Subsidiaries to
comply, in all material respects, with all Equipment Leases; and each of
Parent and Borrower shall duly observe, and cause each of Borrower's
Subsidiaries to duly observe, in all material respects, all valid
requirements of applicable Equipment Leases, the non-observance of which could
reasonably be expected to have a Material Adverse Effect.
SECTION 12. NEGATIVE COVENANTS.
Each of Parent and Borrower covenants and agrees that, so long
any Advance or any Letter of Credit or reimbursement obligation for a Letter of
Credit is outstanding or any Lender has any Revolving Commitment or Term
Commitment hereunder, each of Parent and Borrower shall not, and shall not
suffer or permit any of Borrower's Subsidiaries (and, in the case of Section
12.10 hereof, any ERISA Affiliate) to, without the prior written consent of
the Required Lenders:
12.1. CAPITAL EXPENDITURES. (a) The Companies shall not
suffer or permit Net Capital Expenditures of the Parent and its Subsidiaries
to exceed the amount indicated:
Maximum Net
Fiscal Year: Capital Expenditures
Fiscal Year 1996: $ 8,700,000
Fiscal Year 1997: $12,000,000
Fiscal Year 1998: $13,000,000
The maximum amount for a particular Fiscal Year may be increased by an amount
equal to fifty percent (50%) of Excess Cash Flow calculated for the immediately
prior Fiscal Year, any such increase being effective only after actual
payment of the Excess Cash Flow has been paid to Lenders and applied to the
Term Loan following the end of such prior Fiscal Year, as contemplated by
Section 3.6 hereof.
(b) In no event shall Parent, Borrower or any Subsidiary of
Borrower assume or incur any Indebtedness in connection with the acquisition of
a fixed or capital asset (including, without limitation, under a Capitalized
Lease) if the fair market value (as determined by an independent appraisal or
as determined in good faith by management of Borrower) of such asset does not
exceed the aggregate principal (or notional principal, in the case of
Capitalized Lease Obligations, which notional principal amount shall be
calculated in accordance with GAAP but assuming an implicit interest rate of
the higher of 15% or the market rate of interest available to the Company, as
determined by the Company in its good faith judgment) amount of such
Indebtedness so incurred or assumed.
12.2. LIENS. Create, incur, assume or suffer to exist any Lien
upon or defect in title to or restriction upon the use of any of its property
or assets of any character, whether owned at the Closing Date or hereafter
acquired, or hold or acquire any property or assets of any character under
conditional sales, finance lease or other title retention agreements, other
than:
(a) (i) Liens in favor of the Agent or the Lenders pursuant
to this Agreement or the Security Documents; and
(ii) Liens described in clause (vi) of the definition of
"Eligible Inventory";
(b) (i) Liens, other than in favor of the PBGC, arising out
of judgments or awards in respect of which Borrower or any of its
Subsidiaries shall in good faith be prosecuting an appeal or proceedings
for review and in respect of which it shall have secured a subsisting stay of
execution pending such appeal or proceedings for review, provided it shall
have set aside on its books adequate reserves, in accordance with GAAP,
with respect to such judgment or award;
(ii) Liens for taxes, assessments or governmental charges or
levies, provided payment thereof shall not at the time be required in
accordance with the provisions of Section 11.2 hereof;
(iii) deposits, Liens or pledges to secure payments of
workmen's compensation and other payments, unemployment and other
insurance, old-age pensions or other social security obligations, or the
performance of bids, tenders, leases, contracts (other than contracts for the
payment of money), public or statutory obligations, surety, stay or appeal
bonds, or other similar obligations arising in the ordinary course of
business;
(iv) mechanics', workmen's, repairmen's, warehousemen's, vendors'
or carriers' Liens, or other similar Liens arising in the ordinary course of
business and securing sums which are not past due, or are being contested in
good faith (so long as there is no risk of the sale or forfeiture of the
property subject to such Lien or enforcement of such Lien has been stayed),
or deposits or pledges to obtain the release of any such Liens;
(v) (i) Statutory landlord's Liens on property located in
Texas under Leases or of mortgagees of any such landlord, in each case, to
which Borrower or any of its Subsidiaries is a party and (ii) Liens
described in Section 8.20 hereof existing as of the date of the first
Advance or Letter of Credit issued hereunder and deemed not material by
the Agent under Section 8.20 hereof;
(vi) zoning restrictions, easements, licenses, covenants,
restrictions on the use of real property or minor irregularities in title
thereto, which do not materially impair the use of such property in the
normal operation of the business of Borrower or any of its Subsidiaries;
and
(vii) deposits, Liens or pledges up to an aggregate of
$1,000,000 to secure payments due to public utilities for services provided
in the ordinary course of business;
(c) existing Liens set forth in Schedule 12.2(c) hereto and any
renewals thereof, but not any increase in amount thereof and not any
extension thereof to other property;
(d) (i) purchase money mortgages or other purchase money Liens
(excluding Capital Leases) upon any fixed or capital assets hereafter
acquired, or purchase money mortgages or other purchase money Liens
(excluding Capital Leases), on any such assets hereafter acquired or
existing at the time of acquisition of such assets, whether or not the related
Indebtedness is recourse to Borrower, in each case, to the extent that any
such Lien does not exist on the Closing Date, so long as
(x) such Lien does not extend to or cover any other asset of
Borrower or any of its Subsidiaries,
(y) such Lien secures the obligation to pay the purchase
price of such asset and interest thereon and other customary
obligations relating thereto only, and
(z) the principal amount of the aggregate Indebtedness
incurred from and after the Closing Date and secured by all such
purchase money Liens (excluding Capital Leases) does not exceed
$5,000,000 in the aggregate, and
(ii) Liens consisting of Capital Leases (including any
such Capital Lease permitted by Section 12.5(f) hereof and other than any
Capital Lease outstanding on the Closing Date), upon any fixed or capital
assets now owned or hereafter acquired, incurred in any Fiscal Year and
not exceeding in aggregate notional principal amount for any Fiscal Year
the sum of (A) $7,000,000, plus (B) an amount, not to exceed $3,500,000,
determined by subtracting from $7,000,000, the amount of the aggregate
notional principal amount of Capital Leases actually acquired or incurred
by Borrower during the immediately preceding Fiscal Year.
(e) at any time, Liens covering consigned Inventory received
by Borrower as part of a consignment arrangement between Borrower and
the vendor of such Inventory so long as the most recent Borrowing Base
Certificate delivered to the Agent under Section 11.1(j) hereof prior to
such time has set forth the total dollar value of consigned Inventory of
Borrower;
(f) Liens on any property or asset, other than the Collateral,
acquired by Borrower or any Subsidiary of Borrower which are in existence on
the date of acquisition of such property or asset and, in the case of a
Person which becomes a Subsidiary of Borrower, Liens on its property or
capital stock in existence on the date such Person becomes a Subsidiary of
Borrower;
(g) Liens on AWG Equity owned or hereafter acquired by
Borrower to secure Borrower's obligations to AWG under the Supply
Agreement and the Membership Sign-Up Documents;
(h) Liens consisting of the Use Restrictions; and
(i) Liens consisting of the First Offer Rights.
12.3. INDEBTEDNESS. Create, incur, assume or suffer to exist,
contingently or otherwise, any Indebtedness, other than:
(a) Indebtedness under the Loan Documents;
(b) unsecured Current Liabilities incurred in the ordinary
course of business other than unsecured Current Liabilities for
Indebtedness for Borrowed Money or which are evidenced by bonds,
debentures, notes or other similar instruments;
(c) Indebtedness for Borrowed Money and Contingent
Obligations set forth on Schedule 12.3(c) hereto;
(d) Indebtedness (not overdue) secured by Liens permitted by
Section 12.2(d) hereof;
(e) Indebtedness under the Subordinated Note Documents not
exceeding $60,000,000 in aggregate principal amount, less any
repayments of principal or redemptions of Subordinated Notes, and any
replacement or refinancing of such Indebtedness on terms acceptable to
the Agent in its sole discretion;
(f) payments constituting Permitted Transactions;
(g) Indebtedness in respect of obligations owed to AWG by
Borrower under the Supply Agreement and the Membership Sign-Up
Documents;
(h) Priority Tax Claims, as defined and described in the Plan; and
(i) Indebtedness of Borrower existing under the employee
stock bonus plan trust, which is or will be established on behalf of
Borrower's unionized employees, as more fully described in the Disclosure
Statement.
12.4. LOANS, INVESTMENTS AND GUARANTEES. Lend or advance money
or credit to any Person, or invest in (by capital contribution, creation of
Subsidiaries or otherwise), or purchase or repurchase the stock or
Indebtedness, or all or a substantial part of the assets or properties, of
any Person, or enter into any exchange of securities with any Person, or
guarantee, assume, endorse or otherwise become responsible for (directly or
indirectly or by any instrument having the effect of assuring any Person's
payment or performance or capability) the Indebtedness, performance,
obligations, stock or dividends of any Person (each of the foregoing, an
"Investment"), or agree to do any of the foregoing, other than:
(a) endorsement of negotiable instruments for deposit or collection
in the ordinary course of business;
(b) (i) Investments in securities issued, or that are directly and
fully guaranteed or insured, by the United States Government or any
agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (ii) time deposits and certificates of
deposit having maturities of not more than six months from the date of
acquisition of (x) any Lender or (y) any other domestic commercial bank
having capital and surplus in excess of $100,000,000, the holding
company of which has outstanding commercial paper meeting the requirements
specified in clause (iv) below, (iii) repurchase agreements with a term of
not more than seven (7) days for underlying securities of the types described
in clauses (i) and (ii) above (provided that the underlying securities of the
type described in clause (i) may have maturities of more than six months from
the date of acquisition) entered into with any Lender or any other bank
meeting the qualifications specified in clause (ii) above or with securities
dealers of recognized national standing, provided that the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Institutions Examination Council Supervisory Policy Repurchase Agreements of
Depository Institutions With Securities Dealers and Others as adopted by the
Comptroller of the Currency on October 31, 1985 (the "Supervisory Policy"),
and provided, further, that possession or control of the underlying
securities is established as provided in the Supervisory Policy, and (iv)
commercial paper rated (as of the date of acquisition thereof) at least A-1
or the equivalent thereof by Standard & Poor's Corporation and P-1 or the
equivalent thereof by Moody's Investors Service, Inc. and in either case
maturing within six (6) months after the date of its acquisition;
(c) Investments representing stock or obligations issued to
Borrower or any of its Subsidiaries in settlement of claims against any
other Person by reason of a composition or readjustment of debt or a
reorganization of any debtor of Borrower or such Subsidiary;
(d) Investments representing the Indebtedness of any Person
owing as a result of the sale by Borrower or any of its Subsidiaries in the
ordinary course of business of products or services (on customary trade
terms);
(e) Investments in the stock of any present Subsidiary, but not
any additional investments therein;
(f) Guaranties in favor of the Agent or in favor of any one or
more Lenders, in each case, of all or any portion of Lender Debt;
(g) Guaranties by Parent or any Subsidiaries of the "Obligations"
(as such term is defined in the Indenture as of the Closing Date);
(h) Investments and guaranties outstanding on the Closing
Date and described on Schedule 12.4 hereto;
(i) (i) Investments in the Collection Accounts, the Lock-Box
Accounts, the Concentration Account and the Special Accounts permitted
pursuant to Section 11.17(c) hereof, so long as the same are maintained in
accordance with Sections 11.17 and 12.15 hereof and (ii) other deposit
accounts maintained by Borrower or Parent;
(j) Investments in Indebtedness for Borrowed Money arising from any
sale or disposition permitted under Section 12.5(a), (b) or (d) hereof;
(k) Investments in interest rate caps purchased by Borrower;
(l) Investments that are Permitted Transactions;
(m) Investments in the form of cash deposits to secure payments
described in Section 12.2(b)(iii); provided, that no such cash
deposit shall exceed an amount equal to 55% of the face amount of any
Letter of Credit that the Borrower is permitted to cause to be issued to
support the applicable payment, and provided, further, that the aggregate
outstanding amount of all such cash deposits shall not at any time exceed
$3,500,000;
(n) Investments consisting of (i) the purchase by Borrower of
15 shares of AWG Membership Stock and (ii) AWG members deposit
certificates, patronage refund certificates or similar types of AWG Equity
received or earned by Borrower from time to time based on Borrower's
gross purchases from AWG pursuant to the Supply Agreement or in lieu
of receiving cash rebates or refunds from AWG;
(o) Investments consisting of (i) purchases of capital
stock, in an aggregate amount not exceeding $25,000, of retail purchasing
cooperatives (including, without limitation, Farm Fresh, Inc., an
Oklahoma retail dairy cooperative ("Farm Fresh") in connection
with becoming a member of such cooperatives and (ii) additional
capital stock of such cooperatives which is received or earned by Borrower,
in an aggregate amount not exceeding $1,000,000 in the case of Farm
Fresh and $150,000 in the case of all other cooperatives, based on
Borrower's gross purchases from such cooperatives or in lieu of receiving
cash rebates or refunds from such cooperatives; provided that, in each case,
such stock is purchased, received or earned in connection with a supply
agreement or arrangement between Borrower and such cooperative which is on
terms at least as favorable to Borrower as the terms that could be
obtained by Borrower in a comparable transaction made on an arms' length
basis with another cooperative, wholesaler or supplier; and
(p) Investments in assets or properties that constitute a supermarket
business, the amount of such Investments not to exceed twenty percent (20%)
of the lesser of (i) the indicated amount of Net Capital Expenditures as
permitted under Section 12.1 hereof for the then current Fiscal Year, without
adjustment as otherwise provided in Section 12.1 hereof, or (ii) the actual
amount of Net Capital Expenditures incurred during the then current Fiscal Year.
12.5. MERGER, SALE OF ASSETS, DISSOLUTION, ETC.
Without the prior written consent of the Agent and the Required Lenders, (i)
enter into any transaction of merger or consolidation, (ii) change its
name, (iii) acquire all or a substantial portion of the assets of any Person,
or (iv) transfer, sell, assign, lease, or otherwise dispose of all or any
part of its properties or assets, or any of its notes or Receivables, or any
stock of Borrower or any of its Subsidiaries, or wind up, liquidate or
dissolve, or agree to do any of the foregoing, except:
(a) sales, not exceeding $1,000,000 in aggregate book value, in
the ordinary course of business of assets and properties of Borrower or a
Subsidiary of Borrower no longer necessary for the proper conduct of its
business;
(b) sales or other dispositions by Borrower, Guarantor or any
Subsidiary thereof of worn out or obsolete property (including motor
vehicles and inventory) in the ordinary course of business;
(c) sales of Inventory in the ordinary course of business;
(d) sales or other dispositions (including leases) of Excluded
Properties at a price with respect to each such Excluded Property
at least equal to its fair market value, as determined by the President of
Borrower in good faith.
(e) the abandonment of any assets and properties of Borrower
or any Subsidiary thereof which are no longer useful in its business and
cannot be sold;
(f) the sale of any asset (other than any Collateral) pursuant to
a transaction in which such asset is, concurrently with such sale, leased by
Borrower as lessee for use in the business of Borrower;
(g) the exchange of assets leased pursuant to Capital Leases for
other assets ("exchanged assets") to be leased pursuant to such leases (or
other leases on substantially the same terms), provided, however, that such
exchanged assets are acquired within forty-five days of the disposition of
such leased assets.
12.6. DIVIDENDS, REDEMPTIONS AND OTHER PAYMENTS.
(a) Declare or pay any distributions or dividends on any of its
shares of capital stock of any class, or purchase, redeem, cancel or acquire
any of its capital stock or capital stock of any of its Subsidiaries or any
option, warrant, or other right to acquire such capital stock, or apply or set
apart any of its assets therefor, or make any distribution (by reduction of
capital or otherwise) in respect of any such shares of capital stock or any
such option, warrant or other right, except that in any Fiscal Year of
Borrower any Subsidiary of Borrower may pay dividends to its direct parent; or
(b) make any optional prepayment or optional redemption of or
purchase or repurchase any Indebtedness for Borrowed Money or give any
notice thereof (other than (i) the Advances and the Funded Debt described
in Schedule 12.6(b) hereto, (ii) prepayments up to an aggregate of
$1,000,000 of Capitalized Lease Obligations solely in connection with the
exchange of assets leased pursuant to Capital Leases for other assets
("exchanged assets") to be leased pursuant to such leases (provided,
however, that such exchanged assets are acquired within forty-five days of
the disposition of such leased assets), (iii) prepayments, optional
redemptions, purchases or repurchases of Indebtedness for Borrowed
Money relating to assets to be purchased by Borrower, and thereafter sold
to AWG, in connection with the AWG Purchase Agreement, or in connection with
stores to be closed;
provided, however, that nothing contained in this Section 12.6 shall
prohibit any Permitted Transaction.
12.7. TRANSACTIONS WITH AFFILIATES. Except for
transactions specifically required or permitted by the terms of this Agreement,
enter into or perform any transaction, including, without limitation, the
purchase, leasing, sale or exchange of property or assets or the rendering
of any service, with any Affiliate of Parent, Borrower or any Subsidiary
thereof, except for any transaction which is in the ordinary course of its
business, and which transaction is, in the good faith determination of the
board of directors of Borrower, upon fair and reasonable terms no less
favorable to it than it could obtain in a comparable arm's length transaction
with a Person not an Affiliate of Parent, Borrower or a Subsidiary of
Borrower; provided, however, that nothing contained in this Section
12.7 shall prohibit any Permitted Transaction or any other transaction
specifically permitted under this Agreement.
12.8. MANAGEMENT FEES AND OTHER PAYMENTS. Pay, directly or
indirectly, during any Fiscal Year of Parent, any management, consulting or
similar fees to, or make any other payments of any kind to (a) Parent or (b)
in respect of employment, management, consulting, servicing or similar
services or in respect of any non-competition or similar agreement, any
officers, directors, general or limited partners of, or other management
of, or any stockholders of, Parent, Borrower or any Affiliate of Parent or
Borrower, in each case, other than any payment constituting a Permitted
Transaction.
12.9. COMPROMISE OF PLEDGED ACCOUNTS.
Compromise or adjust any of the Pledged Accounts (or extend the time for
payment thereof) or grant any discounts, allowances or credits thereon, other
than discounts of Pledged Accounts in the ordinary course of business.
12.10. NON-COMPLIANCE WITH ERISA. (a) Engage in any transaction
in connection with which a Credit Party or any of its ERISA Affiliates
could be subject to either a material civil penalty assessed pursuant to the
provisions of Section 502(i) of ERISA or a material tax imposed under the
provisions of Section 4975 of the Code;
(b) adopt an amendment to any Pension Benefit Plan requiring
the provision of security under Section 307 of ERISA or Section 401(a)(29)
of the Code;
(c) terminate any Pension Benefit Plan in a "distress
termination" under Section 4041(c) of ERISA; or
(d) fail to make payment when due of all material amounts
which, under the provisions of any Pension Benefit Plan or Multiemployer
Plan, it is required to pay as contributions thereto or, with respect to
any Pension Benefit Plan, permit to exist any "accumulated funding deficiency"
(within the meaning of Section 302 of ERISA and Section 412 of the Code).
12.11. AMENDMENTS AND MODIFICATIONS. (a) Directly
or indirectly, amend, modify, supplement, waive compliance with, seek a waiver
under, or assent to noncompliance with (i) any of the Subordinated Note
Documents or any document relating thereto, if the effect of any such
amendment, waiver, modification, supplement, or assent is to (u) increase
the interest rate or increase or add any fee or other amount payable
thereunder, (v) advance to an earlier date any payment of principal (by
prepayment or redemption or otherwise) thereunder, (w) add any covenant, make
any covenant as in effect on the Closing Date thereunder more burdensome,
more difficult to achieve or comply with or otherwise more adverse to
Borrower, (x) add any event of default or change in a manner more adverse to
Borrower any event of default as in effect on the Closing Date or (z) make
any term or provision thereof more adverse to Borrower than those in effect
on the Closing Date or (ii) any instrument, document or agreement evidencing,
creating, guaranteeing or governing any Indebtedness for Borrowed
Money permitted under Section 12.3(c) hereof or entered into in connection
therewith, other than amendments, modifications, supplements or waivers of
Capital Leases but solely to the extent that the Agent has received prior
written notice of such amendments, modifications, supplements or waivers
and such amendments, modifications, supplements or waivers are not adverse
to the Borrower.
(b) Amend, modify or supplement the charter or by-laws of
Borrower, Parent or any of Borrower's Subsidiaries, except as specifically
provided for in the Plan with regard to non-voting stock of the Borrower and
the parent.
12.12. FISCAL YEAR. Change for financial reporting purposes
hereunder its Fiscal Year from a period of fifty-two (52) or fifty-three (53)
consecutive weeks beginning on the first day following the end of the previous
Fiscal Year and ending on the Saturday on or closest to the next December 31.
12.13. CHANGE OF BUSINESS. Alter the nature of its business or
engage in any business other than the supermarket business, except
changes attendant to the Plan. No change or amendment shall occur in any of
the material supplier contracts and related arrangements of Borrower
(including without limitation the Supply Agreement and the Membership
Sign-Up Documents) which would have a Material Adverse Effect on the
financial condition or operations of Borrower; and Borrower shall not
permit there to exist any default in Borrower's obligations under such material
supplier contracts and related arrangements of Borrower (including without
limitation the Supply Agreement and the Membership Sign-Up Documents).
12.14. NO NEGATIVE PLEDGES. Except under the Subordinated Note
Documents, the Supply Agreement as in effect on the Closing Date, and the
Membership Sign-Up Documents as in effect on the Closing Date, enter into or
become subject to, directly or indirectly, including, without limitation, as
a non-party Subsidiary of a party to any agreement,
(a) any agreement prohibiting or restricting, in any manner
(including, without limitation, by way of covenant, representation or event
of default),
(i) the incurrence, creation or assumption of any
Indebtedness, or any Lien upon any property of any Credit Party other
than, in the case of an agreement for a purchase money financing (including
a Capitalized Lease Obligation), the asset subject to such financing,
(ii) the sale, disposition or pledge of any asset of any
Credit Party other than, in the case of an agreement for a purchase money
financing (including a Capitalized Lease Obligation), the asset subject to
such financing,
(iii) the incurrence or existence of any Contingent
Obligations of any Credit Party,
(iv) any investments of any Credit Party,
(v) any capital expenditures by any Credit Party,
(vi) any acquisition, merger or consolidation involving any
Credit Party,
(vii) any change in control of any Credit Party, or
(viii) any amendment or supplement to or waiver under
this Agreement or any other Loan Document or other document relating to
the Lender Debt, or
(b) which provides that any default by any Credit Party which
is not a party to such agreement of any obligation not arising under such
agreement is a default under such agreement.
12.15. COLLECTION AND CONCENTRATION ACCOUNTS; LOCK-BOX ACCOUNTS.
(a) Deposit, or cause to be deposited, into any Collection Account any funds
other than funds constituting proceeds of Inventory or Pledged Accounts,
miscellaneous income not arising from Asset Sales, and as may be specified in
a Collection Account Agreement, funds from another Collection Account at
the time of such deposit; or
(b) deposit, or cause to be deposited, into any
Lock-Box Account any funds other than funds constituting proceeds of
Pledged Accounts at the time of such deposit; or
(c) deposit, or cause to be deposited, into the
Concentration Account any funds other than funds from a Collection
Account or a Lock-Box Account; or
(d) withdraw or transfer funds from any Lock-Box
Account or Collection Account except to the Concentration Account or as
may be specified in a Collection Account Agreement other than to
(1) repay the Term Loan,
(2) prepay the Revolving Loan, or if no Revolving Loan is then
outstanding, provide Letter of Credit Cash Collateral, or
(3) to the extent not required to be applied under (1) above,
the Concentration Account (to the extent representing proceeds of Collateral)
and thereafter as otherwise determined by Borrower; or
(e) make any change in its instructions to account debtors
regarding payments to be made to any Lock-Box Account; or
(f) suffer or permit, except with the prior written
consent of the Agent, any Collection Account, Lock-Box Account, or the
Concentration Account to be closed or terminated, or the Collection
Account Agreement, Lock-Box Agreement, or Concentration Account
Agreement relating thereto, as the case may be, to be terminated or no
longer in full force and effect.
12.16. TAX SHARING AGREEMENTS. Enter into any tax
sharing agreement pursuant to which (a) Borrower's provision for taxes would
be greater than such provision would be in the absence of such agreement or
(b) Borrower would not be promptly reimbursed in the amount of any refunds
received by the consolidated group which are attributable to Borrower.
12.17. COVENANT OF PARENT. Parent will not engage in any type
of business activity other than (in each case, subject to any restriction
contained herein):
(a) maintenance of its corporate existence and compliance with
applicable law;
(b) the issuance of equity securities to any Person;
(c) the issuance of debt securities unsecured by any assets of Parent;
(d) any guarantee of any obligation of Borrower or any of its
Subsidiaries not otherwise prohibited by this Agreement, including,
without limitation, any guarantee of the obligations under this Agreement
and the Indenture;
(e) the registration of any of its securities under the Securities
Act, the Securities Exchange Act or any state or local securities law;
(f) the listing of any securities with any securities exchange,
any interdealer quotation system or the National Association of Securities
Dealers, Inc. or its successor;
(g) the ownership and disposition of the common stock of Borrower;
(h) accounting, legal, public relations, investor relations,
financial or management activities (including the employment of
employees, counsel, accountants, consultants, bankers, advisors or other
professionals) in connection with, or which are reasonably incidental to,
any of the foregoing activities;
(i) entering into, performing its obligations and exercising its
rights under this Agreement and the Plan; or
(j) activities in connection with, required by, or reasonably
incidental to, any of the foregoing.
12.18. MAXIMUM RETURNED INVENTORY. The Borrower
shall not suffer or permit the Inventory of the Borrower and its
subsidiaries that Borrower or its Subsidiaries returns to AWG, for
whatever reason (other than manufacturer recalls), to exceed $350,000,
in the aggregate, during any calendar month.
12.19. THIRD PARTY PAYORS. Borrower shall not suffer or
permit any certificate of need, provider number or contract listed on Schedule
14.16 to be amended, altered, suspended, terminated or made provisional, in any
material way, without giving immediate written notice to Agent. Borrower shall
immediately notify Agent in writing of any new provider number or any
execution by Borrower of any contract with any Third Party Payor. Borrower
shall give immediate written notice to Agent if any existing certificate of
need is amended, altered, suspended, or made provisional, or any new
certificate of need or other governmental consent is applied for by Borrower,
if such amendment, alteration, suspension, or being made provisional, or such
new certificate of need or other governmental consent, would have a material
effect on Borrower or Agent hereafter requests that it be notified of such
circumstances.
SECTION 13. DEFAULTS AND REMEDIES.
13.1. EVENTS OF DEFAULT. If any one or more of the
following events (herein called "Events of Default") shall occur for any reason
whatsoever (and whether such occurrence shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) default shall be made in the due and punctual payment of
the principal of any of the Revolving Loan, the Term Loan or the
reimbursement of any drawings under Letters of Credit, when and as the
same shall become due and payable whether pursuant to Section 2 hereof,
at maturity, by acceleration or otherwise (other than any failure to
reimburse a Letter of Credit drawing to the extent that such failure is
caused by the failure of any Lender to fund its pro rata share of a Advance
in respect of which Borrower shall have satisfied all conditions to the
making of such Advance (other than notice requirements and the delivery
of a Borrower's Certificate)); or
(b) default shall be made in the due and punctual payment of
any amount of interest on the Revolving Loan, the Term Loan or other
Lender Debt or of any fee owing to any Lender or the Agent pursuant to
any of the Loan Documents, when and as such amount of interest or fee
shall become due and payable and such default shall continue unremedied
for five (5) Business Days; or
(c) default shall be made in the due and punctual payment of
any expense owing to any Lender or the Agent pursuant to any of the Loan
Documents, when and as such expense shall become due and payable or
default shall be made by any Credit Party in the performance or
observance of, or shall occur under, any covenant, agreement or provision
(other than as described in clause (a) or (b) above) contained in this
Agreement or any other Loan Document or in any instrument or document
evidencing or creating any obligation, guaranty or Lien in favor of the
Agent or delivered to the Lenders or the Agent in connection with or
pursuant to this Agreement or any Lender Debt, and, except in the case of
the agreements and covenants contained in Sections 11.1(a), 11.1(b),
11.1(c), 11.1(g)(i), 11.1(j), 11.1(k), 11.1(l), 11.6, 11.7, 11.8,
11.14, 11.16, 11.17 and Section 12 (as to each of which no notice or grace
period, except as otherwise set forth in this Section 13.1, shall apply),
continuance of such default for a period of thirty (30) days after there has
been given Written Notice of such default to any of the Credit Parties by
the Agent, or if this Agreement or any other Loan Document or any such other
instrument or document shall terminate, be terminable or be terminated or
become void or unenforceable for any reason whatsoever without the
written consent of the Agent; or
(d) (i) one or more defaults shall occur in the payment of any
principal, interest or premium with respect to any Indebtedness for
Borrowed Money or any obligation which is the substantive equivalent of
Indebtedness for Borrowed Money (including, without limitation,
obligations under conditional sales contracts, finance leases and the like
but excluding trade payables incurred in the ordinary course of business)
of which any Credit Party is principal, guarantor, or other surety,
outstanding in a principal amount of at least $1,000,000 in the aggregate,
or (ii) one or more defaults shall occur under any agreement or instrument
under or pursuant to which any such Indebtedness for Borrowed Money or
obligation may have been issued, evidenced, created, assumed, guaranteed
or secured by any Credit Party and, in the case of either clause (i) or (ii)
of this Subsection 13.1(d), such default shall continue for more than the
period of grace, if any, therein specified or any holder of any such
Indebtedness for Borrowed Money (or any agent or trustee therefor) shall
be entitled to take any action to realize upon any Lien on any property
securing same, or (iii) any such Indebtedness for Borrowed Money or
obligation shall be declared due and payable prior to the stated maturity
thereof; or
(e) any representation, warranty or other statement of fact
given herein or in any writing, certificate, report or statement at any time
furnished by or on behalf of any Credit Party to any Lender or the Agent
pursuant to or in connection with this Agreement (including, without
limitation, any Borrower's Certificate) or any other Loan Document, shall
be false or misleading in any material respect when given and shall remain
false and misleading in any material respect; or
(f) any Credit Party shall (i) be unable to pay its debts
generally as they become due or is generally not paying its debts as they
become due; (ii) file a petition to take advantage of any insolvency act;
(iii) make an assignment for the benefit of its creditors; (iv) commence a
proceeding for the appointment of a receiver, trustee, liquidator or
conservator of itself or of a whole or any substantial part of its property;
(v) file a petition or answer seeking reorganization or arrangement or
similar relief under the Federal Bankruptcy Code or any other applicable
law or statute of the United States of America or any state; or
vi) by appropriate proceedings of the board of directors of any Credit
Party or other governing body, authorize the filing of any such petition,
making of such assignment or commencement of such a proceeding; or
(g) a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator or
conservator of any Credit Party or of the whole or any substantial part of
its properties, or approve a petition filed against any Credit Party seeking
reorganization or arrangement or similar relief under the Federal
Bankruptcy Code or any other applicable law or statute of the United
States of America or any state; or if, under the provisions of any other law
for the relief or aid of debtors, a court of competent jurisdiction shall
assume custody or control of any Credit Party or of the whole or any
substantial part of its properties; or if there is commenced against any
Credit Party any proceeding for any of the foregoing relief and such
proceeding or petition remains undismissed for a period of sixty (60) days;
or if any Credit Party by any act indicates its consent to or approval of any
such proceeding or petition; or
(h) (i) a final judgment shall be rendered against any
Credit Party which, with other outstanding final judgments against such
Credit Party, to the extent not covered by insurance, by itself or together
with all other such judgments, exceeds in the aggregate $1,000,000 and if,
within thirty (30) days after entry thereof, such judgment shall not have
been discharged or execution thereof stayed pending appeal, or if, within
thirty (30) days after the expiration of any such stay, such judgment shall
not have been discharged; or (ii) any of the assets of a Credit Party or any
Subsidiary thereof shall be attached, seized, levied upon or subject to an
injunction, execution, writ or distress warrant and shall remain unstayed or
undismissed for a period of thirty (30) days, which by itself or together
with all other attachments, seizures, levies, injunctions, executions, writs
or distress warrants against properties of such Credit Party or Subsidiary
remaining unstayed or undismissed for a period of thirty (30) days is for
an amount in excess of $1,000,000; or
(i) (i) a Reportable Event shall have occurred with respect
to a Pension Benefit Plan;
(ii) any Credit Party or any ERISA Affiliate thereof, or
an administrator of any Pension Benefit Plan, shall have filed a notice of
intent to terminate a Pension Benefit Plan in a "distress termination" under
the provisions of Section 4041(c) of ERISA;
(iii) any Credit Party or any ERISA Affiliate thereof, or
an administrator of a Pension Benefit Plan shall have received a notice that
the PBGC has instituted proceedings to terminate (or appoint a trustee to
administer) a Pension Benefit Plan;
(iv) any other event or condition exists which, in the
reasonable opinion of the Required Lenders, constitutes grounds under the
provisions of Section 4042 of ERISA for the termination of (or the
appointment of a trustee to administer) any Pension Benefit Plan by the
PBGC;
(v) any Credit Party or any ERISA Affiliate has incurred a
liability under the provisions of Section 4063, 4064 or 4201 of ERISA;
(vi) any Person shall engage in any transaction in
connection with which any Credit Party will, in the reasonable opinion of
the Required Lenders, be subject to either a civil penalty assessed pursuant
to the provisions of Section 502(i) of ERISA or a tax imposed under the
provisions of Section 4975 of the Code; or
(vii) any Credit Party or any ERISA Affiliate fails to pay
the full amount of any installment due under Section 412(m) of the Code
or any "accumulated funding deficiency" (within the meaning of Section
302 of ERISA and Section 412 of the Code) shall exist with respect to any
Pension Benefit Plan;
and in each case in clauses (i) through (vii) above, in the reasonable
opinion of the Required Lenders, such event or condition, together with all
other such events or conditions, if any, will subject a Credit Party to any
tax, penalty or other liability which, in the aggregate, after giving effect
to any available indemnity or bond, will be in excess of $1,000,000;
(j) a Change of Control shall occur;
(k) a default by any Credit Party under any provision of any
Lease which, together with other Leases in default, involve annual base
rent of $600,000 or more, shall occur and continue beyond any applicable
grace period which would permit the lessor thereunder to (i) terminate the
Lease or (ii) exercise any other rights under such Lease which would have
an adverse effect on the Lenders' interest in any Collateral located on the
premises in respect of such Lease;
(l) a materially adverse change, as determined by the Agent in
good faith, occurs in the financial condition of either Borrower or Parent;
then, and in any such event and at any time thereafter, if such or any
other Event of Default shall then be continuing:
(A) either or both of the following actions may
be taken: (i) the Agent shall, at the direction of all Lenders, (x) declare
any obligation to lend hereunder terminated, and/or (y) declare any
obligation to issue Letters of Credit hereunder terminated, whereupon such
obligation to make further Advances or issue Letters of Credit hereunder
shall terminate immediately and (ii) the Agent may, at its option, or, the
Agent shall, upon the direction of the Required Lenders, declare any or all
of the Lender Debt to be due and payable, and the same shall forthwith
become due and payable without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived, anything contained
herein or in any instrument evidencing the Lender Debt to the contrary
notwithstanding; provided, however, that notwithstanding the above, if
there shall occur an Event of Default under clause (f) (other than clause (f)
(i)) or (g) above, then the obligation of the Lenders to lend and issue
Letters of Credit hereunder shall automatically terminate and any and all
of the Lender Debt shall be immediately due and payable without any
action by the Agent or any Lender;
(B) the Agent, at the direction of all Lenders,
shall have and may exercise all rights and remedies of a secured party
under the UCC in effect in the State of New York at such time, whether or
not applicable to the affected Collateral, and otherwise, including, without
limitation, the right to foreclose the Liens granted herein or in any of the
Security Documents by any available judicial procedure and/or to take
possession of any or all of the Collateral, the other security for the Lender
Debt and the books and records relating thereto, with or without judicial
process; for the purposes of the preceding sentence, the Agent may enter
upon any or all of the premises where any of the Collateral, such other
security or books or records may be situated and take possession and
remove the same therefrom; and
(C) the Agent, at the direction of all Lenders,
shall have the right, in its sole discretion, to determine which rights, Liens
or remedies it shall at any time pursue, relinquish, subordinate, modify or
take any other action with respect thereto, without in any way modifying
or affecting any of them or any of the Lenders' rights hereunder; and any
moneys, deposits, Pledged Accounts, balances or other property which
may come into any Lender's or the Agent's hands at any time or in any
manner, may be retained by such Lender or the Agent and applied to any
of the Indebtedness of the Credit Parties to the Agent and the Lenders
hereunder.
13.2. SUITS FOR ENFORCEMENT. In case any one or more
Events of Default shall occur and be continuing, the Agent, at the direction
of all Lenders, on behalf of the Agent and the Lenders may proceed to
protect and enforce their rights or remedies either by suit in equity or by
action at law, or both, whether for the specific performance of any covenant,
agreement or other provision contained herein or in any document or instrument
delivered in connection with or pursuant to this Agreement or any other Loan
Document, or to enforce the payment of the Lender Debt or any other legal or
equitable right or remedy.
13.3. RIGHTS AND REMEDIES CUMULATIVE. No right or
remedy herein conferred upon the Lenders or the Agent is intended to be
exclusive of any other right or remedy contained herein or in any instrument or
document delivered in connection with or pursuant to this Agreement or any
other Loan Document, and every such right or remedy shall be cumulative
and shall be in addition to every other such right or remedy contained herein
and therein or now or hereafter existing at law or in equity or by statute, or
otherwise.
13.4. RIGHTS AND REMEDIES NOT WAIVED. No course of
dealing between any of the Credit Parties and any Lender or the Agent or any
failure or delay on the part of any Lender or the Agent in exercising any
rights or remedies hereunder shall operate as a waiver of any rights or
remedies of the Lenders or the Agent and no single or partial exercise of any
rights or remedies hereunder shall operate as a waiver or preclude the
exercise of any other rights or remedies hereunder or of the same right or
remedy on a future occasion.
13.5. APPLICATION OF PROCEEDS. After the occurrence of
an Event of Default and acceleration of the Lender Debt, the proceeds of the
Collateral, other collections received from the Credit Parties and proceeds of
property of Persons other than the Credit Parties securing the Lender Debt and
collections from each Guaranty shall be applied by the Agent to payment of the
Lender Debt in the following order, unless a court of competent jurisdiction
shall otherwise direct:
(a) FIRST, to payment of all costs and expenses of the
Agent and the Lenders incurred in connection with the preservation,
collection and enforcement of the Lender Debt or any Guaranties, or of
any of the Liens granted to the Agent pursuant to the Security Documents
or otherwise, including, without limitation, any amounts advanced by the
Agent or the Lenders to protect or preserve the Collateral;
(b) SECOND, to payment of that portion of the Lender
Debt constituting accrued and unpaid interest and fees and indemnities
payable under Sections 3, to the extent applicable to Term Loan Advances,
Section 4 hereof, ratably amongst the Agent and the Lenders in accordance
with the proportion which the accrued interest and fees and indemnities
payable under Section 3 and, to the extent applicable to Term Loan
Advances, Section 4 hereof constituting the Lender Debt owing to the
Agent and each such Lender at such time bears to the aggregate amount of
accrued interest and fees and indemnities payable under Section 3 and, to
the extent applicable to Term Loan Advances, Section 4 hereof constituting
the Lender Debt owing to the Agent and all of the Lenders at such time until
such interest, fees and indemnities shall be paid in full;
(c) THIRD, to payment of that portion of the Lender
Debt constituting accrued and unpaid interest and fees and indemnities
payable under Section 2, and, to the extent applicable to Revolving Credit
Advances, Section 4, hereof, ratably amongst the Agent and the Lenders in
accordance with the proportion which the accrued interest and fees and
indemnities payable under Section 2, to the extent applicable to Revolving
Credit Advances, Section 4 hereof constituting the Lender Debt owing to
the Agent and each such Lender at such time bears to the aggregate
amount of accrued interest and fees and indemnities payable under
Section 2, to the extent applicable to Revolving Credit Advances,
Section 4 hereof constituting the Lender Debt owing to the Agent and all
of the Lenders at such time until such interest, fees and indemnities shall
be paid in full;
(d) FOURTH, to each Issuing Lender to reimburse the
Issuing Lender for that portion of any payments made by it with respect to
Letters of Credit for which a Lender, as a participant in such Letter of
Credit, failed to pay its pro rata share thereof as required pursuant to
Section 15.18 hereof;
(e) FIFTH, to payment of the principal of the Term
Loan Advances, ratably amongst the Lenders in accordance with the
proportion which the principal amount of the Term Loan Advances owing
to each such Lender bears to the aggregate principal amount of the Term
Loan Advances owing to all of the Lenders until such principal of the
Term Loan Advances shall be paid in full;
(f) SIXTH, to payment of the principal of the
Revolving Credit Advances (excluding the aggregate undrawn amount of
any then outstanding Letters of Credit), ratably amongst the Lenders in
accordance with the proportion which the principal amount of the
Revolving Credit Advances owing to each such Lender bears to the
aggregate principal amount of the Revolving Credit Advances owing to
each such Lender bears to the aggregate principal amount of the Revolving
Credit Advances (excluding the aggregate undrawn amount of any then
outstanding Letters of Credit) owing to all of the Lenders until such
principal of the Revolving Credit Advances shall be paid in full;
(g) SEVENTH, to the extent, with respect to Letters of
Credit, that the collateral, if any, held by the Agent as security for the
Letters of Credit outstanding at the time of distribution hereunder is
insufficient, to the Agent to be held by the Agent as additional collateral
therefor;
(h) EIGHTH, to the payment of all other Lender Debt,
ratably amongst the Lenders in accordance with the proportion which the
amount of such other Lender Debt owing to each such Lender bears to the
aggregate principal amount of such other Lender Debt owing to all of the
Lenders until such other Lender Debt shall be paid in full; and
(i) NINTH, the balance, if any, after all of the Lender
Debt has been satisfied, shall, except as otherwise provided in the Security
Documents, be deposited by the Agent in an operating account of Borrower
with the Agent designated by Borrower, or paid over to such other Person or
Persons as may be required by law.
The Credit Parties acknowledge and agree that they shall remain
liable to the extent of any deficiency between the amount of the proceeds of
the Collateral and collections under the Guaranties and the aggregate amount
of the sums referred to in the first through sixth clauses above.
13.6 INVENTORY COUNTING AND APPRAISAL. After the
occurrence of a Default or an Event of Default, the Agent has the right to
engage a third party, acceptable to the Agent in its sole discretion, and
at Borrower's expense, to (a) provide directly to the Agent and the Lenders
sampling counts of Borrower's Inventory at times acceptable to the Agent and the
Lenders, and (b) provide directly to the Agent and the Lenders appraisals of the
Borrower's Inventory at times acceptable to the Agent and the Lenders.
SECTION 14. REPRESENTATIONS AND WARRANTIES.
Each of Parent and Borrower hereby represents and warrants as
follows (which representations and warranties shall survive the execution and
delivery of this Agreement and shall be deemed to be incorporated in each
officer's certificate submitted to the Agent pursuant to Section 9.1 hereof,
and shall be deemed repeated and confirmed with respect to, and as of
the date of, each borrowing and each issuance of a Letter of Credit hereunder,
provided that any representation or warranty which is made as of a specified
date shall be deemed repeated as of such date):
14.1. CORPORATE STATUS. (a) Each Credit Party is a duly
organized and validly existing corporation in good standing under the laws
of the state of its incorporation with perpetual corporate existence,
and has the corporate power and authority to own its properties and to
transact the business in which it is engaged or presently proposes to engage.
(b) Each Credit Party is qualified as a foreign corporation and
in good standing in each other jurisdiction in which it owns or leases
property of a nature, or transacts business of a type, that would make such
qualification necessary, except where the failure to so qualify could not
reasonably be expected to have a Material Adverse Effect.
(c) The capital stock of each Credit Party is owned as set forth
on Schedule 14.1 hereto (which shall be updated from time to time upon the
formation of any new Subsidiary of Borrower and delivered to the Agent and each
Lender), which Schedule 14.1 correctly sets forth all Liens encumbering the
equity interests of Parent in the capital stock of Borrower.
(d) None of the Credit Parties has any Subsidiaries except as
set forth in Schedule 14.1 hereto (which shall be updated from time to time
upon the formation of any new Subsidiary of Borrower and delivered to
the Agent and each Lender), which Schedule 14.1 correctly sets forth the name
of each such Subsidiary, its jurisdiction of incorporation and a statement of
the outstanding capitalization of each such Subsidiary as of the date of
delivery of such Schedule 14.1.
14.2. POWER AND AUTHORITY. Each of the Credit Parties
has the corporate power and authority to execute, deliver and perform the terms
and provisions of this Agreement and the other Loan Documents, in each case, to
which it is a party, and all instruments and documents delivered by it pursuant
thereto and hereto and each of the Credit Parties has duly taken or caused to
be duly taken all necessary corporate action (including, without
limitation, the obtaining of any consent of stockholders required by law or its
certificate of incorporation or bylaw), to authorize the execution, delivery
and performance of this Agreement and each other Loan Document, in each case, to
which it is a party, and the instruments and documents delivered by it pursuant
thereto and hereto. Each of this Agreement and the other Loan Documents, and
each of the other instruments and documents executed and delivered by any of
the Credit Parties, pursuant hereto and thereto to which it is a party
constitute a legal, valid and binding obligation of such Person, and is
enforceable in accordance with its terms.
14.3. NO VIOLATION OF AGREEMENTS. None of the Credit
Parties is in violation of any provision of its certificate or articles of
incorporation, as the case may be, or its bylaws or is in default under any
lease, indenture, mortgage, deed of trust, agreement or other instrument, in any
case, involving total payments to or total payments by, Borrower or Parent of
$1,000,000 or more, to which any of them is a party or by which any of them
may be bound. Neither the execution and delivery of this Agreement, the
other Loan Documents or any of the instruments and documents to be delivered
pursuant hereto or thereto, the consummation of the transactions herein and
therein contemplated, compliance with the provisions hereof or thereof, nor
the execution, delivery and performance by any Credit Party of this
Agreement, the other Loan Documents or any of such instruments or documents,
nor compliance with the provisions hereof or thereof, will violate any
provision of the certificate of incorporation or bylaws of any Credit Party
or any law or regulation, or any order or decree of any court or governmental
instrumentality, or will (a) conflict with, or result in the breach of,
or constitute a default or permit termination under, any lease, indenture,
mortgage, deed of trust, agreement or other instrument, in any case,
involving total payments to or total payments by Borrower of $1,000,000 or
more, to which any Credit Party is a party or by which any of them or their
respective properties may be bound, or (b) except as contemplated under this
Agreement or under any other Loan Document, result in the creation or
imposition of any Lien upon any property of any Credit Party.
14.4. NO LITIGATION. (a) Except for the Cases and as set
forth in Schedule 14.4 hereto, there are no actions, suits or proceedings
pending or, to the best knowledge of Borrower, threatened against any of
the Credit Parties or any of their respective Subsidiaries before any court,
arbitrator or governmental or administrative body or agency which challenge
the validity or propriety of the transactions contemplated under this
Agreement, the other Loan Documents or the documents, instruments and
agreements executed or delivered in connection herewith, therewith or
related thereto, or which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.
(b) No Credit Party or any Subsidiary thereof is in default in
any material respect under any applicable statute, rule, order, decree or
regulation of any court, arbitrator or governmental body or agency having
jurisdiction over such Credit Party or Subsidiary.
(c) No judgment, order, injunction or other similar restraint
with respect to any Credit Party or any Subsidiary thereof exists which
prohibits any of the other transactions contemplated hereby or in
connection herewith.
14.5. GOOD TITLE TO PROPERTIES. (a) Each Credit Party
and its Subsidiaries has good and marketable title to all the material
properties and assets reflected on its balance sheet and valid leasehold
interests in the property it leases, including, without limitation, the
Collateral, subject to no Liens, except such as would be permitted under
Section 12.2 of this Agreement. All real property owned by or leased to any
Credit Party or any Subsidiary thereof is described on Schedule 14.5(a)
annexed hereto. Notwithstanding the foregoing, this Section 14.5
specifically excludes any representation or warranty with respect
to Excluded Properties.
(b) Each Lease described on Schedule 14.5(a) hereto is in full
force and effect, is valid and binding and is enforceable in accordance with
its terms. There exists no default by any Credit Party, or to the
best knowledge of Borrower by any other Person, under any provision of any Lease
which would permit the lessor thereunder to terminate the Lease or to
exercise any other rights under such Lease which would have an adverse effect
on the Lenders' interest in any Collateral located on the premises in respect
of any Lease.
(c) No payment due on any Lease described on Schedule
14.5(a) is more than thirty (30) days past due, except for those Leases
described on Schedule 14.5(c) annexed hereto and except for contested
rental payments not required to be paid under the Plan.
14.6. FINANCIAL STATEMENTS AND CONDITION. (a)
The audited financial statements of Parent and its Subsidiaries for the
year ended December 30, 1995, present fairly in accordance with GAAP (i) the
financial position of Borrower as of the date of such financial statements
and (ii) the results of operations of Borrower for such period. Borrower had no
direct or indirect contingent liabilities as of the date of such financial
statements which are not reserved for therein or which in accordance with
GAAP would have to be included in footnotes thereto, such financial
statements have been prepared in accordance with GAAP applied on a basis
consistently maintained throughout the period involved (subject to normal
year end adjustments), and there has been no material adverse change in the
business, operations, liabilities, assets, properties, prospects or condition
(financial or otherwise) of Borrower since December 31, 1995. There has been
no material adverse change in the business, operations, liabilities, assets,
properties, prospects or condition (financial or otherwise) of any
Credit Party since June 15, 1996.
(b) The Agent has been furnished projections of the future
performance of Borrower and its Subsidiaries. The projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by Borrower to be reasonable at the time
made, it being recognized by the Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the
period or periods covered by such projections may differ from the projected
results. No fact is known to any Credit Party which could reasonably be
expected to have a Material Adverse Effect, that has not been set forth in
the financial statements referred to in this Section 14.6 or disclosed herein
or otherwise disclosed to the Agent in writing prior to the most recent date
on which the representation contained in this Section 14.6 is made or repeated.
(c) The budget dated as of May 8, 1996, a copy of which is
attached hereto as Exhibit 14.6(c), is the budget of the financial condition
and results of operations of Parent and its Subsidiaries for the Fiscal Year
ending December 28, 1996, required to be delivered pursuant to Section
11.1(l).
14.7. TRADEMARKS, PATENTS, ETC. Each of the Credit
Parties possesses all the trademarks, trade names, copyrights, patents,
licenses or rights in any thereof adequate for the conduct of its business,
without conflict with the rights of others.
14.8. TAX LIABILITY. Each of the Credit Parties and their
respective Subsidiaries has filed all tax returns which are required to be
filed, and, except as otherwise permitted by Section 11.2 hereof, has paid
all taxes which have become due pursuant to such returns or pursuant to any
assessment received by it.
14.9. GOVERNMENTAL ACTION. No action of, or filing
with, any governmental or public body or authority (other than normal reporting
requirements or filing as to Collateral under the provisions of Section 7
hereof) is required to authorize, or is otherwise required in connection
with, the execution, delivery or performance of this Agreement, the Security
Documents, the Guaranties, the Notes, the other Loan Documents, or any of the
instruments or documents to be delivered pursuant hereto or thereto, except such
as have been made or will be made as contemplated by such agreements.
14.10. DISCLOSURE. Neither the Schedules hereto, nor the
financial statements referred to in Section 14.6 hereof, nor the certificates,
statements, reports or other documents furnished to any Lender or the Agent
by or on behalf of any of the Credit Parties in connection herewith or
in connection with any transaction contemplated hereby, nor this Agreement or
any other Loan Document, at the time furnished, contained any untrue statement
of a material fact or omitted to state any material fact (known to any such
Person in the case of any document not furnished by it) necessary in order to
make the statements contained herein or therein not misleading in light of
the circumstances in which the same were made.
14.11. REGULATION U. None of the Credit Parties or any of
their respective Subsidiaries owns any "margin stock" as such term is defined
in Regulation U, as amended (12 C.F.R. Part 221), of the Board. The proceeds
of the borrowings made hereunder will be used only for the purposes
set forth in Section 10 hereof. None of the proceeds will be used, directly
or indirectly, for the purpose of purchasing or carrying any margin stock or
for the purpose of reducing or retiring any Indebtedness which was originally
incurred to purchase or carry margin stock or for any other purpose which might
constitute the Revolving Loan under this Agreement a "purpose credit" within the
meaning of said Regulation U or Regulation X (12 C.F.R. Part 224) of the
Board. None of the Credit Parties or any of their respective Subsidiaries or
any agent acting in its behalf has taken or will take any action which might
cause this Agreement or any of the documents or instruments delivered
pursuant hereto to violate any regulation of the Board or to violate the
Securities Exchange Act or any applicable state securities laws.
14.12. INVESTMENT COMPANY. None of the Credit Parties
or any of their respective Subsidiaries is an "investment company," or an
"Affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act
of 1940, as amended (15 U.S.C. 80a-1, et seq.). None of the transactions
contemplated by this Agreement, the other Loan Documents or the Subordinated
Note Documents will violate such Act.
14.13. EMPLOYEE BENEFIT PLANS. (a) Except as set forth
on Schedule 14.13(a) hereto, no Reportable Event has occurred with respect to
any Pension Benefit Plan.
(b) No Credit Party has engaged in, or has any knowledge of,
any non-exempt prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) with respect to any Employee Plan.
(c) All of the Employee Plans comply currently both as to form
(to the extent required by Section 401(b) of the Code) and operation, in all
material respects, with their terms (to the extent consistent with the
currently applicable provisions of the Code) and with the provisions of
ERISA and the Code, and all other applicable laws, rules and regulations. A
favorable determination as to the qualification under Section 401(a) of the
Code has been made by the Internal Revenue Service with respect to each Pension
Benefit Plan and, to the best knowledge of each of the Credit Parties, nothing
has occurred since the date of such determination that would adversely affect
such qualification.
(d) The amount for which the Credit Parties or any of their
respective ERISA Affiliates would be liable pursuant to the provisions of
Sections 4062, 4063 or 4064 of ERISA if each Pension Benefit Plan were
terminated as described therein could not reasonably be expected to have a
Material Adverse Effect.
