<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 6, 1995
REGISTRATION NO. 33-56451
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
ON
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FOOD 4 LESS SUPERMARKETS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5411 95-4222386
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
SUBSIDIARY REGISTRANTS
ALPHA BETA COMPANY CALIFORNIA 95-1456805
BAY AREA WAREHOUSE STORES, INC. CALIFORNIA 93-1087199
BELL MARKETS, INC. CALIFORNIA 94-1569281
CALA CO. DELAWARE 95-4200005
CALA FOODS, INC. CALIFORNIA 94-1342664
FALLEY'S, INC. KANSAS 48-0605992
FOOD 4 LESS OF CALIFORNIA, INC. CALIFORNIA 33-0293011
FOOD 4 LESS GM, INC. CALIFORNIA 95-4390407
FOOD 4 LESS MERCHANDISING, INC. CALIFORNIA 33-0483193
FOOD 4 LESS OF SOUTHERN CALIFORNIA, INC. DELAWARE 33-0483203
(EXACT NAME OF REGISTRANT AS (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
SPECIFIED IN ITS CHARTER) INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
777 SOUTH HARBOR BOULEVARD
LA HABRA, CALIFORNIA 90631
(714) 738-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
MARK A. RESNIK, ESQ.
VICE PRESIDENT AND SECRETARY
FOOD 4 LESS SUPERMARKETS, INC.
777 SOUTH HARBOR BOULEVARD
LA HABRA, CALIFORNIA 90631
(714) 738-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
THOMAS C. SADLER, ESQ. WILLIAM M. HARTNETT, ESQ.
PAMELA B. KELLY, ESQ. CAHILL GORDON & REINDEL
LATHAM & WATKINS 80 PINE STREET
633 WEST FIFTH STREET NEW YORK, NEW YORK 10005
LOS ANGELES, CALIFORNIA 90071 (212) 701-3000
(213) 485-1234
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. /X/
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SECTION 8(A) MAY
DETERMINE.
===============================================================================
<PAGE> 2
FOOD 4 LESS SUPERMARKETS, INC.
CROSS-REFERENCE SHEET
PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NO. FORM S-4 CAPTION PROSPECTUS CAPTION
- -------- --------------- ------------------
<C> <S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................... Facing Page; Cross Reference Sheet;
Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front Cover Page; Outside Back
Cover Page
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Summary; Risk Factors; Business; Selected
Historical Financial Data of Food 4
Less
4. Terms of the Transaction................. The Exchange Offers and Solicitation;
Certain Federal Income Tax
Considerations; The Proposed
Amendments; Description of the New F4L
Notes; Appendix A; Appendix B
5. Pro Forma Financial Information.......... Unaudited Pro Forma Combined Financial
Statements
6. Material Contracts with the Company Being
Acquired................................. *
7. Additional Information Required for
Reoffering by Person and Parties Deemed
to Be Underwriters....................... *
8. Interests of Named Experts and Counsel... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. *
10. Information with Respect to S-3
Registrants.............................. *
11. Incorporation of Certain Information by
Reference................................ *
12. Information with Respect to S-2 or S-3
Registrants.............................. *
13. Incorporation of Certain Information by
Reference................................ *
14. Information with Respect to Registrants
Other than S-3 or S-2 Registrants........ Inside Front Cover Page; Summary; Pro
Forma Capitalization; Selected Historical
Financial Data of Food 4 Less;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Consolidated
Financial Statements of Food 4 Less
15. Information with Respect to S-3
Companies................................ *
16. Information with Respect to S-2 or S-3
Companies................................ *
17. Information with Respect to Companies
Other than S-2 or S-3 Companies.......... *
18. Information If Proxies, Consents or
Authorizations Are to Be Solicited....... *
19. Information If Proxies, Consents or
Authorizations Are not to Be Solicited,
or in an Exchange Offer.................. Management; Executive Compensation;
Principal Stockholders; Certain
Relationships and Related Transactions
</TABLE>
- ---------------
* Inapplicable
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JANUARY 6, 1995
NO CONSENT WILL BE SOLICITED NOR WILL ANY EXCHANGE OFFER BE MADE AND NO
TENDER OF OLD SECURITIES PURSUANT TO THE EXCHANGE OFFERS MAY BE MADE OR WILL BE
ACCEPTED UNTIL THE REGISTRATION STATEMENT RELATING TO THE SECURITIES OFFERED
HEREBY BECOMES EFFECTIVE UNDER THE SECURITIES ACT OF 1933.
------------------------
PROSPECTUS AND SOLICITATION STATEMENT
FOOD 4 LESS SUPERMARKETS, INC.
TO BE COMBINED THROUGH MERGER WITH
[LOGO] RALPHS GROCERY COMPANY [LOGO]
OFFERS TO EXCHANGE
UP TO
$175,000,000 OF ITS % SENIOR NOTES DUE , 2004
FOR ITS
10.45% SENIOR NOTES DUE APRIL 15, 2000
AND UP TO
$145,000,000 OF ITS 13.75% SENIOR SUBORDINATED NOTES DUE , 2005
FOR ITS
13.75% SENIOR SUBORDINATED NOTES DUE JUNE 15, 2001
AND SOLICITATION OF CONSENTS
------------------------
Food 4 Less Supermarkets, Inc. ("Food 4 Less") hereby offers, upon the terms
and subject to the conditions set forth in this Prospectus and Solicitation
Statement and in the accompanying Consent and Letter of Transmittal (the "Letter
of Transmittal"), (i) to holders of its 10.45% Senior Notes due 2000 (the "Old
F4L Senior Notes") to exchange (the "F4L Senior Notes Exchange Offer") such Old
F4L Senior Notes for its new Senior Notes due 2004 (the "New F4L Senior Notes"),
plus $5.00 in cash for each $1,000 principal amount tendered for exchange (the
"Senior Notes Exchange Payment") and (ii) to holders of its 13.75% Senior
Subordinated Notes due 2001 (the "Old F4L Senior Subordinated Notes," and
together with the Old F4L Senior Notes, the "Old F4L Notes") to exchange (the
"F4L Senior Subordinated Notes Exchange Offer," and together with the F4L Senior
Notes Exchange Offer, the "Exchange Offers") such Old F4L Senior Subordinated
Notes for its new 13.75% Senior Subordinated Notes due 2005 (the "New F4L Senior
Subordinated Notes," and together with the New F4L Senior Notes, the "New F4L
Notes") plus $20.00 in cash for each $1,000 principal amount tendered for
exchange (the "Senior Subordinated Notes Exchange Payment," and together with
the Senior Notes Exchange Payment, the "Exchange Payment"), in each case as more
fully described below.
<TABLE>
<CAPTION>
FOR EACH $1,000 THE TENDERING HOLDER
PRINCIPAL AMOUNT OF: WILL RECEIVE
- ---------------------------------- -------------------------------------------------------------------------
<S> <C>
Old F4L Senior Notes $1,000 principal amount of New F4L Senior Notes and $5.00 in cash, plus
accrued and unpaid interest to the date of exchange.
Old F4L Senior Subordinated Notes $1,000 principal amount of New F4L Senior Subordinated Notes and $20.00
in cash, plus accrued and unpaid interest to the date of exchange.
</TABLE>
Concurrently with the Exchange Offers and the other financing transactions
described herein, Food 4 Less is offering up to $400 million principal amount of
New F4L Senior Notes pursuant to a public offering (the "Public Offering")
registered under the Securities Act of 1933, as amended (the "Securities Act").
The Public Offering is expected to price five business days preceding the
Expiration Date (as defined). The New F4L Senior Notes offered pursuant to the
F4L Senior Notes Exchange Offer will be part of the same issue as the New F4L
Senior Notes offered pursuant to the Public Offering and will bear interest at a
fixed rate per annum equal to the greater of (a) 11% and (b) the Applicable
Treasury Rate (as defined) plus 375 basis points (3.75 percentage points);
provided, however, that in no event will the New F4L Senior Notes offered for
exchange hereby bear interest at a rate per annum that is less than the interest
rate on the New F4L Senior Notes offered pursuant to the Public Offering.
THE EXCHANGE OFFERS AND THE SOLICITATION (AS DEFINED) WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON , 1995, UNLESS EXTENDED (THE
"EXPIRATION DATE"). CONSENTS MAY BE REVOKED AND TENDERS MAY BE WITHDRAWN AT ANY
TIME UNTIL THE LATER OF (A) SUCH TIME AS THE REQUISITE CONSENTS (AS DEFINED)
WITH RESPECT TO THE APPLICABLE ISSUE OF OLD F4L NOTES HAVE BEEN RECEIVED AND THE
SUPPLEMENTAL INDENTURE (AS DEFINED) FOR SUCH ISSUE HAS BEEN EXECUTED AND (B) [20
BUSINESS DAYS FOLLOWING COMMENCEMENT]. FOOD 4 LESS EXPECTS TO EXTEND THE
EXPIRATION DATE TO A DATE THAT IS FIVE BUSINESS DAYS FOLLOWING THE PRICING OF
THE PUBLIC OFFERING.
------------------------
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED
IN EVALUATING THE EXCHANGE OFFERS AND THE SOLICITATION.
------------------------
The Dealer Managers for the Exchange Offers and the Solicitation are:
BT SECURITIES CORPORATION
CS FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
------------------------
The date of this Prospectus and Solicitation Statement is , 1995
<PAGE> 4
(cover page continued)
The Exchange Offers and the Solicitation (as defined) are part of the
financing required to consummate the proposed merger (the "RSI Merger") of Food
4 Less with and into Ralphs Supermarkets, Inc. ("RSI"). Immediately following
the RSI Merger, Ralphs Grocery Company ("RGC"), a wholly-owned subsidiary of
RSI, will merge with and into RSI (the "RGC Merger," and together with the RSI
Merger, the "Merger") and RSI will change its name to Ralphs Grocery Company
("Ralphs Grocery Company" or the "Company"). As a result of the Merger, the New
F4L Notes and any Old F4L Notes not exchanged in the Exchange Offers will be the
obligations of the Company.
Concurrently with the Exchange Offers, Food 4 Less is soliciting (the
"Solicitation") consents ("Consents") from holders of each of the Old F4L Senior
Notes (the "Old F4L Senior Noteholders") and the Old F4L Senior Subordinated
Notes (the "Old F4L Senior Subordinated Noteholders," and together with the Old
F4L Senior Noteholders, the "Old F4L Noteholders") representing at least a
majority in aggregate principal amount of each of the outstanding Old F4L Senior
Notes and the Old F4L Senior Subordinated Notes held by persons other than Food
4 Less and its affiliates (the "Requisite Consents") to certain amendments
described herein (the "Proposed Amendments") to the indentures under which the
Old F4L Notes were issued (collectively, the "Old F4L Indentures"). As of
January 1, 1995, there were issued and outstanding $175 million aggregate
principal amount of the Old F4L Senior Notes and $145 million aggregate
principal amount of the Old F4L Senior Subordinated Notes. HOLDERS OF OLD F4L
NOTES WHO DESIRE TO ACCEPT THE APPLICABLE EXCHANGE OFFER MUST CONSENT TO THE
PROPOSED AMENDMENTS. The Proposed Amendments will only become operative upon
consummation of the Exchange Offers. The primary purpose of the Proposed
Amendments is to permit the Merger and to eliminate substantially all of the
restrictive covenants in the Old F4L Indentures.
Interest on the New F4L Senior Notes will be payable semiannually on each
February 1 and August 1, commencing on August 1, 1995, at the rate set forth
above. The New F4L Senior Notes will mature on February 1, 2004. Interest on the
New F4L Senior Subordinated Notes will be payable semiannually on each February
1 and August 1, commencing August 1, 1995, at the rate of 13.75% per annum. The
New F4L Senior Subordinated Notes will mature on February 1, 2005. The New F4L
Senior Notes will be redeemable, in whole or in part, at the option of the
Company, at any time on and after February 1, 2000 and the New F4L Senior
Subordinated Notes will be redeemable, in whole or in part, at the option of the
Company, at any time on and after June 15, 1996, each at the respective
redemption prices set forth herein, plus accrued and unpaid interest to the
redemption date. In addition, on or prior to February 1, 1998, the Company may,
at its option, use the net cash proceeds of one or more Public Equity Offerings
(as defined) to redeem up to an aggregate of 35% of the New F4L Senior Notes
originally issued, at a redemption price equal to % of the principal amount
thereof, plus accrued and unpaid interest, if any, to the redemption date. Upon
a Change of Control (as defined) each holder of New F4L Notes has the right to
require the Company to repurchase such holders' New F4L Notes at a price equal
to 101% of their principal amount plus accrued and unpaid interest to the date
of repurchase. In addition, subject to certain conditions, the Company will be
obligated to make an offer to repurchase the New F4L Notes at 100% of their
principal amount, plus accrued and unpaid interest to the date of repurchase,
with the net cash proceeds of certain sales or other dispositions of assets.
The New F4L Senior Notes will be senior unsecured obligations of the
Company and will rank pari passu in right of payment with other senior and
unsecured indebtedness of the Company. However, the New F4L Senior Notes will be
effectively subordinated to all secured indebtedness of the Company and its
subsidiaries, including indebtedness under the New Credit Facility (as defined).
See "Risk Factors -- Corporate Structure" and "-- Effects of Asset
Encumbrances." The New F4L Senior Notes will rank senior in right of payment to
all subordinated indebtedness of the Company, including the New F4L Senior
Subordinated Notes, the Old F4L Senior Subordinated Notes that remain
outstanding following the F4L Senior Subordinated Notes Exchange Offer
(collectively, the "F4L Senior Subordinated Notes") and the RGC Senior
Subordinated Notes (as defined). At September 17, 1994, on a pro forma basis
after giving effect to the Merger and the Financing (and certain related
assumptions), the Company and its subsidiaries would have had outstanding $992.7
million aggregate principal amount of secured indebtedness.
The New F4L Senior Subordinated Notes will be senior subordinated unsecured
obligations of the Company and will be subordinated in right of payment to all
Senior Indebtedness (as defined) of the Company, including the Company's
obligations under the New Credit Facility, the New F4L Senior Notes
ii
<PAGE> 5
(cover page continued)
and any Old F4L Senior Notes that remain outstanding following the F4L Senior
Notes Exchange Offer (collectively, the "F4L Senior Notes"). The New F4L Senior
Notes will be unconditionally guaranteed on a senior unsecured basis by each of
the Company's wholly-owned subsidiaries (the "Subsidiary Guarantors") and the
New F4L Senior Subordinated Notes will be unconditionally guaranteed (together,
the "Guarantees") on a senior subordinated unsecured basis by each of the
Subsidiary Guarantors. At the time the New F4L Notes are issued, the Subsidiary
Guarantors will be Alpha Beta Company, Bay Area Warehouse Stores, Inc., Bell
Markets, Inc., Cala Co., Cala Foods, Inc., Falley's Inc., Food 4 Less of
California, Inc., Food 4 Less GM, Inc., Food 4 Less Merchandising, Inc. and Food
4 Less of Southern California, Inc. The Guarantees of the New F4L Notes will be
released upon the occurrence of certain events. See "Description of the New F4L
Notes -- Guarantees." At September 17, 1994, on a pro forma basis after giving
effect to the Merger and the Financing (and certain related assumptions), the
aggregate outstanding amount of Senior Indebtedness of the Company (excluding
Company guarantees of certain Guarantor Senior Indebtedness (as defined)) would
have been approximately $1,554.8 million and the aggregate outstanding amount of
Guarantor Senior Indebtedness of the Subsidiary Guarantors (excluding guarantees
by Subsidiary Guarantors of certain Senior Indebtedness of the Company) would
have been approximately $16.0 million and the Company would have had $218.2
million available to be borrowed under the New Revolving Facility (as defined).
Tendering holders will receive accrued and unpaid interest on Old F4L Notes
accepted for exchange, up to, but not including, the date of such exchange.
Interest on the New F4L Notes will accrue from, and including, the date of such
exchange, which will be the date of issuance of the New F4L Notes.
If Food 4 Less shall decide to decrease the amount of Old F4L Notes being
sought in either Exchange Offer or to increase or decrease the consideration
offered to holders of Old F4L Notes, and if, at the time that notice of such
increase or decrease is first published, sent or given to holders of Old F4L
Notes in the manner specified in this Prospectus and Solicitation Statement,
such Exchange Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth Business Day from and including the
date that such notice is first so published, sent or given, then such Exchange
Offer will be extended for such purposes until the expiration of such period of
ten Business Days. As used in this Prospectus and Solicitation Statement,
"Business Day" has the meaning set forth in Rule 14d-1 (and applicable to
Regulation 14E) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
In addition to the Exchange Offers and the Solicitation, (i) Food 4 Less is
(A) offering up to $400 million principal amount of New F4L Senior Notes
pursuant to the Public Offering (which will be part of the same issue as the New
F4L Senior Notes offered for exchange pursuant to the F4L Senior Notes Exchange
Offer), (B) offering to holders of RGC's 9% Senior Subordinated Notes due 2003
(the "Old RGC 9% Notes") and to holders of RGC's 10 1/4% Senior Subordinated
Notes due 2002 (the "Old RGC 10 1/4% Notes," and together with the Old RGC 9%
Notes, the "Old RGC Notes") to exchange (the "RGC Exchange Offers") such Old RGC
Notes for new Senior Subordinated Notes due 2005 (the "New RGC Notes") plus
$10.00 in cash for each $1,000 principal amount of Old RGC Notes tendered for
exchange, and (C) soliciting consents from the holders of each of the Old RGC 9%
Notes and the Old RGC 10 1/4% Notes to certain amendments to the indentures
(collectively, the "Old RGC Indentures") under which the Old RGC Notes were
issued (the RGC Exchange Offer and the solicitation of consents being referred
to herein collectively as the "RGC Exchange Offers"), and (ii) Food 4 Less
Holdings, Inc. ("Holdings"), which currently owns 100% of the outstanding stock
of Food 4 Less, is soliciting consents from holders of its 15.25% Senior
Discount Notes due 2004 (the "Holdings Discount Notes") to certain amendments to
the indenture (the "Holdings Discount Note Indenture"), under which the Holdings
Discount Notes were issued, with respect to which Holdings will make a cash
consent payment of $20.00 for each $1,000 principal amount of Holdings Discount
Notes for which a consent is properly delivered and accepted (such transaction
being referred to herein as the "Holdings Consent Solicitation"). Prior to the
Merger, Holdings' parent corporation, Food 4 Less, Inc. ("FFL"), will merge with
and into Holdings, which will be the surviving corporation (the "FFL Merger").
Immediately following the FFL Merger, Holdings will change its jurisdiction of
incorporation by merging into a newly formed, wholly-owned subsidiary ("New
Holdings"), incorporated in Delaware. See "The Merger and the Financing,"
"Description of Holding Company Indebtedness" and "The RGC Exchange Offers and
the Public Offering." The RGC Exchange Offers, the Public Offering and the
Holdings Consent Solicitation are sometimes hereinafter referred to as the
"Other Debt Financing Transactions." The
iii
<PAGE> 6
(cover page continued)
New RGC Notes and any Old RGC Notes not exchanged in the RGC Exchange Offers are
collectively referred to herein as the "RGC Senior Subordinated Notes."
Concurrently with the consummation of the Exchange Offers and the Other
Debt Financing Transactions, Food 4 Less and RGC intend to obtain new senior
financing (the "Bank Financing") pursuant to a senior facility of up to $1,075
million (the "New Credit Facility") and to obtain $150 million in cash equity
financing (the "New Equity Investment"). In addition, New Holdings will issue as
part of the consideration for the RSI Merger $100 million aggregate principal
amount of 13% Senior Subordinated Pay-In-Kind Debentures due 2007 (the "Seller
Debentures"). See "The Merger and the Financing."
Notwithstanding any other provision of the Exchange Offers or the
Solicitation, the obligation of Food 4 Less to accept for exchange any validly
tendered Old F4L Note is conditioned upon, among other things, the satisfaction
or waiver of certain conditions, including (i) at least 80% of the aggregate
principal amount of the outstanding Old F4L Notes being validly tendered and not
withdrawn pursuant to the Exchange Offers prior to the Expiration Date (the
"Minimum Tender"), (ii) the receipt of the Requisite Consents with respect to
each of the Old F4L Senior Notes and Old F4L Senior Subordinated Notes on or
prior to the Expiration Date, (iii) the satisfaction or waiver, in Food 4 Less'
sole discretion, of all conditions precedent to the RSI Merger, (iv) the prior
or contemporaneous successful completion of the Other Debt Financing
Transactions (including the Public Offering), and (v) the prior or
contemporaneous consummation of the Bank Financing and the New Equity
Investment. There can be no assurance that such conditions will be satisfied or
waived. For additional information regarding other conditions to the
consummation of the Exchange Offers, see "The Exchange Offers and
Solicitation -- Conditions."
Standard & Poor's Ratings Group ("Standard & Poor's") has publicly
announced that, upon consummation of the Merger, it intends to assign a new
rating to the Old RGC Notes. Such new rating assignment, if implemented, would
constitute a Rating Decline (as defined) under the Old RGC Indentures. The
consummation of the Merger (which is conditioned on, among other things,
successful consummation of the Other Debt Financing Transactions and the Bank
Financing, which itself is conditioned upon the receipt of the Minimum Tender
(as defined) and the resulting change in composition of the Board of Directors
of RGC, together with the anticipated Rating Decline would constitute a Change
of Control Triggering Event (as defined) under the Old RGC Indentures. Upon such
a Change of Control Triggering Event the Company would be obligated to make a
change of control purchase offer following the Merger for all outstanding Old
RGC Notes at 101% of the principal amount thereof ($90.9 million, assuming $90
million of Old RGC Notes are outstanding following the Merger) plus accrued and
unpaid interest to the date of repurchase (the "Change of Control Offer"). The
Merger will not constitute a change of control under the Old F4L Indentures and
no change of control purchase offer will be made with respect to the Old F4L
Notes.
Although it has no obligation to do so, the Company reserves the right in
the future to seek to acquire Old F4L Notes not tendered in the Exchange Offers
by means of open market purchases, privately negotiated acquisitions, subsequent
exchange or tender offers, redemptions or otherwise, at prices or on terms which
may be higher or lower or more or less favorable than those in the Exchange
Offers.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS AND SOLICITATION STATEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE EXCHANGE OFFERS ARE NOT BEING MADE TO, AND NO CONSENTS ARE BEING
SOLICITED FROM, HOLDERS OF OLD F4L NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFERS OR THE ISSUANCE OF ANY SECURITY UPON
ACCEPTANCE OF TENDERS WOULD NOT BE IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
iv
<PAGE> 7
(cover page continued)
Any Old F4L Noteholder desiring to accept the applicable Exchange Offer
should either (i) complete and sign the Letter of Transmittal or facsimile
thereof, have his signature thereon guaranteed and forward the Letter of
Transmittal with the certificate(s) evidencing his Old F4L Notes and any other
required documents to the Exchange Agent (as defined), (ii) comply with the
guaranteed delivery procedures, (iii) tender such Old F4L Notes pursuant to the
procedure for book-entry transfer or (iv) request his broker, dealer, commercial
bank, trust company or other nominee to effect the transaction for him, in each
case on or prior to the Expiration Date. Old F4L Noteholders having Old F4L
Notes registered in the name of a broker, dealer, commercial bank, trust company
or other nominee must contact such person if they desire to tender such Old F4L
Notes. HOLDERS OF OLD F4L NOTES WHO DESIRE TO ACCEPT THE APPLICABLE EXCHANGE
OFFER MUST CONSENT TO THE PROPOSED AMENDMENTS. A HOLDER OF OLD F4L NOTES WHO
DESIRES TO TENDER INTO THE APPLICABLE EXCHANGE OFFER WITH RESPECT TO ANY OLD F4L
SENIOR NOTES OR OLD F4L SENIOR SUBORDINATED NOTES MUST TENDER ALL OF SUCH
HOLDERS' OLD F4L SENIOR NOTES OR OLD F4L SENIOR SUBORDINATED NOTES, AS THE CASE
MAY BE. See "The Exchange Offers and Solicitation -- Procedures for Tendering
and Consenting."
Questions and requests for assistance or for additional copies of this
Prospectus and Solicitation Statement or the accompanying Letter of Transmittal
or any other required documents may be directed to the Dealer Managers or the
Information Agent at the addresses and telephone numbers set forth on the back
cover hereof.
This Prospectus and Solicitation Statement, together with the accompanying
Letter of Transmittal, is being sent to holders of Old F4L Notes who are
registered holders as of January , 1995.
v
<PAGE> 8
(cover page continued)
AVAILABLE INFORMATION
Food 4 Less has filed a Registration Statement on Form S-4 (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") under the Securities Act with respect to the New F4L Notes. Each
of Food 4 Less and RGC is subject to the reporting and other informational
requirements of the Exchange Act, and the rules and regulations promulgated
thereunder, and in accordance therewith files reports and other information with
the Commission. Such reports and other information filed by Food 4 Less or RGC
with the Commission can be inspected without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the following Regional Offices of the Commission:
New York Regional Office, 7 World Trade Center, 13th Floor, New York, New York
10048; and Chicago Regional Office, Suite 1400, Northwestern Atrium Center, 500
West Madison Street, Chicago, Illinois 60661. Copies of such materials can also
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
In addition, whether or not it is required to do so by the rules and
regulations of the Commission, the Company will be obligated under the indenture
governing the New F4L Senior Notes (the "New F4L Senior Note Indenture") and the
indenture governing the New F4L Senior Subordinated Notes (the "New F4L Senior
Subordinated Note Indenture," and together with the New F4L Senior Note
Indenture, the "New F4L Indentures") to file with the Commission (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's independent certified public accountants and (ii) all reports
that would be required to be filed with the Commission on Form 8-K. The Company
intends to furnish to each holder of New F4L Notes, upon their request, annual
reports containing audited financial statements and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year. Any such request should be directed to Jan Charles Gray, Senior
Vice-President, General Counsel and Secretary of Ralphs Grocery Company at 1100
West Artesia Boulevard, Compton, California 90220, telephone number (310)
884-4000.