(e) Except as set forth on Schedule 14.13(e) hereto, none of the
Credit Parties nor any of their respective ERISA Affiliates is now, or has been
during the preceding five years, a contributing employer to a Multiemployer
Plan. None of the Credit Parties nor any of their respective ERISA
Affiliates has:
(i) ceased operations at a facility so as to become subject to the
provisions of Section 4062(e) of ERISA,
(ii) withdrawn as a substantial employer so as to become subject
to the provisions of Section 4063 of ERISA,
(iii) ceased making contributions to any Pension Benefit
Plan subject to the provisions of Section 4064(a) of ERISA to
which any of the Credit Parties or any of their respective ERISA
Affiliates made contributions,
(iv) incurred or caused to occur a "complete
withdrawal" (within the meaning of Section 4203 of ERISA) or a
"partial withdrawal" (within the meaning of Section 4205 of
ERISA) from a Multiemployer Plan so as to incur withdrawal
liability under Section 4201 of ERISA (without regard to
subsequent reduction or waiver of such liability under Sections
4207 or 4208 of ERISA) which could reasonably be expected to
have a Material Adverse Effect, or
(v) been a party to any transaction or agreement under
which the provisions of Section 4204 of ERISA were applicable
and which could reasonably be expected to result in liability for
any Credit Party.
(f) The potential withdrawal liability to the Multiemployer
Plans, in the aggregate, (i) at the Closing Date does not exceed
$6,000,000 based on the most recent estimate of such liability provided to
the Credit Parties by each such Plan and (ii) at any time thereafter, will
not exceed an amount that would have a Material Adverse Effect if imposed.
(g) (i) No notice of intent to terminate a Pension Benefit Plan
under Section 4041(c) of ERISA has been filed by any of the Credit Parties or
any of their respective ERISA Affiliates, (ii) no Pension Benefit
Plan been terminated, pursuant to the provisions of Section 4041(e) of ERISA
and (iii) no Credit Party has any outstanding liability as a result of any
other termination of a Pension Benefit Plan subject to Title IV of ERISA
which could reasonably be expected to have a Material Adverse Effect.
(h) The PBGC has not instituted proceedings to terminate (or
appoint a trustee to administer) a Pension Benefit Plan, and no
event has occurred or condition exists which could reasonably be expected to
constitute grounds under the provisions of Section 4042 of ERISA for the
termination of (or the appointment of a trustee to administer) any such Plan.
(i) None of the Credit Parties has any reason to believe that,
with respect to each Pension Benefit Plan that is subject to the provisions
of Title I, Subtitle B, Part 3 of ERISA, the funding method used in
connection with such Plan is not acceptable under ERISA, and the actuarial
assumptions and methods used in connection with funding such Pension Benefit
Plan are not reasonable. No such Pension Benefit Plan has incurred any
"accumulated funding deficiency" (as defined in Section 412 of the Code),
whether or not waived.
(j) There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of any of the Credit Parties,
which could reasonably be expected to be asserted, against any Employee Plan
maintained for employees or the assets of any such Employee Plan. No civil or
criminal action brought pursuant to the provisions of Title I, Subtitle B,
Part 5 of ERISA is pending or, to the best knowledge of any Credit Party,
threatened against any fiduciary or any Employee Plan.
14.14. PERMITS, ETC. (a) Except as set forth in Schedule
14.14(a) hereto, each Credit Party and each Subsidiary thereof possesses all
permits, licenses, approvals and consents of Federal, state and local
governments and regulatory authorities required to conduct properly its
business as presently conducted and proposed to be conducted, except to the
extent failure to have any such permit, license, approval or consent could
not be reasonably be expected to have a Material Adverse Effect.
(b) Each such permit, license, approval and consent is and will
be in full force and effect, and no event has occurred which permits (or with
the passage of time would permit) the revocation or termination of
any such permit, license, approval or consent or the imposition of any
restriction thereon of such nature as may materially limit the operation of
the business covered thereby.
(c) All approvals, applications, filings, registrations, consents
or other actions required of any local, state or Federal authority to enable
each Credit Party and the Subsidiaries thereof to exploit any such
permit, license, approval or consent has been obtained or made.
(d) No Credit Party nor any Subsidiary of any Credit Party (i)
is in violation of any duty or obligation required by law or any rule or
regulation applicable to the operation of any of its businesses, which
violation could reasonably be expected to have a Material Adverse Effect, or
(ii) has received any notice from the granting body or any other governmental
authority with respect to any material breach of any covenant under, or any
material default with respect to, any such permit, license, approval or consent.
(e) Before and upon giving effect to this Agreement, the Notes
and the other Loan Documents, no material default shall have occurred and be
continuing under any such permit, license, approval or consent.
(f) All consents and approvals of, filings and registrations
with, and all other actions in respect of, all governmental agencies,
authorities or instrumentalities required to maintain any such permit, license,
approval or consent in full force and effect prior to the scheduled date of
expiration thereof has been, or, prior to the time when required, will have
been, obtained, given, filed or taken and are or will be in full force and
effect.
(g) There is not pending or, to the best knowledge of any
Credit Party or Subsidiary thereof, threatened, any action to revoke, cancel,
suspend, modify or refuse to renew any such permit, license, approval or
consent and each business covered by each such permit, license, approval
or consent is being operated in compliance with such permit, license, approval
or consent.
(h) There is not now issued or outstanding or, to the best
knowledge of any Credit Party or Subsidiary thereof, threatened any notice of
any hearing, violation or complaint against such Credit Party or
Subsidiary thereof with respect to any such permit, license, approval or
consent and no Credit Party or Subsidiary thereof has any knowledge that any
Person intends to contest the renewal of any such permit, license, approval
or consent.
14.15. ENVIRONMENTAL STATUS. (a) Except as described
on Schedule 14.15 hereto, none of the Credit Parties or any of their respective
Subsidiaries is in violation of any applicable Environmental Law, nor are any
of the Credit Parties or any of their respective Subsidiaries under
investigation or under review by any governmental agency or authority with
respect to compliance therewith or with respect to the generation, use,
treatment, storage or Release of any Hazardous Material in any case, except
as to any such violation, investigation or review existing as of the Closing
Date, which could reasonably be expected to have a Material Adverse Effect,
involve criminal penalties or could expose the Agent or any Lender to civil
or criminal penalties.
(b) None of the Credit Parties nor any of their respective
Subsidiaries has any liability or contingent or potential liability in
connection with the past generation, use, treatment, storage, or Release of any
Hazardous Material in any case, (i) which exists as of the Closing Date and
which could reasonably be expected to cause cost and expense to Borrower and its
Subsidiaries of in excess of $500,000 individually or in the aggregate,
except as set forth on Schedule 14.15 hereto, or (ii) which does not exist on
the Closing Date and which (x) was required to be disclosed to the Agent
under Section 11.1(m) hereof and which has not been disclosed in writing to
the Agent or (y) could reasonably be expected to have a Material Adverse
Effect, involve criminal penalties or could expose the Agent or any Lender to
civil or criminal penalties.
(c) Except as described on Schedule 14.15 hereto, there is no
Hazardous Material that may pose any material risk to safety, health, or the
environment, or that is defined or regulated as a hazardous, toxic or dangerous
waste or other substance under any Environmental Law on, under or about any
property owned, leased or operated by any Credit Party or any Subsidiary
thereof except any such Hazardous Material that is required in the
ordinary course of Borrower's business as conducted as of the Closing Date
and that is adequately protected or contained in accordance with applicable
Environmental Laws, and there has been no Release of any such Hazardous
Material on, under or about such property in any case, (i) which exists as of
the Closing Date and which could reasonably be expected to cause cost and
expense to Borrower and its Subsidiaries of in excess of $500,000
individually or in the aggregate, except as set forth on Schedule 14.15
hereto, or (ii) which does not exist on the Closing Date and which
(x) was required to be disclosed to the Agent under Section 11.1(m) hereof and
which has not been disclosed in writing to the Agent or (y) could reasonably be
expected to have a Material Adverse Effect, involve criminal penalties or could
expose the Agent or any Lender to civil or criminal penalties.
14.16. MEDICARE/MEDICAID AND THIRD PARTY PAYOR AGREEMENTS.
Borrower has obtained and currently has in place valid and binding provider
agreements or other written agreements necessary to enable Borrower to
receive payment form Medicare/Medicaid Account Debtors, Third Party Payors
or other governmental entities. All written agreements between Borrower
and such Medicare/Medicaid Account Debtors, Third Party Payors and other
governmental entities, and all provider numbers which Borrower is required
to have in its own name in order to operate its business as presently
conducted are listed on the attached Schedule 14.16.
14.17. VALIDITY OF RECEIVABLES. (a) Except with respect to
Receivables, the aggregate amount of which would not constitute a material
percentage of all Receivables at any given time and Receivables the
failure of which to satisfy the following requirements, would not have a
material adverse effect on the value of the Collateral, each Receivable
existing on the Closing Date is, and each future Receivable will be, at the time
of its creation, a genuine obligation enforceable against the account debtor
thereof in accordance with its terms, and represents an undisputed and bona fide
indebtedness owing to Borrower by an account debtor, without defense, setoff or
counterclaim, free and clear of all Liens other than the security interest in
favor of the Agent under the Security Documents; and no payment has been
received with respect to any Receivable and no Receivable is subject to any
credit or extension or agreement therefor.
(b) No Receivable is evidenced by any note, draft, trade
acceptance or other instrument for the payment of money.
14.18. COLLECTION AND CONCENTRATION ACCOUNTS; LOCK-BOX
ACCOUNTS. (a) The names and addresses of all the banks holding one or
more Collection Accounts, Lock-Box Accounts, and/or
Pharmaceutical Collection Accounts, and the name and address of the bank
holding the Concentration Account, together with the account numbers of the
Collection Accounts, the Lock-Box Accounts, the Pharmaceutical Collection
Accounts, and the Concentration Account at such banks, are specified in
Schedule 14.18(a) hereto, as amended from time to time with the prior
written consent of the Agent.
(b) The names and addresses of all the banks holding one or
more Special Accounts, together with the account numbers of such Special
Accounts at such banks, are specified in Schedule 14.18(b) hereto, as amended
from time to time with the prior written consent of the Agent.
14.19. PARENT. Parent neither owns nor controls access to (a)
inventory or accounts or (b) books or records relating to Collateral of
Borrower.
14.20. VALIDITY OF PHARMACEUTICAL RECEIVABLES. (a) Except with
respect to Pharmaceutical Receivables, the aggregate amount of which would
not constitute a material percentage of all Pharmaceutical Receivables at
any given time and Pharmaceutical Receivables the failure of which to satisfy
the following requirements, would not have a material adverse effect on the
value of the Collateral, each Pharmaceutical Receivable existing at the
Closing Date is, and each future Pharmaceutical Receivable will be, at the
time of its creation, a genuine obligation enforceable against the account
debtor thereof in accordance with its terms, and represents an undisputed and
bona fide indebtedness owing to borrower by an account debtor, without
defense, setoff or counterclaim, free and clear of all Liens other than the
security interest in favor of the Agent under the Security Documents; and no
payment has been received with respect to any Pharmaceutical Receivable and
no Pharmaceutical Receivable is subject to any credit or extension or
agreement therefor.
(b) No Pharmaceutical Receivable is evidenced by any note,
draft, trade acceptance or other instrument for the payment of money.
SECTION 15. MISCELLANEOUS.
15.1. COLLECTION COSTS. If an Event of Default occurs, the
Credit Parties, jointly and severally, shall pay all court costs and costs of
collection, including, without limitation, reasonable fees, expenses and
disbursements of counsel employed in connection with any and all collection
efforts. The attorney's fees arising from such services, including those of
any appellate proceedings, and all reasonable out-of-pocket expenses,
costs, charges and other fees incurred by such counsel in any way or with
respect to or arising out of or in connection with or relating to any of the
events or actions described in this Section 15.1 shall be payable by the
Credit Parties to the Agent or the Lenders, as the case may be, on demand,
and shall be additional obligations under this Agreement. Without limiting
the generality of the foregoing, such expenses, costs, charges and fees may
include: recording costs, appraisal costs, paralegal fees, costs and
expenses; accountants' fees, costs and expenses; court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and
expenses; long distance telephone charges; air express charges; telegram
charges; telecopier charges; secretarial overtime charges; and expenses
for travel, lodging and food paid or incurred in connection with the
performance of such legal services.
15.2. AMENDMENT, MODIFICATION AND WAIVER. (a) No amendment,
modification or waiver of any provision of the Loan Documents and no consent
by the Agent or the Lenders to any departure therefrom by any of the Credit
Parties shall be effective unless such amendment, modification or waiver
shall be in writing and signed by a duly authorized officer of the
appropriate Credit Party, the Agent, the Lenders or the Required Lenders, as
the case may be (as more fully described below), and the same shall
then be effective only for the period and on the conditions and for the specific
instances and purposes specified in such writing.
(b) No notice to or demand on any of the Credit Parties in any
case shall entitle any of the Credit Parties to any other or further notice
or demand in similar or other circumstances.
(c) Any term or provision of any Loan Document may be amended or
modified and the observance of any provision of any Loan Document
may be waived with the written consent of the Credit Parties being a party to
such Loan Document and the Required Lenders; provided, however, that
no such amendment, modification or waiver shall, without the prior
written consent of the Agent, amend or waive any of the provisions of Section
4.8, 5.7, 15.13, 15.14 or 15.15 hereof, or otherwise change any of the rights or
obligations of the Agent under any of the Loan Documents; provided, further,
that no amendment, modification or waiver of any of the provisions of Section 6,
15.14, 15.15 or 15.18 hereof shall be effective without the prior written
consent of the Agent and, in the case of any amendment to any of the
provisions of (x) Section 6 or Section 15.18 hereof or (y) any other
provision relating to Letters of Credit which adversely affects any Issuing
Lender, with the prior written consent of such Issuing Lender; provided,
further, that no such amendment, modification or waiver shall, without the
prior written consent of all of the Lenders:
(i) extend the due date of the principal of or interest on
the Revolving Loan, the Term Loan, or any other amount payable hereunder, or
portion thereof, change the rate of interest on the Revolving Loan, the Term
Loan, or portion thereof, or reduce the amount of any principal payable on
the Revolving Loan, the Term Loan or portion thereof, or reduce the fees
payable to the Lenders hereunder or extend the time of payment thereof;
(ii) substitute, discharge, release or surrender any material
portion of the Collateral or use any portion of the Collateral to secure any
Indebtedness for Borrowed Money other than Lender Debt, except as permitted
in such Loan Document (it being understood that a release of Collateral under
circumstances where the Net Proceeds of the disposition of such Collateral
are applied to Lender Debt shall not require unanimous consent, but shall be
governed under Section 12.5 and Section 5.1(b) hereof) or amend the terms of
any Guaranty or release any such Guaranty;
(iii) except as provided in Section 15.14 hereof, change
the dollar amount or percentage of either the Revolving Commitment or
the Term Commitment of any Lender;
(iv) modify any provision of this Section 15.2 or any
other provision which expressly requires the consent of all Lenders;
(v) amend the definition of "Required Lenders";
(vi) amend Section 13.5 hereof; or
(vii) amend or modify the definition of "Borrowing Base" to
increase the percentage advance rates against the Net Amount of
Eligible Inventory, the Net Amount of Eligible Pharmaceutical Inventory,
the Net Amount of Eligible Coupons, or the Net Amount of Eligible
Pharmaceutical Receivables.
The Agent, the Lenders other than NBC, and the Credit Parties hereby agree to
cooperate with NBC to effectuate the provisions of Section 15.14 hereof,
including, without limitation, with respect to the execution of one or more
amendments of this Agreement or any other Loan Document.
15.3. NEW YORK LAW. THIS AGREEMENT AND THE NOTES SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
15.4. NOTICES. All notices, requests, demands or other
communications provided for herein shall be in writing (unless otherwise
expressly provided herein) and shall be deemed to have been given (a) if by
registered or certified mail, return receipt requested, four (4) Business Days
following the date when sent, (b) if by telex, when sent and answer-back
received, (c) if by overnight courier, when received, (d) if by telecopier,
when sent, or (e) if personally delivered or delivered by messenger, when
receipted for, in each case, addressed to the appropriate Credit Party or to
the Agent or any Lender, at its respective office under its name on the
signature pages of this Agreement and to the attention of the Person so
designated, or to such Person or address as any party hereto shall
designate to the other from time to time in writing forwarded in like manner.
15.5. FEES AND EXPENSES. Whether or not any Advances or
other financial accommodations are made hereunder, Borrower shall pay all
expenses paid or incurred by the Agent in connection with the transactions
contemplated hereunder including but not limited to appraisal fees, syndication
fees, title insurance fees, audit fees, recording fees, computer fees,
duplication fees, telephone and telecopier fees, travel and transportation
fees, search and filing fees, and the reasonable fees and expenses of Hughes
& Luce, L.L.P., special counsel to the Agent, and all local counsel to the
Agent. Borrower shall also pay all reasonable costs and expenses paid or
incurred by the Agent, at any time, or any Lender, after the occurrence of a
Default, in connection with any waivers, amendments, modifications,
extensions, renewals, internal assessments, renegotiations or "work-outs" of
this Agreement or any instrument or document delivered in connection herewith
and any consents or approvals provided hereunder or otherwise requested by
any Credit Party. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include: recording costs, appraisal
costs, paralegal fees, costs and expenses; accountants' or other consultants'
fees, costs and expenses; photocopying and duplicating expenses; long
distance telephone charges; air express charges; telegram charges; telecopier
charges; secretarial overtime charges; and expenses for travel, lodging and
food paid or incurred in connection with the performance of such legal services.
15.6. STAMP OR OTHER TAX. Should any stamp or excise
tax become payable in respect of this Agreement, any Note, any other Loan
Document, the Lender Debt, the Collateral or any modification hereof or
thereof, each of the Credit Parties shall pay, the liability of which is
joint and several, the same (including interest and penalties, if any) and
shall hold the Lenders and the Agent harmless with respect thereto.
15.7. WAIVER OF JURY TRIAL AND SET-OFF. IN ANY LITIGATION IN
ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS
AGREEMENT, ANY OF THE ADVANCES, ANY OF THE NOTES OR OTHER LOAN DOCUMENTS,
THE COLLATERAL, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS
AGREEMENT, OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR
ENFORCEMENT THEREOF, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING,
BETWEEN ANY CREDIT PARTIES AND THE LENDERS OR THE AGENT, EACH OF THE CREDIT
PARTIES HEREBY, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, (A) WAIVES
THE RIGHT TO INTERPOSE ANY SETOFF, RECOUPMENT, COUNTERCLAIM OR CROSS-CLAIM IN
CONNECTION WITH ANY SUCH LITIGATION, IRRESPECTIVE OF THE NATURE OF SUCH
SETOFF, RECOUPMENT, COUNTERCLAIM OR CROSS-CLAIM, UNLESS SUCH SETOFF,
RECOUPMENT, COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY
APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR
ALLEGED IN ANY OTHER ACTION AND (B) WAIVES TRIAL BY JURY IN CONNECTION WITH
ANY SUCH LITIGATION. EACH OF THE CREDIT PARTIES AGREES THAT THIS SECTION
15.7 IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES
THAT THE LENDERS WOULD NOT EXTEND TO BORROWER ANY FINANCIAL ACCOMMODATIONS
HEREUNDER IF THIS SECTION 15.7 WERE NOT PART OF THIS AGREEMENT.
15.8. TERMINATION OF AGREEMENT. (a) Subject to the
Agent's and Borrower's rights to terminate this Agreement earlier as set forth
below, Lender's commitment to make Advances hereunder shall be for an original
period extending from the Closing Date through the Maturity Date.
(b) The Agent on behalf of the Lenders shall have the right to,
upon the direction of the Required Lenders, terminate this Agreement
immediately, at any time, during the continuance of an Event of Default under
Section 13 hereof.
(c) Borrower may terminate this Agreement at any time when
no Letters of Credit are outstanding upon not less than five (5) days' prior
Written Notice (which shall be irrevocable) to the Agent (which shall
promptly notify each Lender thereof in writing or by telephone confirming
immediately in writing) of termination and by prepaying the Revolving Loan in
whole, terminating the Revolving Credit Facility Commitment and paying
all other amounts payable hereunder and all applicable penalties, fees,
charges, premiums and costs, all as provided hereunder, including
specifically, but without limitation, the fees payable under Section 5.6
hereof.
(d) The termination of this Agreement shall not affect any
rights of the Credit Parties, the Lenders or the Agent or any obligation of
any of the Credit Parties, the Lenders or the Agent to the others,
arising on or prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all Lender Debt
and obligations of the Credit Parties and their Subsidiaries hereunder
incurred on or prior to such termination have been paid and performed in full.
(e) Upon the giving of notice of termination of this Agreement,
all Lender Debt shall be due and payable on the date of termination specified
in such notice.
(f) The Liens and rights granted to the Agent on behalf of the
Agent and the Lenders hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement, until all of the Lender Debt
has been indefeasibly paid in full.
(g) All representations, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof unless otherwise
provided.
(h) Notwithstanding the foregoing, if after receipt of any
payment of all or any part of the Lender Debt, the Agent or any Lender is for
any reason compelled to surrender such payment to any Person or entity
because such payment is determined to be void or voidable as a preference, an
impermissible setoff, a diversion of trust funds or for any other reason, this
Agreement shall continue in full force, and the Credit Parties, as appropriate,
shall be liable to, and shall indemnify and hold such Lender or the Agent
harmless for, the amount of such payment surrendered until such Lender or the
Agent, as the case may be, shall have been finally and irrevocably paid in
full. The provisions of the foregoing sentence shall be and remain effective
notwithstanding any contrary action which may have been taken by the Lenders
or the Agent in reliance upon such payment, and any such contrary action so
taken shall be without prejudice to the Lenders' or the Agent's rights under
this Agreement and shall be deemed to have been conditioned upon such payment
having become final and irrevocable.
(i) All indemnities provided for under this Agreement and the
other Loan Documents, including, without limitation, under Sections 4.8 and
15.5, shall survive the termination of this Agreement and the payment
in full of the Lender Debt.
15.9. CAPTIONS. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
15.10. LIEN; SETOFF BY LENDERS. Each of the Credit Parties
hereby grants to each Lender and the Agent a continuing Lien for all
Lender Debt upon any and all monies, securities and other property of such
Credit Party and the proceeds thereof, now or hereafter held or received
by, or in transit to, such Lender or the Agent from or for such Credit Party,
whether for safekeeping, custody, pledge, transmission, collection or
otherwise, and also upon any and all deposits (general or special) and
credits of such Credit Party with, and any and all claims of such Credit
Party against, any Lender or the Agent, at any time existing (which shall
constitute part of the Collateral). Upon the occurrence and during the
continuance of an Event of Default, each Lender and the Agent is hereby
authorized at any time and from time to time, without notice to such Credit
Party, to setoff, appropriate and apply any or all items hereinabove referred
to against all Lender Debt. After any such setoff by the Agent or any
Lender, the Agent or such Lender shall notify the Credit Party against which
it setoff of the exercise by it of such right of setoff, provided that the
failure of the Agent or such Lender to so notify such Credit Party shall not
affect the validity of such setoff or create a cause of action against the
Agent or such Lender.
15.11. PAYMENT DUE ON NON-BUSINESS DAY. Whenever any payment
to be made hereunder or under any other Loan Document or on the Revolving
Loan shall be stated to be due and payable, or whenever the last day of any
Interest Period would otherwise occur, on a day which is not a Business Day,
such payment shall be made and the last day of such Interest Period
shall occur on the next succeeding Business Day and such extension of time
shall in such case be included in computing interest on such payment;
provided, however, if such extension would cause a payment of a Eurodollar
Advance to be made, or the last day of such Interest Period for a Eurodollar
Advance to occur, in the next following calendar month, such payment shall be
made and the last day of such Interest Period shall occur on the next preceding
Business Day.
15.12. SERVICE OF PROCESS. Each of the Credit Parties
hereby irrevocably consents to the jurisdiction of the courts of the State of
New York and of any Federal Court located in the City of New York in
connection with any action or proceeding arising out of or relating to this
Agreement, any Guaranty, any of the Security Documents, all or any of the Lender
Debt, the Collateral, all or any of the Notes, any other Loan Document or
any document or instrument delivered pursuant to this Agreement. In any such
litigation, each of the Credit Parties waives, to the fullest extent it may
effectively do so, personal service of any summons, complaint or other
process and agrees that the service thereof may be made by certified or
registered mail directed to any Credit Party at its address set forth in
Section 15.4 hereof. Within thirty (30) days after such mailing, such Credit
Party shall appear, answer or move in respect of such summons, complaint or
other process. Should such Credit Party fail to appear or answer within said
thirty (30)-day period, such Credit Party shall be deemed in default and
judgment may be entered by the Agent on behalf of the Lenders against such
Credit Party for the amount as demanded in any summons, complaint or other
process so served. Each of the Credit Parties hereby waives, to the fullest
extent it may effectively do so, the defenses of forum non conveniens and
improper venue.
15.13. NATIONAL BANK OF CANADA, AS AGENT. (a) Each Lender
hereby irrevocably designates and appoints NBC as the agent of such Lender
under each of the Loan Documents in which NBC is named as agent, and
each such Lender hereby irrevocably authorizes NBC, as the agent for such
Lender, to take such action on behalf of each Lender under the provisions of
the Loan Documents and to exercise such powers and perform such
duties as are expressly delegated to the Agent by the terms of the Loan
Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in the
LoanDocuments, the Agent shall not have any duties or responsibilities except
those expressly set forth in the Loan Documents, nor any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into the
Loan Documents or otherwise exist against the Agent.
(b) The Agent may execute any of its duties under the Loan
Documents by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
(c) Neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for
any action lawfully taken or omitted to be taken by it or such Person under
or in connection with the Loan Documents (except for its or such Person's own
gross negligence or willful misconduct), or (ii) responsible in any manner to
any Lender for any recitals, statements, representations or warranties made
by any of the Credit Parties or any of their respective Subsidiaries or any
officer thereof contained in the Loan Documents or in any certificate,
report, statement or other document referred to or provided for in, or
received by the Agent under or in connection with the Loan Documents, or for
the value, validity, effectiveness, genuineness, enforceability or
sufficiency of the Loan Documents or for any failure of any of the Credit
Parties or any of their respective Subsidiaries to perform its obligations
under the Loan Documents. The Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any
of the agreements contained in, or conditions of, the Loan Documents, or
to inspect the properties, books or records of any of the Credit Parties or any
of their respective Subsidiaries.
(d) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation
reasonably believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements
of legal counsel (including, without limitation, counsel to the Credit Parties),
independent accountants and other experts selected by the Agent. The Agent
may deem and treat the payee of any Note as the owner thereof for all purposes
unless a Written Notice of assignment, negotiation or transfer thereof shall
have been filed with the Agent.
(e) The Agent shall be fully justified in failing or refusing to
take any action under the Loan Documents unless it shall first receive such
advice or concurrence of the Required Lenders as it deems appropriate or
it shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under the Loan Documents
in accordance with a request of the Required Lenders (or where required by
the terms of this Agreement, the Lenders), and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Notes.
(f) The Agent shall not be deemed to have knowledge or notice of
the occurrence of any Default or Event of Default hereunder unless the
Agent shall have received notice from a Lender or one of the Credit Parties
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, or if the Agent has actual knowledge of the
occurrence of any Default or Event of Default, the Agent shall give prompt
notice thereof to the Lenders. The Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed
by the Required Lenders; provided that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
or Event of Default as it shall deem advisable in the best interests of the
Lenders.
(g) Each Lender expressly acknowledges that neither the Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates has made any representations or warranties to it and that no act
by the Agent hereinafter taken, including any review of the affairs of any of
the Credit Parties or any of their respective Subsidiaries, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without
reliance upon the Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of each of the Credit Parties and their
respective Subsidiaries, and made its own decision to make its loans
hereunder and enter into this Agreement. Each Lender also represents that
it will, independently and without reliance upon the Agent or any other
Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, liabilities, assets, properties and condition
(financial or otherwise) and creditworthiness of each of the Credit Parties
and their respective Subsidiaries. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of
any of the Credit Parties or any of their respective Subsidiaries
which may come into the possession of the Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
(h) Each Lender agrees to indemnify the Agent in its capacity
as such (to the extent not reimbursed by the Credit Parties and without
limiting the obligation of the Credit Parties to do so), ratably according
to such Lender's pro rata share of the Revolving Credit Facility Commitment and
the Term Loan Facility Commitment from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including without limitation at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating
to or arising out of the Loan Documents or the transactions contemplated
thereby or any action taken or omitted by the Agent under or in connection
with any of the foregoing; provided that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct. The
agreements in this Section 15.13(h) shall survive the payment of the Notes
and the Lender Debt.
(i) The Agent and its Affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Credit
Parties as though the Agent were not the Agent hereunder. With respect
to its pro rata share of the Advances made or renewed by it and any Note issued
to it, the Agent shall have the same rights and powers under this Agreement
as any Lender and may exercise the same as though it were not the Agent. The
terms "Lender" and "Lenders" shall include the Agent in its individual capacity.
(j) The Agent may resign as Agent upon thirty (30) days' Written
Notice to the Lenders. In the event that the Agent shall enter receivership,
then the Lenders (other than the Lender which is an acting as Agent, if
applicable) may by unanimous consent of such Lenders, remove the Agent
under this Agreement. If the Agent shall give a notice of its intention to
resign as Agent under this Agreement or the Agent shall be removed, then
the Required Lenders shall, within such thirty (30)-day period, appoint a
successor agent for the Lenders, whereupon such successor agent shall succeed
to the rights, powers and duties of the Agent, and the term "Agent" shall
mean such successor agent effective upon its appointment, and the former
Agent's rights, powers and duties as Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Agreement or any holders of the Notes. After any retiring
Agent's resignation hereunder as Agent or any Agent's removal, the provisions
of this Section 15.13 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement.
(k) Each Lender agrees that (i) all obligations of the Credit
Parties to each Lender under this Agreement and under the Notes rank pari passu
in all respects with each other, and (ii) if any Lender shall, through the
exercise of a right of banker's lien, setoff, counterclaim or otherwise,
obtain payment with respect to any portion of the Revolving Loan or the Term
Loan which results in its receiving more than its pro rata share of the
aggregate payments in respect of the Revolving Loan or the Term Loan, as the
case may be, then (A) such Lender shall be deemed to have simultaneously
purchased from each of the other Lenders a share in the portion of the
Revolving Loan or the Term Loan advanced by the other Lenders so that the
portions of the Revolving Loan and the Term Loan advanced by each Lender
shall be pro rata and (B) such other adjustments shall be made from time to
time as shall be equitable to ensure that all Lenders share such payments
ratably. If all or any portion of any such excess payment is thereafter
recovered from the Lender which received the same, the purchase provided in
this Section 15.13(k) shall be deemed to have been rescinded to the
extent of such recovery, without interest. Each of the Credit Parties
expressly consents to the foregoing arrangements and agrees that each
Lender so purchasing a portion of the Revolving Loan or the Term Loan
advanced by another Lender may exercise all rights of payment (including,
without limitation, all rights of setoff, banker's lien or counterclaim) with
respect to such portion as fully as if such Lender were the direct holder of
such portion.
(l) The Agent agrees that it shall promptly deliver to each
Lender copies of all notices, demands, statements and communications which the
Agent receives from or gives to the Credit Parties, except for routine
notices of payments due under the Loan Documents and other miscellaneous
notices, demands, statements and communications, which are not material to
the interests of any Lender. The Agent shall have no liability to any Lender,
nor shall a cause of action arise against the Agent, as a result of the
failure of the Agent to deliver to any Lender any such notice, demand,
statement or communication.
(m) The Agent shall endeavor to exercise the same care in
administering the Loan Documents as it exercises with respect to similar
transactions in which it is involved and where no other co-lenders or
participants are involved; provided that the liability of the Agent for
failing to do so shall be limited as provided in the preceding paragraphs of
this Section 15.13.
(n) (i) If at any time or times it shall be necessary or prudent in
order to conform to any law of any jurisdiction in which any of the
Collateral shall be located, or the Agent shall be advised by counsel, that
it is so necessary or prudent in the interest of the Lenders, or the Agent
shall deem it necessary for its own protection in the performance of its duties
hereunder, the Agent and (to the extent required by the Agent) each Credit Party
shall execute and deliver all instruments and agreements reasonably necessary
or proper to constitute another bank or trust company, or one or more
individuals approved by the Agent (to the extent necessary or requested by
the Agent) (each an "Approved Delegate"), either to act as co-agent or
co-agents or trustee of all or any of the Collateral, jointly with the Agent
originally named herein or any successor, or to act as separate agent or
agents or trustee of any such Collateral. In the event that any of the
Credit Parties shall not have joined in the execution of such instruments
or agreements with any Approved Delegate within thirty (30) Business Days after
the receipt of a written request from the Agent to do so, or in case an Event
of Default shall have occurred and be continuing, each of the Credit
Parties hereby irrevocably appoints the Agent as its agent and attorney to act
for it under the foregoing provisions of this Section 15.13(n) in such
contingency.
(ii) Every separate agent and every co-agent and every trustee,
other than any agent which may be appointed as successor to the Agent, shall,
to the extent permitted by applicable law, be appointed to act and be such,
subject to the following provisions and conditions, namely:
(A) except as otherwise provided herein, all
rights, remedies, powers, duties and obligations conferred upon,
reserved or imposed upon the Agent in respect of the custody,
control and management of moneys, paper or securities shall be
exercised solely by the Agent hereunder;
(B) all rights, remedies, powers, duties and
obligations conferred upon, reserved to or imposed upon the Agent
hereunder shall be conferred, reserved or imposed and exercised or
performed by the Agent except to the extent that the instrument
appointing such separate agent or separate agents or co-agent or
co-agents or trustee shall otherwise provide, and except to the
extent that under any law of any jurisdiction in which any
particular act or acts are to be performed, the Agent shall be
incompetent or unqualified to perform such act or acts, in which
event such rights, remedies, powers, duties and obligations shall be
exercised and performed by such separate agents or co-agent or
co-agents to the extent specifically directed in writing by the
Agent;
(C) no power given hereby to, or which it is
provided hereby may be exercised by, any such separate agent or
separate agents or co-agent or co-agents or trustee shall be
exercised hereunder by such separate agent or separate agents or
co-agent or co-agents or trustee except jointly with, or with the
consent in writing of, the Agent, anything herein contained to the
contrary notwithstanding;
(D) no separate agent or co-agent or trustee
constituted under this Section 15.13(n) shall be personally liable by
reason of any act or omission of any other agent, separate agent,
co-agent or trustee hereunder; and
(E) the Agent, at any time by an instrument in
writing, executed by it, may accept the resignation of or remove
any such separate agent or co-agent or trustee, and in that case, by
an instrument in writing executed by the Agent and the Credit
Parties (to the extent necessary or requested by the Agent) jointly,
may appoint a successor to such separate agent or co-agent or
trustee, as the case may be, anything herein contained to the
contrary notwithstanding. In the event that any of the Credit
Parties shall not have joined in the execution of any such
instrument with a Person or entity within ten (10) days after the
receipt of a written request from the Agent to do so, or in the case
an Event of Default shall have occurred and be continuing, the
Agent, acting alone, may appoint a successor and may execute any
instrument in connection therewith, and the Credit Parties hereby
irrevocably appoint the Agent its agent and attorney to act for it in
such connection in either or such contingencies.
15.14. SALE, ASSIGNMENT OR TRANSFER TO ADDITIONAL
LENDERS. (a) Without limiting any additional rights which
NBC may have as a Lender under Section 15.13 hereof, NBC may:
(i) in its individual capacity, from time to time after
consultation with Borrower, sell, assign or transfer one or more portions of
its pro rata share of any Revolving Credit Advance, Term Loan Advance,
the Revolving Credit Facility Commitment or the Term Loan Facility
Commitment to any one or more banks or other financial institutions of its
choosing, in its sole discretion (the "Additional Lenders") without the
consent of any other party; provided, however, if Heller or IBJ is a Lender
at such time hereunder, NBC must obtain the consent of Heller and IBJ,
respectively, to any sale, assignment or transfer by NBC of a portion of its
pro rata share of the Revolving Credit Facility Commitment or the Term
Loan Facility Commitment, as the case may be, if, after giving effect
thereto, (A) with regard to Heller, NBC's pro rata share of the Revolving
Credit Facility Commitment or the Term Loan Facility Commitment would be less
than Heller's pro rata share of the Revolving Credit Facility
Commitment or the Term Loan Facility Commitment, as the case may be,
and (B) with regard to IBJ, NBC's pro rata share of the Revolving Credit
Facility Commitment or the Term Loan Facility Commitment would be
less than IBJ's pro rata share of the Revolving Credit Facility
Commitment or the Term Loan Facility Commitment, as the case may be; and
(ii) in its capacity as Agent and in accordance with
Section 15.2 hereof, execute one or more amendments of this Agreement
or any other Loan Document so that each Additional Lender shall be a
named party thereof with all of the rights and obligations of any Lender
hereunder (to the extent sold, assigned or transferred by NBC).
(b) Each Credit Party hereby agrees that it shall execute and
deliver, at the request of NBC:
(i) if part of NBC's pro rata share of any Revolving
Loan, Term Loan, the Revolving Credit Facility Commitment or the Term
Loan Facility Commitment is sold, assigned or transferred to any Lender
or Additional Lender, to the extent requested by NBC, one or more Notes
to the order of NBC and such Lender and/or Additional Lender to evidence the
portions of the Revolving Loan and/or the Revolving Credit
Facility Commitment or the Term Loan and/or the Term Loan Facility
Commitment retained and sold; and
(ii) any amendment to any Loan Document to effectuate this
Section 15.14 (without limiting the right of the Agent as set forth in
Section 15.2 to execute an amendment in connection with this Section
15.14). The terms "sale," "assignment" or "transfer" shall include a
novation or assumption by any Additional Lender of all or any portion of
the obligations and commitments of NBC hereunder.
15.15. BENEFIT OF AGREEMENT. (a) This Agreement shall
be binding upon and inure to the benefit of the parties hereto, and their
respective successors and assigns, except that the obligation of the Lenders
to make Advances and other financial accommodations hereunder shall not
inure to the benefit of any successors and assigns of Borrower.
(b) No Credit Party may assign or transfer any of its interest
hereunder without the prior written consent of the Lenders. Each of the
Lenders may make, carry or transfer its pro rata share of the Revolving
Loan or the Term Loan at, to or for the account of any of its branch offices or
the office of one or more of its Affiliates.
(c) Each Lender may, with the prior written consent of the
Agent, which consent shall not be unreasonably withheld, and after consultation
with Borrower, assign its rights and delegate its obligations under this
Agreement and may, with the prior written consent of the Agent, assign,
sell, or without the consent of the Agent grant participation in, all or any
part of its pro rata share of the Revolving Loan, its Revolving Commitment,
the Term Loan, its Term Commitment, or any other interest herein or in its
Notes to another bank or other entity, in which event:
(i) in the case of an assignment, upon notice thereof by
such Lender to Borrower, the assignee shall have, to the extent of such
assignment (unless otherwise provided therein), the same rights and
benefits as it would have if it were such Lender hereunder and the holder
of a Note, and
(ii) in the case of a participation, the participant shall
not have any rights under this Agreement or any Note or any other Loan
Document (the participant's rights against such Lender in respect of such
participation to be those set forth in the agreement executed by such
Lender in favor of the participant relating thereto which agreement shall
not, in any event, grant to the participant the right of consent as to any
matter under the Loan Documents other than those which require the
consent of all Lenders).
(d) Each Lender may furnish any information concerning the
Credit Parties and their respective Subsidiaries in the possession of such
Lender from time to time to assignees and participants (including
prospective assignees and participants).
(e) In the event that any Lender shall assign or sell its Notes,
such Lender shall at the time of such assignment or sale give Written Notice
to the Agent of the name and address of the assignee (including the name
of the account officer if applicable), and shall make all endorsements to the
grid schedule attached thereto to make the information contained therein
accurate.
(f) Each Credit Party hereby agrees that it shall execute and
deliver, at the request of: any Lender if part of such Lender's pro rata
share of any Revolving Loan or Term Loan and/or the Revolving Credit Facility
Commitment or the Term Loan Facility Commitment is sold, assigned or
transferred, to the extent requested by such Lender, one or more Notes to the
order of such Lender and/or purchasers, assignees or transferees to evidence the
portions of the Revolving Loan or Term Loan and/or the Revolving Credit Facility
Commitment or the Term Loan Facility Commitment retained and sold.
15.16. COUNTERPARTS; FACSIMILE SIGNATURE. (a)
This Agreement may be executed by the parties hereto individually
or in any combination, in one or more counterparts, each of which shall be
an original and all of which shall together constitute one and the same
agreement.
(b) Delivery of an executed counterpart of a signature
page to this Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Agreement.
15.17. INVALIDITY. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under all applicable laws and regulations. If, however, any
provision of this Agreement shall be prohibited by or invalid under any such
law or regulation, it shall be deemed modified to conform to the minimum
requirements of such law or regulation, or, if for any reason it is not
deemed so modified, it shall be ineffective and invalid only to the extent of
such prohibition or invalidity without the remainder thereof or any of the
remaining provisions of this Agreement being prohibited or invalid.
15.18. LETTER OF CREDIT PARTICIPATIONS AND CERTAIN PAYMENTS.
(a) Each Lender agrees that upon any acceleration of the Lender Debt as
provided in Section 13 hereof or upon the occurrence of any
Event of Default under clause (f) or (g) of Section 13.1 hereof,
each such Lender shall and hereby does, without any further action, take
as of the date of issuance of each Letter of Credit an undivided
participating interest from each Issuing Lender in all Letters of Credit
outstanding at such time and the Letter of Credit Agreements relating
thereto in a percentage equal to such Lender's pro rata share of the
Revolving Credit Facility Commitment. Each Lender shall hold the
relevant Issuing Lender harmless and indemnify such Issuing Lender for such
Lender's pro rata share of any drawing under any Letter of Credit in which
it has taken such an undivided participating interest under this Section
15.18.
(b) The obligation of each Lender to make payments to an
Issuing Lender with respect to any Letter of Credit after having taken a
participation therein as provided above shall be irrevocable and shall not be
subject to any qualification or exception whatsoever and shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances, including without limitation any of the following circumstances:
(i) any lack of validity or enforceability of this
Agreement, any of the Loan Documents, and all other documents and
instruments executed by any of the Credit Parties or any Affiliate thereof
and delivered to the Agent, NBC, the Issuing Lender of a Letter of Credit
or any other Lender in connection with or related to the Revolving Loan,
the Letters of Credit or the Collateral, together with any and all
amendments, extensions, renewals and modifications thereof;
(ii) the existence of any claim, set-off, defense or
other right which Borrower may have at any time against NBC or any
claim, set-off, defense or other right which any Credit Party may have
at any time against the beneficiary named in any Letter of Credit or any
transferee of any Letter of Credit (or any person for whom any such transferee
may be acting), the Agent, NBC, the Issuing Lender of a Letter of
Credit, any other Lender or any other person, whether in connection with this
Agreement, a Letter of Credit, the transactions contemplated herein or any
unrelated transactions (including any underlying transactions between any
Credit Party or any Subsidiary thereof and the beneficiary named in a
Letter of Credit);
(iii) any draft, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue
or inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of this Agreement or
any of the Loan Documents; or
(v) the occurrence of any Default or Event of Default.
15.19. DISCLOSURE OF FINANCIAL INFORMATION.
Each Lender shall hold all non-public information obtained
pursuant to the requirements of this Agreement which has been identified as such
by Borrower in writing in accordance with its customary procedure for handling
confidential information of this nature and in accordance with safe and sound
banking practices; provided, however, that the Agent and each Lender are
each hereby authorized to deliver a copy of any financial statement or any
other information relating to the business, operations or financial condition of
Borrower and each of its Subsidiaries which may be furnished to it hereunder or
otherwise, to any other Lender, any court, regulatory body or agency having
jurisdiction over the Agent or such Lender, to any Person which shall, or
shall have any right or obligation to, succeed to all or any part of the
Agent's or such Lender's interest in any of the Advances, the Letters of
Credit, this Agreement and any Collateral or to any actual or prospective
participant therein or assignee thereof.
15.20. AMENDMENT AND RESTATEMENT. This
Agreement is given in amendment, modification, supplementation,
restatement and renewal (and not in extinguishment or satisfaction) of the
Amended and Restated Revolving Credit Agreement dated as of April 21, 1995,
made by and among Borrower, Parent, Heller and NBC, individually and as agent
for Heller and NBC, as previously amended by that certain Ratification and
Amendment Agreement dated as of May 10, 1996. All rights, titles, liens,
security interests and priorities under the Existing Agreement are preserved,
maintained and carried forward under this Agreement, subject, however, to
the terms of this Agreement.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective officers thereunto duly authorized
as of the day and year first above written.
HOMELAND STORES, INC.
By:
Larry W. Kordisch,
Executive Vice President-Finance
Address for Notice:
2601 Northwest Expressway
Oklahoma City, Oklahoma 73112
Attention: Chief Financial Officer
Telecopier No.: (405) 879-4614
HOMELAND HOLDING CORPORATION
By:
Larry W. Kordisch,
Executive Vice President-Finance
Address for Notice:
2601 Northwest Expressway
Oklahoma City, Oklahoma 73112
Attention: Chief Financial Officer
Telecopier No.: (405) 879-4614
NATIONAL BANK OF CANADA,
as Agent
By:
Larry L. Sears
Group Vice President
By:
John T. Dixon
Vice President
Address for Notice:
2121 San Jacinto, Suite 1850
Dallas, Texas 75201
Attention: Larry L. Sears
Telecopier No. (214) 871-2015
LENDERS:
IBJ SCHRODER BANK & TRUST
COMPANY
By:
James M. Steffy
Vice President
Address for Notice:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: James M. Steffy
Telecopier No.: (212) 858-2151
Domestic Lending Office:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: James M. Steffy
Telecopier No.: (212) 858-2151
Eurodollar Lending Office:
IBJ Schroder Bank & Trust Company
Cayman Branch
One State Street
New York, New York 10004
Attention: James M. Steffy
Telecopier No.: (212) 858-2151
HELLER FINANCIAL, INC.
By:
Elizabeth Manning
Vice President
Address for Notice:
c/o Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
Attention: HBC Portfolio Manager
Telecopier No.: (312) 441-7026
Domestic Lending Office:
Heller Financial, Inc.
c/o Heller Business Credit - Eastern Region
101 Park Avenue, 10th Floor
New York, New York 10178
Attention: HBC Portfolio Manager
Eurodollar Lending Office:
Heller Financial, Inc.
c/o Heller Business Credit - Eastern Region
101 Park Avenue, 10th Floor
New York, New York 10178
Attention: HBC Portfolio Manager
NATIONAL BANK OF CANADA
By:
Larry L. Sears
Group Vice President
By:
John T. Dixon
Vice President
Address for Notice:
2121 San Jacinto, Suite 1850
Dallas, Texas 75201
Attention: Larry L. Sears
Telecopier No. (214) 871-2015
Domestic Lending Office:
National Bank of Canada
125 West 55th
New York, New York 10019
Eurodollar Lending Office:
National Bank of Canada
125 West 55th
New York, New York 10019
06729.0021:0174197.08
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AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HOMELAND HOLDING CORPORATION
(FORMERLY SWO HOLDING CORPORATION)
TO THE SECRETARY OF STATE OF THE STATE OF DELAWARE:
The undersigned officers of Homeland Holding Corporation
("Corporation") do hereby certify as follows:
1. The Certificate of Incorporation of the Corporation was
originally filed with the Secretary of State of the State of Delaware
("Secretary of State") on November 6, 1987. At the time of its original
incorporation, the name of the Corporation was "SWO Holding Corporation."
2. Such certificate of incorporation has been previously
amended and restated on July 14, 1989, and August 2, 1990. The name of the
Corporation was changed to "Homeland Holding Corporation" on August 2,
1989. Such certificate of incorporation, as previously amended and
restated, is referred to in this Amended and Restated Certificate of
Incorporation as the "Prior Certificate of Incorporation."
3. This Amended and Restated Certificate of Incorporation has
been amended for the purpose of modifying the capital structure of the
Corporation in accordance with the Plan of Reorganization of Homeland
Stores, Inc. and Homeland Holding Corporation confirmed by the United States
Bankruptcy Court for the District of Delaware ("Court") under Chapter 11 of
the United States Bankruptcy Code in the cases styled In re Homeland Stores,
Inc., Debtor, Case No. 96-747 (PJW), and In re Homeland Holding Corporation,
Debtor, Case No. 96-748 (PJW), on July 19, 1996. The cases were filed
with the Court on May 13, 1996.
4. This Amended and Restated Certificate of Incorporation has
been duly adopted in accordance with the provisions of Section 242, Section
245 and Section 303 of the General Corporation Law of the State of Delaware.
5. The text of the Prior Certificate of Incorporation is hereby
further amended by this Amended and Restated Certificate of Incorporation and
is restated to read in its entirety as follows:
FIRST: The name of the Corporation is Homeland Holding
Corporation.
SECOND: The Corporation's registered office in the State of
Delaware is at 15 North Street in the City of Dover, County of Kent.
The name of its registered agent at such address is National Corporate
Research, Ltd.
THIRD: The nature of the business of the Corporation and its
purpose is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of
Delaware.
FOURTH: The capital stock of the Corporation shall consist of a
single class and the total number of shares of stock which the Corporation
shall have authority to issue is 7,500,000 shares of Common Stock,
par value $0.01 per share.
Each share of Common Stock shall entitle the record holder thereof
to one vote on all matters submitted to the shareholders. The Corporation
shall not have the authority to issue non-voting equity securities.
FIFTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the Corporation and for
the purpose of creating, defining, limiting and regulating the powers of the
Corporation and its directors and stockholders:
(a) The number of directors of the Corporation shall be
fixed and may be altered from time to time in the manner provided in the
By-laws and vacancies in the Board of Directors and newly created
directorships resulting from any increase in the authorized number of
directors may be filled, and directors may be removed, as provided in the
By-laws.
(b) The election of directors may be conducted in any manner
approved by the shareholders at the time when the election is held and need
not be by ballot.
(c) All corporate powers and authority of the Corporation
(except as at the time otherwise provided by law, by this Amended and
Restated Certificate of Incorporation or by the By-laws) shall be vested
in and exercised by the Board of Directors.
(d) The Board of Directors shall have the power without the
assent or vote of the stockholders to adopt, amend, alter or repeal the
By-laws of the Corporation, except to the extent that the this Amended
and Restated Certificate of Incorporation or the By-laws otherwise provide.
(e) No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of his or
her fiduciary duty as a director, provided that nothing contained in
this Amended and Restated Certificate of Incorporation shall eliminate or
limit the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware or (iv) for any transaction from
which the director derived an improper personal benefit.
SIXTH: The Corporation reserves the right to amend or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation in the manner now or hereafter prescribed by the laws of the
State of Delaware, and all rights herein conferred upon shareholders or
directors are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned officers have signed this
Amended and Restated Certificate of Incorporation
this day of , 1996.
HOMELAND HOLDING CORPORATION
By:
James A. Demme,
President
ATTEST:
Secretary
(SEAL)
160277
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of August 2, 1996 (the "Agreement"),
between HOMELAND HOLDING CORPORATION, a Delaware corporation (the
"Company"), and LIBERTY BANK AND TRUST COMPANY OF OKLAHOMA CITY, N.A., as
Warrant Agent (the "Warrant Agent").
WHEREAS, in connection with the financial restructuring (the
"Restructuring") of the Company and its subsidiary, Homeland Stores, Inc., a
Delaware corporation ("Homeland"), to be consummated pursuant to their Plan of
Reorganization (as such term and all other capitalized terms used herein are
defined in section 15), the Company proposes to issue the Warrants described
herein to purchase up to an aggregate of 263,158 shares of Common Stock,
subject to adjustment as provided herein (the "Warrants"), to the holders of
the Old Common Stock in exchange (together with certain shares of Common
Stock) for all issued and outstanding shares of Old Common Stock, pursuant to
the Plan of Reorganization; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing to act, in connection with
the issuance, transfer, exchange, replacement and exercise of the Warrant
Certificates and other matters as provided herein; and
WHEREAS, the Company desires to enter into this Agreement to set
forth the terms and conditions of the Warrants and the rights of the
holders thereof; and
WHEREAS, concurrently with the execution hereof, and in connection
with the consummation of the Restructuring, the Company and certain stock
holders of the Company are entering into a Registration Rights Agreement,
dated as of the date hereof (the "Registration Rights Agreement"), under
which the Company will grant certain registration rights to the holders of
the Warrants;
NOW, THEREFORE, in consideration of the foregoing premises and of
the mutual agreements set forth herein, the Company and the Warrant Agent
hereby agree as follows:
1. Issuance of Warrants.
1.1 Initial Issuance; Initial Share Amount. On the date
hereof (the "Original Issue Date"), the Company shall issue an
aggregate of 263,158 Warrants to the holders of the Old Common
Stock, pursuant to the Plan of Reorganization. The number of
shares of Common Stock issuable upon exercise of all such
Warrants shall be subject to all adjustments from and after the
Original Issue Date provided in sections 4 and 5, as set forth in
section 3.1, whether or not such Warrants were issued on or after
the date on which any event resulting in an adjustment occurred.
1.2 Form of Warrant Certificates. The Warrants shall be
evidenced by certificates substantially in the form attached
hereto as Exhibit A (the "Warrant Certificates"). Each Warrant
Certificate shall be dated as of the date on which it is countersigned by
the Warrant Agent, which shall be either on the
Original Issue Date or other date of issuance thereof, or on
division, exchange, substitution or transfer of any of the
Warrants. Each Warrant Certificate may have such legends and
endorsements stamped, printed, lithographed or engraved thereon
as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation pursuant
thereto or with any rule or regulation of any securities exchange
on which the Warrants may be listed.
1.3 Execution of Warrant Certificates. Warrant Certificates
shall be executed on behalf of the Company by its President, any
Vice President, its Treasurer or Secretary, either manually or by
facsimile signature printed thereon. In case any such officer of
the Company whose signature shall have been placed upon any
Warrant Certificate shall cease to be such officer of the Company
before countersignature by the Warrant Agent or issuance and
delivery thereof, such Warrant Certificate nevertheless may be
countersigned by the Warrant Agent and issued and delivered with
the same force and effect as though such person had not ceased to
be such officer of the Company.
1.4 Countersignature of Warrant Certificates. Warrant
Certificates shall be manually countersigned by an authorized
signatory of the Warrant Agent and shall not be valid for any
purpose unless so countersigned. Such manual countersignature
shall constitute conclusive evidence of such authorization. The
Warrant Agent is hereby authorized to countersign, in accordance
with the provisions of this section 1.4, and deliver any new War
rant Certificates as and when required pursuant to the provisions
of sections 12 and 13. Each Warrant Certificate shall, when
manually countersigned by an authorized signatory of the Warrant
Agent, entitle the registered holder thereof to exercise the
rights as the holder of the number of Warrants set forth thereon,
subject to the provisions of this Agreement.
2. Duration of Warrants.
Irrespective of the date ofissuance, each Warrant shall
entitle the holder thereof to purchase from the Company one share of
Common Stock, at any time up to and including 5:00 p.m., New York City
time on August 2, 2001 (the "Expiration Date").
3. Exercise of Warrants.
3.1 Manner of Exercise. All or any of the Warrants
represented by a Warrant Certificate may be exercised by the
registered holder thereof during normal business hours on any
Business Day, by surrendering such Warrant Certificate, with the
subscription form set forth therein duly executed by such holder,
by hand or by mail to the Warrant Agent at the address set forth
in Section 17.1 (or, if such exercise shall be in connection with
an underwritten Public Offering, at the location designated by
the Company). Such Warrant Certificate shall be accompanied by
payment in respect of each Warrant that is exercised, which shall
be made by certified or official bank or bank cashier's check
payable to the order of the Company. Such payment shall be in an
amount equal to the product of (i) the number of shares of Common
Stock (without giving effect to any adjustment therein) designated in
such subscription form multiplied by (ii) the Warrant
Purchase Price in effect as of the date of such exercise. Upon
such surrender and payment, such holder shall thereupon be en
titled to receive the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other
Securities) determined as provided in sections 4 and 5.
3.2 When Exercise Effective. Each exercise of any Warrant
pursuant to section 3.1 shall be deemed to have been effected
immediately prior to the close of business on the Business Day on
which the Warrant Certificate representing such Warrant, duly
executed, with accompanying payment shall have been delivered as
provided in section 3.1, and at such time the Person or Persons
in whose name or names the certificate or certificates for Common
Stock (or Other Securities) shall be issuable upon such exercise
as provided in section 3.3 shall be deemed to have become the
holder or holders of record thereof.
3.3 Delivery of Certificates, etc.
(a) As promptly as practicable after the exercise of
any Warrant, and in any event within five Business Days thereafter
(or, if such exercise is in connection with an underwritten
Public Offering concurrently with such exercise), the Company at its
expense (other than as to payment of transfer taxes) will cause to be issued
and delivered to such holder, or as such holder may direct in writing
(subject to section 13),
(i) a certificate or certificates for the number of full
shares of Common Stock (or Other Securities) to which such holder
is entitled,
(ii) any cash payment in lieu of any fraction of a share or
security as provided in section 3.4, and
(iii) if less than all the Warrants represented by a Warrant
Certificate are exercised, a new Warrant Certificate or
Certificates of the same tenor and for the aggregate number of
Warrants that were not exercised, executed and countersigned in
accordance with sections 1.3 and 1.4.
(b) The Warrant Agent shall countersign any new Warrant
Certificate, register it in such name or names as may be directed in
writing by such holder, and shall deliver it to the person entitled to
receive the same in accordance with section 3.3(a). The Company, whenever
required by the Warrant Agent, will supply the Warrant Agent with Warrant
Certificates executed on behalf of the Company for such purpose.
3.4 Fractional Shares. No fractional shares of Common Stock
(or Other Securities) shall be issued upon any exercise of
Warrants. If more than one Warrant Certificate shall be
delivered for exercise at one time by the same holder, the number
of full shares or securities that shall be issuable upon exercise
shall be computed on the basis of the aggregate number of
Warrants exercised. As to any fraction of a share of Common
Stock (or Other Securities), the Company shall pay a cash
adjustment in respect thereto in an amount equal to the product
of the Market Price per share of Common Stock (or Other Securities)
as of the Business Day next preceding the date of such
exercise multiplied by such fraction.
4. Adjustment of Common Stock Issuable Upon Exercise.
4.1 Adjustment of Number of Shares. The number of shares of
Common Stock that the holder of a Warrant shall be entitled to
receive upon each exercise thereof shall be determined by multiplying
the number of shares of Common Stock that would otherwise
(but for the provisions of this section 4) be issuable upon such
exercise, as designated by such holder pursuant to section 3.1,
by a fraction of which (i) the numerator is $11.85 and (ii) the
denominator is the Warrant Purchase Price in effect on the date
of such exercise.
4.2 Adjustment of Warrant Purchase Price.
(a) The "Warrant Purchase Price" shall initially be $11.85 per
share, shall be adjusted and readjusted from time to time as
provided in this section 4 and, as so adjusted or readjusted,
shall remain in effect until a further adjustment or readjustment
thereof is required by this section 4.
(b) Additional Shares of Common Stock. If at any time or from
time to time after the Original Issue Date, the Company shall
issue or sell Additional Shares of Common Stock without consideration
or for a consideration per share less than the Current
Market Price in effect on the date of and immediately prior to
such issuance or sale or Additional Shares of Common Stock are
deemed to be issued pursuant to section 4.4 or 4.5, then in each
such case (subject to section 4.9), the Warrant Purchase Price
then in effect shall be reduced, concurrently with such issuance
or sale, to a price (calculated to the nearest .001 of a cent)
determined by multiplying such Warrant Purchase Price by a
fraction,
(i) the numerator of which shall be (A) the number of shares
of Common Stock outstanding immediately prior to such issuance or
sale plus (B) the number of shares of Common Stock that the aggregate
consideration received by the Company (computed in
accordance with section 4.6) for the total number of such
Additional Shares of Common Stock so issued or sold would
purchase at the Current Market Price, and
(ii) the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such
issuance or sale,
provided that, for the purposes of this section 4.2(b), (x) immediately
after any Additional Shares of Common Stock are deemed to have been
issued pursuant to section 4.3(a) or 4.4, such Additional Shares shall
be deemed to be out standing, and (y) treasury shares shall not be
deemed to be outstanding.
4.3 Extraordinary Dividends and Distributions. In case the
Company at any time or from time to time after the Original Issue
Date shall declare, order, pay or make a dividend or other
distribution (including, without limitation, any distribution of
other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on any
Common Stock, other than (a) a dividend payable in Additional
Shares of Common Stock or in Options for Common Stock or (b) a
regular, periodic dividend payable in cash and declared out of
the earned surplus of the Company as at the date hereof as
increased by any credits (other than credits resulting from a
revaluation of property) and decreased by any debits made thereto
after such date, then, and in each such case, subject to section
4.9, the Warrant Purchase Price in effect immediately prior to
the close of business on the record date fixed for the
determination of holders of any class of securities entitled to
receive such dividend or distribution shall be reduced, effective
as of the close of business on such record date, to a price
(calculated to the nearest .001 of a cent) determined by
multiplying such Warrant Purchase Price by a fraction,
(i) the numerator of which shall be the Current Market Price
in effect on such record date or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of ex-
dividend trading, less the value of such dividend or distribution
(as determined in good faith by the Board of Directors of the
Company) applicable to one share of Common Stock, and
(ii) the denominator of which shall be such Current Market
Price.
4.4 Options and Convertible Securities.
(a) If at any time or from time to time after the Original
Issue Date, the Company shall issue, sell, grant or assume, or shall fix a
record date for the determination of holders of any class of securities
entitled to receive, any Options or Convertible Securities, then in each
such case, the maximum number of Additional Shares of Common Stock issuable
(as set forth in the instruments relating thereto, without regard to any
provision thereof for subsequent adjustment of such number) upon the exercise
of such Options or the conversion or exchange of such Convertible
Securities (and in the case of Options for Convertible Securities, the
exercise of such Options and the conversion or exchange of such Convertible
Securities), shall be deemed to be issued for purposes of section 4.2(b) as
of the time of such issuance, sale, grant or assumption or, in case
such a record date shall have been fixed, as of the close of business on such
record date, provided that such Additional Shares of Common Stock shall
not be deemed to have been issued unless the consideration per share
(determined pursuant to section 4.6) for such shares would be less than the
Current Market Price in effect on the date of and immediately prior to such
issuance, sale, grant or assumption or immediately prior to the close of
business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), as the case may be. In any such case in which
Additional Shares of Common Stock are deemed to be issued,
(i) no further adjustment of the Warrant Purchase Price shall
be made upon the subsequent issuance or sale of Additional Shares
of Common Stock or Convertible Securities upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities;
(ii) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase
in the consideration payable to the Company, or decrease in the
number of Additional Shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof (by change of rate or
otherwise), the Warrant Purchase Price computed upon the original
issuance, sale, grant or assumption thereof or upon the
occurrence of the record date with respect thereto, and any
subsequent adjustments based thereon, shall, upon any such in
crease or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options, or
the rights of conversion or exchange under such Convertible
Securities, that are outstanding at such time;
(iii) upon the expiration of any such Options or of the rights
of conversion or exchange under any such Convertible Securities
that shall not have been exercised (or upon purchase by the
Company and cancellation or retirement of any such Options that
shall not have been exercised or of any such Convertible Se
curities the rights of conversion or exchange under which shall
not have been exercised), the Warrant Purchase Price computed
upon the original issuance, sale, grant or assumption thereof or
upon the occurrence of the record date with respect thereto, and
any subsequent adjustments based thereon, shall, upon such expiration
(or such cancellation or retirement, as the case may be), be
recomputed as if:
(A) in the case of Options for Common Stock or
of Convertible Securities, the only Additional Shares of Common Stock
issued or sold were the Additional Shares of Common Stock, if any,
actually issued or sold upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, and the consideration
received therefor was an amount equal to (x) the consideration actually
received by the Company for the issuance, sale, grant or assumption of
all such Options, whether or not exercised, or all such Convertible
Securities that were actually converted or exchanged, plus (y) the
consideration actually received by the Company upon such exercise,
conversion or exchange, if any, minus (z) the consideration paid by
the Company for any purchase of any such Options that were not exercised,
or any such Convertible Securities the rights of conversion or exchange
under which were not exercised, and
(B) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued or sold upon
the exercise of such Options were issued at the time of the issuance, sale,
grant or assumption of such Options, and the consideration received by the
Company for the Additional Shares of Common Stock deemed to have then been
issued was an amount equal to (x) the consideration actually received by the
Company for the issuance, sale, grant or assumption of all such Options,
whether or not exercised, plus (y) the consideration deemed to have been
received by the Company (pursuant to section 4.8) upon the issuance or sale
of the Convertible Securities with respect to which such Options were actually
exercised, minus (z) the consideration paid by the Company for any purchase
of such Options that were not exercised; and
(iv) no readjustment pursuant to clause (ii) or (iii) above
shall have the effect of increasing the Warrant Purchase Price by
an amount in excess of the amount of the adjustment thereof originally
made in respect of the issuance, sale, grant or assumption of such
Options or Convertible Securities.
(b) Notwithstanding section 4.4(a), in the case of any
such Options that expire by their terms not more than 30 days after the
date of issuance, sale, grant or assumption thereof, no adjustment of
the Warrant Purchase Price shall be made until the expiration or exercise
of all such Options, whereupon such adjustment shall be made in
the manner provided in clause (iii) of section 4.4(a) above.
(c) If at any time or from time to time after the Original
Issue Date, the Company shall be required to increase the number of
Additional Shares of Common Stock subject to any Option or into which
any Convertible Securities are convertible or exchangeable pursuant to the
operation of anti-dilution provisions applicable thereto, such Additional
Shares of Common Stock shall be deemed to be issued for purposes of
section 4.2(b) as of the time of such increase.
4.5 Stock Dividends, Stock Splits, etc. If at any time or
from time to time after the Original Issue Date, the Company
shall declare or pay any dividend or other distribution on any
class of stock of the Company payable in Common Stock, or shall
effect a subdivision of the outstanding shares of Common Stock
into a greater number of shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common
Stock), then in each such case, Additional Shares of Common Stock
shall be deemed to have been issued for the purposes of section 4.2(b),
(i) in the case of any such dividend, immediately
after the close of business on the record date for the determination of
holders of any class of securities entitled to
receive such dividend, or (ii) in the case of any such
subdivision, at the close of business on the day immediately
prior to the day upon which such subdivision becomes effective.
4.6 Computation of Consideration. For the purposes of this
section 4:
(a) Subject to the other provisions of this section 4.6, the
consideration for the issuance or sale of any Additional Shares
of Common Stock or for the issuance, sale, grant or assumption of
any Options, Convertible Securities or Other Securities, irrespective of
the accounting treatment of such consideration, shall equal
(i) (x) insofar as it consists of cash, the amount of cash
received by the Company, without deducting any expenses paid or
incurred (including but not limited to any commissions or
compensation paid or payable or concessions or discounts allowed
to underwriters, dealers or others performing similar services),
and any accrued interest or dividends, in connection with such
issuance, sale, grant or assumption, plus
(y) insofar as it consists of consideration other
than cash (including securities and other property), the Fair Value, at
the time of such issuance, sale, grant or assumption, of such
consideration received by the Company, without deducting any expenses
paid or incurred (including but not limited to any commissions or
compensation paid or payable or concessions or discounts allowed
to underwriters, dealers or others performing similar services), and
any accrued interest or dividends, in connection with such issuance, sale,
grant or assumption, or
(ii) if Additional Shares of Common Stock are issued
or sold or Options or Convertible Securities are issued, sold, granted or
assumed together with other stock or securities or other assets
of the Company or a Subsidiary for a consideration that covers
both, the proportion of such consideration so received, computed
as provided in clause (i) above, allocable based on relative Fair
Value to such Additional Shares of Common Stock, Options, or
Convertible Securities, as the case may be, all as determined in
good faith by the Board of Directors of the Company.
(b) All Options or Convertible Securities issued or delivered
in payment of any dividend or other distribution on any class of
stock of the Company, shall be deemed to have been issued without
consideration.
(c) All Additional Shares of Common Stock shall be deemed to
have been issued without consideration that are (x) issued or
delivered in payment of any dividend or other distribution on any
class of stock of the Company, (y) issued to effect a subdivision
of the outstanding shares of Common Stock into a greater number
of shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in Common Stock), or (z) issued or
deemed to have been issued pursuant to the operation of
anti-dilution provisions applicable to Options, Convertible
Securities or other securities of the Company or a Subsidiary,
whether as a result of the adjustments provided for hereby or
otherwise.
(d) For purposes of section 4.4 (subject to section 4.6(c)),
Additional Shares of Common Stock shall be deemed to have been
issued for a consideration per share determined by dividing
(i) the total amount, if any, received and receivable
by the Company as consideration for the issuance, sale, grant or assumption
of the relevant Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as set
forth in the instruments relating thereto, without regard to any
provision thereof for subsequent adjustment of such
consideration) payable to the Company upon the exercise in full
of such Options or the conversion or exchange of such Convertible
Securities (and in the case of Options for Convertible
Securities, the exercise of such Options and the conversion or
exchange of such Convertible Securities), in each case computing
such consideration as provided in section 4.6(a) or 4.6(b),
by
(ii) the maximum number of shares of Common Stock issuable
(as set forth in the instruments relating thereto, without regard to
any provision thereof for subsequent adjustment of such number)
upon the exercise of such Options or the conversion or exchange
of such Convertible Securities (and in the case of Options for
Convertible Securities, the exercise of such Options and the
conversion or exchange of such Convertible Securities).
4.7 Adjustments for Combinations, etc. If at any time or
from time to time after the Original Issue Date, the outstanding
shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of
Common Stock, the Warrant Purchase Price in effect immediately
prior to such combination or consolidation shall, at the close of
business on the day on which such combination or consolidation
becomes effective, be proportionately increased.
4.8 Dilution in Case of Other Securities. If at any time or
from time to time after the Original Issue Date the Warrants
shall be exercisable for Other Securities (either alone or in
addition to Common Stock), and Other Securities shall be issued,
sold, granted or assumed, or shall become subject to issuance,
sale, grant or assumption upon any exercise, conversion or
exchange of any stock, options or convertible or other securities
(including but not limited to any Options or Other Securities) of
the Company (or any issuer of Other Securities or any other
Person referred to in section 5), or to subscription, purchase or
other acquisition pursuant to any Options issued or granted by
the Company (or any other issuer or Person), for a consideration
such as to dilute, on a basis consistent with the standards
established in the other provisions of this section 4, the rights
to purchase Other Securities granted hereunder and under the
Warrants, then in each such case, the computations, adjustments
and readjustments provided for in this section 4 with respect to
the Warrant Purchase Price shall be made as nearly as possible in
the manner so provided and applied to determine the amount of
Other Securities from time to time receivable upon the exercise
of the Warrants, so as to protect the holders of the Warrants
against the effect of such dilution.
4.9 Minimum Adjustment of Warrant Purchase Price. If the
amount of any adjustment of the Warrant Purchase Price required
pursuant to this section 4 would be less than one-tenth of
one percent (0.1%) of the Warrant Purchase Price in effect at the
time such adjustment is otherwise so required to be made, such
amount shall be carried forward and adjustment with respect
thereto made at the time of and together with any subsequent
adjustment that, together with such amount and any other amount
or amounts so carried forward, shall aggregate at least one-tenth
of one percent (0.1%) of such Warrant Purchase Price; provided
that, upon exercise of this Warrant, all adjustments carried
forward and not theretofore made up to and including the date of
such exercise shall be made to the nearest one one-hundredth
(.01) of a cent.
4.10 Other Dilutive Events. If any event shall occur as to
which the provisions of this section 4 or of section 5 are not
strictly applicable but the failure to make any adjustment would
not fairly protect the purchase rights represented by this
Agreement and the Warrants issued hereunder in accordance with
the essential intent and principles of such sections, then in
each such case, the Company shall appoint a firm of independent
public accountants of recognized national standing (which may be
the regular auditors of the Company), which shall give their
opinion upon the adjustment, if any, on a basis consistent with
the essential intent and principles established in sections 4 and
5, necessary to preserve, without dilution, the purchase rights
represented by this Agreement and the Warrants issued hereunder.
Upon receipt of such opinion, the Company will promptly mail a
copy thereof to the Warrant Agent and each holder of a Warrant
and shall make the adjustments described therein.
5. Consolidation, Merger, Sale of Assets, Reorganization, etc.
5.1 General Provisions. In case the Company, after the
Original Issue Date, (a) shall consolidate with or merge into any
other Person and shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) shall permit
any other Person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving Person but,
in connection with such consolidation or merger, Common Stock or
Other Securities shall be changed into or exchanged for cash,
stock or other securities of any other Person or any other
property, or (c) shall transfer all or substantially all of its
properties and assets to any other Person, or (d) shall effect a
capital reorganization or reclassification of Common Stock or
Other Securities (other than a capital reorganization or
reclassification resulting in the issue of Additional Shares of
Common Stock for which adjustment in the Warrant Purchase Price
is provided in section 4.2(b) or 4.3), then, and in the case of
each such transaction, the Company shall give written notice
thereof to each holder of any Warrant not less than 30 days prior
to the consummation thereof and proper provision shall be made so
that, upon the basis and the terms and in the manner provided in
this section 5, the holder of this Warrant, upon the exercise
hereof at any time after the consummation of such transaction,
shall be entitled to receive, at the aggregate Warrant Purchase
Price in effect at the time of such consummation for all Common
Stock (or Other Securities) issuable upon such exercise
immediately prior to such consummation, in lieu of the Common
Stock (or Other Securities) issuable upon such exercise prior to
such consummation, either of the following, as such holder shall
elect by written notice to the Company on or before the date
immediately preceding the date of the consummation of such
transaction:
(i) the highest amount of cash, securities or other property
to which such holder would actually have been entitled as a
shareholder upon such consummation if such holder had exercised
this Warrant immediately prior thereto, subject to adjustments
(subsequent to such consummation) as nearly equivalent as
possible to the adjustments provided for in section 4 and this
section 5, provided that if a purchase, tender or exchange offer
shall have been made to and accepted by the holders of Common
Stock under circumstances in which, upon completion of such
purchase, tender or exchange offer, the maker thereof, together
with members of any group (within the meaning of Rule 13d-5(b)(1)
under the Exchange Act) of which such maker is a part, and
together with any affiliate or associate of such maker (within
the meaning of Rule 12b-2 under the Exchange Act) and any members
of any such group of which any such affiliate or associate is a
part, own beneficially (within the meaning of Rule 13d-3 under
the Exchange Act) more than 50% of the outstanding shares of
Common Stock, and if the holder of this Warrant so designates in
such notice given to the Company, the holder of this Warrant
shall be entitled to receive the highest amount of cash,
securities or other property to which such holder would actually
have been entitled as a shareholder if the holder of this Warrant
had exercised this Warrant prior to the expiration of such
purchase, tender or exchange offer and accepted such offer (or,
if prorationing shall have been applicable to such purchase,
tender or exchange offer, the combined amount per share of cash,
securities or other property to which such holder would have been
entitled if such holder had accepted such offer and sold the same
percentage of shares pursuant thereto as other accepting
shareholders, and, as to the shares not sold in such offer, had
the same rights to receive cash, securities or other property per
share as other shareholders holding shares immediately prior to
the consummation of such transaction), subject to adjustments
(from and after the consummation of such purchase, tender or
exchange offer) as nearly equivalent as possible to the
adjustments provided for in section 4 and this section 5; or
(ii) in the event of a Stock Sale, the number of shares of
capital stock (or equivalent equity interests) of the Acquiring
Person (the "Merger Stock"), subject to adjustments (subsequent
to such corporate action) as nearly equivalent as possible to the
adjustments provided for in section 4 and this section 5,
determined by dividing (x) the product obtained by multiplying
(1) the number of shares of Common Stock (or Other Securities) to
which the holder of this Warrant would have been entitled had
such holder exercised this Warrant immediately prior to the
consummation of such transaction, times (2) the greater of the
Acquisition Price and the Warrant Purchase Price in effect on the
date immediately preceding the date of such consummation, by
(y) the Current Market Price per share of the the Merger Stock,
on the date immediately preceding the date of such consummation.
5.2 Assumption of Obligations, etc. Notwithstanding anything
contained in this Agreement to the contrary, the Company will not
effect any of the transactions described in clauses (a) through
(d) of section 5.1 unless, prior to the consummation thereof,
(a) each Person (other than the Company) that may be required to
deliver any cash, stock or other securities or other property
upon the exercise of the Warrants as provided herein shall
assume, by written instrument delivered to, and reasonably
satisfactory to, the Warrant Agent, (x) the obligations of the
Company under this Agreement (and if the Company shall survive
the consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any
continuing obligations of the Company under this Agreement) and
(y) the obligation to deliver to each holder of a Warrant such
cash, stock or other securities or other property as such holder
may be entitled to receive in accordance with the provisions of
section 5.1, and (b) such Person shall have similarly delivered
to the Warrant Agent an opinion of counsel for such Person, which
counsel may be an in-house counsel of such Person or such other
counsel reasonably satisfactory to the Warrant Agent and which
opinion shall be reasonably satisfactory to the Warrant Agent,
addressed to the Warrant Agent and stating that this Agreement
and the Warrants issued hereunder shall thereafter continue in
full force and effect and the terms hereof and thereof (in
cluding, but not limited to, all of the provisions of section 4
and this section 5) shall be applicable to the cash, stock or
other securities or other property that such Person may be
required to deliver upon any exercise of any Warrant or the
exercise of any rights pursuant thereto. Nothing in this sec
tion 5 or in section 8 shall be deemed to authorize the Company
to enter into any transaction not otherwise permitted by this
Agreement.
6. No Dilution or Impairment.
The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization,
transfer of assets, dissolution, issuance or sale of securities
or any other voluntary action or omission, avoid or seek to avoid the
observance or performance of any of the terms of this Agreement or any
of the Warrants issued hereunder, but will at all times in
good faith observe and perform all such terms and take all such action
as may be necessary or appropriate in order to protect the rights of each
holder of a Warrant against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not permit
the par value of any shares of stock receivable upon the exercise of
any Warrant to exceed the amount payable therefor upon such exercise,
(b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of stock upon the exercise of all of the Warrants
from time to time outstanding, (c) will not take any action that results
in any adjustment of the Warrant Purchase Price if the total number of
shares of Common Stock (or Other Securities) issuable after the action
upon the exercise of all of the Warrants would exceed the total number
of shares of Common Stock (or Other Securities) then authorized by the
Company's certificate of incorporation and available for the purpose
of issuance upon such exercise and (d) will not issue any capital stock
of any class that (x) has the right to more than one vote per share or
(y) is preferred as to dividends or as to the distribution of assets upon
voluntary or involuntary dissolution, liquidation or winding-up, unless
such stock is sold for a cash consideration at least equal to the amount
of its preference upon voluntary or involuntary dissolution, liquidation
or winding-up and the rights of the holders thereof shall be limited to a
fixed per centage (not exceeding 15%) of such cash consideration in
respect of participation in dividends.
7. Accountants' Reports.
In each case of any adjustment or readjustment in the
Warrant Purchase Price or the shares of Common Stock (or Other Securities)
issuable upon the exercise of the Warrants, the Company at its expense
will promptly compute such adjustment or readjustment in accordance with the
terms of this Agreement and cause independent public accountants of
recognized national standing selected by the Company (which may be the
regular auditors of the Company) to verify each such computation and
prepare a report setting forth such adjustment or readjustment and showing
in reasonable detail the method of calculation thereof and the facts upon
which such adjustment or readjustment is based, including, but not limited
to, a statement of (a) the consideration received or to be received by
the Company for any Additional Shares of Common Stock issued, sold or
transferred or deemed hereby to have been issued, (b) the number of shares
of Common Stock outstanding or deemed hereby to be outstanding, and (c) the
Warrant Purchase Price in effect immediately prior to such issuance or
sale and as adjusted and readjusted (if required by section 4) on account
thereof. The Company will forthwith mail a copy of each such report to
the Warrant Agent, which shall promptly mail a copy to each holder of a
Warrant. The Warrant Agent will cause the same to be available for
inspection at its principal office during normal business hours by any
holder of a Warrant or any prospective purchaser of a Warrant
designated by the holder thereof.
8. Notification of Certain Events.
8.1 Corporate Action. In the event of:
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend (other
than a regular periodic dividend payable in cash out of earned
surplus in an amount not exceeding by more than 10% the amount of
the cash dividend for the immediately preceding period) or other
distribution of any kind, or any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right or
interest of any kind; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the Common Stock or other
capital stock of the Company, any consolidation or merger
involving the Company, or any sale or transfer of all or
substantially all of the assets of the Company; or
(c) the voluntary or involuntary dissolution, liquidation, or
winding up of the Company or Homeland;
the Company shall cause to be filed with the Warrant Agent and mailed
to each holder of a Warrant a notice specifying (i) the date or
expected date on which any such record is to be taken for the purpose
of such dividend, distribution or rights, and the amount and character of
such dividend, distribution or right, or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution or rights are to be determined, and the
amount and character of such dividend, distribution or right, and (ii)
the date or expected date on which any such reorganization,
reclassification, recapitalization, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective,
and the time, if any such time is to be fixed, as of which holders of
record of Common Stock (or Other Securities) shall be entitled to exchange
their shares of Common Stock (or Other Securities) for the securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up. Such notice shall be delivered not less than
20 days prior to such date therein specified, in the case of any such
date referred to in clause (i) of the preceding sentence, and not less
than 45 days prior to such date therein specified, in the case of any
such date referred to in clause (ii) of the preceding sentence.
8.2 Expiration Date. The Company shall give each holder of a
Warrant written notice of the Expiration Date. Such notice may
be given by the Company not fewer than 30 days but not more than
60 days prior to the Expiration Date.
8.3 Available Information. The Company shall promptly file
with the Warrant Agent copies of its annual reports and of the
information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules
and regulations prescribe) that the Company is required to file
with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. If the Company is not required to make such
filings, the Company shall promptly deliver to the Warrant Agent
adequate current public information with respect to the Company
within the meaning of paragraph (c)(2) of Rule 144 of the General
Rules and Regulations under the Securities Act.
9. Registration Rights Agreement.
(a) Each holder of a Warrant or of any securities issued or
issuable upon the exercise thereof or any securities issued or
issuable upon the exercise, conversion or exchange of such
securities is entitled to the benefits of the Registration Rights
Agreement, to the extent and for so long as therein provided. By
acceptance of a Warrant Certificate or of any securities issued
or issuable upon the exercise thereof or any securities issued or
issuable upon the exercise, conversion or exchange of such
securities, each holder of a Warrant agrees to be bound by the
terms of the Registration Rights Agreement, to the extent and for
so long as therein provided.
(b) Each Warrant Certificate issued hereunder and each Warrant
Certificate issued upon transfer or in substitution for any such
Warrant Certificate pursuant to section 13 or 14 shall be stamped
or otherwise imprinted with a legend in substantially the
following form, until such time as the rights of any holder
thereof under the Registration Rights Agreement shall terminate
in accordance with the terms thereof:
"Each holder of this Warrant
Certificate or any shares acquired upon the
exercise of any Warrant represented hereby by
acceptance of this Warrant Certificate or any
certificate representing any such shares
acknowledges that such holder is entitled to the
benefits of and bound by the terms of the Registration
Rights Agreement, dated as of August 2,
1996, among the Company and certain of its
stockholders and holders of other equity interests,
a copy of which is on file at the offices of the
Company."
(c) Each certificate for Common Stock (or Other Securities)
issued upon the exercise of any Warrant and each certificate
issued upon the direct or indirect transfer of any such Common
Stock (or Other Securities) shall be stamped or otherwise
imprinted with a legend in substantially the following form,
until such time as the rights of any holder thereof under the
Registration Rights Agreement shall terminate in accordance with
the terms thereof:
"Each holder of the shares represented
by this certificate by acceptance of this
certificate acknowledges that such holder is
entitled to the benefits of and bound by the terms
of the Registration Rights Agreement, dated as of
August 2, 1996, among the Company and certain of
its stockholders and holders of other equity
interests, a copy of which is on file at the
offices of the Company."
10. Reservation of Stock, etc.
10.1 Reservation; Due Authorization, etc. The Company shall at
all times reserve and keep available, free from preemptive
rights, out of its authorized but unissued Common Stock (or out
of authorized Other Securities), solely for issuance and delivery
upon exercise of Warrants, the full number of shares of Common
Stock (and Other Securities) from time to time issuable upon the
exercise of all Warrants from time to time outstanding. All
shares of Common Stock (and Other Securities) shall be duly
authorized and, when issued upon such exercise, shall be duly and
validly issued, and (in the case of shares) fully paid and non
assessable, and free from all taxes, liens, charges, security
interests, encumbrances and other restrictions created by or
through the Company.
10.2 Compliance with Law. The Company will use its best
efforts, at its expense and on a continual basis, to assure that
all shares of Common Stock (and Other Securities) that may be
issued upon exercise of Warrants may be so issued and delivered
without violation of any Federal or state securities law or
regulation, or any other law or regulation applicable to the
Company or any of its subsidiaries, provided that with respect to
any such exercise involving a sale or transfer of Warrants or any
such securities issuable upon such exercise, the Company shall
have no obligation to register such Warrants or securities under
any such securities law except as provided in the Registration
Rights Agreement.
11. Payment of Taxes.
The Company will pay any and all documentary stamp or similar
issue taxes payable to the United States of America or any State, or any
political subdivision or taxing authority thereof or therein, in respect
of the issuance or delivery of shares of Common Stock (or Other Securities)
on exercise of Warrants, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of Common Stock (or Other Securities) in a name other
than that of the registered holder of the Warrants to be exercised, and
no such issuance or delivery shall be made unless and until the person
requesting such issuance has paid to the Company the amount of any such tax
or has established, to the reasonable satisfaction of the Company, that
such tax has been paid.
12. Loss or Mutilation.
Upon receipt by the Company and the Warrant Agent of evidence
reasonably satisfactory to them of the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate and of an indemnity
bond reasonably satisfactory to them in form or amount, and (in the case of
mutilation) upon surrender and cancellation thereof, then, in the absence
of notice to the Company or the Warrant Agent that the Warrants represented
thereby have been acquired by a bona fide purchaser, the Company shall
execute and deliver to the Warrant Agent and, upon the Company's request,
an authorized signatory of the Warrant Agent shall manually countersign
and deliver, to the registered holder of the lost, stolen, destroyed or
mutilated Warrant Certificate, in exchange for or in lieu thereof, a new
Warrant Certificate of the same tenor and for a like aggregate number of
Warrants. Upon the issuance of any new Warrant Certificate under this
section 12, the Company may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the reasonable fees and expenses
of the Warrant Agent) in connection there with. Every new Warrant
Certificate executed and delivered pursuant to this section 12 in lieu of
any lost, stolen or destroyed Warrant Certificate shall be entitled to the
same benefits of this Agreement equally and proportionately with any and
all other Warrant Certificates, whether or not the allegedly lost, stolen
or destroyed Warrant Certificate shall be at any time enforceable by
anyone. The provisions of this section 12 are exclusive and shall preclude
(to the extent lawful) all other rights or remedies with respect to the
replacement of mutilated, lost, stolen or destroyed Warrant Certificates.
13. Warrant Registration.
13.1 Registration. The Warrant Certificates shall be issued
inregistered form only and shall be registered in the names of the
record holders of the Warrant Certificates to whom they are to be
delivered. The Company shall maintain or cause to be maintained
a register in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of
Warrants and of transfers or exchanges of Warrant Certificates as
provided in this Agreement. Such register shall be maintained at
the office of the Company or the Warrant Agent located at the
respective address therefor as provided in section 17.1. Such
register shall be open for inspection upon notice at all
reasonable times by the Warrant Agent and each holder of a
Warrant.
13.2 Transfer or Exchange. At the option of the holder,
Warrant Certificates may be exchanged or transferred for other
Warrant Certificates for a like aggregate number of Warrants,
upon surrender of the Warrant Certificates to be exchanged at the
office of the Company or the Warrant Agent maintained for such
purpose at the respective address therefor as provided in section 17.1,
and upon payment of the charges hereinafter provided. Whenever any Warrant
Certificates are so surrendered for exchange or transfer, the Company shall
execute, and an authorized signatory of the Warrant Agent shall manually
countersign and deliver, the Warrant Certificates that the holder making the
exchange is entitled to receive.
All Warrant Certificates issued upon any registration of
transfer or exchange of Warrant Certificates shall be the valid obligations
of the Company, evidencing the same obligations, and entitled to the same
benefits under this Agreement, as the Warrant Certificates surrendered for
such registration of transfer or exchange.
Every Warrant Certificate surrendered for registration of
transfer or exchange shall (if so required by the Company or the Warrant
Agent) be duly endorsed, or be accompanied by an instrument of transfer
in form reasonably satisfactory to the Company and the Warrant Agent and
duly executed, by the registered holder thereof or such holder's
officer or representative duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Warrant Certificates.
Any Warrant Certificate surrendered for registration of
transfer, exchange or the exercise of the Warrants represented thereby shall,
if surrendered to the Company, be delivered to the Warrant Agent, and all
Warrant Certificates surrendered or so delivered to the Warrant Agent
shall be promptly cancelled by the Warrant Agent. Any such Warrant
Certificate shall not be reissued by the Company and, except as provided in
this section 13 in case of an exchange or transfer, in section 12 in case
of a mutilated Warrant Certificate and in section 3 in case of the exercise
of less than all the Warrants represented thereby, no Warrant Certificate
shall be issued hereunder in lieu thereof. The Warrant Agent shall deliver to
the Company from time to time or otherwise dispose of such cancelled Warrant
Certificates in a manner reasonably satisfactory to the Company.
14. Warrant Agent.
The Warrant Agent undertakes the duties and obligations imposed
by this Agreement upon the terms and conditions set forth in this section 14.
The Company, and the holders of Warrants by their acceptance thereof, shall
be bound by all of such terms and conditions.
(a) The Warrant Agent shall not by countersigning Warrant
Certificates or by any other act hereunder be accountable with
respect to or be deemed to make any representations as to the
validity or authorization of the Warrants or the Warrant
Certificates (except as to its countersignature thereon), as to
the validity, authorization or value (or kind or amount) of any
Common Stock or of any other securities or other property delivered or
deliverable upon exercise of any Warrant, or as to the purchase price of
such Common Stock, securities or other property. The Warrant Agent shall
not (i) be liable for any recital or statement of fact contained herein or
in the Warrant Certificates or for any action taken, suffered or omitted by
the Warrant Agent in good faith in the belief that any Warrant
Certificate or any other document or any signature is genuine or
properly authorized, (ii) be responsible for determining whether
any facts exist that may require any adjustment of the purchase
price and the number of shares of Common Stock purchasable upon
exercise of Warrants, or with respect to the nature or extent of
any such adjustments when made, or with respect to the method of
adjustment employed, (iii) be responsible for any failure on the
part of the Company to issue, transfer or deliver any Common
Stock or other securities or property upon the surrender of any
Warrant for the purpose of exercise or to comply with any other
of the Company's covenants and obligations contained in this
Agreement or in the Warrant Certificates or (iv) be liable for
any act or omission in connection with this Agreement except for
its own negligence or willful misconduct.
(b) The Warrant Agent is hereby authorized to accept
instructions with respect to the performance of its duties hereunder
from the President, any Vice President, the Treasurer or any
Assistant Treasurer of the Company and to apply to any such
officer for advice or instructions. The Warrant Agent shall not
be liable for any action taken, suffered or omitted by it in good
faith in accordance with the instructions of any such officer.
(c) The Warrant Agent may execute and exercise any of the
rights and powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys, agents or
employees, provided reasonable care has been exercised in the
selection and in the continued employment of any such attorney,
agent or employee. The Warrant Agent shall not be under any
obligation or duty to institute, appear in, or defend any action,
suit or legal proceeding in respect hereof, but this provision
shall not affect the power of the Warrant Agent to take such
action as the Warrant Agent may consider proper. The Warrant
Agent shall promptly notify the Company in writing of any claim
made or action, suit or proceeding instituted against the Warrant
Agent arising out of or in connection with this Agreement.
(d) The Company will perform, execute, acknowledge and deliver
or cause to be performed, executed, acknowledged and delivered
all such further acts, instruments and assurances as may
reasonably be required by the Warrant Agent in order to enable
the Warrant Agent to carry out or perform its duties under this
Agreement.
(e) The Warrant Agent shall act solely as agent. The Warrant
Agent shall not be liable except for the performance of such
duties as are specifically set forth herein, and no implied
covenants or obligations shall be read into this Agreement
against the Warrant Agent, whose duties and obligations shall be
determined solely by the express provisions hereof.
(f) The Warrant Agent may at any time consult with legal
counsel satisfactory to it (who may be legal counsel for the
Company) and the Warrant Agent shall incur no liability or responsibility
to the Company or to any Warrant holder for any action
taken, suffered or omitted by the Warrant Agent in good faith in
accordance with the opinion or advice of such counsel.
(g) The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse the
Warrant Agent for its reasonable expenses hereunder; and further
agrees to indemnify the Warrant Agent and hold it harmless
against any and all liabilities, including, but not limited to,
judgments, costs and counsel fees, for anything done, suffered or
omitted by the Warrant Agent in the execution of its duties and
powers hereunder, except for any such liabilities that arise as a
result of the Warrant Agent's negligence or willful misconduct.
(h) The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently pay to the
Company all moneys received by the Warrant Agent on behalf of the
Company on the purchase of shares of Common Stock through the
exercise of Warrants.
(i) The Warrant Agent and any stockholder, director, officer
or employee of the Warrant Agent may buy, sell or deal in any of
the Warrants or other securities of the Company or become
pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to the Company
or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
(j) The Warrant Agent may resign its duties and be discharged
from all further duties and liabilities hereunder (except
liabilities arising as a result of the Warrant Agent's negligence
or willful misconduct), after giving 30 days' prior written
notice to the Company. The Company may remove the Warrant Agent
upon 30 days' written notice, and the Warrant Agent shall
thereupon in like manner be discharged from all further duties
and liabilities hereunder, except as to liabilities arising as a
result of the Warrant Agent's negligence or willful misconduct.
The Company shall cause to be mailed (by first class mail,
postage prepaid) to each registered holder of a Warrant at such
holder's last address as shown on the register of the Company, at
the Company's expense, a copy of such notice of resignation or
notice of removal, as the case may be. Upon such resignation or
removal the Company shall promptly appoint in writing a new
warrant agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified
in writing of such resignation by the resigning Warrant Agent or
after such removal, then the holder of any Warrant may apply to
any court of competent jurisdiction for the appointment of a new
warrant agent. Pending appointment of a successor to the Warrant
Agent, either by the Company or by such a court, the duties of
the Warrant Agent shall be carried out by the Company. Any
successor warrant agent, whether appointed by the Company or by
such a court, shall be a corporation, incorporated under the laws
of the United States or of any State thereof and authorized under
such laws to exercise corporate trust powers, be subject to supervision
and examination by Federal or State authority, and have a combined capital
and surplus of not less than $100,000,000 as set
forth in its most recent published annual report of condition.
After acceptance in writing of such appointment by the new
warrant agent it shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance,
act or deed; but if for any reason it shall be necessary or expedient to
execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of
the Company and shall be legally and validly executed and
delivered by the resigning or removed Warrant Agent. Not later
than the effective date of any such appointment the Company shall
file notice thereof with the resigning or removed Warrant Agent
and shall forthwith cause a copy of such notice to be mailed (by
first class mail, postage prepaid) to each registered holder of a
Warrant at such holder's last address as shown on the register of
the Company. Failure to give any notice provided for in this
paragraph (j), or any defect in any such notice, shall not affect
the legality or validity of the resignation of the Warrant Agent
or the appointment of a new warrant agent, as the case may be.
(k) If at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall
have been countersigned but not delivered, the Warrant Agent may
adopt the countersignature under its prior name and deliver
Warrant Certificates so countersigned; and if at that time any of
the Warrant Certificates shall not have been countersigned, the
Warrant Agent may countersign such Warrant Certificates either in
its prior name or in its changed name; and in all such cases such
Warrant Certificates shall have the full force and effect
provided in the Warrant Certificates and this Agreement.
(l) Any corporation into which the Warrant Agent or any new
warrant agent may be merged or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent
shall be a party or any corporation succeeding to all or sub
stantially all the agency business of the Warrant Agent or any
new warrant agent shall be a successor Warrant Agent under this
Agreement without any further act, provided that such corporation
would be eligible for appointment as a new warrant agent under
the provisions of paragraph (j) of this section 14. The Company
shall promptly cause notice of the succession as Warrant Agent of
any such successor Warrant Agent to be mailed (by first class
mail, postage prepaid) to each registered holder of a Warrant at
his last address as shown on the register of the Company.
15. Definitions.
As used herein, the following terms have the following
respective meanings:
Acquiring Person:
(a) the continuing or surviving corporation of a consolidation
or merger with the Company (if other than the Company), (b) the
transferee of substantially all of the properties and assets of the Company,
(c) the corporation consolidating with, merging into or acquiring the
Company in a consolidation, merger or other transaction in connection with
which the Common Stock is changed into or exchanged for stock or
other securities of any other Person or cash or any other property, or (d)
in the case of a capital reorganization or reclassification or
recapitalization, the Company.
Acquisition Price:
as applied to the Common Stock, with respect to any transaction
to which section 5 applies, (a) the price per share equal to the
greater of the following, determined in each case as of the date immediately
preceding the date of consummation of such transaction: (i) the Market
Price of the Common Stock and (ii) the highest amount of cash plus the Fair
Value of the highest amount of securities or other property which the
holder of this Warrant would have been entitled as a shareholder to receive
upon such consummation if such holder had exercised this Warrant immediately
prior thereto, or (b) if a purchase, tender or an exchange offer is made by
the Acquiring Person (or by any of its affiliates) to the holders of the
Common Stock and such offer is accepted by the holders of more than 50% of
the outstanding shares of Common Stock, the greater of (i) the price
determined in accordance with the foregoing subdivision (a) and (ii) the
price per share equal to the greater of the following, determined in each
case as of the date immediately preceding the acceptance of such offer by the
holders of more than 50% of the outstanding shares of Common Stock:
(x) the Market Price of the Common Stock and (y) the highest amount of cash
plus the Fair Value of the highest amount of securities or other property
which the holder of this Warrant would be entitled as a shareholder to
receive pursuant to such offer if such holder had exercised this Warrant
immediately prior to the expiration of such offer and accepted the same.
Additional Shares of Common Stock: all shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to section 4.4
or 4.5, deemed to be issued) by the Company after the Original Issue Date,
whether or not subsequently reacquired or retired by the Company,
other than (a) shares of Common Stock issued or issuable upon the exercise
of Warrants issued hereunder and (b) not more than 263,158 shares of
Common Stock issued or issuable upon the exercise of the Management Stock
Options.
Affiliate: with respect to any Person, any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, (a) "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of Voting Common Stock (or equivalent equity interests), by
contract or otherwise, and the terms "controlling" or "controlled" have
meanings correlative to the foregoing, and (b) a Subsidiary is an Affiliate
of the Company and each other Subsidiary.
Bankruptcy Court: the United States Bankruptcy Court for the
District of Delaware.
Business Day: any day other than a Saturday or a Sunday or a
day on which commercial banking institutions in New York City are
authorized by law to be closed, provided that, in determining the period
within which certificates or Warrants are to be issued and delivered pursuant to
section 3.1 at a time when shares of Common Stock (or Other Securities) are
listed or admitted to trading on any national securities exchange or in
the over-the-counter market and in determining the Market Price of any
securities listed or admitted to trading on any national securities exchange
orin the over-the-counter market, "Business Day" shall mean any day when
the principal exchange on which such securities are then listed or admitted
to trading is open for trading or, if such securities are traded in the
over-the-counter market in the United States, such market is open
for trading, and provided further that any reference in this Agreement to
"days" (unless Business Days are specified) shall mean calendar days.
Commission: the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act or the
Exchange Act, whichever is the relevant statute for the particular purpose.
Common Stock: the Company's Common Stock, par value $.01 per
share, as constituted on the Original Issue Date after giving effect to the
consummation of the Restructuring, any stock into which such Common Stock
shall have been changed or any stock resulting from any reclassification of
such Common Stock, and all other stock of any class or classes (however
designated) of the Company the holders of which have the right, without
limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference.
Company: the meaning specified in the opening paragraphs of
this Agreement.
Convertible Securities: any evidences of indebtedness, shares
of stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
Current Market Price: on any date specified herein, (a) with
respect to Common Stock or to Voting Stock (or equivalent equity interests)
of an Acquiring Person or its Parent, (i) the average daily Market Price
during the period of the most recent 20 consecutive Business Days ending on
such date, or (ii) if shares of Common Stock are not then listed or admitted
to trading on any national securities exchange and if the closing bid
and asked prices thereof are not then quoted or published in the
over-the-counter market, the Market Price on such date and (b) with respect to
any other securities, the Market Price on such date.
Exchange Act: the Securities Exchange Act of 1934, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be amended and in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934
shall include a reference to the comparable section, if any, of any such
similar Federal statute.
Expiration Date: the meaning specified in section 2.
Fair Value: with respect to any securities or other property,
the Fair Value thereof as of a date which is within 15 days of the
date as of which the determination is to be made (a) determined by an
agreement between the Company and the Requisite Holders of Warrants or (b)
if the Company and the Requisite Holders of Warrants fail to agree,
determined jointly by an independent investment banking firm retained by the
Company and by an independent investment banking firm retained by the
Requisite Holders of Warrants, either of which firms may be an independent
investment banking firm regularly retained by the Company or any such holder
or (c) if the Company or such holders shall fail so to retain an independent
investment banking firm within five Business Days of the retention of such
firm by such holders or the Company, as the case may be, determined solely
by the firm so retained or (d) if the firms so retained by the Company and
by such holders shall be unable to reach a joint determination within 15
Business Days of the retention of the last firm so retained, determined by
another independent investment banking firm which is not a regular investment
banking firm of the Company or any such holder chosen by the first two such
firms.
Management Stock Options: the options to purchase up to
263,158 shares of Common Stock to be granted to certain executive officers
and key employees of the Company and its Subsidiaries pursuant to Management
Stock Option Plan to be implemented in connection with the Restructuring.
Market Price: on any date specified herein, (a) with respect
to Common Stock, the amount per share equal to (i) the last sale price
of shares of Common Stock, regular way, on such date or, if no such sale
takes place on such date, the average of the closing bid and asked prices
thereof on such date, in each case as officially reported on the principal
national securities exchange on which the Common Stock is then listed
or admitted to trading, or (ii) if the Common Stock is not then listed or
admitted to trading on any national securities exchange but the Common Stock
is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or if the Common Stock is not
so designated, the average of the reported closing bid and asked prices
thereof on such date as shown by the NASD automated quotation system or, if no
shares thereof are then quoted in such system, as published by the National
Quotation Bureau, Incorporated or any successor organization, and in
either case as reported by any member firm of the New York Stock Exchange
selected by the Company, or (iii) if the Common Stock is not then listed or
admitted to trading on any national exchange or designated as a national
market system security and if no closing bid and asked prices thereof are then
so quoted or published in the over-the-counter market, the higher of (x) the
book value thereof as determined by any firm of independent public
accountants of recognized national standing selected by the Board of
Directors of the Company, as of the last day of any month ending within 60 days
preceding the date as of which the determination is to be made and (y) the
Fair Value thereof, determined on the basis of an assumed sale of the
Company and its Subsidiaries as a whole without giving effect to any control
premium, to any discount for lack of liquidity or to the fact that
the Company has no class of equity securities registered under the Exchange
Act; and (b) with respect to any other securities, (x) the value as
determined in accordance with the methods provided in (i) and (ii) of clause
(a) above or (y) if such other security is not then listed or admitted to
trading on any national exchange or designated as a national market system
security and if no closing bid and asked prices thereof are then quoted or
published in the over-the-counter market, the Fair Value thereof.
Merger Stock: the meaning specified in section 5.1(i).
NASD: the National Association of Securities Dealers.
Old Common Stock: the Company's former Class A Common Stock,
$.01 par value per share, outstanding immediately prior to the
effectiveness of the Plan of Reorganization.
Options: options, warrants or other rights to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible
Securities.
Original Issue Date: the meaning specified in section 1.1.
Other Securities: any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) that
the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or that at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to section 5 or otherwise.
Parent: as to any Acquiring Person, any corporation that (a)
controls the Acquiring Person directly or indirectly through one or more
intermediaries, (b) is required to include the Acquiring Person in its
consolidated financial statements under generally accepted accounting
principles and (c) is not itself included in the consolidated financial
statements of any other Person (other than its consolidated subsidiaries).
Person: any individual, partnership, association, joint
venture, corporation, business, trust, unincorporated organization,
government or department, agency or subdivision thereof, or other
person or entity.
Plan of Reorganization: the Joint Plan of Reorganization of
the Company and Homeland, which was approved by the Bankruptcy Court on July
19, 1996 and pursuant to which the Restructuring will be consummated.
Public Offering: any offering of Common Stock (or Other
Securities) to the public pursuant to an effective registration statement
under the Securities Act.
Registration Rights Agreement: the meaning specified in the
recitals of this Agreement.
Requisite Holders of Warrants: the holders of at least a
majority of all Warrants at the time outstanding, determined on the basis of
the number of shares of Common Stock or Other Securities deliverable upon
exercise thereof.
Restructuring: the meaning specified in the recitals of this
Agreement.
Securities Act: the Securities Act of 1933, or any successor
Federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be amended and in effect at the time. Reference to a
particular section of the Securities Act of 1933 shall include a reference to
the comparable section, if any, of any such successor Federal statute.
Stock Sale: a transaction of the type described in clauses (a),
(b), (c) or (d) of section 5.1, pursuant to which Common Stock or Other
Securities are changed into or exchanged for capital stock (or equivalent
equity interests, including, without limitation, Convertible
Securities) of an Acquiring Person.
Subsidiary: any corporation, association or other business
entity a majority (by number of votes) of the Voting Common Stock (or
equivalent equity interests entitled to vote for the election of a majority
of the directors thereof or persons performing similar functions therefor)
of which is at the time owned by the Company or by one of or more
Subsidiaries or by the Company and one or more Subsidiaries.
Voting Common Stock: with respect to any corporation, stock of
any class or classes if the holders of the stock of such class or classes
are ordinarily (in the absence of contingencies) entitled to vote for the
election of a majority of the directors of such corporation.
Warrant: the meaning specified in section 1.1.
Warrant Certificates: the meaning specified in section 1.2.
Warrant Purchase Price: the meaning specified in section 4.2.
Warrants: the meaning specified in the opening recitals of
this Agreement.
16. Remedies, etc.
16.1 Remedies. The Company stipulates that the remedies at law
of each holder of a Warrant in the event of any default or
threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant are not and will
not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or
otherwise.
16.2 Warrant Holder Not Deemed a Stockholder. Prior to the
exercise of the Warrants represented thereby no holder of a
Warrant Certificate, as such, shall be entitled to any rights of
a stockholder of the Company, including, but not limited to, the
right to vote, to receive dividends or other distributions, to
exercise any preemptive right or to receive any notice of
meetings of stockholders, and no such holder shall be entitled to
receive notice of any proceedings of the Company except as
provided in this Agreement. Nothing contained in this Agreement
shall be construed as imposing any liabilities on such holder to
purchase any securities or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by
creditors or stockholders of the Company or otherwise.
16.3 Right of Action. All rights of action in respect of this
Agreement are vested in the registered holders of the Warrants.
Any registered holder of any Warrant, without the consent of the
Warrant Agent or the registered holder of any other Warrant, may
in such holder's own behalf and for such holder's own benefit enforce,
and may institute and maintain any suit, action or
proceeding against the Company suitable to enforce, or otherwise
in respect of, such holder's right to exercise such holder's
Warrants in the manner provided in the Warrant Certificate representing
such Warrants and in this Agreement.
17. Miscellaneous.
17.1 Notices. Any notice, demand or delivery authorized by
this Agreement shall be sufficiently given or made if sent by
first class mail, postage prepaid, addressed to any registered
holder of a Warrant at such holder's last known address appearing
on the register of the Company, and to the Company or the Warrant
Agent as follows:
To the Company:
Homeland Holding Corporation
2601 Northwest Expressway
Oil Center East, 11th Floor
Oklahoma City, OK 73112
Attention: Secretary
with a copy to:
Crowe & Dunlevy
1800 Mid-American Tower
20 North Broadway
Oklahoma City, OK 73102-8273
Attention: Kenni B. Merritt, Esq.
To the Warrant Agent:
By Hand
Liberty Bank and Trust Company of Oklahoma, N.A.
100 North Broadway, Ninth Floor
Stock Transfer Department
Oklahoma City, OK 73102
By Mail
Liberty Bank and Trust Company of Oklahoma, N.A.
P.O. Box 25848
Oklahoma City, OK 73125
Attention: Stock Transfer Department
or such other address as shall have been furnished in writing, in accordance
with this section 17.1, to the party giving or making such notice, demand
or delivery.
17.2 Governing Law. This Agreement, each Warrant Certificate
issued hereunder and all rights arising hereunder shall be
construed and determined in accordance with the laws of the State
of New York, without giving effect to the conflict of laws
principles or rules thereof, and the performance thereof shall be
governed and enforced in accordance with such laws.
17.3 Benefits of this Agreement. This Agreement shall be
binding upon and inure to the benefit of the Company and the
Warrant Agent and their respective successors and assigns, and
the registered and beneficial holders from time to time of the
Warrants. Nothing in this Agreement is intended or shall be
construed to confer upon any person, other than the Company, the
Warrant Agent and the registered and beneficial holders of the
Warrants, any right, remedy or claim under or by reason of this
Agreement or any part hereof.
17.4 Agreement of Holders of Warrant Certificates. Every
holder of a Warrant Certificate, by accepting the same, consents
and agrees with the Company, the Warrant Agent and with every
other holder of a Warrant Certificate that the Warrant
Certificates are transferable on the registry books of the
Warrant Agent only upon the terms and conditions set forth in
this Agreement, and the Company and the Warrant Agent may deem
and treat the person in whose name the Warrant Certificate is
registered as the absolute owner for all purposes whatsoever and
neither the Company nor the Warrant Agent shall be affected by
any notice to the contrary.