This Prospectus and Solicitation Statement summarizes the contents and
terms of documents not included herewith. These documents are available upon
request from, as applicable, Food 4 Less at 777 South Harbor Blvd., La Habra,
California 90631, telephone number (714) 738-2000, Attn: Robert P. Bermingham,
Esq., Vice President and General Counsel; RGC at 1100 West Artesia Blvd.,
Compton, California 90220, telephone number (310) 884-4000, Attn: Jan Charles
Gray, Esq., Senior Vice President, General Counsel and Secretary; or D.F. King &
Co., Inc., at the address and telephone number set forth on the back cover
hereof. In order to ensure timely delivery of the documents, any request for
such documents should be made at least five business days prior to the
Expiration Date.
vi
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. vi
SUMMARY............................................................................... 1
COMPARISON OF OLD F4L SENIOR NOTES AND NEW F4L SENIOR NOTES........................... 9
COMPARISON OF OLD F4L SENIOR SUBORDINATED NOTES AND NEW F4L SENIOR SUBORDINATED
NOTES............................................................................... 11
RISK FACTORS.......................................................................... 22
THE MERGER AND THE FINANCING.......................................................... 28
PRO FORMA CAPITALIZATION.............................................................. 31
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS..................................... 32
SELECTED HISTORICAL FINANCIAL DATA OF RALPHS.......................................... 40
SELECTED HISTORICAL FINANCIAL DATA OF FOOD 4 LESS..................................... 42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................................... 44
BUSINESS.............................................................................. 59
MANAGEMENT............................................................................ 73
EXECUTIVE COMPENSATION................................................................ 75
PRINCIPAL STOCKHOLDERS................................................................ 81
DESCRIPTION OF CAPITAL STOCK.......................................................... 82
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................ 85
THE EXCHANGE OFFERS AND SOLICITATION.................................................. 87
DESCRIPTION OF THE NEW F4L NOTES...................................................... 102
MARKET PRICES OF THE OLD F4L NOTES.................................................... 131
THE PROPOSED AMENDMENTS............................................................... 131
THE RGC EXCHANGE OFFERS AND THE PUBLIC OFFERING....................................... 133
DESCRIPTION OF THE NEW CREDIT FACILITY................................................ 135
DESCRIPTION OF HOLDING COMPANY INDEBTEDNESS........................................... 137
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS............................................. 140
LEGAL MATTERS......................................................................... 145
EXPERTS............................................................................... 145
INDEX TO FINANCIAL STATEMENTS......................................................... F-1
COMPARISON OF OLD F4L SENIOR NOTES AND NEW F4L SENIOR NOTES........................... A-1
COMPARISON OF OLD F4L SENIOR SUBORDINATED NOTES AND NEW F4L SENIOR SUBORDINATED
NOTES............................................................................... B-1
</TABLE>
vii
<PAGE> 10
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the Financial Statements and notes thereto, appearing elsewhere in this
Prospectus and Solicitation Statement. Unless the context otherwise requires,
the terms "Food 4 Less" and "Ralphs," as used herein, refer to Food 4 Less and
RSI and their consolidated subsidiaries, respectively, prior to the consummation
of the Merger. The "Company" refers to Ralphs Grocery Company as the surviving
and renamed corporation following the consummation of the Merger and includes,
unless the context otherwise requires, all of its consolidated subsidiaries. As
used herein, "Southern California" means Los Angeles, Orange, Ventura, San
Bernardino, Riverside and San Diego counties. Except as otherwise stated,
references in this Prospectus and Solicitation Statement to numbers of stores
prior to the consummation of the Merger are as of October 1, 1994. References to
the "pro forma" number of stores to be operated by the Company following the
consummation of the Merger are based on October 1, 1994 totals, but give effect
to certain anticipated store conversions, divestitures and closings.
THE COMPANY
The combination of Ralphs Grocery Company and Food 4 Less Supermarkets,
Inc. will create the largest food retailer in Southern California. Pro forma for
the Merger, the Company will operate approximately 332 Southern California
stores with an estimated 26% market share among the area's supermarkets. The
Company will operate the second largest conventional supermarket chain in the
region under the "Ralphs" name and the largest warehouse supermarket chain under
the "Food 4 Less" name. In addition, the Company will operate approximately 24
conventional format stores and 39 warehouse format stores in Northern California
and the Midwest. Management believes that by the end of the fourth full year of
combined operations, approximately $90 million in net annual cost savings will
be achieved as a result of the Merger. Pro forma for the Merger, the Company
would have had sales of approximately $5.1 billion, operating income of $183
million and EBITDA (as defined) of $343 million for the 52 weeks ended June 25,
1994. Management believes the Merger will enhance the growth and profitability
of Ralphs and Food 4 Less by providing the Company with the following benefits:
- - TWO LEADING COMPLEMENTARY FORMATS. The Company will operate its conventional
supermarkets in Southern California under the "Ralphs" name and all of its
price impact warehouse format stores in Southern California under the "Food 4
Less" name. Pro forma for the Merger and certain planned store conversions,
the Company will operate 264 Ralphs conventional format stores and 68 Food 4
Less warehouse format stores in the region. The Ralphs stores will continue to
emphasize a broad selection of merchandise, high quality fresh produce, meat
and seafood and service departments, including bakery and delicatessen
departments in most stores. The Company's conventional stores will also
benefit from Ralphs' strong private label program and its strengths in
merchandising, store operations and systems. Passing on format-related
efficiencies, the price impact warehouse format stores will continue to offer
consumers the lowest overall prices while providing product selections
comparable to conventional supermarkets. Management believes the Food 4 Less
warehouse format has demonstrated its appeal to a wide range of demographic
groups in Southern California and offers a significant opportunity for future
growth. The Company plans to open nine new Food 4 Less warehouse stores and 21
new Ralphs stores over the next two years.
- - SUBSTANTIAL COST SAVINGS OPPORTUNITIES. Management believes that approximately
$90 million of net annual cost savings will be achieved by the end of the
fourth full year of combined operations. It is also anticipated that
approximately $117 million in Merger-related capital expenditures and $50
million of other non-recurring costs will be required to complete store
conversions, integrate operations and expand warehouse facilities over the
same period. Although a portion of the anticipated cost savings is premised
upon the completion of such capital expenditures, management believes that
over 70% of the cost savings could be achieved without making any
Merger-related capital expenditures.
The following anticipated savings are based on estimates and assumptions
made by the Company that are inherently uncertain, though considered reasonable
by the Company, and are subject to significant business,
1
<PAGE> 11
economic and competitive uncertainties and contingencies, all of which are
difficult to predict and many of which are beyond the control of management.
There can be no assurance that such savings will be achieved. The sum of the
components of the estimated annual cost savings exceeds $90 million; however,
management has made an offsetting adjustment to reflect its expectation that a
portion of the savings will be reinvested in the Company's operations. See "Risk
Factors -- Ability to Achieve Anticipated Cost Savings."
-- REDUCED ADVERTISING EXPENSES. Consolidating the conventional format stores
in Southern California under the "Ralphs" name will eliminate the separate
advertising associated with Food 4 Less' existing Alpha Beta, Boys and Viva
formats. Since Ralphs' current advertising program covers the Southern
California region, the Company will be able to advertise for all of its
Southern California stores under the existing Ralphs program. Management
estimates that annual advertising cost savings of approximately $28 million
will be achieved in the first full year of combined operations.
-- REDUCED STORE OPERATIONS EXPENSE. Management expects to reduce store
operations costs as a result of both reduced labor and benefit costs and
reduced non-labor expenses. Store-level labor savings will be achieved when
Ralphs' labor scheduling, computerized record keeping and other advanced
store systems are applied to the Food 4 Less store base. In addition,
management believes that the adoption of Ralphs' store systems in non-labor
areas, such as energy management, safety programs and pooled supply
purchasing, will produce further annual cost savings. Management estimates
that annual store operations cost savings of approximately $21 million will
be achieved by the fourth full year of combined operations after certain
required capital expenditures are made.
-- INCREASED VOLUME PURCHASING EFFICIENCIES. The combined volume requirements
and leading market position of the Company should generally allow the
Company to obtain improved terms from vendors, including suppliers of
products carried on an exclusive or promoted basis, and to convert some
less-than-truckload shipping quantities to full truckload quantities.
Management estimates that annual purchasing cost savings of approximately
$19 million will be achieved by the second full year of combined
operations.
-- WAREHOUSING AND DISTRIBUTION EFFICIENCIES. Consolidating the Company's
warehousing and distribution operations into Ralphs' two primary facilities
located in Compton, California and in the Atwater district of Los Angeles
and Food 4 Less' primary facility located in La Habra, California will
result in lower outside storage, transportation and labor costs. In
addition, occupancy costs will be reduced as a result of the closure of
certain existing facilities. Management estimates that annual warehousing
and distribution cost savings of approximately $16 million will be achieved
by the third full year of combined operations after certain capital
expenditures on existing facilities are completed.
-- CONSOLIDATED MANUFACTURING. Ralphs and Food 4 Less operate manufacturing
facilities that produce similar products or have excess capacity.
Management believes that consolidating meat, bakery, dairy, and other
manufacturing and processing operations, and discontinuing external
purchases of certain goods that can be manufactured internally, will
achieve annual cost savings of approximately $11 million by the second full
year of combined operations.
-- CONSOLIDATED ADMINISTRATIVE FUNCTIONS. The Company expects to achieve
savings from the elimination of redundant administrative staff, the
consolidation of management information systems and a decreased reliance on
certain outside services and consultants. Management estimates that annual
savings of approximately $15 million associated with consolidating
administrative functions will be achieved by the second full year of
combined operations.
- - TECHNOLOGICALLY ADVANCED WAREHOUSING AND DISTRIBUTION. The Company will
utilize Ralphs' technologically advanced warehousing and distribution
systems, which include a 17 million cubic foot high-rise automated storage
and retrieval system warehouse (the "ASRS") for non-perishable items and a
5.4 million cubic foot perishable service center (the "PSC") designed for
processing, storing and distributing all perishable items. These facilities
will provide the Company with substantial operating benefits, including: (i)
enhanced turnover to further improve the freshness and quality of in-store
products, (ii) reduced in-store storage space to increase available selling
space, (iii) added opportunities in forward buying programs and (iv) an
increased percentage of inventory supplied by the Company's own warehousing
and distribution system. Management believes the utilization of these
facilities will enable the
2
<PAGE> 12
Company to meet the combined inventory requirements of all stores with fewer
employees and lower operating and occupancy-related expenses.
- - STORE LOCATIONS. As a result of Ralphs' 122-year history and Alpha Beta
Company's ("Alpha Beta") 91-year history in Southern California, the Company
will have valuable and well established store locations, many of which are in
densely populated metropolitan areas.
- - RECENTLY REMODELED AND NEW STORE BASE. The Company will have a modern,
technologically advanced store base. During the five years ended June 25,
1994, on a combined basis, Ralphs and Food 4 Less opened 74 new stores and
remodeled 211 stores. Approximately 84% of the Company's stores have been
opened or remodeled during the last five years.
- - EXPERIENCED MANAGEMENT TEAM. The executive officers of the Company have
extensive experience in the supermarket industry. The strength of Ralphs
management expertise is evidenced by Ralphs' reputation for quality and
service, technologically advanced systems, strong store operations and high
historical EBITDA margins. The Food 4 Less management team will provide
valuable experience in operating warehouse supermarkets and in effectively
integrating companies into a combined operation. Following the acquisition of
Alpha Beta in 1991, Food 4 Less management successfully integrated Alpha Beta
with its existing Southern California operations and (within three years)
achieved annual cost savings in excess of $40 million (compared to a
pre-acquisition estimate of approximately $33 million).
THE YUCAIPA COMPANIES
Food 4 Less was organized in 1989 by its sponsor, The Yucaipa Companies
("Yucaipa"), a private investment group which specializes in the supermarket
industry. Yucaipa has a successful track record in acquiring, integrating and
improving the cash flow of supermarket companies. Since 1986, Yucaipa and its
affiliated companies have completed ten acquisition transactions, including five
acquisitions by Food 4 Less and its subsidiaries. Following completion of the
Merger, Yucaipa and its affiliates will control the Board of Directors of New
Holdings and the Company.