17.5 Counterparts. This Agreement may be executed in any
number of counterparts and each such counterpart shall for all
purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument.
17.6 Amendments. The Warrant Agent may, without the consent
or concurrence of the holders of the Warrants, by supplemental
agreement or other writing, join with the Company in making any
amendments or modifications of this Agreement that they shall
have been advised by counsel (a) are required to cure any
ambiguity or to correct any defective or inconsistent provision
or clerical omission or mistake or manifest error herein
contained, (b) add to the covenants and agreements of the Company
in this Agreement further covenants and agreements of the Company
thereafter to be observed, or surrender any rights or power
reserved to or conferred upon the Company in this Agreement or
(c) do not and will not adversely affect, alter or change the
rights, privileges or immunities of the registered holders of
Warrants. Any other amendment to this Agreement may be effected
only with the consent of the Requisite Holders of Warrants.
17.7 Headings. The table of contents hereto and the
descriptive headings of the several sections here of are inserted
for convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
HOMELAND HOLDING CORPORATION
By:_____________________________
Name:
Title:
LIBERTY BANK AND TRUST COMPANY
OF OKLAHOMA CITY, N.A.,
as Warrant Agent
By:_____________________________
Name:
175444 Title:
WARRANT AGREEMENT
between
HOMELAND HOLDING CORPORATION
and
LIBERTY BANK AND TRUST COMPANY OF
OKLAHOMA CITY, N.A.,
as Warrant Agent
263,158 Warrants
Dated as of August 2, 1996
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
Warrant No. __________ Number of Warrant(s): ___________
Exercisable On or Before August 2, 2001
WARRANT TO PURCHASE
COMMON STOCK
OF
HOMELAND HOLDING CORPORATION
SEE REVERSE FOR CERTAIN DEFINITIONS
This Certifies that _____________ or registered assigns, is
the owner of the number of WARRANTS set forth above, each of which
represents the right, at any time after the date hereof and on
or before 5:00 p.m., New York City time, on August 2, 2001, to purchase
from Homeland Holding Corporation, a Delaware corporation (the "Company"),
at the price of $ (the "Warrant Purchase Price"), one share of Common
Stock, $.01 par value, of the Company as such stock was constituted as of
August 2, 1996, subject to adjustment as provided in the Warrant Agreement
hereinafter referred to, upon surrender hereof, with the subscription form
on the reverse hereof duly executed, by hand or by mail to Liberty Bank and
Trust Company of Oklahoma City, National Association, as warrant agent under
the Warrant Agreement, at its office at 100 North Broadway, Ninth Floor,
Stock Transfer Department, Oklahoma City, Oklahoma 73102, or to any
successor thereto, as the warrant agent under the Warrant Agreement, at the
office of such successor maintained for such purpose (any such warrant agent
being herein called the "Warrant Agent") (or, if such exercise shall be
in connection with an underwritten public offering of shares of such Common
Stock (or Other Securities (as such term and other capitalized terms used
herein are defined in the Warrant Agreement)) subject to the Warrant
Agreement, at the location at which the Company shall have agreed to deliver
such securities), and simultaneous payment in full (by certified or official
bank or bank cashier's check payable to the order of the Company) of the
Warrant Pur chase Price in respect of each Warrant represented by this
Warrant Certificate that is so exercised, all subject to the terms and
conditions hereof and of the Warrant Agreement.
Upon any partial exercise of the Warrants represented
by this Warrant Certificate, there shall be issued to the holder hereof a
new Warrant Certificate representing the Warrants that were not exercised.
No fractional shares will be issued upon the exercise of
rights to purchase hereunder. As to any final fraction of a share that the
same holder of one or more Warrant Certificates, the rights under which are
exercised in the same transaction, would otherwise be entitled to purchase
on such exercise, the Company shall pay a cash amount equal to the value thereof
determined as provided in the Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement, dated as of August 2, 1996 (the "Warrant Agreement"),
between the Company and Liberty Bank and Trust Company of Oklahoma City,
National Association, as Warrant Agent, and is subject to the terms and
provisions contained therein, all of which terms and provisions the holder of
this Warrant Certificate consents to by acceptance hereof. Copies of the
Warrant Agreement are on file at the above-mentioned office of the Warrant
Agent and may be obtained by writing to the Warrant Agent.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF
THIS WARRANT SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS
SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Dated:August 2, 1996 HOMELAND HOLDING CORPORATION
By:________________________
Title:
Countersigned:
Liberty Bank and Trust Company of Oklahoma City, N.A., as Warrant Agent
By:__________________________
Authorized Signatory
[FORM OF REVERSE OF WARRANT CERTIFICATE]
HOMELAND HOLDING CORPORATION
The transfer of this Warrant Certificate and all rights hereunder
is registrable by the registered holder hereof, in whole or in part, on the
register of the Company upon surrender of this Warrant Certificate at the
office or agency of the Company or the office of the Warrant Agent maintained
for such purpose in Oklahoma City, Oklahoma, duly endorsed or accompanied by
a written instrument of transfer duly executed and in form satisfactory to
the Company and the Warrant Agent, by the registered holder hereof or his
attorney duly authorized in writing and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer or
registration thereof. Upon any partial transfer the Company will cause to
be delivered to such holder a new Warrant Certificate or Certificates with
respect to any portion not so transferred.
This Warrant Certificate may be exchanged at the office or
agency of the Company or the office of the Warrant Agent maintained for
such purpose in Oklahoma City, Oklahoma, for Warrant Certificates
representing the same aggregate number of Warrants, each new Warrant
Certificate to represent such number of Warrants as the holder hereof shall
designate at the time of such exchange.
Prior to the exercise of the Warrants represented hereby, the
holder of this Warrant Certificate, as such, shall not be entitled
to any rights of a stockholder of the Company, including, but not limited to,
the right to vote, to receive dividends or other distributions, to exercise
any preemptive right or to receive any notice of meetings of stockholders,
and shall not be entitled to receive notice of any proceedings of the
Company except as provided in the Warrant Agreement. Nothing contained
herein shall be construed as imposing any liabilities upon the holder of this
Warrant Certificate to purchase any securities or as a stockholder of the
Company, whether such liabilities are asserted by the Company or by creditors
or stockholders of the Company or otherwise.
This Warrant Certificate shall be void and all rights represented
hereby shall cease unless exercised on or before the close of business
on August 2, 2001.
This Warrant Certificate shall not be valid for any purpose until
it shall have been manually countersigned by an authorized signatory of the
Warrant Agent.
Witness the facsimile seal of the Company and the signature of
its duly authorized officer.
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
TO HOMELAND HOLDING CORPORATION
c/o [Warrant Agent's address]
The undersigned (i) irrevocably exercises ___________ of the
Warrants represented by the within Warrant Certificate, (ii) purchases one
share of Common Stock of Homeland Holding Corporation (before giving effect
to the adjustments provided in the Warrant Agreement referred to in the
within Warrant Certificate) for each Warrant so exercised and herewith makes
payment in full of the purchase price of $ in respect of each Warrant so
exercised as provided in the Warrant Agreement (such payment being by
certified or official bank or bank cashier's check payable to the order of
Homeland Holding Corporation), all on the terms and conditions specified in
the within Warrant Certificate and the Warrant Agreement, (iii) surrenders
this Warrant Certificate and all right, title and interest therein to
Homeland Holding Corporation and (iv) directs that the securities or other
property deliverable upon the exercise of such Warrants be registered or
placed in the name and at the address specified below and
delivered thereto.
Dated:_____________, 19__
_________________________________
(Owner)*
_________________________________
(Signature of Authorized Representative)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
Securities or property to be
issued and delivered to:
____________________________
Signature Guaranteed**
Please insert social
security or other
identifying number
Name__________________________________________________
Street Address___________________________________________
City, State and Zip Code___________________________________
*The signature must correspond with the name as written upon the
face of the within Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
**The signature must be guaranteed by a securities transfer agents
medallion program ("stamp") participant or an institution receiving prior
approval from the Warrant Agent.
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned registered holder of the
within Warrant Certificate hereby sells, assigns and transfers unto the
Assignee named below all of the rights of the undersigned under the within
Warrant Certificate, with respect to the number of Warrants set
forth below:
Name of No. of
Assignee Address Warrants
Please insert social security
or other identifying number
of Assignee
and does hereby irrevocably constitute and appoint ___________ attorney to
make such transfer on the books of Homeland Holding Corporation maintained
for the purpose, with full power of substitution in the premises.
Dated: _______, 19__
Name______________________________*
Signature of Authorized
Representative____________________
Signature Guaranteed_____________**
*The signature must correspond with the name as written upon the
face of the within Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
**The signature must be guaranteed by a securities transfer
agents medallion program ("stamp") participant or an institution receiving
prior approval from the Warrant Agent.
TABLE OF CONTENTS
Page
1. Issuance of Warrants 1
1.1. Initial Issuance; Initial Share Amount 1
1.2. Form of Warrant Certificates 2
1.3. Execution of Warrant Certificates 2
1.4. Countersignature of Warrant Certificates 2
2. Duration of Warrants 2
3. Exercise of Warrants 2
3.1. Manner of Exercise 2
3.2. When Exercise Effective 3
3.3. Delivery of Certificates, etc. 3
3.4. Fractional Shares 4
4. Adjustment of Common Stock Issuable Upon Exercise 4
4.1. Adjustment of Number of Shares 4
4.2. Adjustment of Warrant Purchase Price 4
4.3. Extraordinary Dividends and
Distributions 5
4.4. Options and Convertible Securities 5
4.5. Stock Dividends, Stock Splits, etc. 7
4.6. Computation of Consideration 8
4.7. Adjustments for Combinations, etc. 9
4.8. Dilution in Case of Other Securities 9
4.9. Minimum Adjustment of Warrant Purchase Price 10
4.10. Other Dilutive Events 10
5. Consolidation, Merger, Sale of Assets,
Reorganization, etc. 10
5.1. General Provisions 10
5.2. Assumption of Obligations, etc. 12
6. No Dilution or Impairment 12
7. Accountants' Reports 13
Page
8. Notification of Certain Events 13
8.1. Corporate Action 13
8.2. Expiration 14
8.3. Available Information 14
9. Registration Rights Agreement 14
10. Reservation of Stock, etc. 15
10.1. Reservation; Due Authorization, etc. 15
10.2. Compliance with Law 15
11. Payment of Taxes 16
12. Loss or Mutilation 16
13. Warrant Registration 17
13.1. Registration 17
13.2. Transfer 17
14. Warrant Agent 18
15. Definitions 21
16. Remedies, etc. 26
16.1. Remedies 26
16.2. Warrant Holder Not Deemed a Stockholder 26
16.3. Right of Action 26
17. Miscellaneous 26
17.1. Notices 26
17.2. Governing Law 27
17.3. Benefits of this Agreement 27
17.4. Agreement of Holders of Warrant Certificates 27
17.5. Counterparts 28
17.6. Amendments 28
17.7. Headings 28
Exhibit A - Form of Warrant Certificate
EQUITY REGISTRATION RIGHTS AGREEMENT
EQUITY REGISTRATION RIGHTS AGREEMENT, dated as of August 2, 1996
(this "Agreement"), by Homeland Holding Corporation, a Delaware corporation (the
"Company"), for the benefit of the beneficial owners as of the Confirmation
Date (as such term and other capitalized terms are defined in Section 1.1) of
Old Common Stock (the "Old Equity Holders").
WHEREAS, the Company and Homeland Stores, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company ("Homeland"), filed
a Joint Plan of Reorganization with the United States Bankruptcy Court,
District of Delaware (the "Bankruptcy Court") on May 13, 1996 (the "Plan");
WHEREAS, the Plan was accepted by, among others, the holders of the
requisite percentage and amount of the Old Common Stock (designated as "Class 7
Interests" under the Plan), and the Bankruptcy Court entered an order
confirming the Plan on July 19, 1996 (the "Confirmation Date");
WHEREAS, the Plan became effective on August 2, 1996 (the
"Effective Date"); and
WHEREAS, pursuant to the Plan, (i) the Old Equity Holders are to
receive an aggregate 250,000 shares of Common Stock (the "Original Shares")
and warrants to purchase an aggregate 263,158 shares of Common Stock (the
"Original Warrants" and, together with the Original Shares, the "Original
Securities") in exchange for their Old Common Stock and (ii) registration
rights are to be granted to the Old Equity Holders with respect to such
Original Securities on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the Company agrees, and each Old Equity Holder
by receipt of its Original Securities pursuant to the Plan is deemed to
agree, as follows:
DEFINITIONS
SECTION 1.1 Definitions. As used herein, the following
terms shall have the meanings indicated:
"Bankruptcy Court" shall have the meaning given in the
recitals to this Agreement.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or obligated by law or executive order to close.
Unless specifically stated as a Business Day, all days
referred to herein shall mean calendar days.
"Common Stock" shall mean the common stock, par value $.01
per share, of the Company after the Company's Restated Certificate of
Incorporation is filed with the Secretary of State of the State of
Delaware pursuant to the Plan and any and all securities of any kind
whatsoever of the Company which may be issued after such filing with respect
to, or in exchange for, shares of Common Stock pursuant to a merger,
consolidation, reclassification, stock split, stock dividend, rights
offering, combination, recapitalization of the Company or otherwise.
"Complying Response" shall mean, with respect to any
Registration, each written request (other than an Initial Request)
submitted by a Remaining Class 7 Holder in connection with such
Registration that (i) complies with Section 2.1(c) and (ii) is received
by the Company within 15 Business Days from the date on which the Company
shall have given notice of the Initial Request for such Registration
pursuant to Section 2.1(a).
"Confirmation Date" shall have the meaning given in the
recitals to this Agreement.
"Designated Securities" shall mean, with respect to any
Participating Holder in connection with any Registration, the Registrable
Securities of such Participating Holder requested for inclusion in such
Registration in compliance with Section 2.1(c).
"Effective Date" shall have the meaning given in the
recitals to this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
"Included Securities" shall mean, with respect to any
Registration, all of the Designated Securities requested for inclusion in
such Registration or, in the case of a Registration in connection with an
Underwritten Offering, any lesser number of securities to which such
Registration may be limited pursuant to Section 2.1(h).
"Initial Request" shall have the meaning given in Section
2.1(a).
"Managing Underwriter" shall have the meaning given in
Section 2.1(g).
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Old Common Stock" shall mean the Company's Common Stock,
par value $.01 per share, which was exchanged for the Original Securities
pursuant to the Plan.
"Old Equity Holders" shall have the meaning given in the
recitals to this Agreement.
"Original Securities" shall have the meaning given in the
recitals to this Agreement.
"Original Shares" shall have the meaning given in the
recitals to this Agreement.
"Original Warrants" shall have the meaning given in the
recitals to this Agreement.
"Participating Holder" shall mean, with respect to any
Registration, each Remaining Class 7 Holder that shall have submitted the
Initial Request or a Complying Response in connection with such Registration.
"Permitted Transferee" shall mean a Transferee that satisfies
the eligibility, notice and other requirements set forth in Section 2.1(b)(ii).
"Person" shall mean any individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, or other entity of whatever nature.
"Plan" shall have the meaning given in the recitals to this
Agreement.
"Qualifying Old Equity Holder" shall mean an Old Equity Holder
that satisfies the notice requirements set forth in Section 2.1(b)(i).
"Registrable Securities" shall mean, at any time, (i) all
Original Securities owned beneficially by either Old Equity Holders or Permitted
Transferees, (ii) all shares of Common Stock issuable upon exercise of the
Original Warrants and (iii) all securities that at the time of issuance were
issued in respect of Registrable Securities to the Remaining Class 7 Holder
of such Registrable Securities by way of a stock dividend or stock split or
in connection with a combination of shares, reclassification, rights offering
recapitalization, merger, consolidation, other reorganization or otherwise,
provided that such securities are owned beneficially by either Qualifying
Old Equity Holders or Permitted Transferees.
"Registration" shall mean any registration of Registrable
Securities by the Company with the SEC under the Securities Act pursuant to
Section 2.1(a).
"Registration Document" means any Registration Statement and
any prospectus included therein (including any preliminary prospectus) and any
amendment or supplement to such Registration Statement or prospectus, in each
case, including all exhibits thereto and documents incorporated by reference
therein.
"Registration Expenses" shall mean all expenses incident to
any Registration, whether or not such Registration shall become effective and
whether or not all or a portion of the Registrable Securities originally
requested to be included in such Registration are ultimately included in such
Registration, including, but not limited to: (i) all SEC and stock exchange
or NASD registration and filing fees and expenses; (ii) all fees and expenses of
compliance with applicable state securities or "blue sky" laws (including,
but not limited to, reasonable fees and disbursements of counsel for the
Managing Underwriter, if any, in connection with "blue sky" qualifications of
the Included Securities); (iii) all word processing, duplicating, printing
expenses, messenger and delivery expenses; (iv) all fees and expenses
incurred in connection with the listing of the Included Securities on each
securities exchange or national market system on which the Common Stock is
then listed; (v) all fees and disbursements of counsel for the Company and
all independent certified public accountants (including the expenses of any
annual audit and "cold comfort" letters required by or incident to
such performance and compliance); (vi) all fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (including
the fees and expenses of any "qualified independent underwriter" required by
the NASD); (vii) the reasonable fees and expenses of one counsel retained by
Participating Holders owning a majority in number of the Included Securities
(which counsel shall be reasonably satis factory to the Company); (viii) the
reasonable fees and expenses of any special experts or other Persons
retained by the Company; and (ix) premiums and other costs of policies of
insurance against liabilities arising out of the public offering of the Included
Securities. The foregoing shall not include any underwriting discounts or
commissions or transfer taxes, if any, attributable to the sale of Included
Securities by Participating Holders.
"Registration Statement" shall mean a registration statement
under the Securities Act.
"Registration Trigger Amount" shall mean either (i) 125,000
Original Shares or (ii) 131,579 Original Warrants.
"Remaining Class 7 Holder" shall mean, at any time, (i) each
Qualifying Old Equity Holder that is at such time the beneficial owner of any
Registrable Securities and (ii) each Permitted Transferee that is
at such time the beneficial owner of any Registrable Securities.
"Required Included Securities" shall mean, at any time that
number of Included Securities by which the aggregate Included Securities at
such time exceed the Requisite Class 7 Percentage plus one Included Security.
"Revocation Notice" shall have the meaning given in Section
2.1(j).
"Rule 144" shall mean Rule 144 of the General Rules and
Regulations promulgated under the Securities Act, or any successor rule to
similar effect.
"Rule 144A" shall mean Rule 144A of the General Rules and
Regulations promulgated under the Securities Act, or any successor rule to
similar effect.
"SEC" shall mean the Securities and Exchange Commission and
any successor commission or agency having similar powers.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Transferee" shall mean any beneficial owner of Registrable
Securities other than an Old Equity Holder.
"Underwritten Offering" shall mean a sale of securities of
the Company to an underwriter or underwriters for reoffering to the public.
"Warrants" shall mean warrants to purchase the Common Stock,
including, without limitation, the Original Warrants.
SECTION 1.2 Construction. Unless the context otherwise
requires, words in the singular include the plural, and in the plural
include the singular and "or" is not exclusive.
SECTION 2.1 Demand Registration.
(a) Demand Registration Rights. Subject to the terms and
conditions of this Agreement (including, without limitation, Sec
tions 2.1(b), (c), (d) and (j)), at any one time after the second
anniversary of the Effective Date, one or more Remaining Class 7
Holders owning Registrable Securities at such time equal to or
exceeding the Registration Trigger Amount may make a written
request, which shall comply with Section 2.1(c) (an "Initial
Request"), for Registration of all of their Registrable
Securities or any portion thereof, provided that, in the case of
a Registration of New Common Stock, the number of shares of New
Common Stock requested to be registered shall not be less than
125,000 shares and, in the case of a Registration of New
Warrants, the number of New Warrants requested to be registered
shall not be less than 131,579 warrants. Within 10 Business Days
after receipt of such Initial Request, the Company shall give
written notice thereof to all other Remaining Class 7 Holders
and, subject to Section 2.1(c), such other Remaining Class 7
Holders may request the inclusion of their Registrable Securities
in such Registration. Thereafter, the Company shall, in
accordance with Section 2.4, file a Registration Statement
covering the Included Securities and use all reasonable efforts
to cause such Registration Statement to become effective.
(b) Limitation on Registration Rights.
(i) Notwithstanding any other provision of this
Agreement, the Company shall have no obligations hereunder to any Old Equity
Holder and no Old Equity Holder shall have any rights hereunder (other than
an Old Equity Holder listed on Schedule I hereto, each of whom will be deemed
to have satisfied the identification requirements set forth in this
subsection 2.1(b)) unless and until such Old Equity Holder shall have
established to the reasonable satisfaction of the Company (A) that such Old
Equity Holder was the beneficial owner as of the Confirmation Date of Old
Common Stock and (B) the number of shares and certificate numbers thereof,
which facts such Old Equity Holder can so establish by (1) delivering to the
Company within 90 days of the Effective Date the written certification as to
such facts of the record holder as of the Confirmation Date of such Old Equity
Holder's Old Common Stock or (2) such other proof as shall be reasonably
satisfactory to the Company.
(ii) Notwithstanding any other provision of this
Agreement, the Company shall have no obligations hereunder to any Transferee
and no Transferee shall have any rights hereunder unless (A) the Original
Securities held by such Transferee were originally owned by a Qualifying Old
Equity Holder and each subsequent Transferee of such Original Securities
(including, without limitation, the Person from whom such Transferee
purchased or acquired such Original Securities) has complied timely with the
requirements set forth in clauses (B) and (C) of this Section 2.1(b)(ii), (B)
within 30 days of such Transferee's acquisition or purchase of such Original
Securities, such Transferee delivers to the Company a written certification
(signed by an authorized representative of such Transferee) certifying (1)
the date of such Transferee's acquisition or purchase of such Original
Securities and the number of Original Securities acquired or purchased by
such Transferee, (2) the identity (including record and beneficial owner) and
mailing address of such Transferee and the Person from whom such Transferee
purchased or acquired such Original Securities, (3) the certificate number(s) of
the Original Securities transferred (if reasonably available), (4) to the
knowledge of such Transferee, that the Person from whom such Transferee
purchased or acquired such Original Securities was, at the time of such
purchase or transfer, a Remaining Class 7 Holder (it being understood that
such Transferee shall be entitled to rely on a certificate or written
representation of such Person in making such certification), and (5) that
such securities transferred constitute Registrable Securities and (C) within
30 days of such Transferee's acquisition or purchase of such Original
Securities, such Transferee executes and delivers to the Company a
supplement, in form and substance reasonably satisfactory to the
Company, pursuant to which such Transferee shall agree to be bound by the
terms of this Agreement, including, without limitation, Section 2.5.
(c) Form of Request. Any Remaining Class 7 Holder's request
for Registration pursuant to this Section 2.1 shall (i) state the
number of Registrable Securities to be included in such
Registration, (ii) contain reasonably detailed information as to
prior sales of Original Securities by or on behalf of such
Remaining Class 7 Holder, (iii) contain an undertaking to
(1) furnish all such information and materials and take all such
action as may be reasonably required in order to permit the
Company to comply with all applicable requirements of the SEC and
to obtain acceleration of the effective date of the Registration
Statement filed in connection with such Registration, (2) update,
to the extent required by applicable law, any information about
such Remaining Class 7 Holder contained in such Registration
Statement during the period such Registration Statement is
effective, (3) indemnify and hold harmless each of the parties
specified in Section 2.5(b) to the extent provided in such Section 2.5(b)
and to comply with the other provisions of Section 2.5 and (4) comply with
all other provisions of this Agreement, (iv) in the case of an Initial
Request, indicate whether an Underwritten Offering is requested in connection
with such Registration and (v) contain a certification of such
Remaining Class 7 Holder that, as of the date of delivery of such
Remaining Class 7 Holder's request pursuant to this paragraph (c), (1) such
Remaining Class 7 Holder is a "Remaining Class 7 Holder" as defined in
Section 1.1 and (2) the securities identified in such request as Registrable
Securities are "Registrable Securities" as defined in Section 1.1.
(d) Limitations on Filings. Notwithstanding Section 2.1(a),
the Company shall not be obligated to file a Registration Statement pursuant
to this Section 2.1 (i) other than pursuant to the first Initial Request
received by the Company and any Complying Responses in connection therewith
(except as otherwise provided in Section 2.1(i)), (ii) with
respect to any Designated Securities excluded from a Registration
pursuant to Section 2.1(h), (iii) with respect to any Designated
Securities with respect to which the Company shall not have
received the undertaking referred to in Section 2.5(b), (iv) with
respect to any Designated Securities that shall have ceased to be
Registrable Securities, (v) after such time as Designated
Securities that continue to be Registrable Securities no longer
represent the Requisite Class 7 Percentage or (vi) during the 180
day period following the date on which an earlier filed
Registration Statement (other than a Registration Statement on
Form S-8) relating to shares of Common Stock or Warrants shall
have become effective.
(e) Registration Form. In the case of a Registration in
connection with an Underwritten Offering that is a firm
commitment underwriting, if the Company proposes to file a
Registration Statement on Form S-3 (or any similar short-form
Registration Statement), the Company will comply with any request
by the Managing Underwriter to use another permitted form of
Registration Statement if such Managing Underwriter advises the
Company in writing that, in its opinion, the use of another form
of Registration Statement is of material importance to the
success of the offering, in which case such Registration shall be
effected on the form recommended by the Managing Underwriter.
(f) Expenses. All Registration Expenses shall be paid by
the Company.
(g) Underwritten Offering; Managing Underwriter. If the
Initial Request shall so request, the offering of Registrable
Securities pursuant to any Registration shall be an Underwritten
Offering, in which event the Company shall have the right to
select a nationally recognized investment banker (or investment
bankers), reasonably acceptable to Participating Holders owning a
majority in number of the Included Securities, that shall manage
the offering (collectively, the "Managing Underwriter"). If
requested by the Managing Underwriter for any Underwritten
Offering, the Company shall enter into an underwriting agreement
with the underwriters for such offering, such agreement to
contain such representations and warranties by the Company and
such other terms and provisions as are customarily contained in
agreements of this type, including, without limitation,
indemnities to the effect and to the extent provided in Section 2.5. The
Participating Holders shall be parties to such underwriting agreement and the
representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made to
and for the benefit of such Participating Holders and the conditions
precedent to the obligations of such Participating Holders under
such underwriting agreement shall be satisfactory to such
Participating Holders. Such Participating Holders shall not be
required to make any representations or warranties to the Company
or its underwriters other than representations or warranties
regarding such Participating Holder and such Participating
Holder's intended method of distribution.
(h) Priority. In the case of a Registration in connection
with an Underwritten Offering, if the Managing Underwriter shall
advise the Company in writing that, in its opinion, due to market
conditions, the number of shares of Common Stock or Warrants
included in such Underwritten Offering should be limited to fewer
than the aggregate number of Designated Securities, then (i) the
Registration shall be limited to such aggregate number of
securities as the Managing Underwriter shall advise and (ii) the
Company will promptly give written notice of such fact to each
Participating Holder, indicating the number of Designated
Securities of such Participating Holder that will be included in
the Registration as so limited; provided that exclusions of
Designated Securities shall be on a pro rata basis among all
Participating Holders on the basis of the number of Designated
Securities of each such Participating Holder.
(i) Delay of Filing. The Company shall be entitled to
postpone for a reasonable period of time, not to exceed 180 days
from the date of receipt of an Initial Request, the filing of the
Registration Statement otherwise required to be filed by it
pursuant to this Section 2.1 if the Board of Directors of the
Company (i) in good faith determines at such time that such Regis
tration and related offering would materially adversely affect or
interfere with any proposed or pending financing, acquisition,
corporate reorganization or other transaction or the conduct or
outcome of any litigation, in each case, that involves the
Company or any subsidiary thereof and is material to the Company
and its subsidiaries, taken as a whole, and (ii) as promptly as
practicable gives all Participating Holders written notice of
such postponement, setting forth the duration of and reasons for
such postponement; provided, however, that the Company shall not
effect such a postponement more than once in any 360 day period.
(j) Revocation of Request. In any Registration,
Participating Holders owning the Required Included Securities
may, on behalf of all Participating Holders, revoke the request
for such Registration, without incurring any liability to the
Company or to any other Participating Holder, by providing
written notice (a "Revocation Notice") to the Company at any time
prior to the initial filing with the SEC of a Registration
Statement in such Registration. A request for Registration that
is revoked pursuant to this Section 2.1(j) shall not constitute a
request pursuant to Section 2.1(a) and the Remaining Class 7
Holders shall continue to have the right to make one request for
Registration pursuant to Section 2.1(a) if such revocation is
pursuant to (i) a Revocation Notice that is received by the
Company within 10 Business Days of the date on which the Company
shall have given written notice of postponement of the filing of
the Registration Statement in such Registration pursuant to Section 2.1(i)
or (ii) the first Revocation Notice to have been received by the Company in
circumstances other than as described in the preceding clause (i).
(k) Effectiveness. A registration requested pursuant to
Section 2.1(a) shall not be deemed to have been effected:
(i) unless a Registration Statement with respect
thereto has been declared effective by the SEC and remains effective in
compliance with the provisions of the Securities Act and the laws of any
state or other jurisdiction applicable to the disposition of all Included
Securities covered by such Registration Statement until such time as all of
such Included Securities have been disposed of in accordance with such
Registration Statement;
(ii) if, after it has become effective, such
Registration is interfered with by any stop order, injunction or other order
or requirement of the SEC or other governmental or regulatory agency or
court for any reason other than a violation of applicable law solely by the
holders of Included Securities and has not thereafter become effective; or
(iii) if, in the case of an Underwritten Offering, the
conditions to closing specified in the underwriting agreement to which the
Registrant(s) are party are not satisfied other than by reason of any breach
or failure by the holders of the Included Securities, or are not otherwise
waived.
SECTION 2.2 Limitations on Registration Rights.
(a) No Incidental Registrations. The Company shall not be
entitled to include in a Registration any shares of Common Stock
or Warrants other than the Designated Securities, nor shall any
Participating Holder have the right to include any of its Registrable
Securities in any Registration Statement other than pursuant to a
Registration hereunder.
(b) No Other Registration Rights. The Company will not
hereafter enter into any agreement with respect to any shares of
Common Stock or Warrants that grants to any Person incidental
registration rights with respect to any Registration Statement
pursuant to a Registration hereunder.
SECTION 2.3 Holdback Agreements. In the case of a
Registration in connection with an Underwritten Offering, each
Remaining Class 7 Holder and the Company agree not to effect any
sale or distribution, including any private placement or any sale
pursuant to Rule 144, of any shares of Common Stock or Warrants
(other than the Included Securities pursuant to such Underwritten
Offering) during the seven-day period prior, and the 180-day
period following, the effective date of the Registration
Statement in such Registration.
SECTION 2.4 Registration Procedures. If and whenever the
Company is required to effect a Registration, the Company shall,
except as provided in Section 2.1(i), as expeditiously as possible:
(a) prepare and file with the SEC as promptly as
practicable, but in any event not later than 45 days after
receipt of an Initial Request, a Registration Statement on any
form for which the Company then qualifies which counsel for the
Company shall deem appropriate, subject to Section 2.1(e), and
which form shall be available for the sale of the Included
Securities in accordance with the intended methods of
distribution thereof, and use all reasonable efforts to cause
such Registration Statement to become effective; provided that as
promptly as practicable, but in any event not later than four
Business Days before filing any Registration Document with the
SEC, the Company will furnish to each Participating Holder, the
Managing Underwriter, if any, and one counsel selected by
Participating Holders owning a majority in number of the Included
Securities copies of such Registration Document, which shall be
subject to review by such Persons and the Company shall not file
any Registration Document to which the Managing Underwriter, if
any, or Participating Holders owning a majority in number of the
Included Securities or such counsel of such Participating Holders
shall have reasonably objected within three Business Days after
receipt of such Registration Document (provided that the fore
going shall not limit the right of any Participating Holder
identified in such Registration Document reasonably to object,
within three Business Days after receipt of such Registration
Document, to any particular information contained therein
relating specifically to such Participating Holder, including any
information describing the manner in which such Participating
Holder acquired its Included Securities and the intended method
of distribution thereof) and if the Company is unable to file any
such Registration Document due to any objection as provided
herein, use its best efforts to cooperate with the Managing Under
writer, if any, and the Participating Holders to prepare, as
promptly as reasonably practicable, a document that is
satisfactory to the Company, the Managing Underwriter, if any,
and the Participating Holders; provided further that if such
Registration Document refers to any Participating Holder by name
or otherwise as the holder of any Included Securities, then such
Participating Holder shall have the right to require (i) the
insertion therein of language, in form and substance satisfactory
to such Participating Holder, to the effect that the holding by
such Participating Holder of such securities does not necessarily
make such Participating Holder a "Controlling Person" of the
Company within the meaning of the Securities Act and is not to be
construed as a recommendation by such Participating Holder of the
investment quality of the Common Stock or the Warrants, as the
case may be, covered thereby and that such holding does not imply
that such Participating Holder will assist in meeting any future
financial requirements of the Company, or (ii) in the event that
such reference to such Participating Holder by name or otherwise
is not required by the Securities Act or any rules and
regulations promulgated thereunder, the deletion of the reference
to such Participating Holder; and the Company shall notify each
Participating Holder of any stop order issued or threatened by
the SEC and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered;
(b) prepare and file with the SEC such additional
Registration Documents as may be necessary to keep the
Registration Statement in such Registration effective until the
earlier of (i) such time as all Included Securities have been
sold and (ii) 90 days from the effective date of such
Registration Statement or such longer period as may be required
by the Securities Act, and comply with the provisions of the
Securities Act with respect to the disposition of all Included
Securities during such period in accordance with the intended
methods of disposition thereof set forth in such Registration
Statement;
(c) furnish to each Participating Holder and the Managing
Underwriter, if any, copies of such Registration Documents in
such Registration and in such numbers as may be required by the
Securities Act or as any of the foregoing may reasonably request;
(d) use all reasonable efforts to register or qualify the
Included Securities under such other state securities or "blue
sky" laws of such jurisdictions as any Participating Holder or
the Managing Underwriter, if any, reasonably requests and do any
and all other acts and things that may be reasonably necessary or
advisable to enable the Participating Holders and the Managing
Underwriter, if any, to consummate the disposition in such
jurisdictions of the Included Securities; provided that the
Company will not be required to (i) qualify generally to do business
in any jurisdiction where it would not otherwise be required
to qualify but for this Section 2.4(d), (ii) subject itself to
taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction;
(e) use all reasonable efforts to cause the Included
Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by
virtue of the business and operations of the Company to enable
each Participating Holder to consummate the disposition of its
Included Securities;
(f) at any time when a prospectus relating to the Included
Securities is required to be delivered under the Securities Act,
immediately notify each Participating Holder and the Managing
Underwriter, if any, of the happening of any event that comes to
the Company's attention if as a result of such event the
prospectus included in such Registration Statement contains any
untrue statement of a material fact or omits to state any
material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading,
and the Company will promptly prepare and furnish to each
Participating Holder and the Managing Underwriter, if any, a
supplement or amendment to such prospectus so that, as thereafter
delivered to purchasers of Included Securities, such prospectus
will not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading;
(g) use all reasonable efforts to cause the Included
Securities to be listed on each securities exchange or national
market system on which the Common Stock is then listed, if any,
and enter into such customary agreements including a listing application
and indemnification agreement in customary form,
provided that the applicable listing requirements are satisfied,
and to provide a transfer agent and registrar for the Included
Securities no later than the effective date of Registration
Statement in such Registration;
(h) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other
actions as Participating Holders owning a majority in number of
the Included Securities or the Managing Underwriter, if any,
reasonably request in order to expedite or facilitate the
disposition of the Included Securities, including customary
indemnification;
(i) make available for inspection by any Participating
Holder, the Managing Underwriter, if any, and any attorney,
accountant or other agent retained by any Participating Holder or
the Managing Underwriter, if any, all financial and other
records, pertinent corporate documents and properties of the
Company and its subsidiaries as shall be reasonably necessary to
enable such Persons to exercise their due diligence
responsibility, and cause the Company's and its subsidiaries'
officers, directors and employees to supply all information and
respond to all inquiries reasonably requested by any such Person
in connection with the Registration Statement in such
Registration;
(j) deliver an opinion of counsel for the Company and a
"cold comfort" letter from the Company's independent public
accountants in customary form and covering such matters of the
type customarily covered by opinions of issuer's counsel and
"cold comfort" letters and such other matters as Participating
Holders owning a majority in number of the Included Securities or
the Managing Underwriters, if any, reasonably request; and
(k) otherwise use all reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement no later than 60 days after the end of the 12-
month period commencing at the end of the fiscal quarter of the
Company in which the effective date of the Registration Statement
shall have occurred (as the term "effective date" is defined in
Rule 158(c) under the Securities Act), which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder.
Each Participating Holder agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind
described in Sec tion 2.4(f), such Participating Holder will forthwith
discontinue disposition of its Included Securities until such Participating
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 2.4(f), and, if so directed by the Company
such Participating Holder will deliver to the Company (at the Company's
expense) all copies (including, but not limited to, any and all drafts),
other than permanent file copies, then in such Participating Holder's
possession, of the prospectus covering the Included Securities current at
the time of receipt of such notice. In the event the Company shall give any
such notice, the period mentioned in Section 2.4(b) shall be extended by
the greater of (i) 90 days and (ii) the number of days during the period
from and including the date of the giving of such notice pursuant to
Section 2.4(f) to and including the date when each Participating Holder
shall have received the copies of the supplemented or amended prospectus
contemplated by Section 2.4(f).
SECTION 2.5 Indemnification.
(a) Indemnification by the Company. In any Registration,
the Company will, and it hereby does, indemnify and hold
harmless, to the full extent permitted by law, each Participating
Holder, its directors and officers, general partners, limited
partners, managing directors, agents and representatives and each
other Person who participates as an underwriter in the offering
or sale of such securities and each affiliate of such
Participating Holder or underwriter (and directors, officers,
controlling Persons, partners, managing directors, agents and
representatives of any of the foregoing), against any and all
losses, claims, damages or liabilities, joint or several, and
expenses (including any amounts paid in any settlement) to which
such Participating Holder or underwriter, or any such director,
officer, controlling person, partner, managing director, agent or
representative may become subject under the federal securities
laws, state securities or "blue sky" laws, common law or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) or expenses arise
out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in any Registration
Document in such Registration, (ii) any omission or alleged
omission to state therein a material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, or (iii) any violation or alleged
violation by the Company of any federal, state or common law rule
or regulation applicable to the Company and relating to action
required of or inaction by the Company in connection with such
Registration, and the Company will reimburse each Participating
Holder or underwriter and each such director, officer,
controlling person, partner, managing director, agent or
representative for any legal or any other expenses reasonably
incurred by them, as and when incurred, in connection with
investigating or defending such loss, claim, damage, liability,
action or proceeding; provided that the Company shall not be
liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in
such Registration Document in reliance upon and in conformity
with written information furnished to the Company through an
instrument duly executed by such Participating Holder in such
Participating Holder's capacity as a stockholder of the Company
or any such director, officer, controlling Person, partner,
managing director, agent, representative or underwriter specifically
stating that it is for use in the preparation thereof;
provided further that the Company shall not be liable to any Participating
Holder, any Person, if any, who participates as an
underwriter in the offering or sale of Included Securities or any
other Person, if any, who controls such underwriter within the
meaning of the Securities Act, pursuant to this Section 2.5 with
respect to any Registration Document, to the extent that any such
loss, claim, damage or liability of such underwriter or controlling
Person results from the fact that such underwriter sold
Included Securities to a Person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a
copy of the final prospectus or of the final prospectus as then
amended or supplemented, whichever is most recent, covering such
Included Securities if the Company had previously furnished
copies thereof to such underwriter and such final prospectus, as
then amended or supplemented, had corrected any such misstatement
or omission. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of
such Participating Holder or underwriter or any such director,
officer, controlling person, partner, managing director, agent or
representative and shall survive the transfer by such
Participating Holder of its Included Securities.
(b) Indemnification by the Participating Holders and Under
writers. As a condition to including any Designated Securities
in any Registration, the Company shall have received an
undertaking reasonably satisfactory to it from each Participating
Holder or any underwriter, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 2.5(a))
the Company and its directors, officers, controlling
Persons and all other prospective sellers (including, but not
limited to, all other Participating Holders) and their respective
directors, officers, general and limited partners, managing directors,
and their respective controlling Persons with respect to
any statement or alleged statement in or omission or alleged
omission from any Registration Document in such Registration, if
such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to the Company or its representatives
through an instrument duly executed by or on behalf of such Participating
Holder or underwriter specifically stating that it is
for use in the preparation of such Registration Document. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any
Participating Holder, underwriter or any of their respective
directors, officers, general or limited partners, managing
directors or controlling Persons and shall survive the transfer
by such Participating Holder of its Included Securities; provided,
however, that no such Participating Holder shall be liable
under Section 2.5 for any amounts exceeding the product of the
proceeds (net of any underwriting commissions, discounts and the
like) per share to be received by such Participating Holder in
the sale of its Included Securities and the number of Included
Securities owned by such Participating Holder.
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party hereunder of, written notice of the
commencement of any action or proceeding with respect to which a
claim for indemnification may be made pursuant to this Section 2.5,
such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, promptly
give written notice to the indemnifying party of the commencement
of such action; provided, that the failure of any indemnified
party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding
subsections of this Section 2.5, except to the extent that the
indemnifying party is actually materially prejudiced by such
failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party will be entitled to participate in
and, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, to the extent that it
may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party
to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense
thereof, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying
parties arises in respect of such claim after the assumption of
the defense thereof. No indemnifying party will consent to entry
of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from
all liability in respect of such claim or litigation. An
indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel in any single
jurisdiction for all parties indemnified by such indemnifying
party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may
exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event
the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels as may be
reasonably necessary. Notwithstanding anything to the contrary
set forth herein, and without limiting any of the rights set
forth above, in any event each Participating Holder will have the
right to retain at its own expense, counsel with respect to the
defense of a claim.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding subsections of this Section 2.5 (with
appropriate modifications) shall be given by the Company and each
Participating Holder with respect to any required registration or
other qualification of securities under any federal or state law
or regulation or governmental authority other than the Securities
Act.
(e) Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnity
agreement provided for in this Section 2.5 is for any reason held
to be unavailable to an indemnified party in accordance with its
terms, the Company and each Participating Holder shall contribute
to the aggregate losses, liabilities, claims, damages and expenses
of the nature contemplated by said indemnity agreement
incurred by the Company and the Participating Holder (i) in such
proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Participating
Holder in question on the other 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
benefits referred to in clause (i), but also the relative fault
of each of the Company and the Participating Holder in question
in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages and expenses, as well
as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of the Participating
Holder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the Company on the one hand or by the
Participating Holder on the other hand and the parties' relative
intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. No Person guilty of
fraudulent misrepresentation (within the meaning of subsection
11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. The foregoing contribution agreement shall in
no way affect the contribution liabilities of any Person having
liability under Section 11 of the Securities Act other than the
Company and the Participating Holders.
MISCELLANEOUS
SECTION 3.1 Effectiveness. The terms of this Agreement
shall be effective as of the Effective Date.
SECTION 3.2 Amendments. This Agreement cannot be amended,
modified or supplemented except (a) as contemplated by Section
2.1(b)(ii)(C) and (b) by a written instrument signed by the
Company and the Remaining Class 7 Holders owning at the time of
execution thereof not less than a majority in number of the
Registrable Securities at such time, provided, however, that
without the written consent of each such holder affected thereby
no amendment, modification or supplement pursuant to clause (b)
above may make a change that (i) increases the obligations of
such holder or (ii) adversely affects the rights of such holder
under Section 2.5.
SECTION 3.3 Term of Agreement. This Agreement shall
commence on the Effective Date and shall terminate, except for
the provisions of Section 2.5 which shall survive such
termination, on the earliest to occur of (i) the seventh anniversary
of the Effective Date, (ii) the date on which the
effectiveness of a Registration Statement that has become
effective (within the meaning of Section 2.1(k)) in a
Registration shall have been terminated and (iii) such time as
the Registrable Securities no longer represent the Registration
Trigger Amount.
SECTION 3.4. Calculation of Requisite
Class 7 Percentage and Required Included Securities.
For purposes of calculating the Required Class 7
Percentage and the Required Included Securities, and
for purposes of any similar calculation or
determination to be made under this Agreement, each
Original Warrant to purchase one share of Common Stock
shall be treated as one share of Original Common Stock.
SECTION 3.5. Headings. The descriptive
headings of the several Articles and Sections of this
Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
SECTION 3.6. Specific Performance.
Irreparable damage would occur in the event any of the
provisions of this Agreement were not to be performed
in accordance with the terms hereof and the Company and
the Remaining Class 7 Holders, as the case may be,
shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or
equity.
SECTION 3.7. Complete Agreement. This
Agreement contains the entire agreement of the Company
and the Old Equity Holders in respect of the subject
matter contained herein and the transactions
contemplated hereby. There are no restrictions,
agreements, promises, representations, warranties,
covenants, or undertakings with respect to the subject
matter hereof, other than those expressly set forth or
referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties
hereto with respect to the subject matter hereof.
SECTION 3.8. Assignment. The
registration and other rights provided in this
Agreement, and the obligations of the Company
hereunder, are not assignable to any Person (including,
without limitation, any Transferee) except to the
extent expressly provided in Section 2.1(b)(ii).
SECTION 3.9. Notices. Any notice,
request, instruction or other document to be given
hereunder shall be in writing, shall be delivered
personally or sent by Federal Express or other
overnight delivery service, (a) if to the Company, to
Homeland Holding Corporation, 2601 Northwest
Expressway, Oil Center East, 11th Floor, Oklahoma city,
OK 73112, Attention: Secretary, or to such other
address as the Company shall specify by written notice,
(b) if to any Old Equity Holder listed on Schedule I,
to the address listed on such schedule and (c) if to
any other Old Equity Holder or Permitted Transferee, to
such address (which shall not be a post office box, but
shall be an address to which overnight delivery
services will deliver) as such Old Equity Holder or
Permitted Transferee shall have specified in a written
notice to the Company (which may be amended by
subsequent written notice), a copy of which written
notice shall be on file with the Secretary of the
Company. Notwithstanding any other provision of this
Agreement, unless and until the Company shall have
received such notice of address from an Old Equity
Holder or Permitted Transferee, the Company shall have
no obligation to such Old Equity Holder or Permitted
Transferee with respect to the giving of any notice
otherwise required hereunder. Notice shall be
effective when sent in the manner, and directed as, provided
above or, if delivered personally, when received.
SECTION 3.10. Governing Law. This
Agreement shall be governed by and construed in
accordance with the laws of the State of New York,
without regard to applicable principles of conflicts of
laws.
SECTION 3.11. Severability. Whenever
possible, each provision of this Agreement will be
interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of
this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be
ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this
Agreement, except to the extent that such prohibition
or invalidity would constitute a material change in the
terms of this Agreement taken as a whole.
SECTION 3.12. Rule 144 and Rule 144A.
The Company shall take all actions reasonably necessary
to enable the Remaining Class 7 Holders to sell their
Registrable Securities without registration under the
Securities Act within the limitation of the exemptions
provided by (i) Rule 144, (ii) Rule 144A, or (iii) any
similar rules or regulations hereafter adopted by the
SEC, including, without limitation, filing on a timely
basis all reports required to be filed under the
Exchange Act. Upon the request of any such holder, the
Registrant(s) shall deliver to such holder a written
statement as to whether they have complied with such
requirements.
IN WITNESS WHEREOF, the Company has executed,
and each Old Equity Holder by receipt of its Original
Securities is deemed to have executed, this Agreement
as of the date first above written.
HOMELAND HOLDING CORPORATION
By:_____________________
Name:
Title:
Identified Holders
Number of Shares
Holder of Old Common Stock
The Clayton & Dubilier 11,700,000
Private Equity Fund III
Limited Partnership,
270 Greenwich Avenue
Greenwich, CT 06830
The Clayton & Dubilier 13,153,089
Private Equity Fund IV
Limited Partnership
270 Greenwich Avenue
Greenwich, CT 06830
178465
NOTEHOLDER REGISTRATION RIGHTS AGREEMENT
NOTEHOLDER REGISTRATION RIGHTS AGREEMENT, dated as of
August 2, 1996 (this "Agreement"), by Homeland Holding Corporation,
a Delaware corporation ("Holding"), and Homeland Stores, Inc. ("Homeland"),
for the benefit of the beneficial owners as of the Confirmation Date
(as such term and other capitalized terms are defined in Section 1.1) of
Old Notes (the "Old Debt Holders").
WHEREAS, Holding and Homeland filed a Joint Plan of
Reorganization with the United States Bankruptcy Court, District of
Delaware (the "Bankruptcy Court") on May 13, 1996 (the "Plan");
WHEREAS, the Plan was accepted by, among others, the
holders of the requisite percentage and amount of claims designated as
"Class 5 Claims" under the Plan (including claims in respect of the
Old Notes), and the Bankruptcy Court entered an order
confirming the Plan on July 19, 1996;
WHEREAS, the Plan became effective on August 2, 1996 (the
"Effective Date"); and
WHEREAS, pursuant to the Plan, (i) the Old Debt Holders are
to receive, among other things, approximately 2,827,972 shares of Common
Stock in the aggregate (the "Original Shares") and $60,000,000
aggregate principal amount of Senior Subordinated Notes (the "Original
Notes" and, collectively with the Original Shares, the "Original
Securities") and (ii) registration rights are to be granted to the Old
Debt Holders with respect to such Original Securities on the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements contained herein, Holding and Homeland agree, and each Old
Debt Holder by receipt of its Original Securities pursuant to the Plan
is deemed to agree, as follows:
DEFINITIONS
SECTION 1.1 Definitions. As used herein, the following
terms shall have the meanings indicated:
"Bankruptcy Court" shall have the meaning given in
the recitals to this Agreement.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York
are authorized or obligated by law or executive order to close.
Unless specifically stated as a Business Day, all days referred to herein
shall mean calendar days.
"Common Stock" shall mean the common stock, par value
$.01 per share, of Holding after Holding's Amended and Restated
Certificate of Incorporation is filed with the Secretary of State of
the State of Delaware pursuant to the Plan and any and all securities of
any kind whatsoever of Holding which may be issued after such filing with
respect to, or in exchange for, shares of Common Stock pursuant to a
merger, consolidation, reclassification, stock split, stock dividend,
rights offering, combination, recapitalization of Holding or otherwise.
"Complying Response" shall mean, with respect to any
Registration, each written request (other than an Initial Request)
submitted by a Remaining Class 5 Holder in connection with such
Registration that (i) complies with Section 2.1(c) and (ii) is received
by the Registrant(s) within 15 Business Days from the date on which
the Registrant(s) shall have given notice of the Initial Request for such
Registration pursuant to Section 2.1(a).
"Confirmation Date" shall have the meaning given in
the Plan.
"Designated Notes" shall mean, with respect to any
Participating Holder in connection with any Registration, the
Registrable Notes of such Participating Holder requested for inclusion
in such Registration in compliance with Section 2.1(c).
"Designated Securities" shall mean, collectively, the
Designated Notes and the Designated Shares.
"Designated Shares" shall mean, with respect to any
Participating Holder in connection with any Registration, the
Registrable Shares of such Participating Holder requested for inclusion
in such Registration in compliance with Section 2.1(c).
"Effective Date" shall have the meaning given in the
recitals to this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
"Included Notes" shall mean, with respect to any
Registration, all of the Designated Notes requested for inclusion in such
Registration or, in the case of a Registration in connection with an
Underwritten Offering, any lesser amount of securities to which such
Registration may be limited pursuant to Section 2.1(h).
"Included Securities" shall mean, collectively, the
Included Notes and the Included Shares.
"Included Shares" shall mean, with respect to any
Registration, all of the Designated Shares requested for inclusion in
such Registration or, in the case of a Registration in connection with an
Underwritten Offering, any lesser number of shares to which such
Registration may be limited pursuant to Sec tion 2.1(h).
"Initial Request" shall have the meaning given in Section
2.1(a).
"Managing Underwriter" shall have the meaning given in
Section 2.1(g).
"NASD" shall mean the National
Association of Securities Dealers, Inc.
"Old Debt Holders" shall have the meaning given in the
recitals of this Agreement.
"Old Notes" shall mean, collectively, Homeland's Series A
Senior Secured Floating Rate Notes due 1997, Series C Senior Secured Fixed
Rate Notes due 1999 and Series D Senior Secured Floating Rate Notes
due 1997.
"Original Notes" shall have the meaning given in the
recitals to this Agreement.
"Original Securities" shall have the meaning given in
the recitals to this Agreement.
"Original Shares" shall have the meaning given in the
recitals to this Agreement.
"Participating Holder" shall mean, with respect to any
Registration, each Remaining Class 5 Holder that shall have submitted the
Initial Request or a Complying Response in connection with such Registration.
"Permitted Transferee" shall mean a Transferee that
satisfies the eligibility, notice and other requirements set forth in
Section 2.1(b)(ii).
"Person" shall mean any individual, partnership,
limited liability company, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture, or
other entity of whatever nature.
"Plan" shall have the meaning given in the recitals of
this Agreement.
"Qualifying Old Debt Holder" shall mean an Old Debt
Holder that satisfies the notice requirements set forth in Section
2.1(b)(i).
"Registrable Notes" shall mean, at any time, all
Original Notes owned beneficially by either Qualifying Old Debt Holders or
Permitted Transferees.
"Registrable Securities" shall mean,
collectively, the Registrable Notes and the Registrable
Shares.
"Registrable Shares" shall mean, at any time, (i) all
Original Shares owned beneficially by either Old Debt Holders or Permitted
Transferees and (ii) all securities that at the time of issuance were
issued in respect of Registrable Shares to the Remaining Class 5
Holder of such Registrable Shares by way of a stock dividend or stock split
or in connection with a combination of shares, reclassification, rights
offering, recapitalization, merger, consolidation, other reorganization
or otherwise, provided that such securities are owned beneficially by
either Qualifying Old Debt Holders or Permitted Transferees.
"Registrant(s)" shall mean (i) Holding, in the case of a
Registration of Registrable Shares only and (ii) Holding and Homeland, in
the case of a Registration of Registrable Shares and Registrable
Notes.
"Registration" shall mean any registration of
Registrable Securities by the Registrant(s) with the SEC under the
Securities Act pursuant to Section 2.1(a).
"Registration Document" means any Registration
Statement and any prospectus included therein (including any preliminary
prospectus) and any amendment or supplement to such Registration Statement
or prospectus, in each case, including all exhibits thereto and
documents incorporated by reference therein.
"Registration Expenses" shall mean all expenses incident to
any Registration, whether or not such Registration shall become effective
and whether or not all or a portion of the Registrable Securities
originally requested to be included in such Registration are
ultimately included in such Registration, including, but not limited
to: (i) all SEC and stock exchange or NASD registration and filing
fees and expenses; (ii) all fees and expenses of compliance with
applicable state securities or "blue sky" laws (including, but not
limited to, reasonable fees and disbursements of counsel for the Managing
Underwriter, if any, in connection with "blue sky" qualifications of the
Included Securities); (iii) all word processing, duplicating, printing
expenses, messenger and delivery expenses; (iv) all fees and expenses
incurred in connection with the listing of the Included Securities on each
securities exchange or national market system on which such securities are
then listed; (v) all fees and disbursements of counsel for the
Registrant(s) and all independent certified public accountants (including
the expenses of any annual audit and "cold comfort" letters required by or
incident to such performance and compliance); (vi) all fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (including the fees and expenses of any "qualified independent
underwriter" required by the NASD); (vii) the reasonable fees and
expenses of one counsel retained by Participating Holders owning not
less than the Required Included Securities (which counsel shall be
reasonably satisfactory to the Registrant(s)); (viii) the reasonable
fees and expenses of any special experts or other Persons retained
by the Registrant(s)); and (ix) premiums and other costs of policies
of insurance against liabilities arising out of the public offering
of the Included Securities. The foregoing shall not include any
underwriting discounts or commissions or transfer taxes, if any,
attributable to the sale of Included Securities by Participating Holders.
"Registration Statement" shall mean a registration
statement under the Securities Act.
"Registration Trigger Amount" shall mean 470,000 Original
Shares.
"Remaining Class 5 Holder" shall mean, at any time (i)
each Qualifying Old Debt Holder that is at such time the beneficial owner
of any Registrable Securities and (ii) each Permitted Transferee that is
at such time the beneficial owner of any Registrable Securities.
"Required Included Securities" shall mean, at any time,
a majority of the Included Shares.
"Revocation Notice" shall have the meaning given in
Section 2.1(j).
"Rule 144" shall mean Rule 144 of the General Rules and
Regulations promulgated under the Securities Act, or any successor
rule to similar effect.
"Rule 144A" shall mean Rule 144A of the General Rules and
Regulations promulgated under the Securities Act, or any successor
rule to similar effect.
"SEC" shall mean the Securities and Exchange Commission
and any successor commission or agency having similar powers.
"Securities Act" shall mean the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
"Senior Subordinated Notes" shall mean the 10% Senior
Subordinated Notes Due 2003 of Homeland.
"Transferee" shall mean any beneficial owner of Registrable
Securities other than an Old Debt Holder.
"Underwritten Offering" shall mean a sale of securities of
the Company to an underwriter or underwriters for reoffering to the public.
"Warrants" shall mean warrants to purchase Common
Stock, including, without limitation, the Warrants of Holding issued
pursuant to the Plan.
SECTION 1.2 Construction. Unless the context otherwise
requires, words in the singular include the plural, and in the plural include
the singular and "or" is not exclusive.
ARTICLE II
SECTION 2.1 Demand Registration.
(a) Demand Registration Rights. Subject to the terms and
conditions of this Agreement (including, without limitation, Sections
2.1(b), (c), (d) and (j)), at any one time after the second
anniversary of the Effective Date, one or more Remaining Class 5
Holders owning Registrable Shares at such time equal to or
exceeding the Registration Trigger Amount may make a written
request, which shall comply with Section 2.1(c) (an "Initial
Request"), for Registration of (i) all of their Registrable
Shares or any portion thereof that at such time constitutes in
the aggregate not less than the Registration Trigger Amount
and/or (ii) all of their Registrable Notes or any portion thereof
that at such time constitutes in the aggregate not less
$6,000,000 aggregate principal amount. Within 10 Business Days
after receipt of such Initial Request, the Registrant(s) shall
give written notice thereof (in the form attached hereto as
Exhibit A) to all other Remaining Class 5 Holders and, subject to
Section 2.1(c), such other Remaining Class 5 Holders may request
the inclusion of their Registrable Securities in such Registration.
Thereafter, the Registrant(s) shall, in accordance with
Section 2.4, file a Registration Statement covering the Included
Securities and use all reasonable efforts to cause such
Registration Statement to become effective.
(b) Limitation on Registration Rights.
(i) Notwithstanding any other provision of this
Agreement, the Registrant(s) shall have no obligations hereunder to any
Old Debt Holder and no Old Debt Holder shall have any rights hereunder
unless and until such Old Debt Holder shall have established to the
reasonable satisfaction of the Registrant(s) (A) that such Old Debt
Holder was the beneficial owner as of the Confirmation Date of Old
Notes and (B) the series and principal amount thereof, which facts such
Old Debt Holder can so establish by (1) delivering to Holding within
90 days of the Effective Date the written certification as to such
facts of the record holder as of the Confirmation Date of such Old Debt
Holder's Old Notes or (2) such other proof as shall be reasonably
satisfactory to Holding.
(ii) Notwithstanding any other provision of this
Agreement, the Registrant(s) shall have no obligations hereunder to any
Transferee and no Transferee shall have any rights hereunder unless (A)
the Original Securities held by such Transferee were originally owned by
a Qualifying Old Debt Holder and each subsequent Transferee of such
Original Securities (including, without limitation, the Person from whom
such Transferee purchased or acquired such Original Securities) has
complied timely with the requirements set forth in clauses (B) and (C)
of this Section 2.1(b)(ii), (B) within 30 days of such Transferee's
acquisition or purchase of such Original Securities, such Transferee
delivers to Holding a written certification (signed by an authorized
representative of such Transferee) certifying (1) the date of such
Transferee's acquisition or purchase of such Original Securities and the
number of Original Shares and/or the principal amount of Original Notes
acquired or purchased by such Transferee, (2) the identity
(including record and beneficial owner) and mailing address of such
Transferee and the Person from whom such Transferee purchased or acquired
such Original Securities, (3) the certificate number(s) and/or serial
number(s) of the Original Securities transferred (if reasonably
available), (4) to the knowledge of such Transferee, that the Person
from whom such Transferee purchased or acquired such Original Securities
was, at the time of such purchase or transfer, a Remaining
Class 5 Holder (it being understood that such Transferee shall
be entitled to rely on a certificate or written representation of such
Person in making such certification), and (5) that such securities
transferred constitute Registrable Securities and (C) within 30 days of
such Transferee's acquisition or purchase of such Original Securities,
such Transferee executes and delivers to Holding a supplement, in form
and substance reasonably satisfactory to Registrant(s), pursuant to which
such Transferee shall agree to be bound by the terms of this
Agreement, including, without limitation, Section 2.5.
(c) Form of Request. Any Remaining Class 5 Holder's request
for Registration pursuant to this Section 2.1 shall (i) state the
number of Registrable Shares and the aggregate principal amount
of Registrable Notes to be included in such Registration,
(ii) contain reasonably detailed information as to prior sales of
Original Securities by or on behalf of such Remaining Class 5
Holder, (iii) contain an undertaking to (1) furnish all such
information and materials and take all such action as may be
reasonably required in order to permit the Registrant(s) to
comply with all applicable requirements of the SEC and to obtain
acceleration of the effective date of the Registration Statement
filed in connection with such Registration, (2) update, to the
extent required by applicable law, any information about such
Remaining Class 5 Holder contained in such Registration Statement
during the period such Registration Statement is effective,
(3) indemnify and hold harmless each of the parties specified in
Section 2.5(b) to the extent provided in such Section 2.5(b) and
to comply with the other provisions of Section 2.5 and (4) comply
with all other provisions of this Agreement, (iv) in the case of
an Initial Request, indicate whether an Underwritten Offering is
requested in connection with such Registration and (v) contain a
certification of such Remaining Class 5 Holder that, as of the
date of delivery of such Remaining Class 5 Holder's request
pursuant to this paragraph (c), (1) such Remaining Class 5 Holder
is a "Remaining Class 5 Holder" as defined in Section 1.1, and
(2) the securities identified in such request as Registrable
Securities are "Registrable Securities" as defined in Section 1.1.
(d) Limitations on Filings. Notwithstanding Section
2.1(a), the Registrant(s) shall not be obligated to file a
Registration Statement pursuant to this Section 2.1 (i) other
than pursuant to the first Initial Request received by the
Registrant(s) and any Complying Responses in connection therewith
(except as otherwise provided in Section 2.1(i)), (ii) with
respect to any Designated Securities excluded from a Registration
pursuant to Section 2.1(h), (iii) with respect to any Designated
Securities with respect to which the Company shall not have
received the undertaking referred to in Section 2.5(b), (iv) with
respect to any Designated Securities that shall have ceased to be
Registrable Securities, (v) after such time as Designated Shares
that continue to be Registrable Shares no longer represent the
Registration Trigger Amount or (vi) during the 180 day period
following the date on which an earlier filed Registration
Statement (other than a Registration Statement on Form S-8)
relating to shares of Common Stock, Warrants or other securities
shall have become effective.
(e) Registration Form. In the case of a Registration in
connection with an Underwritten Offering that is a firm
commitment underwriting, if the Registrant(s) propose or proposes
to file a Registration Statement on Form S-3 (or any similar
short-form Registration Statement), the Registrant(s) will comply
with any request by the Managing Underwriter to use another per
mitted form of Registration Statement if such Managing
Underwriter advises the Company in writing that, in its opinion,
the use of another form of Registration Statement is of material
importance to the success of the offering, in which case such
Registration shall be effected on the form recommended by the
Managing Underwriter.
(f) Expenses. All Registration Expenses shall be paid by
the Registrant(s).
(g) Underwritten Offering; Managing Underwriter. If the
Initial Request shall so request, the offering of Registrable
Securities pursuant to any Registration shall be an Underwritten
Offering, in which event the Registrant(s) shall have the right
to select a nationally recognized investment banker (or
investment bankers) reasonably acceptable to the holders of the
Required Included Securities that shall manage the offering (collectively,
the "Managing Underwriter"). If requested by the
Managing Underwriter for any Underwritten Offering, the
Registrant(s) shall enter into an underwriting agreement with the
underwriters for such offering, such agreement to contain such
representations and warranties by the Registrant(s) and such
other terms and provisions as are customarily contained in
agreements of this type, including, without limitation,
indemnities to the effect and to the extent provided in Section 2.5.
The Participating Holders shall be parties to such
underwriting agreement and the representations and warranties by,
and the other agreements on the part of, the Registrant(s) to and
for the benefit of such underwriters shall also be made to and
for the benefit of such Participating Holders and the conditions
precedent to the obligations of such Participating Holders under
such underwriting agreement shall be satisfactory to such
Participating Holders. Such Participating Holders shall not be
required to make any representations or warranties to the
Registrant(s) or its underwriters other than representations or
warranties regarding such Participating Holder and such
Participating Holder's intended method of distribution.
(h) Priority. In the case of a Registration in connection
with an Underwritten Offering, if the Managing Underwriter shall
advise the Registrant(s) in writing that, in its opinion, due to
market conditions, the number of shares of Common Stock included
in such Underwritten Offering should be limited to fewer than the
aggregate number of Designated Shares, or the amount of Senior
Subordinated Notes included in such Underwritten Offering should
be limited to less than the aggregate amount of Designated Notes,
then (i) the Registration shall be limited to such aggregate
number of shares of Common Stock and such aggregate amount of
Senior Subordinated Notes as the Managing Underwriter shall
advise and (ii) the Registrant(s) will promptly give written
notice of such fact to each Participating Holder, indicating the
number of Designated Securities of such Participating Holder that
will be included in the Registration as so limited; provided that
exclusions of Designated Securities shall be on a pro rata basis
among all Participating Holders on the basis of the number of
Designated Shares (in the case of Designated Shares) and the
aggregate principal amount of Designated Notes (in the case of
Designated Notes) of each such Participating Holder (treating the
Designated Notes and the Designated Shares as separate classes
for purposes of such pro rata treatment).
(i) Delay of Filing. The Registrant(s) shall be entitled
to postpone for a reasonable period of time, not to exceed 180
days from the date of receipt of an Initial Request, the filing
of the Registration Statement otherwise required to be filed by
it pursuant to this Section 2.1 if the Board(s) of Directors of
the Registrant(s) (i) in good faith determines at such time that
such Registration and related offering would materially adversely
affect or interfere with any proposed or pending financing,
acquisition, corporate reorganization or other transaction or the
conduct or outcome of any litigation, in each case, that involves
the Registrant(s) or any subsidiary thereof and is material to
the Registrant(s) and its subsidiaries, taken as a whole, and
(ii) as promptly as practicable gives all Participating Holders
written notice of such postponement, setting forth the duration
of and reasons for such postponement; provided, however, that the
Registrant(s) shall not effect such a postponement more than once
in any 360 day period.
(j) Revocation of Request. In any Registration,
Participating Holders owning the Required Included Securities
may, on behalf of all Participating Holders, revoke the request
for such Registration, without incurring any liability to the
Registrant(s) or to any other Participating Holder, by providing
written notice (a "Revocation Notice") to the Registrant(s) at
any time prior to the initial filing with the SEC of a
Registration Statement in such Registration. A request for
Registration that is revoked pursuant to this Section 2.1(j)
shall not constitute a request pursuant to Section 2.1(a) and the
Remaining Class 5 Holders shall continue to have the right to
make one request for Registration pursuant to Section 2.1(a) if
such revocation is pursuant to (i) a Revocation Notice that is
received by the Registrant(s) within 10 Business Days of the date
on which the Registrant(s) shall have given written notice of
postponement of the filing of the Registration Statement in such
Registration pursuant to Section 2.1(i) or (ii) the first
Revocation Notice to have been received by the Registrant(s) in
circumstances other than as described in the preceding
clause (i).
(k) Effectiveness. A registration requested
pursuant to Section 2.1(a) shall not be deemed to have been effected:
(i) unless a Registration Statement with
respect thereto has been declared effective by the SEC and
remains effective in compliance with the provisions of the Securities
Act and the laws of any state or other jurisdiction applicable to
the disposition of all Included Securities covered by such Registration
Statement until such time as all of such Included Securities have been
disposed of in accordance with such Registration Statement;
(ii) if, after it has become effective, such
Registration is interfered with by any stop order, injunction or other order
or requirement of the SEC or other governmental or regulatory agency or
court for any reason other than a violation of applicable law
solely by the holders of Included Securities and has not thereafter
become effective; or
(iii) if, in the case of an Underwritten
Offering, the conditions to closing specified in the underwriting
agreement to which the Registrant(s) are party are not satisfied other than by
reason of any breach or failure by the holders of the Included Securities,
or are not otherwise waived.
SECTION 2.2 Limitations on Registration Rights.
(a) No Incidental Registrations. The Registrant(s) shall
not be entitled to include in a Registration any shares of Common
Stock or any Senior Subordinated Notes other than the Designated
Securities, nor shall any Participating Holder have the right to
include any of its Registrable Securities in any Registration
Statement other than pursuant to a Registration hereunder.
(b) No Other Registration Rights. The Company will not
hereafter enter into any agreement with respect to any shares of
Common Stock or Warrants that grants to any Person incidental
registration rights with respect to any Registration Statement
pursuant to a Registration hereunder.
SECTION 2.3 Holdback Agreements. In the case of a
Registration in connection with an Underwritten Offering, each
Remaining Class 5 Holder and the Registrant(s) agree not to
effect any sale or distribution, including any private placement
or any sale pursuant to Rule 144, of any shares of Common Stock
or any Senior Subordinated Notes (other than the Included
Securities pursuant to such Underwritten Offering) during the
seven-day period prior, and the 180-day period following, the
effective date of the Registration Statement in such
Registration.
SECTION 2.4 Registration Procedures. If and whenever the
Registrant(s) is or are required to effect a Registration, the
Registrant(s) shall, except as provided in Section 2.1(i), as
expeditiously as possible:
(a) prepare and file with the SEC as promptly as
practicable, but in any event not later than 45 days after
receipt of an Initial Request, a Registration Statement on any
form for which the Registrant(s) then qualifies which counsel for
the Company shall deem appropriate, subject to Section 2.1(e),
and which form shall be available for the sale of the Included
Securities in accordance with the intended methods of
distribution thereof, and use all reasonable efforts to cause
such Registration Statement to become effective; provided that as
promptly as practicable, but in any event not later than four
Business Days before filing any Registration Document with the
SEC, the Registrant(s) shall furnish to each Participating
Holder, the Managing Underwriter, if any, and one counsel
selected by Participating Holders owning not less than the
Required Included Securities copies of such Registration
Document, which shall be subject to review by such Persons; the
Registrant(s) shall not file any Registration Document to which
the Managing Underwriter, if any, or Participating Holders owning
not less than the Required Included Securities or such counsel of
such Participating Holders shall have reasonably objected within
three Business Days after receipt of such Registration Document
(provided that the foregoing shall not limit the right of any
Participating Holder identified in such Registration Document
reasonably to object, within three Business Days after receipt of
such Registration Document, to any particular information
contained therein relating specifically to such Participating
Holder, including any information describing the manner in which
such Participating Holder acquired its Included Securities and
the intended method of distribution thereof) and if the
Registrant(s) is or are unable to file any such Registration
Document due to any objection as provided herein, use its best
efforts to cooperate with the Managing Underwriter, if any, and
the Participating Holders to prepare, as promptly as reasonably
practicable, a document that is satisfactory to the
Registrant(s), the Managing Underwriter, if any, and the
Participating Holders; provided further that if such Registration
Document refers to any Participating Holder by name or otherwise
as the holder of any Included Securities, then such Participating
Holder shall have the right to require (i) the insertion therein
of language, in form and substance satisfactory to such
Participating Holder, to the effect that the the Registrant(s) by
such Participating Holder of such securities does not necessarily
make such Participating Holder a "Controlling Person" of the
Registrant(s) within the meaning of the Securities Act and is not
to be construed as a recommendation by such Participating Holder
of the investment quality of the securities covered thereby and
that such holding does not imply that such Participating Holder
will assist in meeting any future financial requirements of the
Registrant(s), or (ii) in the event that such reference to such
Participating Holder by name or otherwise is not required by the
Securities Act or any rules and regulations promulgated
thereunder, the deletion of the reference to such Participating
Holder; and the Registrant(s) shall notify each Participating
Holder of any stop order issued or threatened by the SEC and take
all reasonable actions required to prevent the entry of such stop
order or to remove it if entered;
(b) prepare and file with the SEC such additional
Registration Documents as may be necessary to keep the
Registration Statement in such Registration effective until the
earlier of (i) such time as all Included Securities have been
sold and (ii) 90 days from the effective date of such
Registration Statement or such longer period as may be required
by the Securities Act, and comply with the provisions of the
Securities Act with respect to the disposition of all Included
Securities during such period in accordance with the intended
methods of disposition thereof set forth in such Registration
Statement;
(c) furnish to each Participating Holder and the Managing
Underwriter, if any, copies of such Registration Documents in
such Registration and in such numbers as may be required by the
Securities Act or as any of the foregoing may reasonably request;
(d) use all reasonable efforts to register or qualify the
Included Securities under such other state securities or "blue
sky" laws of such jurisdictions as any Participating Holder or
the Managing Underwriter, if any, reasonably requests and do any
and all other acts and things that may be reasonably necessary or
advisable to enable the Participating Holders and the Managing
Underwriter, if any, to consummate the disposition in such
jurisdictions of the Included Securities; provided that the
Registrant(s) will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 2.4(d), (ii) subject
itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction;
(e) use all reasonable efforts to cause the Included
Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by
virtue of the business and operations of the Registrant to enable
each Participating Holder to consummate the disposition of its
Included Securities;
(f) at any time when a prospectus relating to the Included
Securities is required to be delivered under the Securities Act,
immediately notify each Participating Holder and the Managing
Underwriter, if any, of the happening of any event that comes to
the attention of the Registrant(s) if as a result of such event
the prospectus included in such Registration Statement contains
any untrue statement of a material fact or omits to state any
material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading,
and the Registrant(s) will promptly prepare and furnish to each
Participating Holder and the Managing Underwriter, if any, a
supplement or amendment to such prospectus so that, as thereafter
delivered to purchasers of Included Securities, such prospectus
will not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading;
(g) use all reasonable efforts to cause the Included
Securities to be listed on each securities exchange or national
market system on which such securities are then listed, if any,
and enter into such customary agreements including a listing application
and indemnification agreement in customary form,
provided that the applicable listing requirements are satisfied,
and to provide a transfer agent and registrar for the Included
Securities no later than the effective date of Registration
Statement in such Registration;
(h) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other
actions as Participating Holders owning the Required Included
Securities or the Managing Underwriter, if any, reasonably
request in order to expedite or facilitate the disposition of the
Included Securities, including customary indemnification;
(i) make available for inspection by any Participating
Holder, the Managing Underwriter, if any, and any attorney,
accountant or other agent retained by any Participating Holder or
the Managing Underwriter, if any, all financial and other
records, pertinent corporate documents and properties of the
Registrant(s) and its subsidiaries as shall be reasonably necessary
to enable such Persons to exercise their due diligence
responsibility, and cause the Registrant(s) and its or their
subsidiaries' officers, directors and employees to supply all
information and respond to all inquiries reasonably requested by
any such Person in connection with the Registration Statement in
such Registration;
(j) deliver an opinion of counsel for the Registrant(s) and
a "cold comfort" letter from the independent public accountants
of the Registrant(s) in customary form and covering such matters
of the type customarily covered by opinions of issuer's counsel
and "cold comfort" letters and such other matters as
Participating Holders owning the Required Included Securities or
the Managing Underwriters, if any, reasonably request; and
(k) otherwise use all reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement no later than 60 days after the end of the 12-
month period commencing at the end of the fiscal quarter of the
Registrant(s) in which the effective date of the Registration
Statement shall have occurred (as the term "effective date" is
defined in Rule 158(c) under the Securities Act), which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder.
Each Participating Holder agrees that, upon receipt
of any notice from the Registrant(s) of the happening of any event of the
kind described in Sec tion 2.4(f), such Participating Holder will forthwith
discontinue disposition of its Included Securities until such
Participating Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 2.4(f), and, if so directed by
the Registrant(s) such Participating Holder will deliver to the Registrant(s)
(at the expense of the Registrant(s)) all copies (including, but not limited
to, any and all drafts), other than permanent file copies, then in such
Participating Holder's possession, of the prospectus covering the Included
Securities current at the time of receipt of such notice. In the event the
Registrant(s) shall give any such notice, the period mentioned in Section
2.4(b) shall be extended by the greater of (i) 90 days and (ii) the number
of days during the period from and including the date of the giving of
such notice pursuant to Section 2.4(f) to and including the date
when each Participating Holder shall have received the copies of the
supplemented or amended prospectus contemplated by Section 2.4(f).
SECTION 2.5 Indemnification.
(a) Indemnification by the Registrant(s). In any
Registration, each Registrant will, and it hereby does, indemnify
and hold harmless, to the full extent permitted by law, each
Participating Holder, its directors and officers, general
partners, limited partners and managing directors, agents and
representatives and each other Person who participates as an
underwriter in the offering or sale of such securities and each
affiliate of such Participating Holder or underwriter (and
directors, officers, controlling Persons, partners, managing
directors, agents and representatives of any of the foregoing),
against any and all losses, claims, damages or liabilities, joint
or several, and expenses (including any amounts paid in any
settlement) to which such Participating Holder or underwriter, or
any such director, officer, controlling person, partner, managing
director, agent or representative may become subject under the
federal securities laws, state securities or "blue sky" laws,
common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) or
expenses arise out of or are based upon (i) any untrue statement
or alleged untrue statement of any material fact contained in any
Registration Document in such Registration, (ii) any omission or
alleged omission to state therein a material fact necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading, or (iii) any violation or
alleged violation by the Registrant(s) of any federal, state or
common law rule or regulation applicable to the Registrant(s) and
relating to action required of or inaction by the Registrant(s)
in connection with such Registration, and the Registrant(s) will
reimburse each Participating Holder or underwriter and each such
director, officer, controlling person, partner, managing
director, agent or representative for any legal or any other
expenses reasonably incurred by them, as and when incurred, in
connection with investigating or defending such loss, claim,
damage, liability, action or proceeding; provided that the
Registrant(s) shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is
based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in such Registration Document
in reliance upon and in conformity with written information
furnished to the Registrant(s) through an instrument duly executed
by such Participating Holder in such Participating Holder's
capacity as a stockholder or debt holder of the Registrant(s) or
any such director, officer, controlling Person, partner, managing
director, agent, representative or underwriter specifically
stating that it is for use in the preparation thereof; provided
further that the Registrant(s) shall not be liable to any Participating
Holder, any Person, if any, who participates as an
underwriter in the offering or sale of Included Securities or any
other Person, if any, who controls such underwriter within the
meaning of the Securities Act, pursuant to this Section 2.5 with
respect to any Registration Document, to the extent that any such
loss, claim, damage or liability of such underwriter or controlling
Person results from the fact that such underwriter sold
Included Securities to a Person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a
copy of the final prospectus or of the final prospectus as then
amended or supplemented, whichever is most recent, covering such
Included Securities if the Registrant(s) had previously furnished
copies thereof to such underwriter and such final prospectus, as
then amended or supplemented, had corrected any such misstatement
or omission. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of
such Participating Holder or underwriter or any such director,
officer, controlling person, partner, managing director, agent or
representative and shall survive the transfer by such
Participating Holder of its Included Securities.
(b) Indemnification by the Participating Holders and Under
writers. As a condition to including any Designated Securities
in any Registration, each Registrant shall have received an
undertaking reasonably satisfactory to it from each Participating
Holder or any underwriter, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 2.5(a))
each Registrant and its or their directors,
officers, controlling Persons and all other prospective sellers
(including, but not limited to, all other Participating Holders)
and their respective directors, officers, general and limited
partners, managing directors, and their respective controlling
Persons with respect to any statement or alleged statement in or
omission or alleged omission from any Registration Document in
such Registration, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the
Registrant(s) or its or their representatives through an
instrument duly executed by or on behalf of such Participating
Holder or underwriter specifically stating that it is for use in
the preparation of such Registration Document. Such indemnity
shall remain in full force and effect regardless of any inves
tigation made by or on behalf of the Registrant(s) or any
Participating Holder, underwriter or any of their respective
directors, officers, general or limited partners, managing
directors or controlling Persons and shall survive the transfer
by such Participating Holder of its Included Securities; provided,
however, that no such Participating Holder shall be liable
under Section 2.5 for any amounts exceeding the amount of
proceeds (net of any underwriting commissions, discounts and the
like) to be received by such Participating Holder in connection
with the sale of its Included Securities.
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party hereunder of, written notice of the
commencement of any action or proceeding with respect to which a
claim for indemnification may be made pursuant to this Section 2.5,
such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, promptly
give written notice to the indemnifying party of the commencement
of such action; provided, that the failure of any indemnified
party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding
subsections of this Section 2.5, except to the extent that the
indemnifying party is actually materially prejudiced by such
failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party will be entitled to participate in
and, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, to the extent that it
may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party
to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense
thereof, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying
parties arises in respect of such claim after the assumption of
the defense thereof. No indemnifying party will consent to entry
of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from
all liability in respect of such claim or litigation. An
indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel in any single
jurisdiction for all parties indemnified by such indemnifying
party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may
exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event
the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels as may be
reasonably necessary. Notwithstanding anything to the contrary
set forth herein, and without limiting any of the rights set
forth above, in any event each Participating Holder will have the
right to retain at its own expense, counsel with respect to the
defense of a claim.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding subsections of this Section 2.5 (with
appropriate modifications) shall be given by the Registrant(s)
and each Participating Holder with respect to any required
registration or other qualification of securities under any
federal or state law or regulation or governmental authority
other than the Securities Act.
(e) Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnity
agreement provided for in this Section 2.5 is for any reason held
to be unavailable to an indemnified party in accordance with its
terms, the Registrant(s) and each Participating Holder shall
contribute to the aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by said indemnity agree
ment incurred by Registrant(s) and the Participating Holder
(i) in such proportion as is appropriate to reflect the relative
benefits received by the Registrant(s), on the one hand, and the
Participating Holder in question, on the other hand, 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 benefits referred to in clause (i), but also the
relative fault of the Registrant(s) and each Participating Holder
in question in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages and
expenses, as well as any other relevant equitable considerations.
The relative fault of the Registrant(s), on the one hand, and of
the Participating Holder, on the other hand, shall, be determined
by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by each
Registrant(s), on the one hand, or by the Participating Holder,
on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of subsection 11(f) of the
Securities Act) shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation. The
foregoing contribution agreement shall in no way affect the contribution
liabilities of any Person having liability under Section 11 of
the Securities Act other than the Registrant(s) and
the Participating Holders.
ARTICLE II
MISCELLANEOUS
SECTION 3.1 Effectiveness. The terms of this Agreement
shall be effective as of the Effective Date.
SECTION 3.2 Amendments. This Agreement cannot be amended,
modified or supplemented except (a) as contemplated by Section
2.1(b)(ii)(C) and (b) by a written instrument signed by Holding,
Homeland and the Remaining Class 5 Holders owning at the time of
execution thereof not less than a majority in number of the
Registrable Shares and a majority in aggregate principal amount
of Registrable Notes, provided, however, that without the written
consent of each such holder affected thereby no amendment,
modification or supplement pursuant to clause (b) above may make
a change that (i) increases the obligations of such holder or
(ii) adversely affects the rights of such holder under Section 2.5.
SECTION 3.3 Term of Agreement. This Agreement shall
commence on the Effective Date and shall terminate, except for
the provisions of Section 2.5 which shall survive such
termination, on the earliest to occur of (i) the seventh anniversary
of the Effective Date, (ii) the date on which the
effectiveness of a Registration Statement that has become
effective (within the meaning of Section 2.1(k)) in a
Registration shall have been terminated and (iii) such time as
the Registrable Shares and the Registrable Notes no longer
represent the Registration Trigger Amount.
SECTION 3.4 Headings. The descriptive headings of the
several Articles and Sections of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
SECTION 3.5 Specific Performance. Irreparable damage would
occur in the event any of the provisions of this Agreement were
not to be performed in accordance with the terms hereof and the
Registrant(s) and the Remaining Class 5 Holders, as the case may
be, shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
SECTION 3.6 Complete Agreement. This Agreement contains the
entire agreement of Holding, Homeland and the Old Debt Holders in
respect of the subject matter contained herein and the
transactions contemplated hereby. There are no restrictions,
agreements, promises, representations, warranties, covenants, or
undertakings with respect to the subject matter hereof, other
than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings
between the parties hereto with respect to the subject matter
hereof.
SECTION 3.7. Assignment. The
registration and other rights provided in this
Agreement, and the obligations of Holding and Homeland
hereunder, are not assignable to any Person (including,
without limitation, any Transferee) except to the
extent expressly provided in Section 2.1(b)(ii).
SECTION 3.8. Notices. Any notice, request, instruction
or other document to be given hereunder shall be in writing, shall
be delivered personally or sent by Federal Express or other
overnight delivery service, (a) if to Holding or Homeland, to
Homeland Holding Corporation, 2601 Northwest Expressway, Oil Center
East, 11th Floor, Oklahoma city, OK 73112, Attention: Secretary, or to
such other address as Holding or Homeland shall specify by written notice,
and (b) if to any Old Debt Holder or Permitted Transferee, to such address
(which shall not be a post office box, but shall be an address to which
overnight delivery services will deliver) as such Old Debt Holder or
Permitted Transferee shall have specified in a written notice to Holding
(which may be amended by subsequent written notice), a copy of which
written notice shall be on file with the Secretary of Holding.
Notwithstanding any other provision of this Agreement, unless and until
Holding shall have received such notice of address from an Old Debt
Holder or Permitted Transferee, the Registrant(s) shall have no
obligation to such Old Debt Holder with respect to the giving of any
notice otherwise required hereunder. Notice shall be effective when sent in
the manner, and directed as, provided above or, if delivered per
sonally, when received.
SECTION 3.9. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State
of New York, without regard to applicable principles of conflicts of
laws.
SECTION 3.10. Severability. Whenever possible, each
provision of this Agreement will be interpreted in such a manner as to
be effective and valid under applicable law, but if any provision of
this Agreement is held to be prohibited by or invalid under applicable
law, such provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this
Agreement, except to the extent that such prohibition or invalidity would
constitute a material change in the terms of this Agreement taken as a whole.
SECTION 3.11. Rule 144 and Rule 144A. The Registrant(s)
shall take all actions reasonably necessary to enable the Remaining Class
5 Holders to sell their Registrable Securities without registration
under the Securities Act within the limitation of the exemptions provided
by (i) Rule 144, (ii) Rule 144A, or (iii) any similar rules or
regulations hereafter adopted by the SEC, including, without limitation,
filing on a timely basis all reports required to be filed under the
Exchange Act. Upon the request of any such holder, the Registrant(s) shall
deliver to such holder a written statement as to whether they have
complied with such requirements.
IN WITNESS WHEREOF, each of Holding and Homeland has
executed, and each Old Debt Holder by receipt of its Original Shares
is deemed to have executed, this Agreement as of the date first above
written.
HOMELAND STORES, INC. HOMELAND HOLDING CORPORATION
By: _____________________ By:___________________________
Name: Name:
Title: Title:
175446
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of The Securities Exchange
Act of 1934
HOMELAND HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 73-1311075
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
2601 N. W. Expressway
Oklahoma City, Oklahoma 73112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 879-6600
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
HOMELAND HOLDING CORPORATION
FORM 10
TABLE OF CONTENTS
Page
Item 1. Business...........................................................1
General............................................................1
Restructuring......................................................1
Background.........................................................2
Business Strategy..................................................2
AWG Transaction....................................................3
Homeland Supermarkets..............................................4
Merchandising Strategy and Pricing.................................6
Customer Service...................................................6
Advertising and Promotion..........................................6
Products...........................................................7
Supply Arrangements................................................7
Employees and Labor Relations......................................8
Computer and Management Information Systems........................9
Competition........................................................9
Trademarks and Service Marks......................................10
Regulatory Matters................................................10
Item 2. Financial Information.............................................11
Selected Consolidated Financial Data..............................12
Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................14
Results of Operations.............................................14
General...........................................................14
Liquidity and Capital Resources...................................19
Recently-Issued Accounting Standards..............................22
Inflation/Deflation...............................................23
Item 3. Properties........................................................23
Item 4. Security Ownership of Certain Beneficial Owners and Management....23
Item 5. Directors and Executive Officers..................................25
Item 6. Executive Compensation............................................28
Summary of Cash and Certain Other Compensation....................28
Employment Agreements.............................................29
Management Incentive Plan.........................................31
Retirement Plan...................................................31
Management Stock Option Plan......................................32
Compensation Committee Interlocks and Insider Participation.......32
Item 7. Certain Relationships and Related Transactions....................32
Item 8. Legal Proceedings.................................................33
Item 9. Market Price of and Dividends on the Registrants's
Common Equity and Related Stockholders Matters...................34
Item 10. Recent Sales of Unregistered Securities...........................34
Item 11. Description of Registrant's Securities to be Registered...........35
General...........................................................35
Equity Registration Rights Agreement..............................36
Noteholder Registration Rights Agreement..........................37
Item 12. Indemnification of Directors and Officers.........................38
Transfer Agent....................................................39
Item 13. Financial Statements and Supplementary Data.......................39
Item 14. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...........................39
Item 15. Financial Statements and Exhibits.................................39
HOMELAND HOLDING CORPORATION
FORM 10
Item 1. Business
General
Homeland Holding Corporation ("Holding"), through its
wholly-owned subsidiary, Homeland Stores, Inc. ("Homeland," and,
together with Holding, the "Company"), is a leading supermarket
chain in the Oklahoma, southern Kansas and Texas Panhandle
region. The Company operates in four distinct market places:
Oklahoma City, Oklahoma, Tulsa, Oklahoma, Amarillo, Texas and
certain rural areas of Oklahoma, Kansas and Texas. As of
September 1, 1996, the Company operated 65 stores throughout
these markets.
The Company's executive offices are located at 2601
N.W. Expressway, Oklahoma City, Oklahoma 73112, and its telephone
number is (405) 879-6600.
Restructuring
On May 13, 1996, Holding and Homeland filed chapter 11
petitions with the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"). Simultaneous with
such filings, the Company submitted a "pre-arranged" plan of
reorganization and a disclosure statement, which set forth the
terms of the restructuring of the Company (the "Restructuring").
The purposes of the Restructuring were to reduce substantially
the Company's debt service obligations and labor costs and to
create a capital and cost structure that will allow the Company
to maintain and enhance the competitive position of its business
and operations. The Restructuring was negotiated with and
supported by the lenders under the Company's then existing
revolving credit facility, an ad hoc committee (the "Noteholders
Committee") representing approximately 80% of the Company's
outstanding Old Notes (as defined under "Management's Discussion
and Analysis of Financial Conditions and Results of Operations --
Liquidity and Capital Resources") and the Company's labor unions.
The Bankruptcy Court confirmed the Company's First Amended Joint
Plan of Reorganization, as modified (the "Plan of
Reorganization") on July 19, 1996, and the Plan of Reorganization
became effective on August 2, 1996 (the "Effective Date").
Pursuant to the Restructuring, the $95 million of the
Company's Old Notes (plus accrued interest) were canceled, and
the noteholders will receive (in the aggregate) $60 million face
amount of newly-issued 10% Senior Subordinated Notes Due 2003 of
the Company (the "New Notes") and $1.5 million in cash. In
addition, the noteholders and the Company's general unsecured
creditors will receive approximately 60% and 35%, respectively,
of the equity of reorganized Holding (assuming total unsecured
claims of approximately $63 million, including noteholder
unsecured claims). Holding's existing equity holders will
receive the remaining 5% of the new equity, together with five-
year warrants to purchase an additional 5% of such equity.
In connection with the Restructuring, the Company
negotiated an agreement with its labor unions to modify certain
elements of the Company's existing collective bargaining
agreements. These modifications provide for, among other things,
wage and benefit modifications, the buyout of certain employees
and the issuance and purchase of new equity to a trust acting on
behalf of the unionized employees. The modified collective
bargaining agreements became effective on the Effective Date.
See "Business -- Employees and Labor Relations."
On the Effective Date, the Company entered into a loan
agreement (the "New Credit Agreement") with National Bank of
Canada ("NBC"), as agent and lender, and two other lenders,
Heller Financial, Inc. and IBJ Schroder Bank and Trust Company,
under which the lenders will provide a working capital and letter
of credit facility and a term loan. The New Credit Agreement
permits the Company to borrow, under the working capital and
letter of credit facility, up to the lesser of (a) $27.5 million
and (b) the applicable borrowing base. Funds borrowed under such
facility will be available for general corporate purposes of the
Company. The New Credit Agreement also provides the Company a
$10.0 million term loan, which will be used to fund certain
obligations of the Company under the Plan of Reorganization,
including an employee buyout offer and a health and welfare plan
required by the modified collective bargaining agreements,
professional fees and "cure amounts" which must be paid in
connection with executory contracts, secured financings and
unexpired leases. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and
Capital Resources" for a description of the New Credit Agreement.
Background
The Company was organized in 1987 by a group of
investors led by Clayton, Dubilier & Rice, Inc. ("CD&R"), a
private investment firm specializing in leveraged acquisitions
with the participation of management, for the purpose of
acquiring substantially all of the assets and assuming specified
liabilities of the Oklahoma division (the "Oklahoma Division") of
Safeway Inc. ("Safeway") (the "Acquisition"). The stores changed
their name to Homeland in order to highlight the Company's
regional identity.
Prior to the Acquisition, the Company did not have any
significant assets or liabilities or engage in any activities
other than those incidental to the Acquisition. Holding owns all
of the outstanding capital stock of Homeland and has no other
significant assets. Prior to the Effective Date, the Clayton &
Dubilier Private Equity Fund III Limited Partnership ("C&D Fund
III"), a Connecticut limited partnership managed by CD&R, owned
35.9% of Holding's outstanding Class A Common Stock, par value
$.01 per share (including redeemable Class A Common Stock, the
"Common Stock"). Prior to the Effective Date, the Clayton &
Dubilier Private Equity Fund IV Limited Partnership ("C&D Fund
IV"), a Connecticut limited partnership also managed by CD&R,
owned 40.4% of the Class A Common Stock. Following consummation
of the Restructuring, C&D Fund III and C&D Fund IV will own less
than 5% of the New Common Stock outstanding.
Business Strategy
Following the Acquisition, Homeland adopted a business
strategy which was designed to maintain and improve its market
leadership in its operating area. The Company's business
strategy from 1987 through 1993 involved: (a) substantial
investment to upgrade and remodel the existing store network and
to build or acquire additional stores, which could be serviced by
Homeland's existing warehouse and distribution center; and (b)
adoption of a value-oriented merchandising concept combining a
flexible high-low pricing structure (i.e., pricing of advertised
or promotional items below the store's regular price and at or
below the price offered by the store's competitors while
allocating prime shelf space to high margin items) with a wide
selection of products and an emphasis on quality and service.
Increased advertising and promotion were used to expand the
Company's customer base. The Company's decision to commit
significant financing and human resources to upgrade and remodel
its existing stores marked a sharp turnaround for the supermarket
business that had constituted Safeway's Oklahoma Division.
The Company's business has been adversely affected in
recent years by the entry of new competition into the Company's
key markets, which has resulted in a decline in the Company's
comparable store sales. The Company was unable to effectively
respond to this increased competition because (a) the high labor
costs associated with the Company's unionized workforce made it
difficult for the Company to price its goods competitively with
competitors (none of which has a unionized workforce), and (b)
the high fixed overhead costs associated with its warehouse
operation made the closure of marginal and unprofitable stores
financially prohibitive.
In the fourth quarter of 1994, the Company developed a
plan to improve its financial position and to address the
operating problems discussed above. In November 1994, the
Company hired James A. Demme, a 35-year veteran of the wholesale
and retail food distribution business, to be the Company's new
President and Chief Executive Officer. Following the completion
of the AWG Transaction (as defined under "Business -- AWG
Transaction"), Mr. Demme and his new management team began
implementing the Company's new marketing plan consisting of the
following elements: (a) increasing sales of specialty items and
perishables; (b) distinguishing the Company from its competitors
by promoting and enhancing the Company's reputation for good
service and emphasizing the Company's local identity; (c)
increasing utilization of the Company's "high-low" pricing
approach; (d) upgrading the Company's management information
systems; (e) introducing the "Homeland Savings Card," a frequent-
shopper card; and (f) building customer loyalty and improving the
Company's "pricing image" through the Company's private label
program.
As part of its strategic plan, the Company's management
team also implemented a program to close marginal and
unprofitable stores. The Company closed 14 stores in 1995 (seven
prior to the AWG sale and seven after such sale) and closed two
additional stores during the second quarter of 1996. The Company
sold its store in Ponca City, Oklahoma in April 1996.
For additional information, see also "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
AWG Transaction
On April 21, 1995, the Company sold 29 of its stores
and its warehouse and distribution center to Associated Wholesale
Grocers, Inc. ("AWG") pursuant to an Asset Purchase Agreement
dated as of February 6, 1995 (the "AWG Purchase Agreement"), for
a cash purchase price of approximately $72.9 million including
inventory, and the assumption of certain liabilities by AWG. At
the closing, the Company and AWG also entered into a seven-year
supply agreement, whereby the Company became a retail member of
the AWG cooperative and AWG became the Company's primary
supplier. The transactions between the Company and AWG are
referred to herein as the "AWG Transaction."
AWG is a buying cooperative which sells groceries on a
wholesale basis to its retail member stores. AWG has 800 member
stores located in a ten-state region and is the nation's fourth
largest grocery wholesaler, with approximately $2.97 billion in
revenues in 1995.
Of the proceeds from the AWG Transaction, $25.0 million
was allocated to the Old Notes and $12.2 million was allocated to
indebtedness under the Prior Credit Agreement (as hereafter
defined under "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital
Resources"). The remaining proceeds from the AWG Transaction
were (a) used to pay certain costs, expenses and liabilities
required to be paid in connection with the AWG Transaction and
(b) deposited into escrow for reinvestment by the Company.
The AWG Transaction enabled the Company: (a) to reduce
the Company's borrowed money indebtedness in respect of the Old
Notes and under the Prior Credit Agreement by approximately $37.2
million in the aggregate; (b) to have AWG assume, or provide
certain undertakings with respect to, certain contracts and
leases and certain pension liabilities of the Company; (c) to
sell the Company's warehouse and distribution center, which
eliminated the high fixed overhead costs associated with the
operation of the warehouse and distribution center and thereby
permit the Company to close marginal and unprofitable stores; and
(d) to obtain the benefits of becoming a member of the AWG
cooperative, including increased purchases of private label
products, special product purchases, dedicated support programs
and access to AWG's store systems and participation in the
membership rebate and patronage programs.
In August 1996, AWG filed a registration statement with
the Securities and Exchange Commission with respect to a proposed
conversion from a cooperative to a public general business
corporation and a related initial public offering. If the
conversion is consummated, AWG would cease paying annual
patronage rebates and Homeland is expected to receive a one-time
distribution of approximately 1.1 million shares of common stock
in the new public company. This stock would be restricted from
public sale for two years. AWG has indicated in its registration
statement that the market value of each share of its common stock
is anticipated to be $20.00. AWG expects to pay an initial
annualized dividend of $0.20 on each share. Homeland has
notified AWG that Homeland does not support the proposed
conversion and believes that the conversion and initial public
offering may constitute a default by AWG under the Supply
Agreement.
Homeland Supermarkets
The Company's current network of stores features three
basic store formats. Homeland's conventional stores are
primarily in the 25,000 total square feet range and carry the
traditional mix of grocery, meat, produce and variety products.
These stores contain more than 20,000 stock keeping units,
including food and general merchandise. Sales volumes of
conventional stores range from $60,000 to $125,000 per week.
Homeland's superstores are in the 35,000 total square feet range
and offer, in addition to the traditional departments, two or
more specialty departments. Sales volumes of superstores range
from $95,000 to $265,000 per week. Homeland's combo store format
includes stores of approximately 45,000 total square feet and
larger and was designed to enable the Company to expand shelf
space devoted to general merchandise. Sales volume of combo
stores range from $140,000 to $300,000 per week. The Company's
new stores and certain remodeled locations have incorporated
Homeland's new, larger superstore and combo formats.
Of the 65 stores operated by the Company at September
1, 1996, 10 are conventional stores, 44 are superstores and 11
are combo stores. The chart below summarizes Homeland's store
development over the last three years:
_____________Fiscal Year Ended__________
12/30/95 12/31/94 01/01/94
Average sale per store (in millions) $7.9(1) $7.1 $7.2
Average total square feet per store 38,204 34,700 34,700
Average sales per square feet $207(1) $208 $205
Number of stores:
Stores at start of period 111 112 113
Stores remodeled 5 10 3
New stores opened 0 0 1
Stores sold or closed 43 1 2
Stores at end of period 68 111 112
Size of stores:
Less than 25,000 sq. ft. 8 24 24
25,000 to 35,000 sq. ft. 24 38 39
35,000 sq. ft. or greater 36 49 49
Store formats:
Conventional 11 29 29
SuperStore 44 65 66
Combo 13 17 17
(1) Reflects the operation of 68 stores in 1995.
The Company's network of stores is managed by district
managers on a geographical basis through four districts. Each
district manager oversees store operations for approximately 16
stores. Store managers are responsible for determining staffing
levels, managing store inventories (within the confines of
certain parameters set by the Company's corporate headquarters)
and purchasing products. Store managers have significant
flexibility with respect to the quantities of items carried, but
not necessarily types of products purchased. The Company's
corporate headquarters is directly responsible for merchandising,
advertising, pricing and capital expenditure decisions.
Merchandising Strategy and Pricing
The Company's merchandising strategy emphasizes
competitive pricing through a high-low pricing structure, as well
as the Company's leadership in quality products and service,
selection, convenient store locations, specialty departments and
perishable products (i.e., meat, produce, bakery and seafood).
The Company's strategy is to price competitively with each
conventional supermarket operator in each market area. In areas
with discount store competition, the Company attempts to be
competitive on high-volume, price sensitive items. The Company's
in-store promotion strategy is to offer all display items at a
lower price than the store's regular price and at or below the
price offered by the store's competitors. The Company also
currently offers double coupons, with some limitations, in all
areas in which it operates.
Customer Service
The Company's stores provide a variety of customer
services including, among other things, carry-out services,
postal services, automated teller machines, pharmacies, video
rentals, check cashing and money orders. The Company believes it
is able to attract new customers and retain its existing
customers because of its high level of customer service.
Advertising and Promotion
All advertising and promotion decisions are made by the
Company's central merchandising and advertising staff. The
Company's advertising strategy is designed to enhance its value-
oriented merchandising concept and emphasize its reputation for
fast, friendly service, variety and quality. Accordingly, the
Company is focused on presenting itself as a competitively-
priced, promotions oriented operator that offers value to its
customers and an extensive selection of high quality merchandise
in clean, attractive stores. This strategy allows the Company to
accomplish its marketing goals of attracting new customers and
building loyalty with existing customers. In May 1995, the
Company introduced a new weekly advertising layout that improved
product presentation and enhanced price perception. In addition,
new signage was implemented in the stores calling attention to
various in-store specials and creating a friendlier and more
stimulating shopping experience.
The Company currently utilizes a broad range of print
and broadcast advertising in the markets it serves, including
newspaper advertisements, advertising inserts and circulars,
television and radio commercials and promotional campaigns that
cover substantially all of the Company's markets. The Company
receives co-operative and performance advertising reimbursements
from vendors which reduce its advertising costs.
In September 1995, the Company introduced a frequent-
shopper card called the "Homeland Savings Card," in its Texas
stores. The Company believes that it is the only supermarket
chain in its market area that can capitalize on a frequent-
shopper card program because of the Company's advertising and
market share dominance. The Company introduced the Homeland
Savings Card in its other stores in August 1996.
Products
The Company provides a wide selection of name-brand and
private label products to its customers. All stores carry a full
line of meat, dairy, produce, frozen food, health and beauty aids
and selected general merchandise. As of the close of fiscal year
1995, approximately 82% of the Company's stores had service
delicatessens and/or bakeries and approximately 65% had in-store
pharmacies. In addition, some stores provide additional
specialty departments that offer ethnic food, fresh and frozen
seafood, floral services and salad bars.
The Company's private label name is "Pride of America."
The Company's private label program allows customers to purchase
high quality products at lower than national brand retail prices.
The Company's private label products include over 400 items
covering virtually every major category in the Company's stores,
including dairy products, meat, frozen foods, canned fruits and
vegetables, eggs, health and beauty care products and plastic
wrap.
As a result of the Company's supply relationship with
AWG, the Company's stores also offer certain AWG private label
goods, including Best Choicer and Always Saver.
Private label products generally represent quality and
value to customers and typically contribute to a higher gross
profit margin than national brands. The promotion of private
label products is an integral part of the Company's merchandising
philosophy of building customer loyalty as well as improving the
Company's "pricing image."
Supply Arrangements
The Company is a party to the supply agreement with AWG
(the "Supply Agreement"), pursuant to which the Company became a
member of the AWG cooperative and AWG is the Company's primary
supplier. AWG currently supplies approximately 70% of the goods
sold in the Company's stores. AWG is a buying cooperative which
sells groceries on a wholesale basis to its retail member stores.
AWG has approximately 800 member stores located in a ten-state
region and is the nation's fourth largest grocery wholesaler,
with approximately $2.97 billion in revenues in 1995.
Pursuant to the Supply Agreement, AWG is required to
supply products to the Company at the lowest prices and on the
best terms available to AWG's retail members from time to time.
In addition, the Company is (a) eligible to participate in
certain cost-savings programs available to AWG's other retail
members and (b) is entitled to receive certain member rebates and
refunds based on the dollar amount of the Company's purchases
from AWG's distribution center and periodic cash payments from
AWG, up to a maximum of approximately $1.3 million per fiscal
quarter, based on the dollar amount of the Company's purchases
from AWG's distribution centers during such fiscal quarter.
The Company purchases goods from AWG on an open account
basis. AWG requires that each member's account be secured by a
letter of credit or certain other collateral in an amount based
on such member's estimated weekly purchases through the AWG
distribution center. The Company's open account with AWG is
currently secured by an $8.4 million letter of credit (the "AWG
Letter of Credit") issued in favor of AWG by NBC. In addition,
the Company's obligations to AWG are secured by a first lien on
all "AWG Equity" owned from time to time by the Company, which
includes, among other things, AWG membership stock, the Company's
right to receive monthly payments and certain other rebates,
refunds and other credits owed to the Company by AWG (including
patronage refund certificates, direct patronage or year-end
patronage and concentrated purchase allowances). See " -- AWG
Transaction" for description of AWG's proposed conversion from a
cooperative to a public general business corporation.
The amount of the AWG Letter of Credit may be decreased
on a biannual basis upon the request of the Company based on the
Company's then-current average weekly volume of purchases and by
an amount equal to the face amount of the Company's issued and
outstanding AWG patronage refund certificates. In the event that
the Company's open account with AWG exceeds the amount of the AWG
Letter of Credit plus any other AWG Equity held as collateral for
the Company's open account, AWG is not required to accept orders
from, or deliver goods to, the Company until the amount of the
AWG Letter of Credit has been increased to make up for any such
deficiency. In the event AWG consummates its proposed conversion
to a general business corporation, patronage refund certificates
would no longer be issued to the Company to reduce the amount of
the AWG Letter of Credit.
Under the Supply Agreement, AWG has certain "Volume
Protection Rights," including (a) the right of first offer (the
"First Offer Rights") with respect to any proposed sales of
stores supplied under the Supply Agreement (the "Supplied
Stores") and proposed transfers of more than 50% of the
outstanding stock of the Company or Holding to an entity
primarily engaged in the retail or wholesale grocery business,
(b) the Company's agreement not to compete with AWG as a
wholesaler of grocery products during the term of the Supply
Agreement, and (c) the Company's agreement to dedicate the
Supplied Stores to the exclusive use of a retail grocery facility
owned by a retail member of AWG (the "Use Restrictions"). The
Company's agreement not to compete and the Use Restrictions
contained in the Supply Agreement are terminable with respect to
a Supplied Store upon the occurrence of certain events, including
the Company's compliance with AWG's First Offer Rights with
respect to any proposed sale of such store. In addition, the
Supply Agreement provides AWG with certain purchase rights in the
event the Company closes 90% or more of the Supplied Stores.
Employees and Labor Relations
At September 1, 1996, the Company had a total of 4,697
employees, of whom 3,524, or approximately 75%, were employed on
a part-time basis. The Company employs 4,593 in its supermarket
operations. The remaining employees are corporate and
administrative personnel.
The Company is the only unionized grocery chain in its
market areas. Approximately 92% of the Company's employees are
union members, represented primarily by the United Food and
Commercial Workers of North America ("UFCW").
In March 1996, the Company and representatives of the
UFCW reached an agreement in principle regarding certain
modifications to the Company's existing collective bargaining
agreements. The modified union agreements were ratified during
the week of March 11, 1996, by substantially all of each of the
UFCW local union chapters. In addition the local union chapter
of the Bakery, Confectionery and Tobacco Workers International
Union (the "BCT"), representing 30 of the Company's in-store
bakery employees, ratified modifications to its union agreement
on the same terms and conditions as the modified union agreements
with the UFCW (the modified union agreements with the UFCW and
the BCT are referred to collectively as the "Modified Union
Agreements").