THE MERGER AND THE FINANCING
On September 14, 1994, Food 4 Less Supermarkets, Inc. ("Food 4 Less"), Food
4 Less Holdings, Inc. ("Holdings"), and the parent company of Holdings, Food 4
Less, Inc. ("FFL"), entered into a definitive Agreement and Plan of Merger (the
"Merger Agreement") with Ralphs Supermarkets, Inc. ("RSI") and its stockholders.
Pursuant to the terms of the Merger Agreement, Food 4 Less will be merged with
and into RSI (the "RSI Merger"). Immediately following the RSI Merger, RGC,
which is currently a wholly-owned subsidiary of RSI, will merge with and into
RSI (the "RGC Merger," and together with the RSI Merger, the "Merger"), and RSI
will change its name to Ralphs Grocery Company ("Ralphs Grocery Company" or the
"Company"). Prior to the Merger, FFL will merge with and into Holdings, which
will be the surviving corporation (the "FFL Merger"). Immediately following the
FFL Merger, Holdings will change its jurisdiction of incorporation by merging
into a newly-formed, wholly-owned subsidiary ("New Holdings"), incorporated in
Delaware (the "Reincorporation Merger"). As a result of the Merger, the FFL
Merger and the Reincorporation Merger the Company will become a wholly-owned
subsidiary of New Holdings. See "-- Corporate Structure." As a result of the RSI
Merger and the RGC Merger, the New F4L Notes and any outstanding Old F4L Notes
not tendered in the Exchange Offers will be the obligations of the Company.
Conditions to the consummation of the RSI Merger include the receipt of
regulatory approvals and other necessary consents and the completion of
financing. The purchase price for RSI is approximately $1.5 billion, including
the assumption of debt. The consideration payable to the stockholders of RSI
consists of $425 million in cash and $100 million principal amount of the Seller
Debentures to be issued by New Holdings. New Holdings will use $150 million of
cash received from the New Equity Investment, together with $100 million
principal amount of the Seller Debentures, to acquire approximately 48% of the
capital stock of RSI immediately prior to consummation of the RSI Merger. New
Holdings will then contribute the
3
<PAGE> 13
$250 million of purchased shares of RSI stock to Food 4 Less, and pursuant to
the RSI Merger the remaining shares of RSI stock will be acquired for $275
million in cash.
As currently contemplated, the Merger will be financed through the
following transactions (collectively, the "Financing"):
- Borrowings of up to $750 million aggregate principal amount of the New
Term Loans (as defined) under the New Credit Facility to be provided by a
syndicate of banks led by Bankers Trust Company ("Bankers Trust"). The
New Credit Facility will also provide for a $325 million revolving credit
facility (the "New Revolving Facility"), $23.4 million of which is
anticipated to be drawn at closing.
- The issuance of up to $400 million of the New F4L Senior Notes pursuant
to the Public Offering.
- The issuance of preferred stock in a private placement by New Holdings to
a group of investors (the "New Equity Investors") led by Apollo Advisors,
L.P. (on behalf of one or more managed entities) or its affiliates and
designees ("Apollo") and including affiliates of BT Securities
Corporation ("BT Securities") and CS First Boston Corporation ("CS First
Boston") and other institutional investors, yielding cash proceeds of
$150 million pursuant to the New Equity Investment. Concurrently with the
New Equity Investment, the New Equity Investors will purchase outstanding
shares of New Holdings capital stock from a stockholder of New Holdings
for a purchase price of $57.7 million. See "Description of Capital
Stock -- New Equity Investment."
- The exchange by Food 4 Less pursuant to the RGC Exchange Offer of up to
$450 million aggregate principal amount of the Old RGC Notes for up to
$450 million aggregate principal amount of the New RGC Notes plus $10.00
in cash per $1,000 principal amount exchanged, together with the
solicitation of consents from the holders of the Old RGC Notes to certain
amendments to the Old RGC Indentures. It is a condition to the RGC
Exchange Offer that at least 80% of the outstanding principal amount of
the Old RGC Notes are exchanged pursuant to the RGC Exchange Offer.
- The Exchange Offers made hereunder to holders of Old F4L Notes to tender
for exchange such Old F4L Notes for New F4L Notes and the Exchange
Payment, together with the solicitation of consents from such holders to
the Proposed Amendments to the Old F4L Indentures.
- The purchase by New Holdings of approximately 48% of the outstanding
common stock of RSI for an aggregate consideration of $250 million,
consisting of the proceeds of the New Equity Investment and $100 million
principal amount of the Seller Debentures, followed by the contribution
of such common stock of RSI to Food 4 Less. Pursuant to the RSI Merger,
the remaining shares of RSI stock will be acquired for $275 million in
cash.
- The assumption by the Company, pursuant to the Merger, of approximately
$157.7 million of other indebtedness of RGC and Food 4 Less.
- The solicitation of certain consents pursuant to the Holdings Consent
Solicitation from the holders of the Holdings Discount Notes to certain
amendments to the Holdings Discount Note Indenture.
4
<PAGE> 14
The following table illustrates the sources and uses of funds to consummate
the Merger, assuming the transaction occurs as of February 1, 1995. This
presentation assumes that $360 million principal amount of Old RGC Notes is
tendered into the RGC Exchange Offers and $256 million principal amount of Old
F4L Notes is tendered into the Exchange Offers, in each case representing 80% of
the outstanding aggregate principal amount of such securities. The presentation
also assumes that the remaining $90 million of Old RGC Notes not tendered into
the RGC Exchange Offers are repurchased after the Closing Date pursuant to the
Change of Control Offer. Although management believes such assumptions are
reasonable under the circumstances, actual sources and uses may differ from
those set forth below depending upon the outcome of the RGC Exchange Offers and
the Exchange Offers.
For additional information regarding the Financing, see "The Merger and the
Financing."
SOURCES AND USES
(in millions)
<TABLE>
<CAPTION>
CASH SOURCES CASH USES
- --------------------------------------------- ---------------------------------------------
<S> <C> <C> <C>
New Term Loans(a)................ $ 750.0 Purchase RSI Common Stock(g)....... $ 425.9
New Revolving Facility(b)........ 23.4 Purchase Old RGC Notes(h).......... 90.9
Repay Ralphs 1992 Credit
New F4L Senior Notes(c).......... 400.0 Agreement........................ 296.0
New Equity Investment(d)......... 150.0 Repay F4L Credit Agreement......... 170.0
-------- Pay Accrued Interest(i)............ 16.1
Pay EAR Liability(j)............... 22.8
Repay Mortgage Indebtedness(k)..... 187.0
Fees and Expenses(l)............... 114.7
--------
Total Cash Sources............ $1,323.4 Total Cash Uses................ $1,323.4
======== ========
NON-CASH SOURCES NON-CASH USES
- --------------------------------------------- ---------------------------------------------
New F4L Senior Notes(e).......... $ 140.0 Old F4L Senior Notes Exchanged..... $ 140.0
Assumed Old F4L Senior Notes..... 35.0 Assumed Old F4L Senior Notes....... 35.0
New F4L Senior Subordinated Old F4L Senior Subordinated Notes
Notes......................... 116.0 Exchanged........................ 116.0
Assumed Old F4L Senior Assumed Old F4L Senior Subordinated
Subordinated Notes............ 29.0 Notes............................ 29.0
New RGC Notes.................... 360.0 Old RGC Notes Exchanged............ 360.0
Assumed Capital Leases and Other Assumed Capital Leases and Other
Debt.......................... 157.7 Debt............................. 157.7
Seller Debentures(f)............. 100.0 Purchase RSI Common Stock(f)....... 100.0
-------- --------
Total Non-Cash Sources........ $ 937.7 Total Non-Cash Uses............ $ 937.7
======== ========
</TABLE>
- ---------------
(a) Food 4 Less has accepted a commitment letter from Bankers Trust pursuant to
which Bankers Trust has agreed, subject to certain conditions, to provide
the Company up to a maximum aggregate amount of $1,075 million of financing
under the New Credit Facility. It is anticipated that the New Credit
Facility will be syndicated to a number of financial institutions for whom
Bankers Trust will act as agent. The New Credit Facility will provide for
(i) term loans in the aggregate amount of up to $750 million, comprised of a
$375 million tranche with a six year term (the "Tranche A Loan"), a $125
million tranche with a seven year term (the "Tranche B Loan"), a $125
million tranche with an eight year term (the "Tranche C Loan"), and a $125
million tranche with a nine year term (the "Tranche D Loan," and, together
with the Tranche A Loan, Tranche B Loan and Tranche C Loan, the "New Term
Loans"); and (ii) a $325 million revolving credit facility (the "New
Revolving Facility"). The New Term Loans and the New Revolving Facility are
referred to collectively as the "New Credit Facility." See "Description of
the New Credit Facility."
(b) The New Revolving Facility will provide for a $325 million line of credit
which will be available for working capital requirements and general
corporate purposes. Up to $150 million of the New Revolving Facility may be
used to support standby letters of credit. The letters of credit will be
used to cover workers' compensation contingencies and for other purposes
permitted under the New Revolving Facility. The Company anticipates that
letters of credit for approximately $101 million will be issued under the
New Revolving Facility at closing, in replacement of existing
5
<PAGE> 15
letters of credit, primarily to satisfy the State of California's
requirements relating to workers compensation self-insurance.
(c) Represents New F4L Senior Notes issued pursuant to the Public Offering. If
Food 4 Less receives tenders in excess of the Minimum Tender in the RGC
Exchange Offers, Food 4 Less may elect to decrease the amount of New F4L
Senior Notes being offered pursuant to the Public Offering.
(d) Does not include the $10 million equity contribution by Ralphs management.
See note (j) below. Concurrently with the New Equity Investment, certain
existing stockholders of New Holdings (formerly stockholders of FFL),
including affiliates of George Soros, will sell outstanding shares of New
Holdings stock to CLH Supermarket Corp. ("CLH"), a corporation owned by
certain Yucaipa partners, which in turn will sell such shares to the New
Equity Investors for an aggregate purchase price of $57.7 million (which
represents the same price per share as will be paid in the New Equity
Investment). In connection with the New Equity Investment, the New Equity
Investors will contribute the common stock so acquired to New Holdings in
consideration for newly-issued preferred shares. See "Description of Capital
Stock -- New Equity Investment."
(e) Represents New F4L Senior Notes issued pursuant to the F4L Senior Notes
Exchange Offer, which will be part of the same issue as the New F4L Senior
Notes issued pursuant to the Public Offering.
(f) In connection with the RSI Merger, New Holdings will issue $100 million
principal amount of the Seller Debentures as part of the purchase price for
the RSI common stock, up to $10 million of which may be put to Yucaipa on
the closing date of the Merger at a purchase price equal to their principal
amount pursuant to the Put Agreement (as defined). In addition, Yucaipa will
be reimbursed by the Company for (i) any losses incurred upon the resale of
the $10 million principal amount of Seller Debentures which may be put to it
pursuant to the Put Agreement and (ii) its expenses in connection with the
Merger and the related transactions. See "The Merger and the Financing" and
"Description of Holding Company Indebtedness -- The Seller Debentures."
(g) Includes $425 million to be paid in cash to stockholders of RSI and $0.9
million to be paid in cash to holders of RSI management stock options. See
"Executive Compensation -- New Management Stock Option Plan and Management
Investment."
(h) Represents the purchase of Old RGC Notes tendered pursuant to the Change of
Control Offer which will occur up to 90 days following the Merger. A portion
of the proceeds of the Public Offering will be available to fund the
purchase of Old RGC Notes pursuant to the Change of Control Offer. To the
extent that any such Old RGC Notes are not tendered pursuant to the Change
of Control Offer, any excess proceeds from the Public Offering will be used
to repay borrowings under the New Credit Facility. See "The RGC Exchange
Offers and the Public Offering."
(i) Represents accrued interest payable on all debt securities assumed to be
tendered in the Exchange Offers and the RGC Exchange Offers.
(j) Represents payments to Ralphs management with respect to the cancellation of
outstanding equity appreciation rights (the "EARs" or "Equity Appreciation
Rights") in connection with the Merger. Ralphs management will receive New
Holdings stock options in exchange for the cancellation of the remaining EAR
liability of $10 million. See "Executive Compensation -- Equity Appreciation
Rights Plan."
(k) Represents the repayment of outstanding mortgage indebtedness of Ralphs in
the principal amount of $174.6 million, plus the estimated amount of the
prepayment fees payable with respect thereto.
(l) Includes an advisory fee of $24 million to be paid to Yucaipa upon closing
of the Merger. See "Certain Relationships and Related Transactions -- Food 4
Less."
6
<PAGE> 16
CORPORATE STRUCTURE
The following tables illustrate (i) the corporate structures of Food 4 Less
and Ralphs immediately prior to the RSI Merger, the RGC Merger, the
Reincorporation Merger and the FFL Merger and (ii) the corporate structure of
the Company and its parent, New Holdings, and the anticipated outstanding
indebtedness of the Company and New Holdings immediately after such mergers.