The Modified Union Agreements have a term of five years
commencing on the Effective Date. The Modified Union Agreements
consist of five basic elements: (a) wage rate and benefit
contribution reductions and work rule changes; (b) a buyout offer
extended to certain of the Company's unionized employees (the
"Employee Buyout Offer") in the aggregate amount of $6.5 million;
(c) the establishment of an employee stock ownership trust
(acting on behalf of the Company's unionized employees), which
will receive, or be entitled to purchase, up to 522,222 shares of
New Common Stock, or 10% of the New Common Stock, pursuant to the
terms of the Modified Union Agreements; (d) the UFCW's right to
designate one member of the Boards of Directors of Homeland and
Holding following the Restructuring; and (e) the elimination of
certain "snap back" provisions, incentive plans and "maintenance
of benefits" provisions.
As of August 3, 1996 consummation date of the Employee
Buyout Offer, 833 of the Company's unionized employees had
accepted the Employee Buyout Offer. On or about that date, the
Company paid 774 of these employees an aggregate "buyout price"
of $5.9 million, ranging from $4,500 to $11,000 per employee
(depending on job classification, date of hire and full- or part-
time status). The balance of $0.6 million was paid to the
remaining 59 employees who accepted the Employee Buyout Offer in
September 1996. The Company funded the Employee Buyout Offer
through borrowings under the New Credit Agreement.
The Company estimates that the Modified Union
Agreements will result in cost savings of approximately $10
million during the first full contract year following the
Restructuring. There can be no assurance, however, that such
cost savings will actually be realized. In addition, cost
savings in future contract years will be offset in part by
certain wage and benefit increases including the recent federal
mandated minimum wage increase.
Computer and Management Information Systems
During 1995, the Company installed new client/server
systems in order to enhance its information management
capabilities, improve its competitive position and enable the
Company to terminate its outsourcing arrangements. The new
system includes the following features: time and attendance,
human resource, accounting and budget tracking, and scan support
and merchandising systems.
Prior to March 1996, the Company outsourced its
management information system and electronic data processing
functions pursuant to an agreement with K-C Computer Services,
Inc. The Company terminated the outsourcing agreement effective
March 31, 1996.
The Company has installed laser-scanning checkout
systems in all of its 65 stores. The Company utilizes the
information collected through its scanner systems to track sales
and to coordinate purchasing.
Competition
The supermarket business is highly competitive but very
fragmented and includes small independent operators. The Company
estimates that these operators represent over 40% of its markets.
The Company also competes with larger store chains such as
Albertson's and Wal-Mart, which operate 42 stores and 18 stores,
respectively, in the Company's market areas, "price impact"
stores such as Mega-Market, large independent store chains such
as IGA, regional chains such as United and discount warehouse
stores.
The Company is a leading supermarket chain in Oklahoma,
southern Kansas and the Texas Panhandle region. The Company
attributes its leading market position to certain advantages it
has over certain of its competitors including economies of scale
for purchasing and advertising, excellent store locations and a
strong reputation within the communities in which the Company
operates. The Company, under its capital expenditures program,
plans to open 1 new store in Amarillo in late 1996 and continue
to remodel and upgrade its store facilities.
The Company's business has been adversely affected in
recent years by the entry of new competition into the Company's
key markets, which has resulted in a decline in the Company's
comparable store sales. In 1994, there were 14 competitive
openings in the Company's market areas including 11 new Wal-Mart
supercenters, 2 new Albertson's and 1 new Mega Market. In 1995,
there were 8 additional competitive openings in the Company's
market areas, including 3 new Albertson's and 1 new Wal-Mart.
Based on information publicly available, the Company expects
that, in late 1996 or 1997, Albertson's will open 3 new stores,
Wal-Mart will open 2 new stores, Reasor's and Crest will each
open 1 new store in the Company's market areas.
Trademarks and Service Marks
During the transition from "Safeway" to "Homeland," the
Company was able to generate a substantial amount of familiarity
with the "Homeland" name. The Company continues to build and
enhance this name recognition through promotional advertising
campaigns. The "Homeland" name is considered material to the
Company's business and is registered for use as a service mark
and trademark. The Company has received federal and state
registrations of the "Homeland" mark as a service mark and a
trademark for use on certain products. The Company also received
a federal registration of the service mark "A Good Deal Better"
in 1994.
Regulatory Matters
Homeland is subject to regulation by a variety of
local, state and federal governmental agencies, including the
United States Department of Agriculture, state and federal
pharmacy regulatory agencies and state and local alcoholic
beverage and health regulatory agencies. By virtue of this
regulation, Homeland is obligated to observe certain rules and
regulations, the violation of which could result in suspension or
revocation of various licenses or permits held by Homeland. In
addition, most of Homeland's licenses and permits require
periodic renewals. To date, Homeland has experienced no material
difficulties in obtaining or renewing its regulatory licenses and
permits.
Item 2. Financial Information
Selected Consolidated Financial Data
The following selected consolidated financial
information is derived from the audited consolidated financial
statements of the Company and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements
and the notes thereto, appearing elsewhere herein.
The selected consolidated financial information for
both the 24 weeks ended June 17, 1995 and June 15, 1996 is
unaudited.
<TABLE>
<CAPTION>
Selected Consolidated Financial Data
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
52 weeks 53 weeks 52 weeks 52 weeks 52 weeks 24 weeks 24 weeks
ended ended ended ended ended ended ended
12/28/91 01/02/93 01/01/94 12/31/94 12/30/95 06/17/95 06/15/96
Unaudited
Statement of Operations Data:
Sales, net $786,785 $830,964 $810,967 $785,121 $630,275 $325,068 $246,331
Cost of sales 573,470 609,906 603,220 588,405 479,119 246,015 185,910
Gross profit 213,315 221,058 207,747 196,716 151,156 79,053 60,421
Selling and administrative 187,312 199,547 190,483 193,643 151,985 76,008 55,422
Operational restructuring
costs(1) - - - 23,205 12,639 - -
Operating profit (loss) 26,003 21,511 17,264 (20,132) (13,468) 3,045 4,999
Gain on sale of plants - - 2,618 - - - -
Interest expense (22,257) (24,346) (18,928) (18,067) (15,992) 8,310 5,207
Income(loss) before
reorganization items, income
taxes and extraordinary items 3,746 (2,835) 954 (38,199) (29,460) (5,265) (208)
Reorganization items (2) - - - - - - 3,150
Income(loss) before income
taxes and extraordinary items 3,746 (2,835) 954 (38,199) (29,460) (5,265) (3,358)
Income taxes benefit (provision) (992) (982) 3,252 (2,446) - - -
Income(loss) before
extraordinary items 2,754 (3,817) 4,206 (40,645) (29,460) (5,265) (3,358)
Extraordinary items (3)(4)(5) - (877) (3,924) - (2,330) (2,330) -
Net income(loss) 2,754 (4,694) 282 (40,645) (31,790) (7,595) (3,358)
Reduction(accretion) in
redemption value of
redeemable common stock (132) - - 7,284 940 - -
Net income(loss) available to
common stockholders $ 2,622 $(4,694) $ 282 $(33,361) $(30,850) $ (7,593) $ (3,358)
Net income(loss) per common
share (6) $ .07 $ (.13) $ .01 $ (.96) $ (.93) $ (.22) $ (.10)
Consolidated Balance Sheet Data: 12/28/91 01/02/93 01/01/94 12/31/94 12/30/95 06/17/95 06/15/96
Unaudited
Total assets $285,735 $305,644 $274,290 $239,134 $137,582 $160,042 $129,096
Long-term obligations,
including current portion of
long-term obligations (7) $179,680 $198,380 $172,600 $176,731 $124,242 $126,419 $116,681
Redeemable common stock $ 10,616 $ 9,470 $ 8,853 $ 1,235 $ 17 $ 17 $ 17
Stockholers' equity(deficit) $ 41,844 $ 37,150 $ 36,860 $ 4,071 $(28,106) $ (3,524) $(31,464)
Operating Data:
Stores at end of period 114 113 112 111 68 76 65
</TABLE>
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands)
(1) Operational restructuring costs during 1995 included the
write-off of software no longer utilized by the Company,
the write-off of goodwill in connection with the
Restructuring and a termination charge resulting from the
cancellation of the Company's computer outsourcing
agreement. Operational restructuring costs during 1994
included the estimated losses to be incurred on the AWG
Transaction and associated expenses and the estimated
losses and expenses in connection with the anticipated
closing of 15 stores during 1995.
(2) Reorganization items for the 24 weeks ended June 15, 1996
are primarily professional fees related to the
Restructuring.
(3) Extraordinary items during 1995 included the payment of
$906 in premiums and consent fees on the redemption of
$15,600 of the Company's Old Notes and $1,424 in
unamortized financing costs related to the Old Notes so
redeemed as well as the replacement of the prior revolving
credit facility.
(4) Extraordinary items during 1993 included the payment of
approximately $2,776 in premiums on the redemption of
$47,750 in aggregate principal amount of the Company's
remaining 15-1/2% Subordinated Notes due November 1, 1997
(the "Subordinated Notes") at a purchase price of 105.8% of
the outstanding principal amount, and $1,148 in unamortized
financing costs related to the Subordinated Notes so
redeemed.
(5) Extraordinary items during 1992 included the payment of
approximately $1,225 in premiums on the repurchase of
$12,250 in aggregate principal amount of the Company's
Subordinated Notes at a purchase price of 110% of the
outstanding principal amount, $371 in unamortized financing
costs related to the Subordinated Notes so purchased, and a
credit representing the discount of $500 on the Company's
prepayment of $1,500 on the $5,000 note payable to Furrs,
Inc. issued in connection with the Company's acquisition of
certain stores from Furrs, Inc. in September 1991. The
extraordinary items have been shown net of income taxes of
$219.
(6) Common Stock held by management investors prior to the
Restructuring is presented as redeemable common stock and
excluded from stockholders' equity since the Company has
agreed to repurchase such shares under certain defined
conditions, such as death, retirement or permanent
disability. In addition, net income (loss) per common
share reflects the accretion in/reduction to redemption
value as a reduction/increase in income available to all
common stockholders.
(7) Long-term obligations, including current obligations of long-
term obligations, as of June 15, 1996 includes certain
liabilities that may be subject to compromise as a result of the
Restructuring.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
General
The table below sets forth for the periods indicated,
the percentage relationship that the various consolidated
Statement of Operations items bear to sales:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Fiscal Year
24 weeks 24 weeks
ended ended
1993 1994 1995 June 17, 1995 June 15, 1996
Unaudited
Sales, net 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of sales 74.38 74.94 76.02 75.68 75.47
Gross Profit 25.62 25.06 23.98 24.32 24.53
Selling and administrative 23.49 24.67 24.11 23.38 22.50
Operational restructuring costs - 2.96 2.01 - -
Operational profit (loss) 2.13 (2.57) (2.14) 0.94 2.03
Gain on sale of plants 0.32 - - - -
Interest expense (2.33) (2.30) (2.53) (2.56) (2.11)
Income(loss) before
reorganization items, income
taxes and extraordinary items 0.12 (4.87) (4.67) (1.62) (0.68)
Reorganization items - - - - (1.28)
Income(loss) before income
taxes and extraordinary items 0.12 (4.87) (4.67) (1.62) (1.36)
Income tax benefit (provision) 0.40 (0.31) - - -
Income(loss) before
extraordinary items 0.52 (5.18) (4.67) (1.62) (1.36)
Extraordinary items (0.48) - (0.37) (0.72) -
Net income(loss) 0.04 (5.18) (5.04) (2.34) (1.36)
</TABLE>
The following discussion includes statements that are forward-
looking in nature. As with any forward-looking statements, these
statements are subject to a number of factors including
competitive activities, economic conditions in the market area
and consummation of the Restructuring that tend to influence the
accuracy of the statements.
Comparison of Twenty-Four Weeks Ended June 15, 1996
with Twenty-Four Weeks Ended June 17, 1995
Net sales for the 24 weeks ended June 15, 1996
decreased 24.2% over the net sales of the corresponding periods
of 1995. The decrease in net sales was due primarily to the sale
of 29 stores to AWG on April 21, 1995 and the closing of 14
stores in 1995, 5 of which occurred during the first quarter of
1995, 2 during the second quarter of 1995, and the remainder over
the balance of 1995. Comparable store sales for the 24 weeks
ended June 15, 1996 decreased by 0.2% compared to the
corresponding period of 1995. The decrease in comparable store
sales was primarily due to higher 1995 general merchandise sales
resulting from certain continuity programs that did not recur in
1996.
Gross profit as a percentage of sales for the 24 weeks
ended June 15, 1996 increased to 24.5% compared to 24.3% for the
corresponding period of 1995. The improvement was primarily due
to higher vendor allowances and rebates, which were lower in 1995
due to the pending sale of the Company's distribution center and
29 stores to AWG. The higher vendor allowances and rebates are
somewhat offset by the higher cost of goods purchased through AWG
versus self-supply.
For the 24 weeks ended June 15, 1996, selling and
administrative expenses decreased to 22.5% from 23.4%. The
decrease in expenses was due to a reduction in health and welfare
costs and lower corporate office expenses.
Interest expense for the 24 weeks ended June 15, 1996
decreased to $5.2 million from $8.3 million in the corresponding
period of 1995. The decrease in interest expense is primarily a
result of the Company filing chapter 11 petitions with the
Bankruptcy Court on May 13, 1996. The filing stayed the
Company's interest obligation on the Old Notes which would have
amounted to approximately $950,000 for the period of May 13, 1996
to June 15, 1996. Additionally, interest expense decreased due
to the redemption of $25.0 million of senior secured notes on
June 1, 1995.
The Company incurred $3.2 million of reorganization
expenses for the 24 weeks ended June 15, 1996. The
reorganization expenses were primarily professional fees.
Extraordinary items for the 24 weeks ended June 17,
1995 consisted of refinancing costs associated with the Company's
sale of 29 stores and its distribution center to AWG on April 21,
1995.
Comparison of Fifty-Two Weeks Ended December 30, 1995
with Fifty-Two Weeks Ended December 31, 1994
Sales. Net sales for 1995 declined to $630.3 million,
a 19.7% decrease from sales of $785.1 million in 1994. The
decrease in net sales was due primarily to the sale of 29 stores
to AWG on April 21, 1995 and the closing of 14 underperforming
stores over the course of 1995. These stores were closed
pursuant to the Company's plan to close certain marginal and
underperforming stores. Net sales were also impacted by
increased competition in the Company's market area resulting from
additional store openings of Wal-Mart supercenter stores and
Albertsons stores during 1994. There was one new Wal-Mart
supercenter store and three Albertson's stores that opened in the
Company's market area during 1995.
The Company's comparable stores sales for the 68 stores
increased by 0.2% compared to the prior year, due primarily to
improved store conditions, a new advertising program and
increased promotional pricing.
Cost and Expenses. Gross profit as a percentage of
sales decreased to 24.0% in 1995 compared to 25.1% in 1994. The
continued erosion of the Company's gross margins was the result
of a number of factors including (a) the difficulties in
transforming the Company from a self-supplier to a member of a
purchasing cooperative and (b) additional competitive openings
(there were eight additional competitive openings in the
Company's market areas in 1995) and the aggressive pricing
practices of certain competitors.
Selling and administrative expenses as a percentage of
sales decreased in 1995 to 24.1% from 24.7% in 1994. The Company
was able to implement personnel and other cost reductions at the
corporate office as a result of the sale of 29 stores and its
distribution center to AWG. This included a reduction of
headcount by approximately 50% at the corporate office, lower
travel, telephone, and service charges, computer expenses and
other related administrative expenses. The decrease was also due
to an additional workers compensation accrual during 1994 that
did not recur in 1995.
The Company is continuing its drive to contain and
reduce costs. New systems have recently been installed that
allowed the Company to terminate its expensive computer
outsourcing agreement, thereby reducing future computer and
information systems costs. Furthermore, the Company expects to
streamline numerous other processes that will benefit expense
reduction efforts.
Operational Restructuring Costs. Operational
restructuring costs for 1995 amounted to $12.6 million which
included the write-off of computer software no longer being
utilized by the Company, the write-off of goodwill in connection
with the Restructuring and a termination fee associated with the
cancellation of the Company's computer outsourcing agreement.
Operating Loss. Operating loss was $13.5 million in
1995 compared to an operating loss of $20.1 million in 1994. The
lower operating loss was due primarily to lower operational
restructuring costs which declined from $23.2 million in 1994 to
$12.6 million in 1995.
Interest Expense. Interest expense for 1995 decreased
to $16.0 million from $18.1 million in 1994. The lower interest
expense was due primarily to the redemption of $25.0 million of
Old Notes on June 1, 1995.
Income Tax Provision. The Company did not record any
provision for income taxes for 1995. At December 30, 1995, the
Company had tax net operating loss carryforwards of approximately
$48.6 million.
Extraordinary Items. Extraordinary items for the year
consist of the payment of $600,000 in consent fees to the holders
of the Old Notes (as defined in Liquidity and Capital Resources
of this section), $306,000 in premiums on the redemption of $15.6
million of New Fixed Rate Notes (as defined in Liquidity and
Capital Resources of this section) and $1.4 million in
unamortized financing costs related to the redemption of $25.0
million of Old Notes and the replacement of the Prior Credit
Agreement.
Net Loss. The Company had a net loss of $31.8 million
in 1995 compared to a net loss of $40.6 million in 1994. The
lower net loss in 1995 was due primarily to a reduction in
operational restructuring costs from $23.2 million in 1994 to
$12.6 million in 1995.
Comparison of Fifty-Two Weeks Ended December 31, 1994
with Fifty-Two Weeks Ended January 1, 1994
Sales. Net sales for 1994 decreased to $785.1 million,
a 3.2% decrease over 1993 net sales. The decrease in net sales
for fiscal 1994 is primarily attributable to the increased
competition in the Company's market area resulting primarily from
additional store openings of Wal-Mart supercenter stores during
1993 and 1994. There were 11 new Wal-Mart supercenter stores
opened in the Company's market area during 1994. The Company's
comparable store sales decreased by 2.6% compared to the prior
year due primarily to competitors' store openings in the
Company's market area.
Cost and Expenses. Gross profit as a percentage of
sales for 1994 decreased to 25.1% compared to 25.6% in 1993. The
decrease in the gross profit margin was partially due to
increased promotional pricing in response to the increased
competition in the Company's market area. The decrease was also
partially due to a decrease in the period of time for amortizing
video rental tapes. The decrease was partially offset by a
reduction in the inventory losses accounted for in the Company's
retail stores during 1994. The retail store inventory losses
were approximately $1.8 million less than inventory losses in
1993, resulting principally from a reduction in the losses in the
meat department. The improvement in the meat department losses
was due to a change in the procedures to process only the amount
of product anticipated to be sold and not processing excessive
quantities of fresh beef and pork to fill the display areas.
The decline in gross profit margin was also due in part
to an increase in warehouse and transportation expense as a
percent of sales in 1994 which was due to an increase in the
warehouse square footage and an increase in the number of
warehouse personnel resulting from converting the former ice
cream plant into additional frozen food warehouse space.
Selling and administrative expenses as a percentage of
sales increased in 1994 to 24.7% from 23.5% for 1993. The
increase in selling and administrative expenses as a percentage
of sales was due in large part to the decrease in sales for 1994
as compared to the prior year. However, the expenses also
increased during 1994 due in part to the contractual increase in
the monthly fees in connection with the Company's computer
services agreement and a one-time change in the administration of
the vacation policy which occurred during 1993 and did not recur
in 1994. Expenses also increased due to additional reserves
recorded for estimated bad debts on accounts receivable due from
vendors and wholesale customers which may not be collected in
full as a result of the AWG Transaction and the Company wrote
down certain fixed assets to fair market value. The Company also
recorded an increase of $5.7 million in the accrual for workers'
compensation claims in 1994 as compared to the prior year due to
an increase in the actuarially projected ultimate costs of the
self-insured plans reflecting increases in claims and related
settlements. These increases in expense were partially offset by
a reduction in retail wages and benefits resulting from the
modified collective bargaining agreement entered into with the
UFCW in December 1993.
Operational Restructuring Costs. Operational
restructuring costs for 1994 were $23.2 million which included an
estimate of the expenses to be incurred in connection with the
sale of the warehouse and 29 stores to AWG and the closing of 15
stores during 1995. The accrual included the fixed costs of the
closed stores from the time they were expected to be closed until
they could be sold or the leases expire.
Operating Loss. Operating loss was $20.1 million for
1994 compared to operating profit of $17.3 million in 1993. The
decrease in operating profit was due to the decrease in sales,
the decrease in gross profit margin, the increase in selling and
administrative expenses and the operational restructuring costs
recorded in 1994.
Gain on Sale of Plants. The Company recognized a $2.6
million gain from the sale of equipment and related assets
associated with its milk and ice cream plants in 1993.
Interest Expense. Interest expense for 1994 decreased
to $18.1 million from $18.9 million in 1993 due primarily to the
redemption of the Company's Subordinated notes which were
redeemed by the Company on March 1, 1993.
Income Tax Provision. The Company recognized income
tax expense of $2.4 million in 1994, compared to an income tax
benefit of $3.3 million in 1993. The expense in 1994 was the
result of increasing the valuation allowance on the Company's
deferred tax asset from the prior year due to the uncertainty of
realizing the future tax benefits. The expense was offset in
part by the recognition of a tax benefit for alternative minimum
tax net operating losses that were carried back to prior years.
The income tax benefit for 1993 was the result of the reversal of
the prior valuation allowance on the Company's deferred tax asset
due to the proposed disposition of assets, net of the estimated
amount management believed the Company may be required to pay in
connection with the IRS audit.
The IRS concluded in December 1993 a field audit of the
Company's income tax returns for the fiscal years 1990, 1991 and
1992. On January 31, 1994, the IRS issued a Revenue Agent's
Report for those fiscal years proposing adjustments that would
result in additional taxes in the amount of $1.6 million (this
amount is net of any available operating loss carryforwards,
which would be eliminated under the proposed adjustment). The
Company filed its protest with the IRS Appeals Office on June
14, 1994. On June 28, 1995, the Company reached a tentative
agreement with the IRS Appeals office to settle the above claims.
Management has analyzed the proposed settlement and has provided
for, in accordance with generally accepted accounting principles,
amounts which it currently believes are adequate.
Extraordinary Items. There were no extraordinary items
incurred during fiscal 1994. Extraordinary items in 1993
consisted of the payment of $2.776 million in premiums on the
redemption of $47.750 million in aggregate principal amount of
the Subordinated Notes at a purchase price of 105.8% of the
outstanding principal amount and $1.148 million in unamortized
financing costs related to the redemption of the subordinated
notes on March 1, 1993. See "Liquidity and Capital Resources" in
this section.
Net Income (Loss). The Company had net loss of $40.6
million during 1994 compared to net income of $282,000 in 1993.
The net loss experienced in 1994 was due primarily to the
operational restructuring costs, reduction of sales and gross
profit margin, increase in selling and administrative expenses
and an increase in income tax expense.
Liquidity and Capital Resources
Debt. The primary sources of liquidity for the
Company's operations have been borrowings under credit facilities
and internally generated funds. In March 1992, the Company
refinanced its indebtedness by entering into an Indenture with
United States Trust Company of New York, as trustee, pursuant to
which the Company had outstanding as of July 15, 1996, $59.4
million of Series C Senior Secured Fixed Rate Notes due 1999,
$26.1 million of Series D Senior Secured Floating Rate Notes due
1997 and $9.5 Series A Senior Secured Floating Rates Notes due
1997 (collectively, the "Old Notes").
On May 13, 1996, Holding and Homeland filed Chapter 11
petitions with the Bankruptcy Court. The Restructuring was
designed to reduce substantially the Company's debt service
obligations and labor costs and to create a capital and cost
structure that will allow the Company to maintain and enhance the
competitive position of its business and operations. The
Restructuring was negotiated with and supported by the lenders
under the Prior Credit Agreement, the Noteholders Committee and
the Company's labor unions. On July 19, 1996, the Bankruptcy
Court confirmed the Company's Plan of Reorganization and the Plan
of Reorganization became effective on the Effective Date.
Under the Plan of Reorganization, holders of the Old
Notes were deemed to have two claims: (a) an aggregate secured
claim of $61.5 million; and (b) an aggregate unsecured claim of
approximately $40.1 million. In exchange for their secured
claims in respect of the Old Notes, the noteholders will receive
under the Plan of Reorganization (i) $60.0 million aggregate
principal amount of New Notes and (ii) $1.5 million in cash. The
New Notes will mature in 2003, bear interest semi-annually at a
rate of 10% per annum and will not be secured. In exchange for
their unsecured claims in respect of the Old Notes, the
noteholders will receive their ratable portion of 4,450,000
shares of New Common Stock, sharing ratably with other allowed
general unsecured claims against the Company. It is anticipated
that the noteholders and the Company's general unsecured
creditors will receive approximately 60% and 35%, respectively,
of the equity of the reorganized Company (assuming total
unsecured claims of approximately $63 million, including
noteholders' unsecured claims). The Company's existing equity
holders will receive 5% of the new equity, plus five-year
warrants to purchase an additional 5% of such equity.
On April 21, 1995, the Company entered into a revolving
credit agreement (the "Prior Credit Agreement") with National
Bank of Canada, ("NBC"), as agent and as lender, Heller
Financial, Inc. The Prior Credit Agreement permitted borrowings
up to $25 million, subject to a borrowing base, for working
capital needs including certain letters of credit.
On May 13, 1996, the Company entered into an interim
debtor-in-possession lending facility ("DIP Facility"), with its
existing bank group to provide up to $27 million of working
capital financing. The DIP Facility permitted the Company to
borrow up to the lesser of $27 million and the borrowing base.
The borrowings under the DIP Facility bear interest at a rate
equal to the prime rate announced publicly by NBC from time to
time in New York, New York plus two percent. The DIP Facility
matured on the Effective Date.
On the Effective Date, the Company entered into the New
Credit Agreement with NBC, as agent and lender, and two other
lenders, Heller Financial, Inc. and IBJ Schroder Bank and Trust
Company, under which those lenders provided a working capital and
letter of credit facility and a term loan. The New Credit
Agreement permits the Company to borrow, under the working
capital and letter of credit facility, up to the lesser of (a)
$27.5 million or (b) the applicable borrowing base. Funds
borrowed under such facility are available for general corporate
purposes of the Company.
The New Credit Agreement also provides the Company a
$10.0 million term loan, which will be used to fund certain
obligations of the Company under the Plan of Reorganization,
including the Employee Buyout Offer and a new health and welfare
plan required by the Modified Union Agreements, professional fees
and "cure amounts" which were required to be paid under the Plan
of Reorganization in connection with executory contracts, secured
financing and unexpired leases.
The interest rate under the New Credit Agreement is
based on the prime rate publicly announced by National Bank of
Canada from time to time in New York, New York plus a percentage
which varies based on a number of factors, including (a) the
amount which is part of the working capital and letter of credit
facility and the amount which is part of the term loan, (b) the
time period, (c) whether the Company elects to use a London
Interbank Offered Rate, and (d) the earnings of the Company
before interest, taxes, depreciation and amortization expenses.
The indebtedness under the New Credit Agreement will
mature three years from the Effective Date.
The obligations of the Company under the New Credit
Agreement are secured by liens on, and security interests in,
substantially all of the assets of Homeland and are guaranteed by
Holding, with a pledge of its Homeland stock to secure its
obligation. The collateral includes the assets which, prior to
the Effective Date, secured the obligations of the Company to the
holders of the Old Notes.
The New Credit Agreement includes certain customary
restrictions on acquisitions, asset dispositions, capital
expenditures, consolidations and mergers, distributions,
divestitures, indebtedness, liens and security interests and
transactions with affiliates. The New Credit Agreement also
requires the Company to comply with certain financial and other
covenants.
Labor Savings. An integral part of the Restructuring
is the Company's negotiated deal with its labor unions to modify
certain elements of the Company's existing collective bargaining
agreements. The Modified Union Agreements provide for, among
other things, wage and benefit modifications, the Employee Buyout
Offer and the issuance and purchase of new equity to a trust
acting on behalf of the unionized employees. The Modified Union
Agreements became effective on the Effective Date.
The Company estimates that the Modified Union
Agreements will result in cost savings of approximately $10
million during the first full contract year following the
Restructuring. There can be no assurance, however, that such
cost savings will actually be realized. In addition, cost
savings in future contract years will be offset in part by
certain wage and benefit increases.
Working Capital and Capital Expenditures. The
Company's primary sources of capital have been borrowing
availability under the Prior Credit Agreement and cash flow from
operations, to the extent available. The Company uses the
available capital resources for working capital needs, capital
expenditures and repayment of debt obligations.
The Company suffered a negative cash flow from
operations of $8.0 million in 1995 compared to positive cash flow
of $0.3 million in 1994 and $13.0 million in 1993. The cash flow
deficit in 1995 is due to the Company incurring a net cash
outflow before working capital changes of $7.3 million, which is
the net loss of $31.8 million offset by $24.5 million of non-cash
charges. The remainder of the cash outflow from operations is
from net working capital changes that resulted primarily from the
AWG Transaction.
The Company's investing activities provided net cash of
$65.1 million in 1995 and used net cash of $4.0 million and $3.1
million in 1994 and 1993, respectively. The substantial increase
of cash provided by investing activities in 1995 was the result
of sale of the warehouse, 29 stores and associated inventory to
AWG. Capital expenditures were $4.7 million, $5.4 million and
$7.1 million in 1995, 1994 and 1993, respectively. The Company
expects to make total capital expenditures of approximately $8.3
million in 1996, primarily for one new store, remodel stores and
store information systems. As of August 10, 1996, the Company
has funded $2.4 million of capital expenditures with the
remaining escrow funds of approximately $1.7 million available
for reinvestment from the AWG transaction, cash flow from
operations, the Prior Credit Agreement and the DIP Facility. The
funds required for the remaining $5.9 million of 1996 capital
expenditures would come from cash flow from operations and the
New Credit Agreement.
Financing activities of the Company used net cash of
$51.0 million in 1995, provided net cash of $1.9 million in 1994
and used net cash of $33.5 million in 1993. The net cash usage
in 1995 was primarily due to the paydown of $25.0 million in Old
Notes and $21.0 million of revolving credit facility loans.
The Company expects to increase its capital
expenditures for fiscal 1997 and 1998 as compared to 1996,
subject to the limitations under the New Credit Agreement. The
New Credit Agreement limits the Company's capital expenditures
for 1997 to $12.0 million cash capital expenditures and for 1998
to $13.0 million cash capital expenditures and $7.0 million of
capital leases for each fiscal year. The Company intends to
remodel and upgrade certain stores plus continue to improve its
store and corporate information systems. The funds for such
capital expenditures are expected to be obtained from the
Company's operating cash flow and borrowings under the New Credit
Agreement.
Net cash provided by the Company's operations for the
24 weeks ended June 15, 1996, was approximately $8.0 million
(after adjusting for reorganization items of $3.2 million). The
positive net cash from operations was the result of decrease in
inventories of $3.3 million and the non-payment of the scheduled
$4.4 million of interest payments on the Old Notes. The Company
utilized $1.4 million for capital expenditures for the 24 weeks
ended June 15, 1996, reflecting the Company's cash preservation
efforts prior to and during the Restructuring process. The
capital expenditures during this period were more than offset by
the cash proceeds from the sale of the Company's Ponca City
store. The Company used most of its net cash from operations and
investing to fund the $3.4 million of reduced borrowings under
the DIP Facility and $1.2 million in principal payments under its
capital leases obligations.
The Company's ability to continue to meet its working
capital needs, meet its debt and interest obligations and capital
expenditure requirements is dependent on its future operating
performance, which may be negatively affected by the proposed AWG
conversion to a general business corporation. Management
believes that the Restructuring will have a favorable effect on
the Company's future liquidity by (a) reducing future interest
cost, (b) reducing labor costs, (c) extending the maturities of
the Company's long-term debt, (d) reducing the Company's store
lease obligations by the rejection of seven store leases and (e)
permitting additional borrowings through the release of
collateral under the Indenture relating to the Old Notes. There
can be no assurance that future operating performance will
provide positive net cash or that the Restructuring will
ultimately be successful. If the Company is not able to generate
positive cash flow from its operations or if the Restructuring is
not ultimately successful, management believes that this could
have a material adverse effect on the Company's business and the
continuing viability of the Company.
Accounting Standards
The Company's Restructuring will be accounted for
pursuant to the American Institute of Certified Public
Accountants Statement of Position No. 90-7, entitled "Financial
Reporting by Entities in Reorganization under the Bankruptcy
Code" ("SOP No. 90-7"). SOP No. 90-7 is applicable because
holders of the Old Common Stock will receive less than 50% of the
Company's New Common Stock (see Item 4. Security Ownership of
Certain Beneficial Owners and Management) and the reorganized
value of the assets of the reorganized Company is less than the
total of all post-petition liabilities and allowed claims.
The accounting of SOP No. 9-7 will result in "fresh-
start" reporting, in which the Company's assets and liabilities
will be adjusted to their fair market value and a new reporting
entity will be created with no retained earnings or accumulated
deficit as of the Effective Date.
Inflation/Deflation
In recent years, deflation has not had a material
impact upon the Company's operating results. Although the
Company does not expect inflation or deflation to have a material
impact in the future, there can be no assurance that the
Company's business will not be affected by inflation or deflation
in future periods.
Item 3. Properties
Of the 65 supermarkets operated by the Company at
September 1, 1996, 12 are owned and the balance are held under
leases which expire at various times between 1996 and 2013. Most
of the leases are subject to six five-year renewal options. Out
of 53 leased stores, only seven have terms (including option
periods) of fewer than 20 years remaining. Most of the leases
require the payment of taxes, insurance and maintenance costs and
many of the leases provide for additional contingent rentals
based on sales. No individual store operated by Homeland is by
itself material to the financial performance or condition of
Homeland as a whole. The average rent per square foot under
Homeland's existing leases is $3.11 (without regard to
amortization of beneficial interest).
Substantially all of the Company's properties are
subject to mortgages securing the borrowings under the New Credit
Agreement. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
Although the Company believes that most of its existing
store leases are at or below the current market rate, certain of
the Company's stores were subject to burdensome lease terms. As
part of the Restructuring, the Company rejected seven store
leases.
Item 4. Security Ownership of Certain Beneficial Owners
and Management
Under the Company's Plan of Reorganization, each holder
of a general unsecured claim against the Company, including $40.1
million of general unsecured claims in respect of the Old Notes,
will receive its ratable share of 4,450,000 shares of New Common
Stock, based on the amount of such holder's claim relative to all
general unsecured claims.
In addition, under the Plan of Reorganization, all of
the Company's issued and outstanding Class A Common Stock, par
value $.01 per share (the "Old Common Stock"), will be exchanged
for (a) an aggregate of 250,000 shares of newly-issued common
stock, par value $.01 per share, of the Company (the "New Common
Stock"), representing approximately 5.3% of the New Common Stock
to be outstanding upon consummation of the Restructuring, and (b)
warrants to purchase (in the aggregate) up to 263,158 shares of
New Common Stock (the "New Warrants") at an exercise price of
$11.85 per share. Upon consummation of the Restructuring, each
holder of the Old Common Stock will receive 7.73 shares of New
Common Stock and 8.14 New Warrants for each 1,000 shares of Old
Common Stock held by such holders.
As a result of the equity recapitalization and the
issuance of the shares of New Common Stock to the holders of
general unsecured claims pursuant to the Plan of Reorganization,
the persons who, as of the Effective Date, will own at least five
percent of the shares of New Common Stock may be significantly
different than the persons who owned at least five percent of the
shares of Old Common Stock prior to the Effective Date. The
Company is unable to determine at this time the identity of the
persons who will own at least five percent of the New Common
Stock to be outstanding upon consummation of the Restructuring
because, among other reasons, the actual amount of general
unsecured claims (other than general unsecured claims in respect
of the Old Notes) has not been finally determined. The Company
does not anticipate any beneficial ownership of 5% or greater.
See "Legal Proceedings" for a description of the claims
resolution process.
Under the Plan of Reorganization, the Company will
reserve for the account of each creditor holding a disputed
general unsecured claim the New Common Stock that would otherwise
be distributable to such creditor on the Effective Date if such
disputed claim were allowed by the Bankruptcy Court. If a
disputed claim is disallowed in whole or in part, the Company
will distribute the New Common Stock held in reserve ratably to
holders of general unsecured claims allowed by the Bankruptcy
Court. Such distributions will be made on December 31, 1996, and
on June 30 and December 31 of each following year until the
earlier of (a) the date on which all disputed claims have been
resolved or (b) less than 5,000 shares of New Common Stock are on
deposit in the disputed claims reserve. If any time after the
Effective Date, the number of shares of New Common Stock in the
disputed claims reserve is less than 5,000, the remaining shares
of New Common Stock held in such reserve will, at the Company's
option, be canceled or treated as treasury shares.
The Company estimates that total general unsecured
claims will be approximately $63.1 million, consisting of
approximately $40.1 million in general unsecured claims in
respect of the Old Notes and approximately $23.0 million of other
general unsecured claims. Based on such estimate (a) holders of
the Old Notes will receive (in the aggregate) approximately
2,827,922 shares of New Common Stock representing approximately
60.2% of the New Common Stock to be outstanding upon consummation
of the Restructuring and (b) holders of the other general
unsecured claims will receive (in the aggregate) approximately
1,622,029 shares of New Common Stock representing approximately
34.5% of the New Common Stock to be outstanding upon consummation
of the Restructuring.
Under the Plan of Reorganization, holders of the Old
Common Stock will receive the remaining approximately 5.3% of the
New Common Stock, together with New Warrants to purchase an
additional approximately 5.3% of the New Common Stock. None of
the directors of the Company will own any of the New Common Stock
immediately upon consummation of the Restructuring. The officers
of the Company who will own New Common Stock immediately upon
consummation of the Restructuring are as follows: Steven M.
Mason, Vice President - Marketing, who will own 324 shares of the
New Common Stock (less than 1%) and 341 New Warrants; and Alfred
F. Fideline, Sr., Vice President - Retail Operations, who will
own 8 shares of the New Common Stock (less than 1%) and 8 New
Warrants.
Item 5. Directors and Executive Officers
Set forth below are the names, ages, present positions
and years of service (in the case of members of management) of
the directors and management of Homeland:
Years with the
Name Age Position Company and/or
Safeway
James A. Demme* 56 Chairman of the 2
Board, President
and Chief
Executive Officer
Larry W. Kordisch* 49 Executive Vice 1
President-Finance,
Chief Financial Officer,
Treasurer and Secretary
Steven M. Mason 41 Vice President - 26
Marketing
Terry M. Marczewski* 41 Chief Accounting 1
Officer, Assistant
Treasurer and Assistant
Secretary
Alfred F. Fideline, Sr. 59 Vice President- 40
Retail Operations
Prentess E. Alletag, Jr. 49 Vice President- 29
Human Resources
Robert E. (Gene) Burris 49 Director --
Edward B. Krekeler, Jr. 52 Director --
Laurie M. Shahon 44 Director --
John A. Shields 53 Director --
William B. Snow 65 Director --
David M. Weinstein 37 Director --
*Holding's Board of Directors is identical to that of Homeland.
Mr. Demme serves as Holding's Chairman, President and Chief
Executive Officer, Mr. Kordisch as Executive Vice President -
Finance, Treasurer, Chief Financial Officer and Secretary and Mr.
Marczewski as Chief Accounting Officer, Assistant Treasurer and
Assistant Secretary.
James A. Demme was elected Chairman of the Board in
September 1996. He became President, Chief Executive Officer and
a director of the Company as of November 30, 1994. From 1992 to
1994, Mr. Demme served as Executive Vice President of Retail
Operations of Scrivner, Inc. He was responsible for the
operations of their 170 retail stores which had a total volume
exceeding $2 billion. From 1991 to 1992, Mr. Demme served as
Senior Vice President of Marketing of Scrivner, Inc. where he was
responsible for restructuring and refocusing the merchandising
department to retail orientation. From 1988 to 1991, Mr. Demme
was President and Chief Operating Officer of Shaws Supermarkets,
which was the nation's fifteenth largest retail chain with sales
of $1.7 billion.
Larry W. Kordisch joined the Company in February 1995
and became Executive Vice President - Finance, Treasurer, Chief
Financial Officer and Secretary as of May 1995. Prior to joining
Homeland, Mr. Kordisch served as Executive Vice President -
Finance and Administration, Chief Financial Officer and member of
the Board of Directors of Scrivner, Inc. and was responsible for
the Finance, Accounting, Risk Management, Legal and
Administrative functions.
Steven M. Mason joined Safeway in 1970 and the Oklahoma
Division in 1986. At the time of the Acquisition, he was serving
as Special Projects Coordinator for the Oklahoma Division. In
November 1987, he joined Homeland and in October 1988, he was
appointed to the position of Vice President - Retail Operations.
In October 1993, Mr. Mason was appointed to the position of Vice
President - Marketing.
Terry M. Marczewski joined the Company in April 1995
and became the Chief Accounting Officer, Assistant Treasurer and
Assistant Secretary as of May 1995. From July 1994 to April
1995, he was the controller at Fleming Companies, Inc.- Scrivner
Group. From 1990 to July 1994, Mr. Marczewski was the Vice
President and Controller at Scrivner, Inc., the nation's third
largest grocery wholesaler, prior to its acquisition by Fleming
Companies, Inc.
Alfred F. Fideline, Sr. joined Safeway in 1957. At the
time of the Acquisition, he was serving as a District Manager of
the Oklahoma Division. In November 1987, Mr. Fideline joined
Homeland as a District Manager and in May 1994, he was appointed
to the position of Vice President - Retail Operations.
Prentess E. Alletag, Jr. joined the Oklahoma Division
in October 1969, where, at the time of the Acquisition, he was
serving as Human Resources and Public Affairs Manager. In
November 1987, Mr. Alletag joined Homeland as Vice President -
Human Resources.
Robert E. (Gene) Burris became a director of the
Company and Holding on August 2, 1996. Since 1988, Mr. Burris
has been President of the UFCW Local No. 1000, which represents
approximately 65% of the Company's unionized employees. Pursuant
to the Modified UFCW Agreements, the UFCW has the right to
designate one member of the Boards of Directors of Holding and
Homeland. Mr. Burris is the designee of the UFCW. Since
February 1995, Mr. Burris has been the Chief Executive Officer
and owner of G&E Railroad, a retail store.
Edward B. Krekeler, Jr. became a director of the
Company and Holding on August 2, 1996. Since 1994, he has been
Managing Director of Creative Capital Consultancy, a financial
consulting firm. From 1984 to 1994, he served in various
positions as an officer of Washington Square Capital, Inc.,
including Vice-President, Special Investments, Vice-President,
Administration, Private Placements, Vice-President, Portfolio
Manager, Private Placements, and Chief Investment Analyst. From
1970 to 1984, Mr. Krekeler was Director, Fixed Income
Investments, of The Ohio National Life Insurance Company, Inc.
He was Chairman of the Board of Directors of Convenient Food
Marts, Inc. from 1990 to 1994.
Laurie M. Shahon became a director of the Company and
Holding on August 2, 1996. Ms. Shahon has been President of
Wilton Capital Group, a private direct investment firm since
January 1994. Ms. Shahon previously served as Vice Chairman and
Chief Operating Officer of Color Tile, Inc. in 1989. From 1988
to 1993, she served as Managing Director of `21' International
Holdings, Inc., a private holding company. From 1980 to 1988,
she was Vice President of Salomon Brothers, Inc., where she was
founder and head of the retailing and consumer products group.
From 1976 to 1980, Ms. Shahon was an Associate with Morgan
Stanley & Co., Incorporated. Ms. Shahon is a director of Arbor
Drugs, Inc., One Price Clothing Stores, Inc. and Ames Department
Stores, Inc.
John A. Shields became a director of the Company and
Holding in May 1993. Mr. Shields has been the Chairman and Chief
Executive Officer of Delray Farms Fresh Markets, a retail
perishables specialty chain, since January 1994. From 1983 to
1993, he served as President, Chief Executive Officer, Chief
Operating Officer and a member of the Board of Directors of First
National Supermarkets. Mr. Shields is also a director of D.I.Y.
Home Warehouse, Inc.
William B. Snow became a director of the Company and
Holding on August 2, 1996. Mr. Snow has served as Vice Chairman
of Movie Gallery, Inc., the second largest video specialty
retailer in the United States, since 1994. From 1985 to 1994, he
was Executive Vice President and a director of Consolidated
Stores Corporation. From 1980 to 1985, Mr. Snow was Chairman,
President and Chief Executive Officer of Amerimark, Inc., a
diversified supermarket retailer and institutional food service
distributor. From 1974 to 1980, he was President of Continental
Foodservice, Inc. From 1966 to 1974, Mr. Snow was Senior Vice
President of Hartmarx, Inc. Mr. Snow is a director of Movie
Gallery, Inc. and Action Industries, Inc.
David N. Weinstein became a director of the Company and
Holding on August 2, 1996. He is the Managing Director of the
High Yield Capital Markets group at Bank of Boston. From 1993 to
March 1996, he served as Managing Director and High Yield Capital
Market Specialist of Chase Securities, Inc. From 1990 to 1993,
Mr. Weinstein was head of the Capital Markets group in the High
Yield Department of Lehman Brothers and later was a director in
the High Yield/Private Financing Group of Smith Barney Shearson.
From 1988 to 1990, he was Director of Investments of LeBow,
Welcsel & Co. From 1987 to 1988, Mr. Weinstein was retained at
the direction of the Board of Directors of National Securities
and Research Corporation to manage, analyze and restructure the
portfolio of the National Bond Fund. From 1985 to 1987, he was
an Associate in Mergers and Acquisitions and a Business
Consultant to Whitcom Investment Company. From 1982 to 1985, Mr.
Weinstein practiced law in New York City, specializing in
syndication finance, origination and taxation.
Item 6. Executive Compensation
Summary of Cash and Certain Other Compensation
The following table provides certain summary
information concerning compensation paid or accrued by the
Company to or on behalf of the Company's Chief Executive Officer,
each of the three other most highly compensated executive
officers of the Company and one former executive officer
(hereinafter referred to as the "Named Executive Officers") for
the fiscal years ended December 30, 1995, December 31, 1994, and
January 1, 1994:
SUMMARY COMPENSATION TABLE
Annual Compensation
All Other
Name and Principal Other Annual Compensation
Position Year Salary Bonus Compensation (3)(4)
James A. Demme(1)
Chairman, President and 1995 $200,000 $100,000 (2) $ 4,396
Chief Executive Officer 1994 11,538 - (2) -
Mark S. Sellers (6) 1995 $ 81,922 $140,656 $271,613(5) $208,207
Former Executive Vice Pres. 1994 153,000 130,050 114,474(5) 43,447
Finance, Treasurer, Chief 1993 160,192 153,000 80,852(5) 34,604
Financial Officer and
Secretary
Larry W. Kordisch (7) 1995 $126,923 $100,000 (2) $ 3,907
Executive Vice Pres.
Finance, Treasurer,
Chief Financial
Officer and Secretary
Steven M. Mason 1995 $130,500 $ 19,575 (2) $ 6,414
Vice President - 1994 130,500 110,925 (2) 8,963
Marketing 1993 107,250 103,500 (2) 3,904
Terry M. Marczewski(8) 1995 $ 69,326 $ 20,000 (2) $ 43
Chief Accounting
Officer, Assistant
Treasurer, and Assistant
Secretary
______________
(1) Mr. Demme joined the Company as President, Chief Executive
Officer and a director as of November 30, 1994. In
September 1996, he was elected Chairman of the Board.
(2) Personal benefits provided to the Named Executive Officer
under various Company programs do not exceed 10% of total
annual salary and bonus reported for the Named Executive
Officer.
(3) All other compensation includes contributions to the
Company's defined contribution plan on behalf of each of the
Named Executive Officers to match 1993 pre-tax elective
deferral contributions (there was no match for 1994 and
1995) (included under Salary) made by each to such plan, as
follows: Steven M. Mason, $2,956.
(4) The Company provides reimbursement for medical benefit
insurance premiums for the Named Executive Officers. These
persons obtain individual fully-insured private medical
benefit insurance policies with benefits substantially
equivalent to the medical benefits currently provided under
the Company's group plan. The Company also provides for
life insurance premiums for executive officers, including
the Named Executive Officers and one other executive
officer, who obtain fully-insured private term life
insurance policies with benefits of $500,000 per person.
Amounts paid during 1995 are as follows: James A. Demme,
$1,547; Mark S. Sellers, $11,069; Larry W. Kordisch, $2,073;
Steven M. Mason, $1,616; and Terry M. Marczewski, $43.
(5) Includes reimbursement of relocation expenses in the amount
of $271,613 in 1995, $95,378 in 1994 and $78,058 in 1993.
(6) Mr. Sellers was Executive Vice President-Finance and Chief
Financial Officer of the Company until his resignation in
May 1995.
(7) Mr. Kordisch joined the Company in February 1995 and was
appointed Executive Vice President-Finance, Chief Financial
Officer, Treasurer and Secretary of the Company as of May 5,
1995.
(8) Mr. Marczewski joined the Company in April 1995 and was
appointed the Chief Accounting Officer and Controller of the
Company as of May 5, 1995.
Directors who are not employees of the Company or
otherwise affiliated with the Company (presently consisting of
Ms. Shahon and Messrs. Burris, Krekeler, Shields, Snow and
Weinstein) are paid annual retainers of $15,000 and meeting fees
of $1,000 for each meeting of the board or any committee attended
in person and $250 for each meeting attended by telephone.
Directors are reimbursed for all reasonable travel and other
expenses of attending meetings of the Board or a Committee of the
Board. Mr Shields also serves as a consultant to the Company
from time to time at the request of CD&R. During 1995, Mr.
Shields received $166,662 from CD&R for consulting fees for
services provided to the Company.
Employment Agreements
In November 1994, the Company entered into an
employment agreement with James A. Demme, the Company's President
and Chief Executive Officer, for an indefinite term. The
agreement provides a base annual salary of not less than $200,000
subject to increase from time to time at the discretion of the
Board of Directors. The agreement entitles Mr. Demme to
participate in the Company's Management Incentive Plan with a
maximum annual bonus equal to 100% of base salary. The agreement
also provides for awards under a long term incentive compensation
plan which is to be established by the Company and authorizes
reimbursement for certain business-related expenses. The
agreement was amended in April 1996, to provide that, if the
agreement is terminated by the Company for other than cause or
disability prior to December 31, 1997, or is terminated by Mr.
Demme following a change of control or a trigger event (as
defined), Mr. Demme is entitled to receive (a) payment, which
would not be subject to any offset as a result of his receiving
compensation from other employment, equal to two years' salary,
plus a pro rata amount of the incentive compensation for the
portion of the incentive year that precedes the date of
termination, and (b) continuation of welfare benefit arrangements
for a period of two years after the date of termination. The
Restructuring is a trigger event under the agreement only if Mr.
Demme terminates his employment for good reason (as defined) or
if, following the Effective Date, a subsequent trigger event
occurs, such as a change of control or sale of assets.
On September 26, 1995, the Company entered into an
employment agreement with Larry W. Kordisch, the Company's
Executive Vice President-Finance and Chief Financial Officer.
The agreement provides for a base annual salary of not less than
$150,000, subject to increase from time to time at the discretion
of the Board of Directors. Mr. Kordisch is also entitled to
participate in the Management Incentive Plan based upon the
attainment of performance objectives as the Board of Directors
shall determine from time to time. The agreement was amended in
April 1996, to provide that, if the agreement is terminated by
the Company for other than cause or disability prior to December
31, 1997, or is terminated by Mr. Kordisch following a change of
control or a trigger event (as defined), Mr. Kordisch is entitled
to receive (a) payment, which would not be subject to any offset
as a result of his receiving compensation from other employment,
equal to two years' salary, plus a pro rata amount of the
incentive compensation for the portion of the incentive year that
precedes the date of termination, and (b) continuation of welfare
benefit arrangements for a period of two years after the date of
termination. The Restructuring is a trigger event under the
agreement only if Mr. Kordisch terminates his employment for good
reason (as defined) or if, following the Effective Date, a
subsequent trigger event occurs, such as a change of control or
sale of assets.
On September 26, 1995, the Company entered into an
employment agreement with Terry M. Marczewski, the Company's
Controller and Chief Accounting Officer. The agreement, which is
for an indefinite term, provides for a base annual salary of
$90,000, subject to increase from time to time at the discretion
of the Board of Directors. Mr. Marczewski is also entitled to
participate in the Management Incentive Plan based upon the
attainment of performance objectives as the Board shall determine
from time to time. The agreement was amended in April 1996, to
provide that, in the event his employment is terminated prior to
December 31, 1997 for any reason other than cause or disability,
the Company will pay Mr. Marczewski his annual salary for a
period of one year after the termination date or until December
31, 1997, whichever is longer, plus a pro rata amount of the
incentive compensation for the portion of the incentive year that
precedes the date of terminations.
In April 1996, the Company entered into employment
agreements with Steve Mason, the Company's Vice President of
Marketing, and Alfred F. Fideline, Sr., the Company's Vice
President of Retail Operations. The agreements, which are for an
indefinite term, provide a base annual salary of $130,500 for Mr.
Mason and $80,000 for Mr. Fideline, subject to increase from time
to time at the discretion of the Board of Directors. In the
event their employment is terminated prior to December 31, 1997
for any reason other than cause or disability, the Company will
pay Mr. Mason and Mr. Fideline their annual salaries for a period
of one year after the termination date or until December 31,
1997, whichever is longer, plus a pro rata amount of the
incentive compensation for the portion of the incentive year that
precedes the date of termination
On January 30, 1995, the Company entered into an
agreement with Mark S. Sellers, the Company's former Executive
Vice President-Finance, Chief Financial Officer, Treasurer and
Secretary. Pursuant to such agreement, in May 1995, Mr. Sellers
was paid $348,139, which included $195,000 of retention payment,
$140,656 of pro rata bonus related to the Management Incentive
Plan and $12,483 of unpaid vacation and retroactive pay
adjustments.
The Company entered into a settlement agreement as of
August 31, 1995 with Jack M. Lotker, the Company's former Senior
Vice President-Administration, in connection with the termination
of his employment with the Company. In connection with the
settlement, the Company agreed to grant to Mr. Lotker warrants to
purchase 100,000 shares of Holding's Class A Common Stock at an
exercise price of $0.50 per share and at Mr. Lotker's discretion,
the Company agreed to either (a) pay Mr. Lotker a single lump sum
of $188,000 or (b) cause PHH Home Equity to purchase Mr. Lotker's
current principal residence at a price equal to the appraised
value but not less than $575,000. In November 1995, Mr. Lotker
elected for the Company to pay him a single lump sum of $188,000.
However, due to the Company's liquidity constraints, the Company
has not been able to make this payment and accordingly the
Company is in default with respect to the settlement agreement.
Mr. Lotker filed suit against the Company, demanding recovery
under the settlement agreement, together with penalties and
interest. This action was stayed by the Company's bankruptcy
case and Mr. Lotker has a general unsecured claim against the
Company.
Management Incentive Plan
Homeland maintains a Management Incentive Plan to
provide incentive bonuses for members of its management and key
employees. Bonuses are determined according to a formula based
on both corporate, store and individual performance and
accomplishments or other achievements and are paid only if
minimum performance and/or accomplishment targets are reached.
Minimum bonuses range from 0 to 100% of salary for officers (as
set forth in the plan), including the Chief Executive Officer.
Maximum bonus payouts range from 75% to 200% of salary for
officers and up to 200% of salary for the Chief Executive
Officer. Performance levels must significantly exceed target
levels before the maximum bonuses will be paid. Under limited
circumstances, individual bonus amounts can exceed these levels
if approved by the Compensation Committee of the Board.
Incentive bonuses paid to managers and supervisors vary according
to their reporting and responsibility levels. The plan is
administered by a committee consisting, unless otherwise
determined by the Board of Directors, of members of the Board who
are ineligible to participate in the plan. Incentive bonuses
earned for certain highly compensated executive officers under
the plan for performance during fiscal year 1995 are included in
the Summary Compensation Table.
Retirement Plan
Homeland maintains a retirement plan in which all
non-union employees, including members of management,
participate. Under the plan, employees who retire at or after
age 65 and after completing five years of vesting service
(defined as calendar years in which employees complete at least
1,000 hours of service) will be entitled to retirement benefits
equal to 1.50% of career average annual compensation (including
basic, overtime and incentive compensation) plus .50% of career
average annual compensation in excess of the social security
covered compensation, such sum multiplied by years of benefit
service (not to exceed 35 years). Service with Safeway prior to
the Acquisition is credited for vesting purposes under the plan.
Retirement benefits will also be payable upon early retirement
beginning at age 55, at rates actuarially reduced from those
payable at normal retirement. Benefits are paid in annuity form
over the life of the employee or the joint lives of the employee
and his or her spouse or other beneficiary.
Under the retirement plan, estimated annual benefits
payable to the named executive officers of Homeland upon
retirement at age 65, assuming no changes in covered compensation
or the social security wage base, would be as follows: James A.
Demme, $27,280; Larry W. Kordisch, $44,375; Steven M. Mason,
$85,129; and Terry M. Marczewski, $35,372.
Management Stock Option Plan
On the Effective Date, 263,158 shares of New Common
Stock were reserved for issuance under a new management stock
option plan (the "Management Stock Option Plan") to be
established by the Board of Directors following consummation of
the Restructuring. The terms and conditions of the Management
Stock Option Plan, including the identity of the participants and
the number of options to be granted, will be determined by the
Board of Directors.
Compensation Committee Interlocks and Insider Participation
Ms. Laurie Shahon and Messrs. William B. Snow and John
A. Shields currently serve on the Company's Compensation and
Benefits Committee of the Board of Directors. During 1995, Mr.
Shields received $166,662 from CD&R for consulting fees for
services provided to the Company at the request of CD&R.
Item 7. Certain Relationships and Related Transactions
Prior to the Effective Date, the Company's largest
stockholders were C&D Fund III, which owned approximately 35.9%
of the Old Common Stock, and C&D Fund IV, which owned
approximately 40.4% of the Old Common Stock. After consummation
of the Restructuring, C&D Fund III and C&D Fund IV will own less
than 5% of the New Common Stock to be outstanding.
C&D Fund III and C&D Fund IV are private investment
funds managed by CD&R. Amounts contributed to C&D Fund III and
C&D Fund IV by the limited partners thereof are invested at the
discretion of the general partner in the equity of corporations
organized for the purpose of carrying out leveraged acquisitions
involving the participation of management, or, in the case of C&D
Fund IV, in corporations where the infusion of capital coupled
with the provision of managerial assistance by CD&R can be
expected to generate returns on investments comparable to returns
historically achieved in leveraged buy-out transactions. The
general partner of C&D Fund III is Clayton & Dubilier Associates
III Limited Partnership, a Connecticut limited partnership
("Associates III"). The general partner of C&D Fund IV is
Clayton & Dubilier Associates IV Limited Partnership, a
Connecticut limited partnership ("Associates IV"). B. Charles
Ames, a principal of CD&R, a holder of an economic interest in
Associates III and a general partner of Associates IV, also
served as Chairman of the Board of the Company until the
effective date of the Plan of Reorganization. Andrall E.
Pearson, a principal of CD&R and a former director of the
Company, is a general partner of Associates IV. Michael G.
Babiarz, a former director of the Company, is a professional
employee of CD&R. Hubbard C. Howe, a principal of CD&R and a
former director of the Company, is a general partner of
Associates IV.
Through 1995, CD&R received an annual fee for
management and financial consulting services provided to the
Company and reimbursement of certain expenses. The consulting
fees paid to CD&R were $125,000 in 1995, $150,000 in 1994 and
$200,000 in 1993. CD&R agreed to forgo the consulting fee after
October 1995, in view of the Company's financial position and in
order to facilitate the proposed Restructuring.
CD&R, C&D Fund III and the Company entered into an
Indemnification Agreement on August 14, 1990, pursuant to which
the Company agreed to indemnify CD&R, C&D Fund III, Associates
III and their respective directors, officers, partners,
employees, agents and controlling persons against certain
liabilities arising under the federal securities laws and certain
other claims and liabilities.
CD&R, C&D Fund III, C&D Fund IV and the Company entered
into a separate Indemnification Agreement, dated as of March 4,
1992, pursuant to which the Company agreed, subject to any
applicable restrictions in the Indenture relating to the Old
Notes (the "Old Indenture"), the Prior Credit Agreement, the
Subordinated Note Indenture, the 1987 Registration and
Participation Agreement, and the 1990 Registration and
Participation Agreement, to indemnify CD&R, C&D Fund III, C&D
Fund IV, Associates III, Associates IV and their respective
directors, officers, partners, employees, agents and controlling
persons against certain liabilities arising under the federal
securities laws and certain other claims and liabilities.
Homeland has made temporary loans to certain members of
management to enable such persons to make principal payments
under loans from third-party financial institutions. As of
September 1, 1996, $65,000 of such loans remains outstanding and
are currently due on January 21, 1997. The loans bear interest
at a variable rate equal to the rate applicable to the Company's
borrowings under the New Credit Agreement plus one percent.
Mr. Gene Burris, a director of the Company, is
President of UFCW Local No. 1000, which represents approximately
65% of the Company's unionized employees. Pursuant to the
Modified Union Agreements, the UFCW has the right to designate
one member of the Board of Directors of Holding and Homeland.
Mr. Burris is the designee of the UFCW.
Ms. Shahon and Messrs. Krekeler, Snow and Weinstein
were nominated by the Noteholders' Committee to serve as
directors of the Company.
Item 8. Legal Proceedings
The Company is a party to ordinary routine litigation
incidental to its business.
With respect to general unsecured claims against the
Company arising prior to the May 13, 1996 commencement of the
bankruptcy case, each holder of a general unsecured claim will
receive its ratable portion of 4,450,000 shares of New Common
Stock, based on the amount of such holder's claim relative to all
general unsecured claims. The Company is in the process of
analyzing the general unsecured claims and designating certain
general unsecured claims as disputed. The Company will file
objections to any such claims within 90 days after the later of
the Effective Date or the date that a proof of claim with respect
to such claim is filed or deemed to have been filed with the
Bankruptcy Court. The Company will reserve for the account of
each creditor holding a disputed general unsecured claim the New
Common Stock that would otherwise be distributable to such
creditor on the Effective Date is such disputed claim was a claim
allowed by the Bankruptcy Court.
Item 9. Market Price of and Dividends on the Registrants's
Common Equity and Related Stockholders Matters
There is no established public trading market for the
New Common Stock, the only class of common equity of Holding
currently issued and outstanding. Under the Plan of
Reorganization, the Company has undertaken to use its best
efforts to secure the listing of the New Common Stock on the
NASDAQ National Market System (or, in the event the Company fails
to meet the listing requirements of the NASDAQ National Market
System, on such other exchange or system on which the New Common
Stock may be listed) as soon as practicable following the
Effective Date. There can be no assurance that the New Common
Stock will ultimately be listed on NASDAQ (National Market
System) or any such other exchange or system.
Item 10. Recent Sales of Unregistered Securities
Under the Plan of Reorganization, the Old Common Stock
will be exchanged for (a) an aggregate of 250,000 shares of New
Common Stock, representing approximately 5.3% of the New Common
Stock to be outstanding upon consummation of the Restructuring,
and (b) New Warrants to purchase (in the aggregate) up to 263,158
shares of New Common Stock at an exercise price of $11.85 per
share. Upon consummation of the Restructuring, each holder of
the Old Common Stock will receive 7.73 shares of New Common Stock
and 8.14 New Warrants for each 1,000 shares of Old Common Stock
held by such holders. In addition, under the Plan of
Reorganization, each holder of a general unsecured claim,
including holders of the Old Notes, will receive its ratable
portion of 4,450,000 shares of New Common Stock (representing the
remaining approximately 94.7% of the New Common Stock to be
outstanding upon consummation of the Restructuring), based on the
amount of such holder's claim relative to all general unsecured
claims. The issuance of the New Common Stock and the New
Warrants under the Plan of Reorganization is exempt from the
registration requirements of the Securities Act pursuant to
Section 1145(a)(1) of the Bankruptcy Code.
On April 21, 1995, the Company made an offer to
repurchase shares of its Common Stock owned by certain officers
and employees of the Company at a cash purchase price of $0.50
per share, plus a warrant equal to the number of shares purchased
with an exercise price of $0.50. As a result of this offer, the
Company redeemed 1,688,493 shares of its Common Stock and issued
1,550,493 warrants. The warrants were issued in reliance on the
exemption from registration provided by Section 4 (2) of the
Securities Act of 1933, as amended (the "Securities Act"), for
transactions not involving any public offering("Section 4 (2)").
In March 1995, the Company, pursuant to a settlement
agreement, repurchased from its former President and Chief
Executive Officer, Max E. Raydon, 455,000 shares of Common Stock
at $0.50 per share plus a warrant for the same number of shares
with an exercise price of $0.50. Exemption from registration was
claimed under Section 4 (2).
In 1993 and early 1994, the Company repurchased 134,000
and 106,000 shares of Common Stock, respectively, from certain of
its employees at $2.41 per share. The repurchases were made in
compliance with certain provisions in their respective Management
Stock Subscription Agreements. Again, exemption from
registration was claimed under Section 4 (2).
Section 4 (2) of the Securities Act exempts from the
registration provisions of the Securities Act transactions by an
issuer not involving any public offering.
Item 11. Description of Registrant's Securities to be Registered
General
The Company is authorized to issue 7,500,000 shares of
New Common Stock, with a par value of $0.01 per share, of which
4,700,000 million shares will be issued under the Plan of
Reorganization, 263,158 shares will be reserved for issuance
under the New Warrants, 263,158 shares will be reserved for
issuance under the Management Stock Option Plan and 522,222
shares will be reserved for issuance under the Modified Union
Agreements. All of the shares to be issued under the Plan of
Reorganization will be validly issued, fully paid and non-
assessable.
Each holder of New Common Stock will be entitled to one
vote for each share held of record on each matter submitted to
the shareholders. At a meeting of stockholders at which a quorum
is present, a majority of the votes cast decides all questions,
unless the matter is one upon which a different vote is required
by express provisions of law or the Company's Certificate of
Incorporation or By-Laws. Cumulative voting for the election of
directors is not permitted.
Holders of New Common Stock will be entitled to receive
dividends to the extent that Holding's Board of Directors
declares such dividends out of the funds legally available for
such purposes. Holding does not anticipate paying any dividends
on shares of the New Common Stock. The New Credit Agreement and
the Indenture restrict the ability of Holding to pay dividends on
the New Common Stock.
Upon the dissolution or liquidation of Holding, each
holder of New Common Stock will participate, pro rata, in any
distribution of the assets of Holding after payment of, or
provision for, all of the other obligations of Holding.
Holders of New Common Stock have no conversion,
preemptive or redemption rights.
Under the Plan, Holding has undertaken to use its best
efforts to secure the listing of the New Common Stock on the
NASDAQ National Market System (or, in the event Holding fails to
meet the listing requirements of the NASDAQ National Market
System, on such other exchange or system on which the New Common
Stock may be listed) as soon as practicable following the
Effective Date. There can be no assurance, however, that the New
Common Stock will be listed on the NASDAQ National Market System
or such other exchange or system.
Equity Registration Rights Agreement
In connection with the Restructuring, Holding granted
certain registration rights to the holders of the Old Common
Stock who receive New Common Stock and New Warrants pursuant to
the Plan of Reorganization. Pursuant to an equity registration
rights agreement (the "Equity Registration Rights Agreement"),
Holding granted certain registration rights to (a) holders of Old
Common Stock who receive New Securities pursuant to the Plan and
continue to hold such New Securities as of the date of a
registration request and (b) certain permitted transferees of
such holders that satisfy certain eligibility, notice and other
requirements set forth in the Equity Registration Rights
Agreement (the "Remaining Stockholders"). Remaining
Stockholders will have registration rights only with respect to
New Securities issued to holders of Old Common Stock pursuant to
the Plan and shares of New Common Stock issuable upon exercise of
the New Warrants (the "Registrable Stockholder Securities").
The Equity Registration Rights Agreement provides that,
following the second anniversary of the Effective Date, Remaining
Stockholders holding at least 125,000 shares of New Common Stock
or 131,579 New Warrants issued to holders of the Old Common Stock
pursuant to the Plan of Reorganization have the right to initiate
one demand that Holding register under the Securities Act all or
any portion of the Registrable Stockholder Securities held by
such holders, provided that the aggregate number of shares of New
Common Stock requested to be registered may not be less than
125,000 shares and the aggregate number of New Warrants requested
to be registered may not be less than 131,579 New Warrants.
After receipt of a registration demand, Holding will notify all
other Remaining Stockholders (who have previously identified
themselves to Holding as Remaining Stockholders) of the
registration demand. Such other Remaining Stockholders will be
entitled to request that some or all of their Registrable
Stockholder Securities be included in such registration. Such
Registrable Stockholder Securities will be included in such
registration subject to certain priority cutbacks.
Following receipt of a proper demand, Holding and/or
the Company will be required to file a registration statement
under the Securities Act for all Registrable Stockholder
Securities requested to be included in such registration.
Holding will pay all expenses in connection with such
registration, including expenses of one counsel representing the
selling security holders. No registration request may be made
sooner than six months after the termination of effectiveness of
Holding's most recent registration statement under the Securities
Act for New Common Stock or New Warrants. Holding is entitled to
postpone, once in any 360-day period, any demand registration for
a period not to exceed 180 days if Holding's Board of Directors
determine that such registration would interfere with any
proposed financing, acquisition or other extraordinary corporate
action or would otherwise have a material adverse effect on
Holding.
The Equity Registration Rights Agreement terminates
with respect to the registration of the Registrable Stockholder
Securities on the earlier of (a) the seventh anniversary of the
Effective Date, (b) such time as the number of shares of New
Common Stock constituting Registrable Stockholder Securities is
less than 125,000 and the number of New Warrants constituting
Registrable Stockholder Securities is less than 131,579 and (c)
the date on which the effectiveness of a registration statement
that has become effective pursuant to a registration under the
Equity Registration Rights Agreement has been terminated.
Noteholder Registration Rights Agreement
In connection with the Restructuring, Holding granted
certain registration rights to the holders of the Old Notes who
receive New Common Stock and New Notes pursuant to the Plan of
Reorganization. Pursuant to a noteholder registration rights
agreement (the "Noteholder Registration Rights Agreement"),
Holding and/or the Company (as applicable) granted certain
registration rights to (a) holders of Old Notes who will receive
New Securities pursuant to the Plan and continue to hold such New
Securities and (b) certain permitted transferees of such holders
that satisfy certain eligibility, notice and other requirements
set forth in the Noteholder Registration Rights Agreement (the
"Remaining Noteholders"). Remaining Noteholders have
registration rights only with respect to New Securities issued to
holders of Old Notes pursuant to the Plan (the "Registrable
Noteholder Securities").
The Noteholder Registration Rights Agreement provides
that following the second anniversary of the Effective Date,
Remaining Noteholders holding at least 470,000 shares of New
Common Stock issued pursuant to the Plan (the "Registration
Trigger Amount") will have the right to initiate one demand that
Holding and/or the Company (as applicable) register under the
Securities Act all or any portion of the Registrable Noteholder
Securities held by such holders, provided that the aggregate
number of shares of New Common Stock requested to be registered
may not be less than the Registration Trigger Amount and the
aggregate principal amount of New Notes requested to be
registered may not be less than $6 million. After receipt of a
registration demand, Holding and/or the Company (as applicable)
will notify all other Remaining Noteholders (who have previously
identified themselves to Holding as Remaining Noteholders) of the
registration demand. Such other Remaining Noteholders will be
entitled to request that some or all of their Registrable
Noteholder Securities be included in such registration. Such
Registrable Noteholder Securities will be included in such
registration subject to certain priority cutbacks.
Following receipt of a proper demand, Holding and/or
the Company (as applicable) will be required to file a
registration statement under the Securities Act for all
Registrable Noteholder Securities requested to be included in
such registration. Holding and/or the Company (as applicable)
also will pay all expenses in connection with such registration,
including expenses of one counsel representing the selling
securityholders. No registration request may be made sooner than
six months after the termination of effectiveness of Holding's
most recent registration statement under the Securities Act for
New Common Stock or New Warrants. Holding is entitled to
postpone, once in any 360-day period, any demand registration for
a period not to exceed 180 days if the Board of Directors of
Holding and/or the Company (as applicable) determines that such
registration would interfere with any proposed financing,
acquisition or other extraordinary corporate action or would
otherwise have a material adverse effect on Holding and/or the
Company (as applicable).
The Noteholder Registration Rights Agreement terminates
with respect to the registration of shares of Registrable
Noteholder Securities, on the earlier of (a) the seventh
anniversary of the Effective Date, (b) such time as the
Registrable Noteholder Securities no longer represent the
Requisite Percentage and (c) the date on which the effectiveness
of a registration statement that has become effective pursuant to
a registration under the Noteholder Registration Rights Agreement
has been terminated.
Item 12. Indemnification of Directors and Officers
The Certificates of Incorporation of Holding and
Homeland provide that no director of the Company shall be liable
to the Company or its stockholders for monetary damages for
breach of his or her fiduciary duty as a director. This
provision of the Certificates of Incorporation does not eliminate
or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii)
for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law or (iv) for any
transaction from which the director derived an improper personal
benefit. This provision also does not affect a director's
responsibilities under any other law, such as the state or
federal securities law.
Under the Delaware General Corporation Law, Holding and
Homeland have broad powers to indemnify their directors and
officers against liabilities they may incur in such capacities,
including liabilities under state or federal securities law. The
By-Laws of Holding and Homeland requires the Company to indemnify
its directors and officers against expenses, judgments, fines,
settlements and other amounts incurred in connection with any
proceedings, if he or she acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful. However, in the case of a derivative
action, any officer or director will not be entitled to
indemnification in respect of any claim, issue or matter as to
which such person is adjudged to be liable to the Company, unless
and only to the extent that the court in which the action was
brought determines that such person is fairly and reasonably
entitled to indemnity for expenses.
The Company currently holds a directors and officers
insurance policy with an aggregate limit of $10,000,000, with a
deductible of $150,000, providing coverage for losses occurring
after the Effective Date. The Company also holds a similar
directors and officers insurance policy with an aggregate limit
of $20,000,000, with a deductible of $250,000, for coverage of
losses that occurred prior to the Effective Date. The directors
and officers policies provide coverage for losses of the Company,
their directors and officers that may arise from claims of
alleged wrongful acts of the directors and officers of the
Company in such capacities.
CD&R, C&D Fund III and the Company entered into an
Indemnification Agreement on August 14, 1990, pursuant to which
the Company agreed to indemnify CD&R, C&D Fund III, Associates
III and their respective directors, officers, partners,
employees, agents and controlling persons against certain
liabilities arising under the federal securities laws and certain
other claims and liabilities.
CD&R, C&D Fund III, C&D Fund IV and the Company entered
into a separate Indemnification Agreement, dated as of March 4,
1992, pursuant to which the Company agreed, subject to any
applicable restrictions in the Indenture relating to the Old
Notes (the "Old Indenture"), the Prior Credit Agreement, the
Subordinated Note Indenture, the 1987 Registration and
Participation Agreement, and the 1990 Registration and
Participation Agreement, to indemnify CD&R, C&D Fund III, C&D
Fund IV, Associates III, Associates IV and their respective
directors, officers, partners, employees, agents and controlling
persons against certain liabilities arising under the federal
securities laws and certain other claims and liabilities.
There is currently no pending litigation or proceeding
involving a director or officer of the Company as to which
indemnification is being sought nor is the Company aware of any
threatened litigation that may result in claims for
indemnification by any officer or director.
Transfer Agent
Fleet National Bank, Hartford, Connecticut, is the
transfer agent and registrar for the New Common Stock.
Item 13. Financial Statements and Supplementary Data
The Company's consolidated financial statements and
notes thereto are included in this Registration Statement
following the signature pages.
Item 14. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Item 15. Financial Statements and Exhibits
The following documents are filed as part of this
Registration Statement:
1. Financial Statements. The Company's
financial statements are included in this
report following the signature page. See
Index to Financial Statements and Financial
Statement Schedules on page F-1.
2. Exhibits. See attached Exhibit Index on page E-1.
SIGNATURES
Pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, the registrant has duly caused
this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
HOMELAND HOLDING CORPORATION
Date: October 3, 1996 By:______________________________
James A. Demme, Chairman, President
and Chief Executive Officer
INDEX TO FINANCIAL STATEMENTS
HOMELAND HOLDING CORPORATION
Unaudited Consolidated Balance Sheet as of June 15, 1996 F-2
Unaudited Consolidated Statement of Operations
for the 24 weeks ended June 15, 1996 and June17, 1995 F-4
Unaudited Consolidated Statement ofStockholders' Equity (Deficit)
for the 24 weeks ended June 15, 1996 and June 17, 1995 F-5
Unaudited Consolidated Statement of Cash Flows
for the 24 weeks ended June 15, 1996 and June 17, 1995 F-6
Notes to Unaudited Consolidated Financial Statements F-7
Report of Independent Accountants F-10
Consolidated Balance Sheets as of December 30, 1995
and December 31, 1994 F-11
Consolidated Statements of Operations for the 52 weeks
ended December 30, 1995, December 31, 1994 and January 1, 1994 F-13
Consolidated Statements of Stockholders' Equity (Deficit) for the
52 weeks ended December 30, 1995, December 31, 1994 and
January 1, 1994 F-14
Consolidated Statements of Cash Flows for the 52 weeks ended
December 30, 1995, December 31, 1994 and January 1, 1994 F-15
Notes to Consolidated Financial Statements F-16
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
ASSETS
June 15,
1996
Current assets:
Cash and cash equivalents $ 6,854
Receivables, net of allowance for uncollectible
accounts of $1,848 and $2,661 7,502
Inventories 39,476
Prepaid expenses and other current assets 2,055
Total current assets 55,887
Property, plant and equipment:
Land 9,810
Buildings 22,219
Fixtures and equipment 43,935
Land and leasehold improvements 22,582
Software 3,012
Leased assets under capital leases 27,079
Construction in progress 2,697
131,334
Less accumulated depreciation
and amortization 64,874
Net property, plant and equipment 66,460
Other assets and deferred charges 6,749
Total assets $129,096
Continued
The accompanying notes are an integral part
of these consolidated financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, Continued
(In thousands, except share and per share amounts)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' DEFICIT
June 15,
1996
Current liabilities:
Accounts payable - trade $ 17,501
Salaries and wages 1,556
Taxes 5,146
Accrued interest payable 6,540
Other current liabilities 13,119
Long-term obligations in default classified as current 97,053
Current portion of obligations under capital
leases 2,746
Current portion of restructuring reserve 3,062
Total current liabilities 146,723
Long-term obligations:
Obligations under capital leases 6,141
Other noncurrent liabilities 5,224
Noncurrent restructuring reserve 2,455
Total long-term obligations 13,820
Commitments and contingencies -
Redeemable common stock, Class A, $.01 par value,
1,720,718 shares at June 15, 1996 and at
December 30, 1995, at redemption value 17
Stockholders' deficit:
Common stock
Class A, $.01 par value, authorized - 40,500,000
shares, issued - 33,748,482 shares at June 15,
1996 and at December 30, 1995,
outstanding - 30,878,989 shares 337
Additional paid-in capital 55,886
Accumulated deficit (83,546)
Minimum pension liability adjustment (1,327)
Treasury stock, 2,869,493 shares at June 15, 1996
and at December 30, 1995, at cost (2,814)
Total stockholders' deficit (31,464)
Total liabilities and stockholders' deficit $129,096
The accompanying notes are an integral part
of these consolidated financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
24 weeks 24 weeks
ended ended
June 15, June 17,
1996 1995
Sales, net $246,331 $325,068
Cost of sales 185,910 246,015
Gross profit 60,421 79,053
Selling and administrative 55,422 76,008
Operating profit 4,999 3,045
Interest expense 5,207 8,310
Loss before reorganization items,
income taxes and extraordinary items (208) (5,265)
Reorganization items 3,150 -
Loss before income taxes and
extraordinary items (3,358) (5,265)
Income tax expense - -
Loss before extraordinary items (3,358) (5,265)
Extraordinary items - (2,330)
Net loss $ (3,358) $ (7,595)
Loss before extraordinary items per
common share $ (.10) $ (.15)
Extraordinary items per common share - (.07)
Net loss per common share $ (.10) $ (.22)
Weighted average shares outstanding 32,599,707 33,957,711
The accompanying notes are an integral part
of these consolidated financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Additional Pension Total
Common Stock Paid-in Accumulated Liability Treasury Stock Stockholders'
Shares Amount Capital Deficit Adjustment Shares Amount Equity (Deficit)
Balance, December 31,1994 31,604.989 $316 $53,896 $(48,398) $ - 726,000 $(1,743) $ 4,071
Purchase of Treasury Stock 2,116,183 21 1,037 - - 2,116,183 (1,058) -
Net loss - - - (7,595) - - - (7,595)
Balance, June 17, 1995 33,721,172 $337 $54,933 $(55,993) - 2,842,183 $(2,801) $(3,524)
Balance, December 30, 1995 33,748,482 $337 $55,886 $(80,188) $ (1,327) 2,869,493 $(2,814) $(28,106)
Net loss - - - (3,358) - - (3,358)
Balance, June 15, 1996 33,748,482 $337 $55,886 $(83,546) $ (1,327) 2,869,493 $(2,814) $(31,464)
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
(Unaudited)
24 weeks 24 weeks
ended ended
June 15, June 17,
1996 1995
Cash flows from operating activities:
Net loss $(3,358) $(7,595)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 3,282 6,460
Amortization of financing costs 315 585
Write-off of financing costs on long term debt retired - 1,424
Gain on disposal of assets (41) (146)
Amortization of beneficial interest in operating
leases 59 105
Change in assets and liabilities:
Decrease in receivables 549 2,920
Decrease in receivable for taxes - 719
Decrease in inventories 3,354 17,374
Decrease (increase) in prepaid expenses
and other current assets (3) 3,723
Decrease (increase) in other assets
and deferred charges (540) 26
Decrease in accounts payable - trade (231) (14,146)
Increase (decrease) in salaries and wages (53) 418
Increase (decrease) in taxes 270 (472)
Increase (decrease) in accrued interest payable 3,649 (808)
Decrease in other current liabilities (1,201) (5,771)
Decrease in restructuring reserve (353) (10,338)
Decrease in other noncurrent liabilities (872) (938)
Net cash provided by (used in) operating activities 4,826 (6,460)
Cash flows from investing activities:
Capital expenditures (1,404) (409)
Cash received from sale of assets 1,729 73,038
Net cash provided by investing activities 325 72,629
Cash flows from financing activities:
Payments under senior secured floating rate notes - (9,375)
Payments under senior secured fixed rate notes - (15,625)
Borrowings under revolving credit loans 60,423 34,582
Payments under revolving credit loans (63,838) (56,644)
Net payments under swing loans - (1,500)
Principal payments under notes payable - (750)
Principal payments under capital lease obligations (1,239) (5,612)
Payments to acquire treasury stock - (1,058)
Net cash used by financing activities (4,654) (55,982)
Net increase in cash and cash equivalents 497 10,187
Cash and cash equivalents at beginning of period 6,357 339
Cash and cash equivalents at end of period $ 6,854 $10,526
Supplemental information:
Cash paid during the period for interest $ 1,287 $ 8,533
The accompanying notes are an integral part
of these financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Preparation of Consolidated Financial
Statements:
The accompanying unaudited consolidated financial
statements of Homeland Holding Corporation ("Holding")
and its Subsidiary, Homeland Stores, Inc. ("Stores" and
together with Holding, the "Company"), reflect all
adjustments consisting only of normal and recurring
adjustments which are, in the opinion of management,
necessary to present fairly the consolidated financial
position and the consolidated results of operations and
cash flows for the periods presented. These unaudited
consolidated financial statements should be read in
conjunction with the consolidated financial statements
of the Company for the 52 weeks ended December 30, 1995
and the notes thereto.
The accompanying consolidated financial statements have
been prepared on a going concern basis, which
contemplates the realization of assets and the
satisfaction of liabilities and commitments in the
normal course of business. The consolidated financial
statements do not include any adjustments to the assets
or liabilities that may result from the outcome of the
bankruptcy proceedings.
2. Accounting Policies:
The policies of the Company are summarized in the
consolidated financial statements of the Company for the
52 weeks ended December 30, 1995 and the notes thereto.
3. Operational Restructuring:
On April 21, 1995, the Company sold 29 of its stores and
its distribution center to Associated Wholesale Grocers,
Inc. ("AWG"), pursuant to a strategic plan approved by
the Board of Directors in December 1994. In connection
with the plan, the Company closed 14 underperforming
stores in 1995, sold one store and closed one store in
the second quarter of 1996. The Company closed one final
store in July 1996 pursuant to such plan. During the
first 24 weeks ended June 15, 1996, the Company incurred
expenses associated with the operational restructuring
as follows:
Payments applied
against
operational
Operational restructuring Operational
restructuring reserve for restructuring
reserve at the 24 weeks ended reserve at
December 30, 1995 June 15, 1996 June 15, 1996
Expenses associated with the
planned store closings,
primarily occupancy costs
from closing date to lease
termination or sublease date $4,860 $ (350) $4,510
Expenses associated with the AWG
transaction, primarily service
and equipment contract
cancellation fees 58 - 58
Estimated severance costs
associated with the AWG
transaction 927 5 932
Legal and consulting fees
associated with the
AWG transaction 25 (8) 17
Operational restructuring
reserve $5,870 $ (353) $5,517
The separately identifiable revenue and store
contribution to operating profit related to the
stores sold to AWG or closed and expenses related
to the warehouse facility are as follows:
24 weeks 24 weeks
ended ended
June 15, June 17,
1996 1995
Sales, net $6,429 $81,079
Store contribution to
operating profit before
allocation of administrative
and advertising expenses (394) 2,407
Warehouse expenses - 3,853
4.Reorganization:
On May 13, 1996, the Company filed chapter 11
petitions with the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy
Court"). Simultaneous with the filing of such
petitions, the Company filed a plan of
reorganization and a disclosure statement, which
sets forth the terms of a proposed restructuring of
the Company. On June 13, 1996, the Company filed a
first amended plan of reorganization and disclosure
statement. The Company's plan of reorganization
was confirmed by the Bankruptcy Court on July 19,
1996. As a result of the chapter 11 filings,
certain claims against the Company that existed
prior to the filing date are stayed and will be
subject to compromise. Liabilities subject to
compromise as of June 15, 1996, are as follows
(dollars in thousands):
June 15, 1996
(unaudited)
Long-term obligation in default
classified as current $ 95,000
Other 43,732
$138,732
Resolution of the above liabilities subject to
compromise is contingent upon the approval of the
Bankruptcy Court.
Report of Independent Accountants
To the Board of Directors and Stockholders of
Homeland Holding Corporation
We have audited the accompanying consolidated financial
statements of Homeland Holding Corporation and Subsidiary as of
December 30, 1995 and December 31, 1994 and for the 52 weeks
ended December 30, 1995, December 31, 1994 and January 1, 1994
listed in the index on page F-1 of this Form 10. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Homeland Holding Corporation and Subsidiary
as of December 30, 1995 and December 31, 1994, and the
consolidated results of their operations and their cash flows for
the 52 weeks ended December 30, 1995, December 31, 1994 and
January 1, 1994, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 2 to the financial statements, the
Company has incurred recurring losses from operations, negative
cash flows from operations for the year ended December 30, 1995,
a stockholders' deficit as of December 30, 1995 and has been
unable to comply with its debt covenants. In addition, on March
27, 1996, the Company reached an agreement in principle with
members of an ad-hoc noteholders committee with respect to a
financial restructuring of the Company. The Company and the ad-
hoc noteholders committee have agreed to implement the financial
restructuring under a pre-arranged plan of reorganization to be
filed under Chapter 11 of the United States Federal Bankruptcy
Code. These factors raise substantial doubt about the Company's
ability to continue as a going concern. The continuation of its
business as a going concern is contingent upon, among other
things, the ability to (1) complete the pre-arranged plan of
reorganization and (2) sustain satisfactory levels of future
earnings and cash flows. Management's plans with regard to such
financial restructuring are set forth in Note 15 to the financial
statements. The financial statements do not include any
adjustments that might result from the outcome of these
uncertainties or adjustments relating to the establishment,
settlement and classification of liabilities that may be required
in connection with the pre-arranged plan of reorganization of
Homeland Holding Corporation and Subsidiary under Chapter 11 of
the United States Federal Bankruptcy Code.
Coopers & Lybrand, L.L.P.
New York, New York
March 27, 1996
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
ASSETS (Note 4)
December 30, December 31,
1995 1994
Current assets:
Cash and cash equivalents (Notes 3 and 5) $ 6,357 $ 339
Receivables, net of allowance for uncollectible
accounts of $2,661 and $2,690 8,051 12,235
Receivable for taxes (Note 6) - 2,270
Inventories 42,830 89,850
Prepaid expenses and other current assets 2,052 6,384
Total current assets 59,290 111,078
Property, plant and equipment:
Land 9,919 10,997
Buildings 22,101 29,276
Fixtures and equipment 44,616 61,360
Land and leasehold improvements 23,629 32,410
Software (Note 3) 1,991 17,876
Leased assets under capital leases (Note 9) 29,062 46,015
Construction in progress 4,201 2,048
135,519 199,982
Less, accumulated depreciation
and amortization 63,827 82,603
Net property, plant and equipment 71,692 117,379
Excess of purchase price over fair
value of net assets acquired, net
of amortization of $830 in fiscal 1994 (Note 3) - 2,475
Other assets and deferred charges 6,600 8,202
Total assets $137,582 $239,134
Continued
The accompanying notes are an integral part
of these consolidated financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, Continued
(In thousands, except share and per share amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
December 30, December 31,
1995 1994
Current liabilities:
Accounts payable - trade $ 17,732 $ 30,317
Salaries and wages 1,609 1,925
Taxes 4,876 6,492
Accrued interest payable 2,891 3,313
Other current liabilities 14,321 15,050
Current portion of long-term debt
(Notes 4, 5 and 15) - 2,250
Long-term obligations in default classified
as current (Notes 4, 5 and 15) 100,467 -
Current portion of obligations under capital
leases (Note 9) 2,746 7,828
Current portion of restructuring
reserve (Note 14) 3,062 -
Total current liabilities 147,704 67,175
Long-term obligations:
Long-term debt (Notes 4, 5 and 15) - 145,000
Obligations under capital leases (Note 9) 9,026 11,472
Other noncurrent liabilities 6,133 5,176
Noncurrent restructuring reserve (Note 14) 2,808 5,005
Total long-term obligations 17,967 166,653
Commitments and contingencies (Notes 8, 9 and 12) - -
Redeemable common stock, Class A, $.01 par value,
1,720,718 shares at December 30, 1995 and 3,864,211
shares at December 31, 1994, at redemption value
(Notes 10 and 11) 17 1,235
Stockholders' equity (deficit):
Common stock (Note 10):
Class A, $.01 par value, authorized - 40,500,000
shares, issued - 33,748,482 shares at December 30,
1995 and 31,604,989 at December 31, 1994,
outstanding - 30,878,989 shares 337 316
Additional paid-in capita l55,886 53,896
Accumulated deficit (80,188) (48,398)
Minimum pension liability adjustment (Note 8) (1,327) -
Treasury stock, 2,869,493 shares at December 30, 1995
and 726,000 shares at December 31, 1994, at cost (2,814) (1,743)
Total stockholders' equity (deficit) (28,106) 4,071
Total liabilities and stockholders'
equity (deficit) $137,582 $239,134
The accompanying notes are an integral part
of these consolidated financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
52 weeks 52 weeks 52 weeks
ended ended ended
December 30, December 31, January 1,
1995 1994 1994
Sales, net $630,275 $785,121 $810,967
Cost of sales 479,119 588,405 603,220
Gross profit 151,156 196,716 207,747
Selling and administrative expenses 151,985 193,643 190,483
Operational restructuring
costs (Note 14) 12,639 23,205 -
Operating profit (loss) (13,468) (20,132) 17,264
Gain on sale of plants - - 2,618
Interest expense (15,992) (18,067) (18,928)
Income (loss) before income tax benefit
(provision) and extraordinary items (29,460) (38,199) 954
Income tax benefit (provision) (Note 6) - (2,446) 3,252
Income (loss) before extraordinary items (29,460) (40,645) 4,206
Extraordinary items (Note 4) (2,330) - (3,924)
Net income (loss) (31,790) (40,645) 282
Reduction in redemption value -
redeemable common stock 940 7,284 -
Net income (loss) available to
common stockholders $(30,850) $(33,361) $282
Income (loss) before extraordinary
items per common share $ (.86) $ (.96) $ .12
Extraordinary items per common share (.07) - (.11)
Net income (loss) per common share $ (.93) $ (.96) $ .01
Weighted average shares outstanding 33,223,675 34,752,527 34,946,460
The accompanying notes are an integral part
of these consolidated financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Minimum
Class A Additional Pension Total
Common Stock Paid-in Accumulated Liability Treasury Stock Stockholders'
Shares Amount Capital Deficit Adjustment Shares Amount Equity (Deficit)
Balance, January 2, 1993 31,364,989 $314 $46,036 $(8,035) $ - 486,000 $(1,165) $37,150
Purchase of treasury stock 134,000 1 322 - - 134,000 (323) -
Adjustment to recognize
minimum liability - - - - (572) - - (572)
Net income - - - 282 - - - 282
Balance, January 1, 1994 31,498,989 315 46,358 (7,753) (572) 620,000 (1,488) 36,860
Purchase of treasury stock 106,000 1 254 - - 106,000 (255) -
Adjustment to eliminate
minimum liability - - - - 572 - - 572
Redeemable common stock
reduction in redemption
value - - 7,284 - - - - 7,284
Net loss - - - (40,645) - - - (40,645)
Balance, December 31, 1994 31,604,989 316 53,896 (48,398) - 726,000 (1,743) 4,071
Purchase of treasury stock 2,143,493 21 1,050 - - 2,143,493 (1,071) -
Adjustment to recognize
minimum liability - - - - (1,327) - - (1,327)
Redeemable common stock
reduction in redemption
value - - 940 - - - - 940
Net loss - - - (31,790) - - - (31,790)
Balance, December 30, 1995 33,748,482 $337 $55,886 $(80,188) $(1,327) 2,869,493 $(2,814) $(28,106)
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
52 weeks 52 weeks 52 weeks
ended ended ended
December 30, December31, January 1,
1995 1994 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (31,790) $ (40,645) $ 282
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 11,192 17,458 16,797
Amortization of financing costs 1,019 1,443 1,484
Write-off of financing costs on long-term
debt retired 1,424 - 1,148
(Gain) loss on disposal of assets 8,349 384 (2,284)
(Gain) on sale of sold stores (15,795) - -
Amortization of beneficial interest in operating
leases 181 258 261
Impairment of assets 2,360 14,325 744
(Increase) decrease in deferred tax assets - 3,997 (3,997)
Provision for losses on accounts receivable 1,750 1,213 75
Provision for write down of inventories 847 - -
Change in assets and liabilities:
(Increase) decrease in receivables 3,227 2,301 (1,131)
(Increase) decrease in receivable for taxes 2,270 (2,270) -
Decrease in inventories 18,297 2,097 1,236
(Increase) decrease in prepaid expenses and
other current assets 5,542 (2,687) (862)
(Increase) decrease in other assets and deferred
charges (1,215) 103 (238)
Increase (decrease) in accounts payable-trade (12,587) 832 (5,464)
Decrease in salaries and wages (316) (821) (1,994)
Increase (decrease) in taxes (1,616) 1,768 (3,629)
Decrease in accrued interest payable (422) (53) (1,102)
Increase (decrease) in other current
liabilities (3,264) (34) 7,371
Increase in restructuring reserve 1,356 5,005 -
Increase (decrease) in other noncurrent
liabilities 1,157 (4,417) 4,301
Net cash provided by (used in) operating
activities (8,034) 257 12,998
Cash flows from investing activities:
Capital expenditures (4,681) (5,386) (7,129)
Purchase of assets under capital leases (3,966) - -
Cash received from sale of assets 73,721 1,363 3,991
Net cash provided by (used in) investing
activities 65,074 (4,023) (3,138)
Cash flows from financing activities:
Payments under senior secured floating
rate notes (9,375) - -
Payments under senior secured fixed
rate notes (15,625) - -
Payments on subordinated debt - - (47,750)
Borrowings under revolving credit loans 104,087 66,000 100,000
Payments under revolving credit loans (123,620) (56,000) (85,000)
Net borrowings (payments) under swing loans (1,500) (3,500) 5,000
Principal payments under notes payable (750) (1,000) (1,250)
Principal payments under capital lease obligations (3,166) (3,334) (4,198)
Payments to acquire treasury stock (1,073) (255) (323)
Net cash provided by (used in) financing
activities (51,022) 1,911 (33,521)
Continued
</TABLE>
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
(In thousands, except share and per share amounts)
52 weeks 52 weeks 52 weeks
ended ended ended
December 30, December 31, January 1,
1995 1994 1994
Net increase (decrease) in cash and
cash equivalents $ 6,018 $ (1,855) $ (23,661)
Cash and cash equivalents at beginning
of period 339 2,194 25,855
Cash and cash equivalents at end
of period $ 6,357 $ 339 $ 2,194
Supplemental information:
Cash paid during the period for
interest $ 13,439 $ 16,642 $ 18,738
Cash paid during the period for
income taxes $ - $ 236 $ 890
Supplemental schedule of noncash
investing activities:
Capital lease obligations assumed $ - $ 1,493 $ 3,218
Capital lease obligations retired $ - $ - $ 31
The accompanying notes are an integral part
of these consolidated financial statements.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
1. Organization:
Homeland Holding Corporation ("Holding"), a Delaware
corporation, was incorporated on November 6, 1987, but had
no operations prior to November 25, 1987. Effective
November 25, 1987, Homeland Stores, Inc. ("Homeland"), a
wholly-owned subsidiary of Holding, acquired substantially
all of the net assets of the Oklahoma Division of Safeway
Inc. Holding and its consolidated subsidiary, Homeland, are
collectively referred to herein as the "Company".
Holding has guaranteed substantially all of the debt issued
by Homeland. Holding is a holding company with no
significant operations other than its investment in
Homeland. Separate financial statements of Homeland are not
presented herein since they are identical to the
consolidated financial statements of Holding in all respects
except for stockholder's equity (which is equivalent to the
aggregate of total stockholders' equity and redeemable
common stock of Holding) which is as follows:
December 30, December 31,
1995 1994
Homeland stockholder's equity:
Common stock, $.01 par value,
authorized, issued and
outstanding 100 shares 1 1
Additional paid-in capital 53,435 53,713
Accumulated deficit (80,198) (48,408)
Minimum pension liability adjustment (1,327) -
Total Homeland stockholder's
equity (deficit) $(28,089) $ 5,306
2. Basis of Presentation:
The accompanying consolidated financial statements of
Holding have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction
of liabilities in the ordinary course of business.
Accordingly, the consolidated financial statements do not
include any adjustments relating to the recoverability or
classification of recorded asset amounts or the amount and
classification of liabilities that might be necessary should
Holding be unable to successfully complete the financial
restructuring described in Note 15 and continue as a going
concern.
2. Basis of Presentation, continued:
As shown in the accompanying financial statements, the
Company incurred significant losses in 1995 and 1994 and, at
December 30, 1995, had a stockholders' deficit of $28,106.
As discussed in Note 4, at December 30, 1995, as a
consequence of Homeland's financial position and the results
of its operations for the year ended December 30, 1995, the
Company was not in compliance with the Consolidated Fixed
Charge Coverage Ratio and Debt-to-Equity Ratio covenants
under its Senior Note Indenture and Revolving Credit
Agreement; however, waivers of such noncompliance through
April 15, 1996 and May 20, 1996, respectively, have been
received. In addition, the Company failed to make a
scheduled interest payment under its Senior Note Indenture,
due March 1, 1996, and the waiver under such Senior Note
Indenture thereby expired. Furthermore, as discussed in
Note 15, negotiations for the restructuring of the Company's
long-term debt and union agreements are being conducted
which, if unsuccessful, could have a material adverse effect
on the Company's financial condition.
3. Summary of Significant Accounting Policies:
Fiscal year - The Company has adopted a fiscal year which
ends on the Saturday nearest December 31.
Basis of consolidation - The consolidated financial
statements include the accounts of Homeland Holding
Corporation and its wholly owned subsidiary. All
significant intercompany balances and transactions have been
eliminated in consolidation.
Revenue recognition - The Company recognizes revenue at the
"point of sale", which occurs when groceries and related
merchandise are sold to its customers.
3. Summary of Significant Accounting Policies, continued:
Concentrations of credit and business risk - Financial
instruments which potentially subject the Company to
concentrations of credit risk consist principally of
temporary cash investments and receivables. The Company
places its temporary cash investments with high quality
financial institutions. Concentrations of credit risk with
respect to receivables are limited due to the diverse nature
of those receivables, including a large number of retail
customers within the region and receivables from vendors
throughout the country. The Company purchases approximately
70% of its products from Associated Wholesale Grocers, Inc.
("AWG"). Although there are similar wholesalers that could
supply the Company with merchandise, if AWG were to
discontinue shipments, this could have a material adverse
effect on the Company's financial condition.
Restricted Cash - The Company has two escrow accounts at
United States Trust Company of New York, one for
reinvestment in capital expenditures to which the Company is
committed ("Capital Escrow") and one for the redemption of
Senior Notes (as subsequently defined in Note 4)
("Redemption Escrow"). As of December 30, 1995, the Company
has $1,729 deposited in the Capital Escrow and $800
deposited in the Redemption Escrow. The deposited funds in
the Capital Escrow is restricted for reinvestment in capital
expenditures to which the Company is committed or must be
used to permanently pay down the Senior Notes. The
Redemption Escrow consisting of net proceeds from asset
sales occurring after the AWG Transaction (as subsequently
defined in Note 14) is restricted to permanently pay down
the Senior Notes when the aggregate amount reaches $2,000.
Inventories - Inventories are stated at the lower of cost
or market, with cost being determined primarily using the
retail method.
3. Summary of Significant Accounting Policies, continued:
Property, plant and equipment - Property, plant and
equipment obtained at acquisition are stated at appraised
fair market value as of that date; all subsequently
acquired property, plant and equipment are stated at cost
or, in the case of assets under capital leases, at the lower
of cost or the present value of future lease payments.
Depreciation and amortization, including amortization of
leased assets under capital leases, are computed on a
straight-line basis over the lesser of the estimated useful
life of the asset or the remaining term of the lease.
Depreciation and amortization for financial reporting
purposes are based on the following estimated lives:
Estimated lives
Buildings 10 - 40
Fixtures and equipment 5 - 12.5
Leasehold improvements 15
Transportation equipment 5 - 10
Software 5 - 10
The costs of repairs and maintenance are expensed as
incurred, and the costs of renewals and betterments are
capitalized and depreciated at the appropriate rates. Upon
sale or retirement, the cost and related accumulated
depreciation are eliminated from the respective accounts and
any resulting gain or loss is included in the results of
operations for that period. In the fourth quarter of 1995,
approximately $7.9 million of capitalized software costs,
net of accumulated depreciation, have been charged to
operational restructuring costs in the Statement of
Operations as a result of management's decision to replace
such software as part of its operational restructuring
initiatives.
Excess of purchase price over fair value of net assets
acquired - As discussed in Notes 2 and 14, the Board of
Directors approved a strategic plan in December 1995 to
refocus the Company's restructuring efforts, which commenced
in 1994, to address continuing significant losses from
operations as well as evaluating various financial
restructuring alternatives in an effort to improve cash
flows from operations and reduce interest costs on the
Company's long-term debt. There is no assurance that such
restructuring efforts will be successful and, accordingly,
the Company determined during the fourth quarter of 1995
that the recovery of any remaining unamortized excess of
purchase price over fair value of net assets acquired could
not be assured from future operating cash flows.
Consequently, the unamortized
3. Summary of Significant Accounting Policies, continued:
balance of the excess of purchase price over fair value of
net assets acquired was charged to operational restructuring
costs in the statement of operations.
Other assets and deferred charges - Other assets and
deferred charges consist primarily of financing costs
amortized using the effective interest rate method over the
term of the related debt and beneficial interests in
operating leases amortized on a straight-line basis over the
remaining terms of the leases, including all available
renewal option periods.
Net income (loss) per common share - Net income (loss) per
common share is computed based on the weighted average
number of shares, including shares of redeemable common
stock outstanding during the period. Net income (loss) is
reduced (increased) by the accretion to (reduction in)
redemption value to determine the net income (loss)
available to common stockholders.
Cash and cash equivalents - For purposes of the statements
of cash flows, the Company considers all short-term
investments with an original maturity of three months or
less when purchased to be cash equivalents.
Capitalized interest - The Company capitalizes interest as
a part of the cost of acquiring and constructing certain
assets. No interest cost was capitalized in 1995. Interest
costs of $35 and $44 were capitalized in 1994 and 1993,
respectively.
Advertising costs - Costs of advertising are expensed as
incurred. Gross advertising costs for 1995, 1994 and 1993,
respectively, were $10,700, $13,615 and $14,100.
Use of estimates - The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates
of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. The
most significant assumptions and estimates relate to the
reserve for restructuring, the reserve for self-insurance
programs, the deferred income tax valuation allowance, the
accumulated benefit obligation relating to the employee
retirement plan, the allowance for bad debts and
depreciation rates of property and equipment. Actual
results could differ from those estimates.
3. Summary of Significant Accounting Policies, continued:
Income taxes - The Company provides for income taxes based
on enacted tax laws and statutory tax rates at which items
of income and expense are expected to be settled in the
Company's income tax return. Certain items of revenue and
expense are reported for Federal income tax purposes in
different periods than for financial reporting purposes,
thereby resulting in deferred income taxes. Deferred taxes
also are recognized for operating losses that are available
to offset future taxable income and tax credits that are
available to offset future Federal income taxes. Valuation
allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized.
Self-insurance reserves - The Company is self-insured for
property loss, general liability and automotive liability
coverage and was self-insured for workers' compensation
coverage until June 30, 1994, subject to specific retention
levels. Estimated costs of these self-insurance programs
are accrued at their present value based on projected
settlements for claims using actuarially determined loss
development factors based on the Company's prior history
with similar claims. Any resulting adjustments to
previously recorded reserves are reflected in current
operating results.
Impact of Recently Issued Accounting Pronouncement - The
Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, " Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" ("SFAS No.121"), in March 1995 to establish
standards for the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those
assets to be held and used. The Company has not yet adopted
this accounting standard, which becomes effective in 1996
for Homeland, nor has it evaluated the potential impact of
adoption in 1996. The impact of SFAS No. 121 is not
reasonably estimable at this time due to certain factors
discussed in Note 2 to the consolidated financial
statements; although this standard may affect reported
earnings and the carrying values of long-lived assets, there
will be no impact on cash flows.
4. Current and long-term Debt:
In March 1992, the Company entered into an Indenture with
United States Trust Company of New York, as trustee,
pursuant to which the Company issued $45,000 in aggregate
principal amount of Series A Senior Secured Floating Rate
Notes due 1997 (the "Old Floating Rate Notes") and $75,000
in aggregate principal amount of Series B Senior Secured
Fixed Rate Notes due 1999 (the "Old Fixed Rate Notes", and
collectively, the "Old Notes"). Certain proceeds from this
issuance were used to repay all outstanding amounts under
the previous credit agreement. In October and November
1992, the Company exchanged a portion of its Series D Senior
Secured Floating Rate Notes due 1997 (the "New Floating Rate
Notes") and its Series C Senior Secured Fixed Rate Notes due
1999 (the "New Fixed Rate Notes", and collectively, the "New
Notes") for equal principal amounts of the Old Notes. The
New Notes are substantially identical to the Old Notes,
except that the offering of the New Notes was registered
with the Securities and Exchange Commission. At the
expiration of the exchange offer in November 1992, $33,000
in principal amount of the Old Floating Rate Notes and
$75,000 in principal amount of the Old Fixed Rate Notes had
been tendered and accepted for exchange.
On March 1, 1993, the Company redeemed all remaining
outstanding subordinated notes ($47,750 principal amount) at
the optional redemption price, including a premium of $2,776
or 5% of the outstanding principal amount specified in the
subordinated note agreement, together with accrued interest.
On April 21, 1995, the Company and the Indenture trustee
entered into a supplemental indenture effecting certain
amendments to the Indenture. On June 1, 1995, the Company
redeemed $15,625 of its New Fixed Rate Notes, $6,874 of New
Floating Rate Notes and $2,501 of Old Floating Rate Notes.
Also on April 21, 1995, the Company entered into a
revolving credit agreement (the "Revolving Credit
Agreement") with National Bank of Canada ("NBC") as agent
and lender, Heller Financial, Inc. and any other lenders
thereafter parties thereto. The Revolving Credit Agreement
provides a commitment of up to $25 million in collateralized
revolving credit loans, including certain documentary and
standby letters of credit.
4. Current and long-term Debt, continued:
As a result of the 1995 and 1993 redemptions, the Company
incurred the following extraordinary losses:
1995 1993
Premium on redemption/repurchase
of the Company's 15.5%
subordinated notes due
November 1, 1997 $ - $(2,776)
Unamortized financing costs
relating to the redemption/
repurchase of the Company's
15.5% subordinated notes
due November 1, 1997 - (1,148)
Consent fee equal to $5,000
for each principal amount
of the $120.0 million Senior
Notes (600) -
Premium on redemption of $15.6
million of the Senior Secured
Fixed Rate Notes, due
March 1, 1999 (306) -
Unamortized financing costs
relating to the redemption of
$25.0 million of the Senior Notes
and the replacement of the prior
revolving credit agreement (1,424) -
Net extraordinary loss $(2,330) $(3,924)
4. Current and long-term Debt, continued:
Long-term debt at year end consists of:
December 30, December 31,
1995 1994
Note payable* $ - $ 750
Senior Notes Series A** 9,499 12,000
Senior Notes Series D** 26,126 33,000
Senior Notes Series C** 59,375 75,000
Revolving credit loans*** 5,467 26,500
100,467 147,250
Less current portion - 2,250
Less long-term debt obligation
in default classified as current 100,467 -
Long-term debt due after
one year $ - $145,000
*The Company issued a $3,000 note payable in 1992 for
the purchase of fixed assets related to the acquisition
of five stores. The note matured on March 1, 1995 and
was repaid.