Pursuant to the terms of the Merger Agreement, Food 4 Less will merge with and
into RSI and RSI will be the surviving corporation in the RSI Merger.
Immediately following the RSI Merger, RGC will merge with and into RSI and RSI
will be the surviving corporation in the RGC Merger and will change its name to
Ralphs Grocery Company. Prior to these transactions, FFL will merge with and
into Holdings, and Holdings (which will be the surviving corporation) will
reincorporate in Delaware as New Holdings.
[See Edgar Appendix]
7
<PAGE> 17
[See EDGAR Appendix]
8
<PAGE> 18
COMPARISON OF OLD F4L SENIOR NOTES AND
NEW F4L SENIOR NOTES
The following is a brief comparison of the principal features of the Old
F4L Senior Notes and the New F4L Senior Notes. The terms of the New F4L Senior
Notes differ from the current (unamended) terms of the Old F4L Senior Notes in
certain significant respects, including those described below. The summary
comparisons set forth below do not purport to be complete and are qualified in
their entirety by reference to "Description of the New F4L Notes" and to the
"Comparison of Old F4L Senior Notes and New F4L Senior Notes" set forth in
Appendix A hereto, and the related definitions contained therein.
<TABLE>
<CAPTION>
OLD F4L SENIOR NOTES NEW F4L SENIOR NOTES
-------------------------------------------- --------------------------------------------
<S> <C> <C>
</TABLE>
<TABLE>
<S> <C> <C>
ISSUER Food 4 Less. The Company, as successor by merger to Food
4 Less.
PRINCIPAL AMOUNT As of November 1, 1994, $175 million. The up to $175 million principal amount of
OUTSTANDING New F4L Senior Notes offered hereby will be
part of an issue of up to $575 million
aggregate principal amount of New F4L Senior
Notes, up to $400 million principal amount
of which will be issued pursuant to the
Public Offering.
INTEREST RATE The Old F4L Senior Notes bear interest at Concurrently with the Exchange Offers, Food
the rate of 10.45% per annum. 4 Less is offering up to $400 million
principal amount of the New F4L Senior Notes
pursuant to the Public Offering. The Public
Offering is expected to price five business
days preceding the Expiration Date. The New
F4L Senior Notes offered pursuant to the
Exchange Offers will bear interest at a
fixed rate per annum equal to the greater of
(a) 11% and (b) the Applicable Treasury Rate
(as defined) plus 375 basis points (3.75
percentage points); provided, however, that
in no event will the New F4L Senior Notes
offered for exchange hereby bear interest at
a rate per annum that is less than the
interest rate on the New F4L Senior Notes
offered pursuant to the Public Offering.
INTEREST PAYMENT April 15 and October 15. February 1 and August 1, commencing on
DATES August 1, 1995.
FINAL MATURITY DATE April 15, 2000. February 1, 2004.
OPTIONAL REDEMPTION The Old F4L Senior Notes are subject to The New F4L Senior Notes are subject to
redemption in whole or in part, at the redemption in whole or in part, at the
option of Food 4 Less, at any time on or option of the Company, at any time on or
after April 15, 1996, at the following after February 1, 2000, at the following
redemption prices if redeemed during the redemption prices if redeemed during the
twelve-month period commencing on April 15 twelve-month period commencing on April 15
of the year set forth below: of the year set forth below:
1996.................................104.48% 2000.................................. %
1997.................................102.99% 2001.................................. %
1998.................................101.49% 2002.................................. %
1999 and thereafter..................100.00% 2003 and thereafter..................100.00%
in each case plus accrued and unpaid in each case plus accrued and unpaid
interest to the date of redemption. interest to the date of redemption.
In addition, on or prior to February 1,
1998, the Company may, at its option, use
the net cash proceeds of one or more Public
Equity Offerings to redeem up to an
aggregate of 35% of the New F4L Senior Notes
originally issued, at a redemption price
equal to % of the principal amount
thereof, plus accrued and unpaid interest to
the redemption date.
</TABLE>
9
<PAGE> 19
<TABLE>
<CAPTION>
OLD F4L SENIOR NOTES NEW F4L SENIOR NOTES
-------------------------------------------- --------------------------------------------
<S> <C> <C>
MANDATORY Under the Old F4L Senior Note Indenture, The New F4L Senior Notes are not subject to
REDEMPTION Food 4 Less is required to make a mandatory a mandatory sinking fund requirement.
sinking fund payment of $87.5 million on
April 15, 1999, sufficient to retire 50% of
the Old F4L Senior Notes originally issued,
at a redemption price equal to 100% of the
principal amount thereof, plus accrued and
unpaid interest to the date of redemption.
FOOD 4 LESS INTENDS TO CREDIT EXCHANGES OF
OLD F4L SENIOR NOTES ACCEPTED PURSUANT TO
THE EXCHANGE OFFERS HEREUNDER AGAINST ITS
SINKING FUND OBLIGATIONS.
RANKING The Old F4L Senior Notes are senior The New F4L Senior Notes will be senior
unsecured obligations of Food 4 Less and are unsecured obligations of the Company and
senior to all subordinated indebtedness of will rank senior in right of payment to all
Food 4 Less, including the Old F4L Senior subordinated indebtedness of the Company
Subordinated Notes. The Old F4L Senior Notes including the F4L Senior Subordinated Notes
rank pari passu in right of payment with all and the RGC Senior Subordinated Notes. The
borrowings and other obligations of Food 4 New F4L Senior Notes will rank pari passu in
Less and its subsidiaries under the Credit right of payment with other senior and
Agreement. Such borrowings and obligations unsecured indebtedness of the Company.
under the Credit Agreement and related However, the New F4L Senior Notes will be
guarantees are secured by substantially all effectively subordinated to all secured
of the assets of Food 4 Less and its indebtedness of the Company and its
subsidiaries, whereas the Old F4L Senior subsidiaries, including indebtedness under
Notes are senior unsecured obligations of the New Credit Facility. At September 17,
Food 4 Less and its subsidiaries. 1994, on a pro forma basis after giving
effect to the Merger and the Financing (and
certain related assumptions) the Company
would have had outstanding $992.7 million in
secured indebtedness.
GUARANTEES Each Subsidiary Guarantor has Each Subsidiary Guarantor (including the
unconditionally guaranteed, jointly and Subsidiaries of RGC) will unconditionally
severally, the full and prompt performance guarantee, jointly and severally, the full
of Food 4 Less's obligations under the Old and prompt performance of the Company's
F4L Senior Note Indenture and Old F4L Senior obligations under the New F4L Senior Note
Notes. Indenture and the New F4L Senior Notes.
CHANGE OF CONTROL Upon the occurrence of a Change of Control Upon the occurrence of a Change of Control
(as defined), each holder will have the (as defined), each holder will have the
right to require the repurchase of such right to require the Company to repurchase
holder's Old F4L Senior Notes at a purchase such holder's New F4L Senior Notes at a
price equal to 101% of the principal amount purchase price equal to 101% of the
thereof plus accrued and unpaid interest to principal amount thereof plus accrued and
the date of repurchase. The consummation of unpaid interest to the date of repurchase.
the Merger will not constitute a Change of
Control under the Old F4L Senior Note
Indenture.
CERTAIN COVENANTS The Old F4L Senior Notes Indenture contains The New F4L Senior Notes Indenture contains
certain covenants, including, but not certain covenants, including, but not
limited to, covenants with respect to the limited to, covenants with respect to the
following: (i) limitation on restricted following: (i) limitation on restricted
payments; (ii) limitation on incurrences of payments; (ii) limitation on incurrences of
additional indebtedness; (iii) limitation on additional indebtedness and incurrence of
liens; (iv) limitation on disposition of subordinated indebtedness; (iii) limitation
assets; (v) limitation on dividend payment on liens; (iv) limitation on asset sales;
restrictions affecting subsidiaries; (vi) (v) limitation on dividend and other payment
guarantees of certain indebtedness; (vii) restrictions affecting subsidiaries; (vi)
limitation on transactions with affiliates; guarantees of certain indebtedness; (vii)
(viii) limitation on mergers and certain limitation on transactions with affiliates;
other transactions; and (ix) maintenance of (viii) limitation on mergers and certain
Net Worth. other transactions; and (ix) limitations on
preferred stock of subsidiaries.
</TABLE>
10
<PAGE> 20
COMPARISON OF OLD F4L SENIOR SUBORDINATED NOTES AND
NEW F4L SENIOR SUBORDINATED NOTES
The following is a brief comparison of the principal features of the Old
F4L Senior Subordinated Notes to the New F4L Senior Subordinated Notes. The
terms of the New F4L Senior Subordinated Notes differ from the current
(unamended) terms of the Old F4L Senior Subordinated Notes in certain
significant respects, including those discussed below. The summary comparisons
set forth below do not purport to be complete and are qualified in their
entirety by reference to "Description of New F4L Notes" and to the "Comparison
of Old F4L Senior Subordinated Notes and New F4L Senior Subordinated Notes" set
forth in Appendix B hereto, and the related definitions contained therein.
<TABLE>
<CAPTION>
OLD F4L SENIOR NEW F4L SENIOR
SUBORDINATED NOTES SUBORDINATED NOTES
-------------------------------------------- --------------------------------------------
<S> <C> <C>
ISSUER Food 4 Less. The Company, as successor by merger to Food
4 Less.
PRINCIPAL AMOUNT As of November 1, 1994, $145 million. Up to $145 million.
OUTSTANDING
INTEREST RATE The Old F4L Senior Subordinated Notes bear The New F4L Senior Subordinated Notes will
interest at the rate of 13.75% per annum. bear interest at the rate of 13.75% per
annum.
INTEREST PAYMENT June 15 and December 15. February 1, and August 1, commencing on
DATES August 1, 1995.
FINAL MATURITY DATE June 15, 2001. February 1, 2005.
OPTIONAL REDEMPTION The Old F4L Senior Subordinated Notes are The New F4L Senior Subordinated Notes are
subject to redemption in whole or in part, subject to redemption in whole or in part,
at the option of Food 4 Less, at any time on at the option of the Company, at any time on
or after June 15, 1996, at the following or after June 15, 1996, at the following
redemption prices if redeemed during the redemption prices if redeemed during the
twelve-month period commencing on June 15 of twelve-month period commencing on June 15 of
the year set forth below: the year set forth below:
1996................................106.111% 1996................................106.111%
1997................................104.583% 1997................................104.583%
1998................................103.056% 1998................................103.056%
1999................................101.528% 1999................................101.528%
And thereafter......................100.000% And thereafter......................100.000%
in each case plus accrued and unpaid in each case plus accrued and unpaid
interest to the date of redemption. interest to the date of redemption.
In the event of a Change of Control, the Old
F4L Senior Subordinated Notes may be
redeemed on or after June 15, 1994 and prior
to June 15, 1996, at the option of Food 4
Less, at a redemption price equal to the
applicable percentage of the principal
amount thereof set forth below, together
with accrued and unpaid interest to the date
of redemption, if redeemed during the 12
months commencing on June 15 in the years
set forth below:
Year Percentage
---- ----------
1994................................109.167%
1995................................107.639%
MANDATORY REDEMPTION Under the Old F4L Senior Subordinated Note The New F4L Senior Subordinated Notes are
Indenture, Food 4 Less is required to make a not subject to a mandatory sinking fund
mandatory sinking fund payment on June 15, requirement.
2000, sufficient to retire 50% of the Old
F4L Senior Subordinated Notes originally
issued, at a redemption price equal to 100%
of the principal amount thereof, plus
accrued and unpaid interest to the date of
redemption. FOOD 4 LESS INTENDS TO CREDIT
EXCHANGES OF OLD F4L SENIOR SUBORDINATED
NOTES ACCEPTED PURSUANT TO THE EXCHANGE
OFFERS HEREUNDER AGAINST ITS SINKING FUND
OBLIGATIONS.
</TABLE>
11
<PAGE> 21
<TABLE>
<CAPTION>
OLD F4L SENIOR NEW F4L SENIOR
SUBORDINATED NOTES SUBORDINATED NOTES
-------------------------------------------- --------------------------------------------
<S> <C> <C>
RANKING The Old F4L Senior Subordinated Notes are The New F4L Senior Subordinated Notes will
unsecured general obligations of Food 4 Less be senior subordinated unsecured obligations
and are subordinated to all Senior of the Company and will be subordinated in
Indebtedness of Food 4 Less, including the right of payment to all Senior Indebtedness
Old F4L Senior Notes and the borrowings and (as defined) of the Company, including the
other obligations under the Credit Company's obligations under the New Credit
Agreement. As of September 17, 1994, the Facility, the Senior Unsecured Term Loan
Senior Indebtedness of Food 4 Less was Agreement, and the F4L Senior Notes. At
approximately $1,554.8 million. September 17, 1994, on a pro forma basis
after giving effect to the Merger and the
Financing (and certain related assumptions),
the aggregate outstanding amount of Senior
Indebtedness of the Company (excluding
Company guarantees of certain Guarantor
Senior Indebtedness) would have been
approximately $1,554.8 million and the
aggregate outstanding amount of Guarantor
Senior Indebtedness of the Subsidiary
Guarantors (excluding guarantees by
Subsidiary Guarantors of certain Senior
Indebtedness of the Company) would have been
approximately $16.0 million and the Company
would have had $218.2 million available to
be borrowed under the New Revolving
Facility.