**The Series A and Series D Senior Secured Floating
Rate Notes mature on February 27, 1997. Interest
payments are due quarterly and bear interest at the
applicable LIBOR rate, as defined in the Indenture
(8.43% at December 30, 1995). The Series C Senior
Secured Fixed Rate Notes mature on March 1, 1999.
Interest payments are due semiannually at an annual
rate of 12.25%. The notes are collateralized by
substantially all of the consolidated assets of the
Company except for accounts receivable and inventories.
The notes, among other things, require the maintenance
of a Debt-to-EBITDA and a consolidated fixed charge
coverage ratio, as defined, and a capital expenditure
covenant, as well as limiting the incurrence of
additional indebtedness, providing for mandatory
prepayment of the Senior Floating Rate Notes in an
amount equal to 80% of excess cash flow, as defined,
upon certain conditions and limiting the payment of
dividends. At December 30, 1995, the Company was not
in compliance with the Debt-to-EBITDA and the fixed
charge coverage ratio covenants.
4. Current and long-term Debt, continued:
Although a waiver was received by the Company for such
noncompliance through April 15, 1996, the Company
failed to make a scheduled interest payment on March 1,
1996 and, accordingly, such waiver expired. As the
Company may not be able to comply with these debt
covenants in 1996, the aggregate principal amount of
the outstanding debt was classified as current
obligations.
***Borrowings under the Revolving Credit Agreement bear
interest at the NBC Base Rate plus 1.5% for the first
year, payable on a quarterly basis in arrears. At
December 30, 1995, the interest rate on borrowings
under the Revolving Credit Agreement was 10.0%.
Subsequent year's interest rates will be dependent upon
the Company's earnings but will not exceed the NBC base
rate plus 2.0%. All borrowings under the Revolving
Credit Agreement are subject to a borrowing base, which
was $23.7 million as of December 30, 1995, and mature
no later than February 27, 1997, with the possibility
of extending the maturity date to March 31, 1998 if the
Company's Series A Senior Secured Floating Rate Notes
due February 27, 1997, are extended or refinanced on
terms acceptable to NBC.
The Revolving Credit Agreement, among other things,
requires the maintenance of a Debt-to-EBITDA ratio and
consolidated fixed charge coverage ratio, as defined,
and limits the Company's net capital expenditures,
incurrence of additional indebtedness and the payment
of dividends. The notes are collateralized by accounts
receivable and inventories of the Company. At December
30, 1995, the Company was not in compliance with the
Debt-to-EBITDA coverage ratio and the consolidated
fixed charge coverage ratio. The lenders waived
compliance of such default through May 20, 1996. As
the Company may not be able to comply with existing
covenants in 1996, the outstanding borrowings have been
classified as current obligations (See Note 2 -Basis of
Presentation and Note 15 - Subsequent Events).
5. Fair Value of Financial Instruments:
The estimated fair value of financial instruments has been
determined by the Company using available market information
and appropriate valuation methodologies. However,
considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair
value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have
a material effect on the estimated fair value amounts. The
carrying amount and fair value of financial instruments as
of December 30, 1995 and December 31, 1994 are as follows:
December 30, 1995 December 31, 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
Assets:
Cash and Cash
Equivalents $6,357 $6,357 $339 $339
Liabilities:
Current and Long-Term
Obligations in
default classified
as current $100,467 $56,411 - -
Long-Term Debt - - $147,250 $141,250
Cash and cash equivalents - The carrying amount of this item
is a reasonable estimate of its fair value due to its short-
term nature.
Current and long-term obligations in default classified as
current; long-term debt - The fair value of publicly traded
debt (the Senior Secured Notes) is valued based on quoted
market values. The amount reported in the balance sheet for
the remaining long-term obligations in default classified as
current approximates fair value based on quoted market
prices of comparable instruments or by discounting expected
cash flows at rates currently available for debt of the same
remaining maturities.
6. Income Taxes:
The components of the income tax benefit (provision) for
fiscal 1995, 1994 and 1993 were as follows:
1995 1994 1993
Federal:
Current - AMT $ - $ 1,551 $ (36)
Deferred - (3,997) 3,288
Total income tax benefit
(provision) $ - $(2,446) $3,252
A reconciliation of the income tax benefit (provision) at
the statutory Federal income tax rate to the Company's
effective tax rate is as follows:
1995 1994 1993
Federal income tax at statutory
rate $11,127 $13,370 $1,010
AMT in excess of regular tax - - (36)
AMT loss carryback - 1,551 -
Change in valuation allowance (10,074) (16,075) 3,288
Other - net (1,053) (1,292) (1,010)
Total income tax benefit
(provision) $ - $(2,446) $3,252
During the year ended December 30, 1995, the Company
received an income tax refund amounting to $1,339, due to
the recognition of a tax benefit from its year ended
December 31, 1994 for net alternative minimum tax operating
losses that were carried back to prior tax years.
6. Income Taxes, continued:
The components of deferred tax assets and deferred tax
liabilities are as follows:
December 30, December 31,
1995 1994
Current assets (liabilities):
Allowance for uncollectible
receivables $ 1,090 $ 942
Termination of Borden supply
agreement - 789
Operational restructuring reserve 1,282 5,918
Other, net 406 (800)
Net current deferred tax assets 2,778 6,849
Noncurrent assets (liabilities):
Property, plant and equipment 251 (4,577)
Targeted job credit carryforward 815 815
Self-insurance reserves 2,150 3,183
Operational restructuring reserve 969 1,745
Net operating loss carryforwards 17,001 7,048
AMT credit carryforwards 630 507
Capital leases 1,111 600
Other, net 444 (95)
Net noncurrent deferred tax
assets 23,371 9,226
Total net deferred assets 26,149 16,075
Valuation allowance (26,149) (16,075)
Net deferred tax assets $ - $ -
Due to the uncertainty of realizing the future tax benefits,
the full valuation allowance established in fiscal 1994 was
increased to entirely offset the net deferred tax assets as
of December 30, 1995. At December 30, 1995, the Company had
the following operating loss and tax credit carryforwards
available for tax purposes:
6. Income Taxes, continued:
Expiration
Amount Dates
Federal regular tax net
operating loss carryforwards $48,575 2002-2010
Federal AMT credit carryforwards
against regular tax $ 630 indefinite
Federal tax credit carryforwards
(Targeted Jobs Credit) $ 815 2003-2009
The Internal Revenue Service ("IRS") concluded a field audit
of the Company's income tax returns for the fiscal years
1990, 1991 and 1992. On January 31, 1994, the IRS issued a
Revenue Agent's Report for those fiscal years proposing
adjustments that would result in additional taxes of $1,589
(this amount is net of any available operating loss
carryforwards which would be eliminated under the proposed
adjustment). The Company filed its protest with the IRS
Appeals Office on June 14, 1994. On June 28, 1995, the
Company reached a tentative agreement with the IRS appeals
office to settle the above claim. Management has analyzed
the proposed settlement and has provided for amounts which
it believes are adequate.
7. Incentive Compensation Plan:
The Company has bonus arrangements for store management and
other key management personnel. During 1995, 1994, and
1993, approximately $934, $1,939, and $2,900, respectively,
was charged to costs and expenses for such bonuses.
8. Retirement Plans:
Effective January 1, 1988, the Company adopted a non-
contributory, defined benefit retirement plan for all
executive and administrative personnel. Benefits are based
on length of service and career average pay with the
Company. The Company's funding policy is to contribute an
amount equal to or greater than the minimum funding
requirement of the Employee Retirement Income Security Act
of 1974, but not in excess of the maximum deductible limit.
(Assets were held in investment mutual funds during 1995
and 1994.)
In accordance with the provisions of Statement of Financial
Accounting Standards No. 87, "Employers' Accounting for
Pensions", the Company recorded an additional minimum
liability at December 30, 1995 and January 1, 1994
representing the excess of the accumulated benefit
obligation over the fair value of plan assets and accrued
pension liability. The liabilities have been offset by
intangible assets to the extent of previously unrecognized
prior service cost. The accumulated benefit obligation for
December 30, 1995 was determined using a 7.25% discount
rate; if the discount rate used had been at least 7.35%, the
additional minimum liability would not have been recorded.
Net pension cost consists of the following:
1995 1994 1993
Service cost $ 517 $709 $663
Interest cost 465 366 292
Loss (return) on assets (1,140) 63 (319)
Net amortization and deferral 690 (419) 43
Curtailment charge (37) - -
Net periodic pension cost $ 495 $719 $680
The funded status of the plan and the amounts recognized in
the Company's balance sheet at December 30, 1995 and
December 31, 1994 consist of the following:
1995 1994
Actuarial present value of benefit
obligations:
Vested benefits $(6,928) $(4,499)
Non-vested benefits (88) (151)
Accumulated benefit
obligations $(7,016) $(4,650)
8. Retirement Plans, continued:
1995 1994
Projected benefit obligations $(7,693) $(5,441)
Plan assets at fair value 6,902 4,960
Projected benefit obligations in
excess of plan assets (791) (481)
Unrecognized prior service cost (95) (144)
Unrecognized net loss from past
experience different from that
assumed and changes in actuarial
assumptions 2,096 1,340
Adjustment to recognize minimum
liability (1,327) -
Net pension asset (liability)
recognized in statement of
financial position $ (117) $ 715
Actuarial assumptions used to determine year-end plan status
were as follows:
1995 1994
Assumed rate for determination of net
periodic pension cost 9.0% 7.5%
Assumed discount rate to determine
the year-end plan disclosures 7.25% 9.0%
Assumed long-term rate of return
on plan assets 9.0% 9.0%
Assumed range of rates of future
compensation increases
(graded by age) for net
periodic pension cost 5.0% to 7.0% 3.5% to 5.5%
Assumed range of rates of future
compensation increases
(graded by age) for year-end
plan disclosures 3.5% to 5.5% 5.0% to 7.0%
The prior service cost is being amortized on a straight line
basis over approximately 13 years.
8. Retirement Plans, continued:
As a result of the sale of the Company's warehouse and
distribution center and 29 stores to AWG, as well as the
closure of 14 under-performing stores during 1995 (See Note
14), a significant number of employees were terminated that
participated in the Company's non-contributory defined
benefit retirement plan. The effect of the curtailment
resulting from the terminations of such employees was not
material to the Statement of Operations for the year ended
December 30, 1995.
The Company also contributes to various union-sponsored,
multi-employer defined benefit plans in accordance with the
collective bargaining agreements. The Company could, under
certain circumstances, be liable for the Company's unfunded
vested benefits or other costs of these multi-employer
plans. The allocation to participating employers of the
actuarial present value of vested and nonvested accumulated
benefits in multi-employer plans as well as net assets
available for benefits is not available and, accordingly, is
not presented. The costs of these plans for 1995, 1994, and
1993 were $2,110, $3,309, and $3,565, respectively.
Effective January 1, 1988, the Company adopted a defined
contribution plan covering substantially all non-
union employees of the Company. Prior to 1994, the Company
contributed a matching 50% for each one dollar the
participants contribute in pre-tax matched contributions.
Participants may contribute from 1% to 6% of their pre-tax
compensation which was matched by the Company. Participants
may make additional contributions of 1% to 6% of their
pre-tax compensation, but such contributions were not
matched by the Company. Effective January 2, 1994, the plan
was amended to allow a discretionary matching contribution
formula based on the Company's operating results. The cost
of this plan for 1995, 1994, and 1993, was $0, $0, and $425,
respectively.
9. Leases:
The Company leases substantially all of its retail store
properties under noncancellable agreements, the majority of
which range from 15 to 25 years. These leases, which
include both capital leases and operating leases, generally
are subject to six five-year renewal options. Most leases
also require the payment of taxes, insurance and maintenance
costs and many of the leases covering retail store
properties provide for additional contingent rentals based
on sales. Leased assets under capital leases consists of
the following:
December 30, December31,
1995 1994
Buildings $16,670 $21,616
Equipment 7,014 8,340
Beneficial interest
in capital leases 5,378 16,059
29,062 46,015
Accumulated amortization 17,851 21,010
Net leased assets $11,211 $25,005
Future minimum lease payments under capital leases and
noncancellable operating leases as of December 30, 1995 are
as follows:
9. Leases, continued:
Capital Operating
Fiscal Year Leases Leases
1996 $ 4,035 $ 8,849
1997 2,754 8,239
1998 2,134 5,779
1999 1,707 5,448
2000 982 4,899
Thereafter 9,350 38,891
Total minimum obligations 20,962 $72,105
Less estimated interest 9,190
Present value of net minimum
obligations 11,772
Less current portion 2,746
Long-term obligations under
capital leases $ 9,026
Rent expense is as follows:
1995 1994 1993
Minimum rents $10,264 $12,560 $12,642
Contingent rents 107 178 214
$10,371 $12,738 $12,856
10. Common Stock and Warrants:
Holding has agreed to repurchase shares of stock held by
management investors under certain conditions (as defined),
such as death, retirement, or permanent disability.
Pursuant to requirements of the Securities and Exchange
Commission, the shares of Class A common stock held by
management investors have been presented as redeemable
common stock and excluded from stockholders' equity.
The changes in the number of shares outstanding and the
value of the redeemable common stock is as follows:
10. Common Stock and Warrants, continued:
Shares Amount
Balance, January 2, 1993 4,104,211 $ 9,470
Repurchase of common stock (134,000) (323)
Increase in management
stock loans - (294)
Balance, January 1, 1994 3,970,211 8,853
Repurchase of common stock (106,000) (255)
Reduction in redemption value - (7,284)
Increase in management stock
loans - (79)
Balance, December 31, 1994 3,864,211 1,235
Repurchase of common stock (2,143,493) (1,071)
Reduction in redemption value - (940)
Decrease in management stock loans - 793
Balance, December 30, 1995 1,720,718 $ 17
The shares of redeemable common stock are reported on the
balance sheets at redemption value (estimated fair value).
The reduction in redemption value has been reflected as an
increase in additional paid-in capital.
The shares of treasury stock are reported on the balance
sheets at cost.
Holding also has 40,500,000 shares of Class B nonvoting
common stock authorized at December 30, 1995 and December
31, 1994 with a $.01 par value. No shares were issued or
outstanding at either December 30, 1995 or December 31,
1994.
In 1995, Holding repurchased 2,143,493 shares of its Common
Stock from certain officers and employees of the Company at
a cash price of $0.50 per share plus, at the election of
seller, warrants up to the number of shares purchased. As a
result of the purchase, Holding issued 2,105,493 warrants to
such officers and employees of the Company. The warrant and
the shares issuable upon exercise, are subject to certain
restrictions on transferability, including certain first
refusal rights, as set forth in the warrant.
10. Common Stock and Warrants, continued:
The holders of the warrants may, at any time prior to the
expiration date (defined as five years after issuance date),
purchase from Holding the amount of Common Stock indicated
on such warrant, in whole or in part, at a purchase price of
$0.50 per share.
11. Related Party Transactions:
Clayton, Dubilier & Rice, Inc., a private investment firm of
which four directors of the Company are employees, received
$125 in 1995, $150 in 1994, and $200 in 1993, for financial
advisory and consulting services.
The Company made loans during 1995 and 1994 to certain
members of management and key employees for principal
payments on their loans made by the credit union in
connection with their purchase of common stock. The loans
bear interest at a variable rate equal to the Company's
prime lending rate plus 1.0%. Loans outstanding at December
30, 1995 and December 31, 1994 were $82 and $794,
respectively. The outstanding loans mature in July 1996.
12. Commitments and Contingencies:
Effective January 1, 1989, the Company implemented stock
appreciation rights ("SAR's") plans for certain of its
hourly union and non-union employees as well as salaried
employees. Participants in the plans are granted at
specified times "appreciation units" which, upon the
occurrence of certain triggering events, entitle them to
receive cash payments equal to the increase in value of a
share of the common stock over $1.00 from the date of the
plan's establishment. The Company expects the SAR's to be
triggered as a result of the restructuring, discussed in
Note 14, at no liability to the Company due to the continued
decline in per share value below $1.00.
Effective October 1, 1991, the Company entered into an
outsourcing agreement whereby an outside party provides
virtually all of the Company's EDP requirements and assumed
substantially all of the Company's existing hardware
and software leases and related maintenance agreements. The
ten year agreement calls for minimum annual service charges,
increasing over its term, as well as other variable charges.
The Company terminated the outsourcing agreement as of March
31, 1996. Pursuant to the outsourcing agreement, there is
a
12. Commitments and Contingencies, continued:
$3.0 million charge for the termination, of which AWG is
responsible for 52%. The Company has provided for amounts
in the financial statements that management believes to be
reasonable and adequate.
The Company has entered into employment contracts with
certain key executives providing for the payment of minimum
salary and bonus amounts in addition to certain other
benefits in the event of termination of the executives or
change of control of the Company.
The Company is also a party to various lawsuits arising in
the normal course of business. Management believes that the
ultimate outcome of these matters will not have a material
effect on the Company's consolidated financial position,
results of operations and cash flows.
The Company has outstanding at December 30, 1995, $12,000 in
letters of credit which are not reflected in the
accompanying financial statements. The letters of credit
are issued under the Revolving Credit Agreement and the
Company paid associated fees of $335 and $195 in 1995 and
1994, respectively.
13. Sale of Plants:
In November 1993 the Company entered into an asset purchase
agreement with Borden, Inc. ("Borden") whereby certain of
the Company's milk and ice cream processing equipment and
certain other assets and inventory relating to its milk and
ice cream plants was sold. In connection with the sale, the
Company entered into a seven-year agreement with Borden
under which Borden would supply all of the Company's
requirements for most of its dairy, juice and ice cream
products and the Company agreed to purchase minimum volumes
of products. The Company recognized a gain on the sale of
personal property in the amount of $2,618. A $4,000 payment
received in connection with the supply agreement was
deferred and was to be recognized as earned over the term of
the supply agreement.
In December 1994, the Company entered into a settlement
agreement with Borden whereby the seven-year supply
agreement entered into in November 1993 was terminated and a
temporary supply agreement for a maximum period of 120 days
was entered into. As part of the settlement agreement, the
Company repaid $1,650 plus interest in December 1994 and
$1,650 plus interest in April 1995. Upon final
settlement payment, the Company
13. Sale of Plants, continued:
recognized an additional gain of approximately $700 in 1995.
The Company has made arrangements with another dairy
supplier to begin supplying its dairy and ice cream
requirements in April 1995.
14. Restructuring:
In the fourth quarter of 1995, the Company refocused its
restructuring plan, which commenced in 1994. The intent of
the revised restructuring program and new business plan is
to further reduce the Company's indebtedness in respect of
its Senior Notes and its Revolving Credit Agreement,
restructure certain of its lease obligations and negotiate
modifications to certain of its union agreements in an
effort to reduce costs and improve profitability and cash
flow.
In connection with the closing of stores following the sale
of 29 stores and the warehouse facility to AWG, the Company
recognized charges aggregating $12,639 in 1995 and $23,205
in 1994. The major components of the restructuring charges
in 1995 are summarized as follows:
Write-off of capitalized software costs
replaced as part of operational
restructuring initiatives $ 7,971
Write-off of unamortized balance of the
excess of purchase price over fair
value of net assets acquired due to
uncertainty of recovery from future
operating cash flows 2,360
Expense associated with the termination
of an EDP outsourcing agreement 1,410
Expenses associated with remaining store
closings, primarily occupancy costs from
closing date to lease termination or
revised sublease date 898
Total restructuring charges $12,639
The asset write-offs described above, aggregating $10,331,
have been reflected in their respective balance sheet
account classifications, the EDP expense is included in
Other current liabilities and the expenses associated
with the remaining
14. Restructuring, continued:
store closings are included in the Noncurrent restructuring
reserve as of December 30, 1995. In accordance with a
strategic plan approved by the Board of Directors in
December 1994, the Company entered into an agreement with
Associated Wholesale Grocers, Inc. ("AWG") on February 6,
1995, pursuant to which the Company sold 29 of its stores
and its warehouse and distribution center to AWG on April
21, 1995. In connection with this strategic plan, the
Company closed fourteen under-performing stores during 1995
and expects to close an additional store and sell one store
by the second quarter of 1996. During fiscal 1995, the
Company incurred expenses associated with the operational
restructuring as follows:
<TABLE>
<CAPTION>
<S>
Operational (Payments) proceeds Operational
restructuring applied against restructuring
reserve at restructuring reserve at
December 31, 1994 reserve in 1995 December 30, 1995
<C> <C> <C>
Expenses associated with the
planned store closings,
primarily occupancy costs
from closing date to lease
termination or sublease date $ 8,319 $ (3,459) (a) $ 4,860
Expenses associated with the AWG
transaction, primarily service
and equipment contract
cancellation fees 5,649 (5,591) 58
Estimated severance costs
associated with the AWG
transaction 5,624 (4,697) 927
Legal and consulting fees
associated with the AWG
transaction 4,905 (4,880) 25
Net gain on sale of
property, plant and
equipment to AWG (19,492) 19,492 -
Operational restructuring
reserve $ 5,005 $ 865 $ 5,870
</TABLE>
(a) Such amount is net of additional charges of $898 in 1995
14. Restructuring, continued:
The separately identifiable revenue and store
contribution to operating profit related to the stores
sold to AWG or closed during 1995 and expenses related
to the warehouse facility are as follows:
1995 1994 1993
Sales, net $91,462 $253,221 $262,460
Store contribution to
operating profit (loss)
before allocation of
administrative and
advertising expenses $ 2,494 $ 7,795 $ 9,854
Warehouse expenses $ 3,853 $ 12,455 $ 11,080
Under the AWG supply agreement, the ongoing costs of
warehousing are built into the cost of goods purchased
from AWG.
15. Subsequent Events:
On March 27, 1996, the Company entered into an
agreement in principle (the "Noteholder Agreement")
with members of an ad- hoc noteholders committee (the
"Committee") with respect to a financial restructuring
of the Company. The Committee has advised the Company
that it represents approximately 80% of the Company's
outstanding Senior Notes. The Noteholder Agreement
provides for the filing by the Company of a bankruptcy
petition and simultaneously the submission of a "pre-
arranged" plan of reorganization and disclosure
statement under Chapter 11 of the United States Federal
Bankruptcy Code. (the "Restructuring"), all of which
is expected to occur on or about May 13, 1996. If
approved by the United States Bankruptcy Court (the
"Bankruptcy Court"), the Company's creditors and labor
unions, the Restructuring will result in a reduction of
the Company's debt service obligations and labor costs
and a capital and cost structure that will allow the
Company to maintain and enhance the competitive
position of its business and operations.
15. Subsequent Events, continued:
Pursuant to the Noteholder Agreement, upon completion
of the Restructuring, the $95 million of Senior Notes
currently outstanding (together with accrued interest)
will be canceled and the noteholders will receive $60
million in aggregate principal amount of new senior
subordinated notes, a majority of the new equity of the
reorganized Company and approximately $1.5 million in
cash. The new senior subordinated notes will mature in
2003, bear interest semi-annually at a rate of 10% per
annum and will not be secured.
In March 1996, the Company also reached agreements with
representatives of its unionized workforce regarding
certain modifications to the Company's existing
collective bargaining agreements. These modifications
will provide for, among other things, wage and benefit
concessions, the severance of certain employees and the
issuance and purchase of new equity of the reorganized
Company to a trust acting on behalf of the unionized
employees. The modifications to the collective
bargaining agreements have been ratified by the union
membership and are conditioned on, and will be
effective upon, completion of the Restructuring.
In order to facilitate the Restructuring, as provided
under the Noteholder Agreement the Company intends to
file papers with the Bankruptcy Court seeking approval
of a debtor-in-possession financing facility. The
Company anticipates that such facility will provide it
with the financing necessary to maintain its normal
business operations during its period of operations
under supervision of the Bankruptcy Court, including
the payment of postpetition claims of trade creditors
and salaries, wages and benefits of employees. The
Company anticipates that the Restructuring will be
completed by the third quarter of 1996.
EXHIBIT INDEX
Exhibit No. Description
2a Disclosure Statement for Joint Plan of
Reorganization of Homeland Stores, Inc. and
Homeland Holding Corporation dated as of May 13,1996
(Incorporated by reference to Exhibit 2a to Form 8-K
dated May 31, 1996)
2b First Amended Joint Plan of Reorganization,
as modified, of Homeland Holding
Corporation ("Holding") and Homeland
Stores, Inc. ("Homeland"), dated July 19, 1996
(Incorporated by reference to Exhibit 2b to Form
10-Q for the quarterly period ended June 15,1996).
3a* Restated Certificate of Incorporation of
Holding, dated August 2, 1996.
3b By-laws of Holding, as amended and restated
on November 14, 1989 and further amended
on September 23, 1992.
(Incorporated by reference to Exhibit 3b to Form 10-Q for
quarterly period ended June 19, 1993)
3c* Restated Certificate of Incorporation of
Homeland, dated August 2, 1996.
3d By-laws of Homeland, as amended and restated
on November 14, 1989 and further
amended on September 23, 1992.
(Incorporated by reference to Exhibit 3d to Form 10-Q for
quarterly period ended June 19, 1993)
4a Indenture, dated as of November 24, 1987,
among Homeland, The Connecticut National
Bank ("CNB"), as Trustee, and Holding, as
Guarantor. (Incorporated by reference to Exhibit 4a to
Form S-1 Registration Statement, Registration No. 33-22829)
4a.1 First Supplement to Indenture, dated as of
August 15, 1988, among Homeland, CNB and
Holding. (Incorporated by reference to Exhibit 4a.1
to Form S-1 Registration Statement, Registration
No. 33-22829)
4b Purchase Agreement, dated November 24, 1987,
among Homeland, Holding and initial
purchasers of Subordinated Notes. (Incorporated by
reference to Exhibit 4b to Form S-1 Registration Statement,
Registration No. 33-22829)
4c Form of Registration Rights Agreement, dated
as of November 24, 1987, among Homeland,
Holding and initial purchasers of Subordinated Notes.
(Incorporated by reference to Exhibit 4c to Form S-1
Registration Statement, Registration No. 33-22829)
4d Indenture, dated as of March 4, 1992, among
Homeland, United States Trust Company of New
York ("U.S.Trust"), as Trustee, and Holding, as
Guarantor. (Incorporated by reference to Exhibit 4d to
Form 10-K for fiscal year ended December 28, 1991)
4d.1 First Supplement to Indenture, dated as of
June 17, 1992, among Homeland, Holding
and U.S. Trust. (Incorporated by reference to Exhibit
4d.1 to Form S-1 Registration Statement, Registration No.
33-48862)
4d.3 Partial Release of Collateral, dated as of
May 22, 1992, by U.S. Trust, as Collateral
Trustee, in favor of Homeland. (Incorporated by
reference to Exhibit 4d.3 to Form S-1 Registration
Statement, Registration No. 33-48862)
4e Form of Purchase Agreement, dated as of March
4, 1992, among Homeland and initial
purchasers of Senior Notes. (Incorporated by
reference to Exhibit 4e to Form 10-K for fiscal year ended
December 28, 1991)
4f Form of Registration Rights Agreement, dated
as of March 4, 1992, among Homeland and the
initial purchasers of Senior Notes. (Incorporated by
reference to Exhibit 4f to Form 10-K for fiscal year ended
December 28, 1991)
4g Indenture, dated as of August 2, 1996, among
Homeland, Fleet National Bank, as Trustee,
and Holding, as Guarantor. (Incorporated by reference
to Exhibit T3C to Form T-3 of Homeland, SEC File
No. 22-22239)
4h* Warrant Agreement, dated as of August 2,
1996, between Holding and Liberty Bank and Trust
Company of Oklahoma City, N.A., as Warrant Agent.
4i* Equity Registration Rights Agreement, dated
as of August 2, 1996, by Holding for the
benefit of holders of Old Common Stock.
4j* Noteholder Registration Rights Agreement,
dated as of August 2, 1996, by Holding for the
benefit of holders of Old Notes.
10a Asset Purchase Agreement, dated as of
September 15, 1987. (Incorporated by
reference to Exhibit 10a to Form S-1 Registration Statement,
Registration No. 33-22829)
10b First Amendment to Asset Purchase Agreement,
dated November 24, 1987. (Incorporated by
reference to Exhibit 10b to Form S-1 Registration
Statement, Registration No. 33-22829)
10c Stock Subscription Agreement, dated as of
November 24, 1987, between Holding and The
Clayton & Dubilier Private Equity Fund III Limited
Partnership. (Incorporated by reference to Exhibit
10c to Form S-1 Registration Statement, Registration No.
33-22829)
10e Purchase Agreement for Safeway Brand Products,
dated as of November 24, 1987, between Homeland and
Safeway. (Incorporated by reference to Exhibit 10e
to Form S-1 Registration Statement, Registration No.
33-22829)
10f Manufacturing and Supply Agreement, dated as
of November 24, 1987, between Homeland and
Safeway. (Incorporated by reference to Exhibit 10f
to Form S-1 Registration Statement, Registration No.
33-22829)
10g Form of Common Stock Purchase Agreement,
dated November 24, 1987, between Holding and
certain institutional investors. (Incorporated by
reference to Exhibit 10g to Form S-1 Registration
Statement, Registration No. 33-22829)
10h 1 Form of Management Stock Subscription
Agreement, dated as of October 20, 1988,
between Holding and the purchasers named therein, involving
purchase of Holding common stock for cash. (Incorporated by
reference to Form 10-K for fiscal year ended
December 31, 1988)
10h.1 1 Form of Management Stock Subscription
Agreement, dated as of October 20, 1988,
between Holding and the purchasers named therein, involving
purchase of Holding common stock using funds held under
purchasers' individual retirement
accounts. (Incorporated by reference to Form 10-K
for fiscal year ended December 31, 1988)
10h.2 1 Form of Management Stock Subscription
Agreement, dated as of November 29, 1989,
between Holding and the purchasers named therein,
involving purchase of Holding common stock for cash.
(Incorporated by reference to Form 10-K for
fiscal year ended December 30, 1989)
10h.3 1 Form of Management Stock Subscription
Agreement, dated as of November 29, 1989,
between Holding and the purchasers named therein,
involving purchase of Holding common stock using funds
held under purchasers' individual retirement accounts.
(Incorporated by reference to Form 10-K for fiscal year
ended December 30, 1989)
10h.4 1 Form of Management Stock Subscription
Agreement dated as of August 14, 1990, between
Holding and the purchasers named therein, involving
purchase of Holding common stock for cash. (Incorporated
herein by reference to Exhibit 10h.4 to Form 10-K
for fiscal year ended December 29, 1990)
10h.5 1 Form of Management Stock Subscription Agreement dated as
of August 14, 1990, between Holding and the
purchasers named therein, involving
purchase of Holding common stock using funds held under
purchasers' individual retirement
accounts. (Incorporated herein by reference to
Exhibit 10h.5 to Form 10-K for fiscal year ended December
29, 1990)
10i.1 Form of Registration and Participation
Agreement, dated as of November 24, 1987, among
Holding, The Clayton & Dubilier Private Equity Fund III
Limited Partnership, and initial purchasers of Common Stock.
(Incorporated by reference to Exhibit 10i to Form S-1
Registration Statement, Registration No. 33-22829)
10i.2 1990 Registration and Participation
Agreement dated as of August 13, 1990,
among Homeland Holding Corporation, Clayton & Dubilier
Private Equity Fund IV Limited Partnership and certain
stockholders of Homeland Holding Corporation.
(Incorporated by reference to Exhibit 10y to Form 10-Q for
quarterly period ended September 8, 1990)
10i.3 Form of Store Managers Stock Purchase
Agreement. (Incorporated by reference to
Exhibit 10z to Form 10-Q for quarterly period ended
September 8, 1990)
10j Indenture, dated as of November 24, 1987.
(Incorporated by reference to Exhibit 10j to
Form S-1 Registration Statement, Registration No. 33-22829)
10j.1 First Supplement to Indenture, dated as
of August 15, 1988. (Incorporated by
reference to Exhibit 10j.1 to Form S-1 Registration
Statement, Registration No. 33-22829)
10k Form of Purchase Agreement, dated November
24, 1987, among Homeland, Holding and
initial purchasers of Subordinated Notes (Filed as
Exhibit 4b). (Incorporated by reference to Exhibit 10k
to Form S-1 Registration Statement, Registration No.
33-22829)
10l Form of Registration Rights Agreement, dated
as of November 24, 1987, among Homeland,
Holding and initial purchasers of Subordinated Notes.
(Incorporated by reference to Exhibit 10l to Form S-1
Registration Statement, Registration No.
33-22829)
10q 1 Homeland Profit Plus Plan, effective as
of January 1, 1988. (Incorporated by
reference to Exhibit 10q to Form S-1 Registration Statement,
Registration No. 33-22829)
10q.1 1 Homeland Profit Plus Plan, effective as
of January 1, 1989 (Incorporated by reference to
Exhibit 10q.1 to Form 10-K for the fiscal year ended
December 29, 1990)
10r Homeland Profit Plus Trust, dated March 8,
1988, between Homeland and the individuals
named therein, as Trustees. (Incorporated by reference to
Exhibit 10r to Form S-1 Registration Statement,
Registration No. 33-22829)
10r.1 Homeland Profit Plus Trust, dated
January 1, 1989, between Homeland and Bank of
Oklahoma, N.A., as Trustee (Incorporated by reference to
Exhibit 10r.1 to Form 10-K for the fiscal year ended
December 29, 1990)
10s 1 1988 Homeland Management Incentive Plan.
(Incorporated by reference to Exhibit 10s to
Form S-1 Registration Statement, Registration No.
33-22829)
10s.1 1 1989 Homeland Management Incentive Plan.
(Incorporated by reference to Exhibit 10s.1
to Form 10-K for fiscal year ended December 31, 1988)
10s.2 1 1990 Homeland Management Incentive Plan.
(Incorporated by reference to Exhibit 10s.2
to Form S-1 Registration Statement, Registration No.
33-48862)
10s.3 1 1991 Homeland Management Incentive Plan.
(Incorporated by reference to Exhibit 10s.3
to Form S-1 Registration Statement, Registration No.
33-48862)
10s.4 1 1992 Homeland Management Incentive Plan.
(Incorporated by reference to Exhibit 10s.4
to Form S-1 Registration Statement, Registration No.
33-48862)
10s.5 1 1993 Homeland Management Incentive Plan.
(Incorporated by reference to Exhibit
10s.5 to Form 10-K for fiscal year ended January 1,
1994)
10s.6 1 1994 Homeland Management Incentive Plan.
(Incorporated by reference to Exhibit 10.s6
to Form 10-K for fiscal year ended December 31, 1994)
10s.7 1 1995 Homeland Management Incentive Plan.
(Incorporated by reference to Exhibit 10s.7
to Form 10-K for fiscal year ended December 30, 1995)
10t 1 Form of Homeland Employees' Retirement
Plan, effective as of January 1, 1988.
(Incorporated by reference to Exhibit 10t to Form S-1
Registration Statement, Registration No.
33-22829)
10t.1 1 Amendment No. 1 to Homeland Employees'
Retirement Plan effective January 1,
1989. (Incorporated herein by reference to Form 10-K
for fiscal year ended December 30, 1989)
10t.2 1 Amendment No. 2 to Homeland Employees'
Retirement Plan effective January 1,
1989. (Incorporated herein by reference to Form 10-K for
fiscal year ended December 30, 1989)
10t.3 1 Third Amendment to Homeland Employees'
Retirement Plan effective as of January 1,
1988. (Incorporated herein by reference to Exhibit 10t.3 to
Form 10-K for fiscal year ended December 29, 1990)
10t.4 1 Fourth Amendment to Homeland Employees'
Retirement Plan effective as of January 1, 1989.
(Incorporated herein by reference to Exhibit 10t.4 to
Form 10-K for the fiscal year ended December 28, 1991)
10t.5 1 Fifth Amendment to Homeland Employees'
Retirement Plan effective as of January 1, 1989
(Incorporated herein by reference to Form 10-Q for the
quarterly period ended September 9, 1995)
10u 1 Employment Agreement, dated as of
January 11, 1988, between Homeland and Jack
M. Lotker. (Incorporated by reference to Exhibit 10u to
Form S-1 Registration Statement, Registration No. 33-22829)
10v UFCW Stock Appreciation Rights Plan of
Homeland. (Incorporated by reference to Exhibit
10v to Form 10-Q for quarterly period ended March 25, 1989)
10v.1 Stock Appreciation Rights Plan of
Homeland for Non-Union Employees.
(Incorporated by reference to Exhibit 10v.1 to Form 10-Q for
quarterly period ended March 25, 1989)
10v.2 Teamsters Stock Appreciation Rights Plan
of Homeland. (Incorporated by reference to Exhibit
10v.2 to Form S-1 Registration Statement, Registration
No. 33-48862)
10v.3 BC&T Stock Appreciation Rights Plan of
Homeland. (Incorporated by reference to Exhibit
10v.3 to Form S-1 Registration Statement, Registration
No. 33-48862)
10w 1 Employment Agreement, dated as of
September 26, 1989, between Homeland and
Max E. Raydon. (Incorporated by reference to Exhibit 10w
to Form 10-Q for quarterly period ended September 9, 1989)
10x Indemnification Agreement, dated as of August
14, 1990, among Holding, Homeland, Clayton &
Dubilier, Inc. and The Clayton & Dubilier Private
Equity Fund III Limited Partnership. (Incorporated by
reference to Exhibit 10x to Form 10-Q for quarterly
period ended September 8, 1990)
10y Indenture, dated as of March 4, 1992, among
Homeland, United States Trust Company of
New York, as Trustee, ("U.S. Trust") and
Holding, as Guarantor. (Filed as Exhibit 4d)
10y.1 First Supplement to Indenture, dated as
of June 17, 1992, among Homeland, Holding
and U.S. Trust. (Filed as Exhibit 4d.1)
10y.2 Second Supplement to Indenture, dated as
of April 21, 1995, among Homeland,
Holding and United States Trust Company of New York, as
Trustee. (Incorporated by reference to Exhibit 10y.2 to
Form 10-Q for the quarterly period ended March 25, 1995)
10y.3 Amendment No. 2 to the Company Security
Agreement, dated as of April 21, 1995, between
Homeland and United States Trust Company of New
York as Collateral Trustee. (Incorporated by reference to
Exhibit 10y.3 to Form 10-Q for the quarterly
period ended March 25, 1995)
10y.4 Amendment No. 1 to the Intercreditor
Agreement, dated as of April 21, 1995, among
National Bank of Canada, United States Trust Company of
New York and such other persons as may become parties to the
Intercreditor Agreement as provided therein.
(Incorporated by reference to Exhibit 10y.4 to Form 10-Q
for the quarterly period ended March 25, 1995)
10y.5 Amendment No. 1 to the Mortgage Security
Agreement and Financing Statement, dated as
of April 21, 1995, from Homeland to United States
Trust Company of New York as Collateral Trustee.
(Incorporated by reference to Exhibit 10y.5 to Form 10-Q
for the quarterly period ended March 25, 1995)
10z Form of Purchase Agreement, dated as of March
4, 1992, among Homeland, Holding and the
initial purchasers of Senior Notes. (Filed as
Exhibit 4e)
10aa Form of Registration Rights Agreement, dated
as of March 4, 1992, among Homeland and the
initial purchasers of Senior Notes. (Filed as Exhibit 4f)
10bb Form of Parent Pledge Agreement, dated as of
March 4, 1992, made by Holding in favor of U.S.
Trust, as collateral trustee for the holders of the
Senior Notes. (Incorporated by reference to Exhibit 10bb
to Form 10-K for the fiscal year ended December 28, 1991)
10cc Revolving Credit Agreement, dated as of March
4, 1992, among Homeland, Holding, Union Bank
of Switzerland, New York Branch, as Agent and
lender, and any other lenders and other financial
institutions thereafter parties thereto.
(Incorporated by reference to Exhibit 10cc to Form 10-K
for the fiscal year ended December 28, 1991)
10cc.1 Letter Waiver (Truck Sale), dated as of
May 19, 1992, among Homeland, Holding, UBS,
as agent, and the other lenders and financial institutions
parties to the Revolving Credit Agreement. (Incorporated by
reference to Exhibit 10cc.1 to Form S-1
Registration Statement, Registration No. 33-48862)
10cc.2 Form of Amendment Agreement, dated as of
June 15, 1992, among Homeland, Holding,
UBS, as agent, and the other lenders and financial
institutions parties to the Revolving Credit Agreement.
(Incorporated by reference to Exhibit 10cc.2 to
Form S-1 Registration Statement,
Registration No. 33-48862)
10cc.3 Form of Second Amendment Agreement,
dated as of September 23, 1992, among Homeland,
Holding, UBS, as agent, and the other lenders and
financial institutions parties to the Revolving Credit
Agreement. (Incorporated by reference to Exhibit 10cc.3
to Form S-1 Registration Statement, Registration No.
33-48862)
10cc.4 Third Amendment Agreement, dated as of
February 10, 1993, among Homeland,
Holding, UBS, as agent, and the other lenders and financial
institutions parties to the Revolving Credit Agreement.
10cc.5 Fourth Amendment Agreement, dated as of
June 8, 1993, among Homeland, Holding,
UBS, as agent, and the other lenders and financial
institutions parties to the Revolving Credit Agreement.
(Incorporated by reference to Exhibit 10cc.5 to
Form 10-Q for the quarterly period ended June 19, 1993)
10cc.6 Fifth Waiver and Amendment Agreement,
dated as of April 14, 1994, among Homeland,
Holding, UBS, as agent, and the other lenders and
financial institutions parties to the Revolving Credit
Agreement. (Incorporated by reference to Exhibit 10cc.6
to Form 10-K for the fiscal year ended January 1, 1994)
10cc.7 Sixth Waiver and Amendment Agreement,
dated as of February 7, 1995, among Homeland,
Holding, UBS, as agent, and the other lenders and
financial institutions parties to the Revolving Credit
Agreement. (Incorporated by reference to Exhibit 10cc.7
to Form 10-K for the fiscal year ended December 30, 1995)
10dd Agreement for Systems Operations Services,
effective as of October 1, 1991, between
Homeland and K-C Computer Services, Inc. (Incorporated
by reference to Exhibit 10dd to Form 10-K for the fiscal
year ended December 28, 1991)
10dd.1 Amendment No. 1 to Agreement for Systems
Operations Services, dated as of September
10, 1993, between Homeland and K-C Computer Services,
Inc. (Incorporated by reference to Exhibit 10dd.1 to Form
10-K for the fiscal year ended January 1, 1994)
10ee Form of Indemnification Agreement, dated as
of March 4, 1992, among Homeland, Holding,
Clayton & Dubilier, Inc., The Clayton & Dubilier
Private Partnership Equity Fund III Limited Partnership,
and The Clayton & Dubilier Private Equity Fund IV
Limited Partnership. (Incorporated by reference
to Exhibit 10ee to Form 10-K for the fiscal year ended
December 28, 1991)
10ff Product Transportation Agreement, dated as of
March 18, 1992, between Homeland and Drake
Refrigerated Lines, Inc. (Incorporated by reference to
Exhibit 10ff to Form 10-K for the fiscal year ended
December 28, 1991)
10gg Assignment and Pledge Agreement, dated March
5, 1992, made by Homeland in favor of
Manufacturers Hanover Trust Company.
(Incorporated by reference to Exhibit 10gg to Form
10-K for the fiscal year ended December 28, 1991)
10hh Transportation Closure Agreement Summary,
dated May 28, 1992, between Homeland and the
International Brotherhood of Teamsters, Chauffeurs,
Warehousemen and Helpers of America. (Incorporated by
reference to Exhibit 10hh to Form S-1 Registration
Statement, Registration No. 33-48862)
10ii 1 Description of terms of employment with
Mark S. Sellers. (Incorporated by reference
to Exhibit 10ii to Form 10-K for the fiscal year ended
January 2, 1993)
10jj 1 Settlement Agreement, dated as of July
26, 1993, between Homeland and Donald R.
Taylor. (Incorporated by reference to Exhibit 10jj
to Form 10-K for the fiscal year ended January 1, 1994)
10kk 1 Executive Officers Medical/Life
Insurance Benefit Plan effective as of December 9, 1993.
(Incorporated by reference to Exhibit 10kk to Form 10-K
for the fiscal year ended January 1, 1994)
10ll 1 Employment Agreement, dated as of August
11, 1994, between Homeland and Max E. Raydon.
(Incorporated by reference to Exhibit 10ll to Form 10-Q
for the quarterly period ended September 10, 1994)
10mm 1 Employment Agreement, dated as of August
11, 1994, between Homeland and Jack M. Lotker.
(Incorporated by reference to Exhibit 10mm to Form
10-Q for the quarterly period ended September 10, 1994)
10nn 1 Employment Agreement, dated as of August
11, 1994, between Homeland and Steve Mason.
(Incorporated by reference to Exhibit 10nn to Form 10-Q
for the quarterly period ended September 10, 1994)
10oo 1 Employment Agreement, dated as of August
11, 1994, between Homeland and Al Fideline.
(Incorporated by reference to Exhibit 10oo to Form 10-Q
for the quarterly period ended September 10, 1994)
10pp Letter of Intent, executed on November 30,
1994, between Homeland and Associated Wholesale
Grocers, Inc. (Incorporated by reference to Exhibit
10pp to Form 8-K dated November 29, 1994)
10pp.1 Asset Purchase Agreement, dated as of
February 6, 1995, between Homeland and
Associated Wholesale Grocers, Inc. (Incorporated by
reference to Exhibit 10pp.1 to Form 10-K for fiscal year
ended December 30, 1995)
10qq Solicitation Statement, dated April 4, 1995.
(Incorporated by reference to Exhibit 10qq to
Form 8-K dated April 4, 1995)
10rr 1 Employment Agreement, dated as of
November 22, 1994, between Homeland and
James A. Demme. (Incorporated by reference to Exhibit
10rr to Form 10-K for fiscal year ended December 30, 1995)
10rr.11 Amendment to Employment Agreement
between Homeland and James A. Demme, dated as
of April 29, 1996. (Incorporated by reference to Exhibit
10rr.1 to Form 10-K for fiscal year ended December 30, 1995)
10ss 1 Settlement Agreement, dated as of
December 31, 1994, between Homeland and Max E.
Raydon. (Incorporated by reference to Exhibit 10ss1 to
Form 10-K for fiscal year ended December 30, 1995)
10tt 1 Employment Agreement, dated as of
January 30, 1995, between Homeland and Mark
S. Sellers. (Incorporated by reference to Exhibit 10tt1
to Form 10-K for fiscal year ended December 30, 1995)
10uu Amended and Restated Revolving Credit
Agreement, dated as of April 21, 1995, among
Homeland, Holding, National Bank of Canada, as Agent and
lender, Heller Financial, Inc. and any other lenders
thereafter parties thereto. (Incorporated by
reference to Exhibit 10uu to Form 8-K dated
March 14, 1996)
10uu.1 Waiver Agreement, dated as of December
29, 1995 among Homeland, Holding, National Bank of
Canada and Heller Financial, Inc. (Incorporated
by reference to Exhibit 10uu.1 to Form 8-K dated March
14, 1996)
10uu.2 Second Waiver Agreement, dated as of
March 1, 1996 among Homeland, Holding,
National Bank of Canada and Heller Financial, Inc.
(Incorporated by reference to Exhibit 10uu.2 to Form 8-K
dated March 14, 1996)
10uu.3 Ratification and Amendment Agreement to
the $27,000,000 Amended and Restated Revolving
Credit Agreement, dated as of May 10, 1996, among
Homeland, Holding, National Bank of Canada, as Agent and
lender, Heller Financial, Inc. and any other lenders
thereafter parties thereto. (Incorporated
by reference to Exhibit 10uu.3 to Form 10-Q for quarterly
period ended March 23, 1996)
10vv 1 Employment Agreement dated as of July
10, 1995 and as amended September 26, 1995, between
Homeland and Larry W. Kordisch. (Incorporated by
reference to Exhibit 10pp to Form 10-K dated September 9,
1995)
10vv.1 Amendment to Employment Agreement
between Homeland and Larry W. Kordisch, dated
as of April 29, 1996. (Incorporated by reference to Exhibit
10vv.1 to Form 10-K for fiscal year ended December 30, 1995)
10ww 1 Employment Agreement dated as of April
29, 1996, between Homeland and Terry M.
Marczewski. (Incorporated by reference to Exhibit 10ww.1
to Form 10-K for fiscal year ended December 30, 1995)
10xx 1 Settlement Agreement, dated as of August
31, 1995, between Homeland and Jack M. Lotker.
(Incorporated by reference to Exhibit 10xx to Form 10-K
for fiscal year ended December 30, 1995)
10yy 1 Employment Agreement, dated as of April
29, 1996, between Homeland and Steve M. Mason.
(Incorporated by reference to Exhibit 10yy to Form
10-K for fiscal year ended December 30, 1995)
10zz 1 Employment Agreement, dated as of April
29, 1996, between Homeland and Alfred Fideline.
(Incorporated by reference to Exhibit 10zz to Form 10-K
for fiscal year ended December 30, 1995)
10aaa Indenture, dated as of August 2, 1996,
among Homeland, Fleet National Bank, as
Trustee, and Holding, as Guarantor. (Incorporated by
reference to Exhibit 10aaa to Form 8-K dated September
30, 1996)
10bbb * Loan Agreement, dated as of August 2,
1996, among IBJ Schroder Bank & Trust Company, Heller
Financial, Inc., National Bank of Canada,
Homeland and Holding.
22 Subsidiaries. (Incorporated by reference to
Exhibit 22 to Form S-1 Registration
Statement, Registration No. 33-22829)
27* Financial Data Schedule.
99a Press release issued by Homeland on November
30, 1994. (Incorporated by reference to
Exhibit 99a to Form 8-K dated November 29, 1994)
99b Unaudited Summary Financial Data for the 52
weeks ended December 31, 1994. (Incorporated
by reference to Exhibit 99b to Form 8-K dated
November 29, 1994)
99c Press Release issued by Homeland on April 13,
1995. (Incorporated by reference to Exhibit
99c to Form 8-K/A dated April 21, 1995)
99d Press Release issued by Homeland on April 24,
1995. (Incorporated by reference to Exhibit
99d to Form 8-K/A dated April 21, 1995)
99e Press Release issue by Homeland Stores, Inc.
on March 1, 1996. (Incorporated by
reference to Exhibit 99e to Form 8-K dated
March 14, 1996)
99f Press Release issued by Homeland Stores, Inc.
on March 27, 1996. (Incorporated
by reference to Exhibit 99f to Form 10-K for fiscal
year ended December 30, 1995)
99h Press Release issued by Homeland Stores, Inc.
on July 19, 1996. (Incorporated by reference to Exhibit
99h to Form 10-Q for quarterly period ended June 15, 1996)
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HOMELAND STORES, INC.
(FORMERLY SWO ACQUISITION CORPORATION)
TO THE SECRETARY OF STATE OF THE STATE OF DELAWARE:
The undersigned officers of Homeland Stores, Inc. ("Corporation")
do hereby certify as follows:
1. The Certificate of Incorporation of the Corporation was
originally filed with the Secretary of State of the State of Delaware
("Secretary of State") on September 15, 1987. At the time of its
original incorporation, the name of the Corporation was "SWO
Acquisition Corporation."
2. Such certificate of incorporation has been previously
amended and restated on October 21, 1987, November 6, 1987, and March 2,
1989. The name of the Corporation was changed to "Homeland Stores, Inc."
on March 2, 1989. Such certificate of incorporation, as previously
amended and restated, is referred to in this Amended and Restated
Certificate of Incorporation as the "Prior Certificate of Incorporation."
3. This Amended and Restated Certificate of Incorporation has
been amended for the purpose of modifying the capital structure of the
Corporation in accordance with the Plan of Reorganization of Homeland
Stores, Inc. and Homeland Holding Corporation confirmed by the United States
Bankruptcy Court for the District of Delaware ("Court") under Chapter 11 of
the United States Bankruptcy Code in the cases styled In re Homeland Stores,
Inc., Debtor, Case No. 96-747 (PJW), and In re Homeland Holding
Corporation, Debtor, Case No. 96-748 (PJW), on July 19, 1996. The cases
were filed with the Court on May 13, 1996.
4. This Amended and Restated Certificate of Incorporation has
been duly adopted in accordance with the provisions of Section 242, Section
245 and Section 303 of the General Corporation Law of the State of
Delaware.
5. The text of the Prior Certificate of Incorporation is
hereby further amended by this Amended and Restated Certificate of
Incorporation and is restated to read in its entirety as follows:
FIRST: The name of the Corporation is Homeland Stores, Inc.
SECOND: The Corporation's registered office in the State of
Delaware is at 15 North Street in the City of Dover, County of Kent.
The name of its registered agent at such address is National Corporate
Research, Ltd.
THIRD: The nature of the business of the Corporation and its
purpose is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of
Delaware.
FOURTH: The capital stock of the Corporation shall consist of a
single class and the total number of shares of stock which the
Corporation shall have authority to issue is 100 shares of Common Stock,
par value $0.01 per share.
Each share of Common Stock shall entitle the record holder
thereof to one vote on all matters submitted to the shareholders. The
Corporation shall not have the authority to issue non-voting equity
securities.
FIFTH: The following provisions are inserted for the management
of the business and for the conduct of the affairs of the Corporation and
for the purpose of creating, defining, limiting and regulating the
powers of the Corporation and its directors and stockholders:
(a) The number of directors of the Corporation shall be
fixed and may be altered from time to time in the manner provided in the
By-laws and vacancies in the Board of Directors and newly created
directorships resulting from any increase in the authorized number
of directors may be filled, and directors may be removed, as provided in
the By-laws.
(b) The election of directors may be conducted in any
manner approved by the shareholders at the time when the election is held
and need not be by ballot.
(c) All corporate powers and authority of the Corporation
(except as at the time otherwise provided by law, by this Amended
and Restated Certificate of Incorporation or by the By-laws) shall
be vested in and exercised by the Board of Directors.
(d) The Board of Directors shall have the power without the
assent or vote of the stockholders to adopt, amend, alter or repeal the
By-laws of the Corporation, except to the extent that the this Amended
and Restated Certificate of Incorporation or the By-laws otherwise provide.
(e) No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of his
or her fiduciary duty as a director, provided that nothing contained in
this Amended and Restated Certificate of Incorporation shall eliminate or
limit the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware or (iv) for any transaction from
which the director derived an improper personal benefit.
SIXTH: The Corporation reserves the right to amend or repeal any
provision contained in this Amended and Restated Certificate of Incorporation
in the manner now or hereafter prescribed by the laws of the State of
Delaware, and all rights herein conferred upon shareholders or
directors are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned officers have signed this
Amended and Restated Certificate of Incorporation this day of
, 1996.
HOMELAND STORES, INC.
By:
James A. Demme,
President
ATTEST:
Secretary
(SEAL)
135908
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