GUARANTEES Each Subsidiary Guarantor has Each Subsidiary Guarantor will
unconditionally guaranteed, jointly and unconditionally guarantee, jointly and
severally, the full and prompt performance severally, the full and prompt performance
of Food 4 Less's obligations under the Old of the Company's obligations under the New
F4L Senior Subordinated Note Indenture and F4L Senior Subordinated Note Indenture and
the Old F4L Senior Subordinated Notes. the New F4L Senior Subordinated Notes.
CHANGE OF CONTROL Upon the occurrence of a Change of Control Upon the occurrence of a Change of Control
(as defined), each holder will have the (as defined) each holder will have the right
right to require the repurchase of such to require the repurchase of such holder's
holder's Old F4L Senior Subordinated Notes New F4L Senior Subordinated Notes at a
at a purchase price equal to 101% of the purchase price equal to 101% of the
principal amount thereof plus accrued and principal amount thereof plus accrued and
unpaid interest to the date of repurchase. unpaid interest to the date of repurchase.
The consummation of the Merger will not
constitute a Change of Control under the Old
F4L Senior Subordinated Note Indenture.
CERTAIN COVENANTS The Old F4L Senior Subordinated Notes The New F4L Senior Subordinated Notes
Indenture contains certain covenants, Indenture contains certain covenants,
including, but not limited to, covenants including, but not limited to, covenants
with respect to the following: (i) with respect to the following: (i)
limitation on restricted payments; (ii) limitation on restricted payments; (ii)
limitation on incurrences of additional limitation on incurrences of additional
indebtedness; (iii) limitation on liens; indebtedness; (iii) limitations on liens;
(iv) limitation on asset sales; (v) (iv) limitation on asset sales; (v)
limitation on payment restrictions affecting limitation on dividends and other payment
subsidiaries; (vi) guarantees of certain restrictions affecting subsidiaries; (vi)
indebtedness; (vii) limitation on guarantees of certain indebtedness; (vii)
transactions with affiliates; (viii) limitation on transactions with affiliates;
limitations on merger and certain other (viii) limitation on mergers and certain
transactions and (ix) maintenance of Net other transactions; and (ix) limitation on
Worth. preferred stock of subsidiaries.
</TABLE>
12
<PAGE> 22
PURPOSES OF THE EXCHANGE OFFERS AND CONSENT SOLICITATION
The Exchange Offers and the Solicitation, together with the other financing
and solicitation transactions described under "The Merger and the Financing,"
are part of the transactions required to consummate the merger of Food 4 Less
with and into RSI. Immediately following the RSI Merger, RGC, a wholly-owned
subsidiary of RSI, will merge with and into RSI and RSI will change its name to
Ralphs Grocery Company.
As a result of the Merger, the New F4L Notes and any Old F4L Notes not
tendered for exchange pursuant to the Exchange Offers, the New RGC Notes and the
Old RGC Notes not tendered pursuant to the RGC Exchange Offers, and the
indebtedness incurred pursuant to the New Credit Facility will become the
obligations of the Company. In connection with the consummation of the Merger,
Food 4 Less is making the Exchange Offers and the RGC Exchange Offer to (i)
extend the maturities of the existing debt securities of Food 4 Less and RGC by
exchanging such securities for new longer-term securities and (ii) establish
uniform covenants in the New F4L Notes and the New RGC Notes in order to
simplify the capital structure of the Company. The Exchange Offers afford Old
F4L Noteholders an opportunity to elect to participate in the long-term
capitalization of the Company.
Food 4 Less is also seeking Consents to the Proposed Amendments in the
Solicitation. The primary purpose of the Proposed Amendments is to permit the
consummation of the Merger and to eliminate substantially all of the restrictive
covenants in the Old F4L Indentures. See "The Proposed Amendments." If adopted
by the holders of a majority in aggregate principal amount of each of the
outstanding Old F4L Senior Notes and the outstanding Old F4L Senior Subordinated
Notes, the Proposed Amendments will become effective immediately prior to the
consummation of the Merger, upon Food 4 Less' acceptance of properly tendered
Old F4L Notes for exchange pursuant to the Exchange Offers.
THE EXCHANGE OFFERS AND THE SOLICITATION
The Exchange Offers........... Food 4 Less is offering (i) to holders of the
Old F4L Senior Notes to exchange for each
$1,000 principal amount of Old F4L Senior Notes
exchanged, $1,000 principal amount of New F4L
Senior Notes plus $5.00 in cash and (ii) to
holders of the Old F4L Senior Subordinated
Notes to exchange for each $1,000 principal
amount of Old F4L Senior Subordinated Notes
exchanged, $1,000 principal amount of New F4L
Senior Subordinated Notes plus $20.00 in cash,
in each case plus accrued and unpaid interest
to the date of exchange. Each Exchange Offer
constitutes a separate exchange offer by Food 4
Less. See "The Exchange Offers and
Solicitation -- Terms of the Exchange Offers."
Holders of the Old F4L Notes may choose to
participate in the applicable Exchange Offer by
completing the appropriate boxes on the Letter
of Transmittal. See "The Exchange Offers and
Solicitation -- Procedures for Tendering and
Consenting."
Accrued Interest on the
Old F4L Notes............... Tendering holders will receive accrued interest
on Old F4L Notes accepted for exchange up to,
but not including, the date of such exchange.
Interest on the New F4L Notes will accrue from,
and including, the date of such exchange, which
shall be the date of issuance of the New F4L
Notes. Accrued interest on tendered Old F4L
Notes will be paid in cash to such tendering
holders promptly after consummation of the
Exchange Offers. See "The Exchange Offers and
Solicitation -- Acceptance of Old F4L Notes for
Ex-
13
<PAGE> 23
change; Delivery of New F4L Notes and Payment
of Exchange Payment."
The Solicitation.............. Concurrently with the Exchange Offers, Food 4
Less is soliciting Consents from each of the
Old F4L Senior Noteholders and the Old F4L
Senior Subordinated Noteholders representing at
least a majority in aggregate principal amount
of each of the outstanding Old F4L Senior Notes
and Old F4L Senior Subordinated Notes held by
persons other than Food 4 Less and its
affiliates to the Proposed Amendments to the
Old F4L Indentures. See "The Proposed
Amendments." HOLDERS OF OLD F4L NOTES WHO
DESIRE TO ACCEPT THE APPLICABLE EXCHANGE OFFER
MUST CONSENT TO THE PROPOSED AMENDMENTS.
HOLDERS DO NOT HAVE THE OPTION TO CONSENT TO
THE PROPOSED AMENDMENTS WITHOUT TENDERING INTO
THE APPLICABLE EXCHANGE OFFER. See "The
Exchange Offers and Solicitation -- Procedures
for Tendering and Consenting."
The Company and each of the Old Trustees (as
defined) will execute the Supplemental
Indentures (as defined) implementing the
Proposed Amendments to the Old F4L Note
Indentures after certification to each of the
Old F4L Note Trustees that Food 4 Less has
received the Requisite Consents. The Proposed
Amendments will only become operative upon
consummation of the Exchange Offers. If the
Proposed Amendments become operative, the
non-tendering holders of Old F4L Notes will be
bound thereby regardless of whether they
consented to the Proposed Amendments. All
references herein to the Exchange Offers shall
be deemed to include the Solicitation.
As of January 1, 1995, there was issued and
outstanding $175 million aggregate principal
amount of Old F4L Senior Notes and $145 million
aggregate principal amount of Old F4L Senior
Subordinated Notes. See "The Exchange Offers
and Solicitation -- The Consent Solicitation."
Expiration Date............... Each Exchange Offer and the Solicitation will
expire at 12:00 Midnight, New York City time,
on , 1995, unless extended by Food
4 Less. Food 4 Less reserves the right to
extend either Exchange Offer or the
Solicitation at its discretion, in which event
the term "Expiration Date" shall mean the
latest time and date at which such Exchange
Offer or the Solicitation, as the case may be,
as so extended by Food 4 Less, shall expire.
Food 4 Less expects to extend the Expiration
Date to a date that is five Business Days
following the pricing of the Public Offering.
See "The Exchange Offers and
Solicitation -- Expiration Date; Extensions;
Termination; Amendments."
14
<PAGE> 24
Withdrawal Rights and
Revocation of Consents........ Tenders of Old F4L Notes pursuant to the
Exchange Offers may be withdrawn and Consents
may be revoked at any time until the later of
(a) such time as the Requisite Consents with
respect to the applicable issue of Old F4L
Notes have been received and the Supplemental
Indenture for such issue has been executed and
(b) [20 Business Days following commencement].
Thereafter, such tenders may be withdrawn and
Consents may be revoked if the Exchange Offer
with respect to such Old F4L Notes is
terminated without any Old F4L Notes being
accepted for exchange thereunder. Any valid
revocation of Consents will automatically
constitute a withdrawal of the Old F4L Notes to
which such Consents relate. See "The Exchange
Offers and Solicitation -- Withdrawal of
Tenders and Revocation of Consents."
Conditions.................... Notwithstanding any other provision of the
Exchange Offers or the Solicitation, the
obligation of Food 4 Less to accept for
exchange any validly tendered Old F4L Note is
conditioned upon, among other things, the
satisfaction or waiver of certain conditions,
including (i) satisfaction of the Minimum
Tender (i.e., at least 80% of the aggregate
principal amount of the outstanding Old F4L
Notes being validly tendered and not withdrawn
pursuant to the Exchange Offers prior to the
Expiration Date), (ii) the receipt of the
Requisite Consents (i.e., Consents from Old F4L
Noteholders representing at least a majority in
aggregate principal amount of each of the
outstanding Old F4L Senior Notes and Old F4L
Senior Subordinated Notes held by persons other
than Food 4 Less and its affiliates) on or
prior to the Expiration Date, (iii)
satisfaction or waiver, in Food 4 Less' sole
discretion, of all conditions precedent to the
RSI Merger, (iv) the prior or contemporaneous
consummation of the Other Debt Financing
Transactions (including the Public Offering)
and (v) the prior or contemporaneous
consummation of the Bank Financing and the New
Equity Investment. In addition, consummation of
each Exchange Offer is subject to the
consummation of the other Exchange Offer. There
can be no assurance that such conditions will
be satisfied or waived. Food 4 Less reserves
the right to waive certain of the conditions to
either Exchange Offer and, subject to certain
limitations, to extend, terminate, cancel or
otherwise modify or amend either Exchange Offer
in any respect. See "The Exchange Offers and
Solicitation -- Conditions."
Procedures for Tendering and
Consenting.................. Any Old F4L Noteholder desiring to accept the
applicable Exchange Offer should either (i)
complete and sign the Letter of Transmittal or
facsimile thereof, have his signature thereon
guaranteed and forward the Letter of
Transmittal, together with the certificate(s)
evidencing his Old F4L Notes and any other
required documents, to the Exchange Agent, (ii)
comply with the guaranteed delivery procedure
described under the heading "The
15
<PAGE> 25
Exchange Offers and Solicitation -- Guaranteed
Delivery Procedure," (iii) tender such Old F4L
Notes pursuant to the procedure for book-entry
transfer, or (iv) request his broker, dealer,
commercial bank, trust company or other nominee
to effect the transaction for him, in each case
prior to the Expiration Date. Old F4L
Noteholders having Old F4L Notes registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee must contact
such person if such holder desires to tender
such Old F4L Notes. HOLDERS OF OLD F4L NOTES
WHO DESIRE TO ACCEPT THE APPLICABLE EXCHANGE
OFFER MUST CONSENT TO THE PROPOSED AMENDMENTS.
A HOLDER OF OLD F4L NOTES WHO DESIRES TO TENDER
INTO THE APPLICABLE EXCHANGE OFFER WITH RESPECT
TO ANY OLD F4L SENIOR NOTES OR OLD F4L SENIOR
SUBORDINATED NOTES MUST TENDER ALL OF SUCH
HOLDERS' OLD F4L SENIOR NOTES OR OLD F4L SENIOR
SUBORDINATED NOTES, AS THE CASE MAY BE. See
"The Exchange Offers and
Solicitation -- Procedures for Tendering and
Consenting."
Delivery of New F4L Notes and
Payment of the Exchange
Payment..................... Upon satisfaction or waiver of the conditions
to each of the Exchange Offers, Food 4 Less
will accept all Old F4L Notes which are
properly tendered and not withdrawn, and
promptly following such acceptance, the Company
will issue, or cause to be issued, the New F4L
Notes and will pay, or cause to be paid, the
applicable Exchange Payment in accordance with
the instructions of the tendering Old F4L
Noteholder. See "The Exchange Offers and
Solicitation -- Acceptance of Old F4L Notes for
Exchange; Delivery of New F4L Notes and Payment
of the Exchange Payment."
Certain Consequences to Non-
Tendering Old F4L
Noteholders................. Consummation of the Exchange Offers and the
effectiveness of the Proposed Amendments may
have adverse consequences to non-tendering Old
F4L Noteholders, including that non-tendering
holders of Old F4L Notes will no longer be
entitled to the benefit of certain of the
restrictive covenants currently contained in
the Old F4L Indentures and that the reduced
amount of outstanding Old F4L Notes as a result
of the Exchange Offers may adversely affect the
trading market, liquidity and market price of
the Old F4L Notes. If the Requisite Consents
are received and accepted, the Proposed
Amendments will be binding on all non-tendering
Old F4L Noteholders. See "Risk
Factors -- Potential Adverse Effects of the
Exchange Offers and the Solicitation on Holders
of Untendered Old F4L Notes" and "-- Effect of
the Proposed Amendments on Holders That Do Not
Exchange."
16
<PAGE> 26
No Appraisal Rights........... No appraisal rights are available to holders of
Old F4L Notes in connection with the Exchange
Offers.
Certain Federal Income Tax
Considerations.............. Holders of Old F4L Notes who exchange Old F4L
Notes for New F4L Notes and cash should
recognize gain, but not loss, for federal
income tax purposes equal to the lesser of (i)
the amount of cash received (other than that
portion, if any, attributable to accrued but
unpaid interest on the Old F4L Notes) or (ii)
the amount of any gain realized on the exchange
of Old F4L Notes for New F4L Notes and cash.
See "Certain Federal Income Tax
Considerations."
Risk Factors.................. See "Risk Factors" for a discussion of certain
factors that should be considered in evaluating
the Exchange Offers and the Solicitation.
Dealer Managers............... BT Securities Corporation ("BT Securities"), CS
First Boston Corporation ("CS First Boston")
and Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") are serving as Dealer
Managers in connection with the Exchange Offers
and the Solicitation. Their telephone numbers
are (212) 775-4300, (212) 909-2873 and (212)
504-4753, respectively.
Exchange Agent................ Bankers Trust, an affiliate of BT Securities,
is serving as Exchange Agent in connection with
the Exchange Offers and the Solicitation. Its
telephone number is (212) 250-6270.
Information Agent............. D.F. King & Co., Inc. is serving as Information
Agent in connection with the Exchange Offers
and the Solicitation. Requests for additional
copies of this Prospectus and Solicitation
Statement, the Letter of Transmittal and any
other required documents should be directed to
the Information Agent or any Dealer Manager at
one of its addresses set forth on the back
cover page of this Prospectus and Solicitation
Statement. The telephone number of the
Information Agent is (800) 669-5550.
17
<PAGE> 27
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth summary unaudited pro forma combined
financial data for the 52 weeks ended June 25, 1994 and for the 12 weeks ended
September 17, 1994, after giving effect to the Merger and the Financing (and
certain related assumptions), as if such transactions had occurred on June 27,
1993, with respect to the pro forma operating and other data, and as of
September 17, 1994, with respect to the pro forma balance sheet data. Such pro
forma information combines the results of operations of Food 4 Less for the 52
weeks ended June 25, 1994 and the results of operations and balance sheet data
as of and for the 12 weeks ended September 17, 1994, with the results of
operations of Ralphs for the 52 weeks ended July 17, 1994 and the results of
operations and balance sheet data as of and for the 12 weeks ended October 9,
1994, respectively. See "The Merger and the Financing." The pro forma financial
data set forth below is not necessarily indicative of the results that actually
would have been achieved had such transactions been consummated as of the dates
indicated, or that may be achieved in the future. The following pro forma
financial data should be read in conjunction with the "Unaudited Pro Forma
Combined Financial Statements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical consolidated
financial statements of Food 4 Less and Ralphs and related notes thereto,
included elsewhere in this Prospectus and Solicitation Statement.
<TABLE>
<CAPTION>
52 WEEKS ENDED 12 WEEKS ENDED
JUNE 25, 1994 SEPTEMBER 17, 1994
------------- ------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
OPERATING DATA:
Sales.................................................... $5,053.5 $1,160.8
Gross profit............................................. 1,048.2 231.6
Selling, general and administrative expenses............. 829.9 187.6
Interest expense:
Cash.................................................. 224.6 53.3
Non-cash.............................................. 15.2 3.3
Amortization of debt issuance costs................... 11.7 2.7
-------- --------
Total interest expense................................... 251.5 59.3
Net earnings (loss)(a)................................... (85.8) (23.2)
Ratio of earnings to fixed charges(b).................... -- --
BALANCE SHEET DATA (END OF PERIOD):
Working capital (deficit)........................................................ $ (5.7)
Total assets..................................................................... 3,055.1
Total debt....................................................................... 1,971.7
Stockholder's equity............................................................. 249.2
OTHER DATA:
Depreciation and amortization............................ $ 151.0 $ 34.9
Capital expenditures(c).................................. 123.2 36.3
Stores open at end of period(d).......................... -- 395
EBITDA (as defined)(a)(e)(f)............................. $ 342.5 $ 79.5
EBITDA margin(g)......................................... 6.8% 6.9%
</TABLE>
- ---------------
(a) The summary unaudited pro forma combined financial data and the results of
operations and EBITDA (as defined) for the 52 weeks ended June 25, 1994 and
the 12 weeks ended September 17, 1994 do not include certain one-time
non-recurring costs related to (i) severance payments under certain
employment contracts with Food 4 Less management totaling $1.4 million that
are subject to change of control provisions and the achievement of earnings
and sales targets, (ii) costs related to the integration of the Company's
operations, which are estimated to be $50.0 million over a three-year
period, (iii) $1.8 million in costs related to the cancellation of an
employment agreement, and (iv) other costs related to warehouse closures,
which costs are not presently determinable.
(b) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of earnings before income taxes, cumulative effect of change in
accounting principles, extraordinary items and fixed charges before
capitalized interest. "Fixed charges" consist of interest expense (including
amortization of self-insurance reserves discount), capitalized interest,
amortization of deferred debt issuance costs and one-third of rental expense
(the portion deemed representative of the interest factor). The Company's
pro forma earnings were insufficient to cover pro forma fixed charges by
approximately $85.8 million and $23.2 million for the 52 weeks ended
18
<PAGE> 28
June 25, 1994 and the 12 weeks ended September 17, 1994, respectively.
However, such pro forma earnings included non-cash charges of $182.9 million
and $41.8 million, respectively, primarily consisting of depreciation and
amortization.
(c) Does not include Merger-related capital expenditures of $61.0 million and
$10.0 million for the 52 weeks ended June 25, 1994 and the 12 weeks ended
September 17, 1994, respectively.
(d) The pro forma number of stores is based on October 1, 1994 totals, but gives
effect to the closing or divestiture of 32 stores (29 Food 4 Less
conventional supermarkets or warehouse stores and 3 Ralphs stores) in
connection with the Merger and the closure of 2 additional Food 4 Less
stores.
(e) "EBITDA", as defined and presented historically by RGC, represents net
earnings before interest expense, income tax expense (benefit), depreciation
and amortization expense, provision for Equity Appreciation Rights,
provision for tax indemnification payments to Federated Department Stores,
Inc. ("Federated"), provision for postretirement benefits, the LIFO charge,
extraordinary item relating to debt refinancing, provision for legal
settlement, provision for restructuring, provision for earthquake losses, a
one-time charge for Teamsters Union sick pay benefits and gains and losses
on disposal of assets. EBITDA is a widely accepted financial indicator of a
company's ability to service debt. However, EBITDA should not be construed
as an alternative to operating income or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of the Company's
operating performance or as a measure of liquidity. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(f) Pro forma EBITDA does not give any effect to $90 million of anticipated net
annual cost savings which management believes are achievable by the end of
the fourth full year of combined operations. It is anticipated that
approximately $117 million in Merger-related capital expenditures and $50
million of other non-recurring costs will be required to complete store
conversions, integrate operations and expand warehouse facilities over the
same period. Although a portion of the anticipated cost savings is premised
upon the completion of such capital expenditures, management believes that
over 70% of the cost savings could be achieved without making any
Merger-related capital expenditures. As shown below, the sum of the
components of the estimated annual cost savings exceeds $90 million;
however, management has made an offsetting adjustment to reflect its
expectation that a portion of the savings will be reinvested in the
Company's operations. These anticipated savings are based on estimates and
assumptions made by the Company that are inherently uncertain, though
considered reasonable by the Company, and are subject to significant
business, economic and competitive uncertainties and contingencies, all of
which are difficult to predict and many of which are beyond the control of
management. As a result, there can be no assurance that such savings will be
achieved. See "Business -- The Merger" and "Risk Factors -- Ability to
Achieve Anticipated Cost Savings." The components of the estimated cost
savings are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Pro forma EBITDA for the 52 weeks ended June 25, 1994........................ $342.5
Estimated net annual cost savings:
Reduced advertising expenses............................................... 28.0
Reduced store operations expense........................................... 21.0
Increased volume purchasing efficiencies................................... 19.0
Warehousing and distribution efficiencies.................................. 16.0
Consolidated manufacturing................................................. 11.0
Consolidated administrative functions...................................... 15.0
Less: Annual reinvestment of cost savings.................................. (20.0)
------
Total estimated net annual cost savings...................................... $ 90.0
------
Sum of EBITDA (as defined) and full amount of estimated annual cost savings
to be realized over four years............................................. $432.5
======
</TABLE>
(g) EBITDA margin represents EBITDA (as defined) as a percentage of sales.
19
<PAGE> 29
SUMMARY HISTORICAL FINANCIAL DATA OF RALPHS
The following table sets forth summary historical financial data of RGC (as
the predecessor of RSI) as of and for the 52 weeks ended January 28, 1990, the
53 weeks ended February 3, 1991 and the 52 weeks ended February 2, 1992, and
summary historical financial data of RSI as of and for the 52 weeks ended
January 31, 1993 and January 30, 1994, which have been derived from the
financial statements of RSI and RGC audited by KPMG Peat Marwick LLP,
independent certified public accountants. The summary historical financial data
of RSI presented below as of and for the 36 weeks ended October 10, 1993 and
October 9, 1994 have been derived from unaudited interim financial statements of
RSI which, in the opinion of management, reflect all material adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of such data. The following information should be read in
conjunction with the Unaudited Pro Forma Combined Financial Statements,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical consolidated financial statements of RSI and RGC
and related notes thereto included elsewhere in this Prospectus and Solicitation
Statement.
<TABLE>
<CAPTION>
52 WEEKS 53 WEEKS 52 WEEKS 52 WEEKS 52 WEEKS 36 WEEKS 36 WEEKS
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
JANUARY 28, FEBRUARY 3, FEBRUARY 2, JANUARY 31, JANUARY 30, OCTOBER 10, OCTOBER 9,
1990 1991 1992 1993 1994 1993 1994
----------- ----------- ----------- ----------- ----------- ----------- ----------
(DOLLARS IN MILLIONS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Sales........................ $2,556.1 $2,799.1 $2,889.2 $2,843.8 $2,730.2 $1,874.2 $1,856.3
Gross profit................. 505.0 573.7 614.0 626.6 636.5 429.1 423.3
Selling, general and
administrative expense..... 391.0 435.8 456.6 466.7 467.6 319.4 316.0
Interest expense(a).......... 130.9 128.5 130.2 125.6 108.8 75.7 77.2
Net earnings (loss)(b)....... (69.7) (51.4) (41.2) (76.1) 138.4(h) 23.7 19.9
Ratio of earnings to fixed
charges(c)................. --(c) --(c) --(c) 1.02x 1.24x 1.27x 1.22x
BALANCE SHEET DATA (end of
period):
Working capital surplus
(deficit).................. $ (46.5) $ (93.9) $ (114.2) $ (122.0) $ (73.0) $ (87.5) $ (118.3)
Total assets................. 1,404.8 1,406.4 1,357.6 1,388.5 1,483.7 1,363.9 1,491.4
Total debt(d)................ 991.0 986.1 941.9 1,029.8 998.9 990.4 1,000.6
Redeemable stock............. 3.0 3.0 3.0 -- -- -- --
Stockholders' equity
(deficit).................. 35.4 (16.0) (57.2) (133.3) 5.1 (109.5) 15.0
OTHER DATA:
Depreciation and
amortization(e)............ $ 81.6 $ 75.2 $ 76.6 $ 76.9 $ 74.5 $ 51.7 $ 51.9
Capital expenditures......... 103.5 87.6 50.4 102.7 62.2 46.8 44.5
Stores open at end of
period..................... 142 150 158 159 165 163 168
EBITDA (as defined)(f)....... $ 188.8 $ 207.0 $ 225.8 $ 227.3 $ 230.2 $ 155.9 $ 156.1
EBITDA margin(g)............. 7.4% 7.4% 7.8% 8.0% 8.4% 8.3% 8.4%
</TABLE>
- ---------------
(a) Interest expense includes non-cash charges related to the amortization of
deferred debt issuance costs of $4.1 million for the 52 weeks ended January
28, 1990, $4.1 million for the 53 weeks ended February 3, 1991, $5.0 million
for the 52 weeks ended February 2, 1992, $5.5 million for the 52 weeks ended
January 31, 1993, $6.5 million for the 52 weeks ended January 30, 1994 and
$4.5 and $4.3 for the 36 weeks ended October 10, 1993 and October 9, 1994,
respectively.
(b) Net earnings (loss) includes expenses relating to provisions for Equity
Appreciation Rights and for tax indemnification payments to Federated,
extraordinary item relating to debt refinancing, loss on disposal of assets,
provisions for postretirement and pension benefits and provision for
earthquake losses.
(c) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of earnings before income taxes, cumulative effect of change in
accounting principles, extraordinary item and fixed charges before
capitalized interest. "Fixed charges" consist of interest expense (including
amortization of self-insurance reserves discount), capitalized interest,
amortization of deferred debt issuance costs and one-third of rental expense
(the portion deemed representative of the interest factor). Earnings were
insufficient to cover fixed charges for the 52 weeks ended January 28, 1990,
the 53 weeks ended February 3, 1991 and the 52 weeks ended February 2, 1992
by approximately $57.7 million, $25.5 million and $27.7 million,
respectively.
(d) Total debt includes long-term debt, current maturities of long-term debt,
short-term debt and capital lease obligations.
(e) For the 52 weeks ended January 28, 1990, the 53 weeks ended February 3,
1991, the 52 weeks ended February 2, 1992, January 31, 1993 and January 30,
1994 and the 36 weeks ended October 10, 1993 and October 9, 1994,
depreciation and amortization includes amortization of the excess of cost
over net assets acquired of $11.7 million, $11.0 million, $11.0 million,
$11.0 million, $11.0 million, $7.6 million and $7.6 million, respectively.
(f) "EBITDA," as defined and presented historically by RGC, represents earnings
before interest expense, income tax expense (benefit), depreciation and
amortization expense, provisions for Equity Appreciation Rights, provision
for tax indemnification payments to Federated, provision for postretirement
benefits, the LIFO charge, extraordinary item relating to debt refinancing,
provision for legal settlement, provision for restructuring, provision for
earthquake losses, a one-time charge for Teamsters Union sick pay benefits
and loss on disposal of assets. EBITDA is a widely accepted financial
indicator of a company's ability to service debt. However, EBITDA should not
be construed as an alternative to operating income or to cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles) and should not be construed as an indication of
Ralphs' operating performance or as a measure of liquidity. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(g) EBITDA margin represents EBITDA (as defined) as a percentage of sales.
(h) Includes recognition of $109.1 million of deferred income tax benefit and
$1.1 million current income tax expense for Fiscal 1993 (see Note 11 of
Notes to Consolidated Financial Statements of Ralphs Supermarkets, Inc.).
20
<PAGE> 30
SUMMARY HISTORICAL FINANCIAL DATA OF FOOD 4 LESS
The following table sets forth summary historical financial data of Food 4
Less as of and for the 53 weeks ended June 30, 1990 and the 52 weeks ended June
29, 1991, June 27, 1992, June 26, 1993 and June 25, 1994 which have been derived
from the financial statements of Food 4 Less audited by Arthur Andersen LLP,
independent public accountants. The summary historical financial data of Food 4
Less presented below as of and for the 12 weeks ended September 18, 1993 and
September 17, 1994 have been derived from unaudited interim financial statements
of Food 4 Less which, in the opinion of management, reflect all material
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation of such data. The following information should be read in
conjunction with the Unaudited Pro Forma Combined Financial Statements,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical consolidated financial statements of Food 4 Less
and related notes thereto included elsewhere in this Prospectus and Solicitation
Statement.
<TABLE>
<CAPTION>
53 WEEKS 52 WEEKS 52 WEEKS 52 WEEKS 52 WEEKS 12 WEEKS 12 WEEKS
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 29, JUNE 27, JUNE 26, JUNE 25, SEPTEMBER 18, SEPTEMBER 17,
1990 1991(A) 1992 1993 1994(B) 1993 1994
-------- -------- -------- -------- -------- ------------- -------------
(DOLLARS IN MILLIONS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Sales.................................... $1,318.2 $1,606.6 $2,913.5 $2,742.0 $2,585.2 $616.6 $598.7
Gross profit............................. 204.8 265.7 520.8 484.2 469.3 112.4 103.0
Selling, general, administrative and
other expense.......................... 157.8 213.1 469.7 434.9 388.8 95.7 88.1
Interest expense(c)...................... 50.8 50.1 70.2 69.8 68.3 15.7 16.0
Net loss................................. (10.1) (9.6) (33.8) (27.4) (2.7) (1.1) (3.3)
Ratio of earnings to fixed charges(d).... --(d) --(d) --(d) --(d) 1.0x --(d) --(d)
BALANCE SHEET DATA (end of period)(e):
Working capital surplus (deficit)........ $ (40.5) $ 13.7 $ (66.3) $ (19.2) $ (54.9) $(18.6) $(58.1)
Total assets............................. 574.7 980.0 998.5 957.8 980.1 967.3 978.5
Total debt(f)............................ 360.7 558.9 525.3 538.1 517.9 530.6 518.8
Redeemable stock......................... 5.1 -- -- -- -- -- --
Stockholder's equity..................... 20.6 84.6 50.8 72.9 69.0 71.6 65.7
OTHER DATA:
Depreciation and amortization(g)......... $ 25.8 $ 31.9 $ 54.9 $ 57.6 $ 57.1 $ 13.1 $ 13.0
Capital expenditures..................... 36.4 34.7 60.3 53.5 57.5 6.6 16.8
Stores open at end of period............. 115 259 249 248 258 248 261
EBITDA (as defined)(h)................... $ 69.5 $ 80.7 $ 103.1 $ 105.9 $ 130.5 $ 29.0 $ 29.7
EBITDA margin(i)......................... 5.3% 5.0% 3.5% 3.9% 5.0% 4.7% 5.0%
</TABLE>
- ---------------
(a) Operating data for the 52 weeks ended June 29, 1991 include the results of
Alpha Beta only from June 17, 1991, the date of its acquisition. Alpha
Beta's sales for the two weeks ended June 29, 1991 were $59.2 million.
(b) Operating data for the 52 weeks ended June 25, 1994 include the results of
the Food Barn stores, which were not material from March 29, 1994, the date
of the Food Barn acquisition.
(c) Interest expense includes non-cash charges related to the amortization of
deferred financing costs of $4.1 million for the 53 weeks ended June 30,
1990, $5.2 million for the 52 weeks ended June 29, 1991, $6.3 million for
the 52 weeks ended June 27, 1992, $4.9 million for the 52 weeks ended June
26, 1993, $5.5 million for the 52 weeks ended June 25, 1994, $1.2 million
for the 12 weeks ended September 18, 1993 and $1.3 million for the 12 weeks
ended September 17, 1994.
(d) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of loss before provision for income taxes and extraordinary charges
plus fixed charges. "Fixed charges" consist of interest on all indebtedness,
amortization of deferred debt financing costs and one-third of rental
expense (the portion deemed representative of the interest factor). Earnings
were insufficient to cover fixed charges for the 53 weeks ended June 30,
1990, the 52 weeks ended June 29, 1991, June 27, 1992 and June 26, 1993 and
the 12 weeks ended September 18, 1993 and September 17, 1994, by
approximately $9.1 million, $3.4 million, $25.6 million, $25.9 million, $0.8
million and $2.4 million respectively. However, such earnings included
non-cash charges of $29.9 million for the 53 weeks ended June 30, 1990,
$37.0 million for the 52 weeks ended June 29, 1991, $61.2 million for the 52
weeks ended June 27, 1992, $62.5 million for the 52 weeks ended June 26,
1993, $14.3 million for the 12 weeks ended September 18, 1993 and $14.3
million for the 12 weeks ended September 17, 1994, primarily consisting of
depreciation and amortization.
(e) Balance sheet data as of June 30, 1990 relate to Food 4 Less and include the
effect of the acquisition of Breco Holding Company (the "BHC Acquisition"),
as well as the acquisitions of Bell Markets, Inc. and certain assets of ABC
Market Corp. Balance sheet data as of June 29, 1991, June 27, 1992, June 26,
1993 and September 18, 1993 relate to Food 4 Less and reflect the Alpha Beta
acquisition and the financings and refinancings associated therewith.
Balance sheet data as of June 25, 1994 and September 17, 1994 relate to Food
4 Less and reflect the acquisition of the Food Barn stores.
(f) Total debt includes long-term debt, current maturities of long-term debt and
capital lease obligations.
(g) For the 53 weeks ended June 30, 1990, the 52 weeks ended June 29, 1991, June
27, 1992, June 26, 1993 and June 25, 1994, and for the 12 weeks ended
September 18, 1993 and September 17, 1994, depreciation and amortization
includes amortization of excess of cost over net assets acquired of $5.3
million, $5.3 million, $7.8 million, $7.6 million, $7.7 million, $1.8
million and $1.8 million, respectively.
(h) "EBITDA," as defined and presented historically by Food 4 Less, represents
income before interest expense, depreciation and amortization expense, the
LIFO provision, provision for income taxes, provision for earthquake losses
and a one-time charge for Teamsters Union sick pay benefits. EBITDA is a
widely accepted financial indicator of a company's ability to service debt.
However, EBITDA should not be construed as an alternative to operating
income or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of Food 4 Less' operating performance or as a
measure of liquidity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(i) EBITDA margin represents EBITDA (as defined) as a percentage of sales.
21
<PAGE> 31
RISK FACTORS
Before deciding whether to participate in the applicable Exchange Offer and
the Solicitation, each holder of Old F4L Notes should carefully consider the
following factors, in addition to the other matters described in this Prospectus
and Solicitation Statement.
LEVERAGE AND DEBT SERVICE
Following the consummation of the Merger and the Financing, the Company
will be highly leveraged. At September 17, 1994, pro forma for the Merger and
the Financing (and certain related assumptions), the Company's total
indebtedness (including current maturities) and stockholder's equity would have
been $1,971.7 million and $249.2 million, respectively, and the Company would
have had an additional $218.2 million available to be borrowed under the New
Revolving Facility. In addition, as of September 17, 1994, after giving effect
to the Merger and the Financing, scheduled payments under operating leases of
the Company and its subsidiaries for the twelve months following the Merger
would have been $111.6 million. On the same pro forma basis, for the 52 weeks
ended June 25, 1994 and the 12 weeks ended September 17, 1994, the Company's
earnings before fixed charges would have been inadequate to cover fixed charges
by $85.8 million and $23.2 million, respectively. However, such earnings include
non-cash charges of $182.9 million and $41.8 million, respectively, primarily
consisting of depreciation and amortization. At September 17, 1994, after giving
effect to the Merger, the FFL Merger, the Financing and the Reincorporation
Merger (and certain related assumptions), New Holdings would have had (i) $61.4
million in accreted value of Indebtedness outstanding under the Holdings
Discount Notes, which will accrete to $103.6 million aggregate principal amount
on December 15, 1997 and (ii) $100 million principal amount of Indebtedness
outstanding under the Seller Debentures which, through payment of interest
thereon with additional Seller Debentures, will increase to $187.7 million
aggregate principal amount over a five-year period. The New F4L Indentures
permit the Company (in the absence of a default or event of default thereunder)
to pay cash dividends to New Holdings in an amount sufficient to allow New
Holdings to pay interest on such Indebtedness when due. The Company's ability to
make scheduled payments of the principal of, or interest on, or to refinance its
Indebtedness (including the New F4L Notes) and to make scheduled payments under
its operating leases depends on its future performance, which to a certain
extent is subject to economic, financial, competitive and other factors beyond
its control.
Based upon the current level of operations and anticipated cost savings,
the Company believes that its cash flow from operations, together with
borrowings under the New Revolving Facility and its other sources of liquidity
(including leases), will be adequate to meet its anticipated requirements for
working capital, capital expenditures, interest payments and scheduled principal
payments over the next several years. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources." There can be no assurance, however, that the Company's business will
continue to generate cash flow at or above current levels or that anticipated
cost savings can be fully achieved. If the Company is unable to generate
sufficient cash flow from operations in the future to service its debt and make
necessary capital expenditures, or if its future earnings growth is insufficient
to amortize all required principal payments out of internally generated funds,
the Company may be required to refinance all or a portion of its existing debt,
sell assets or obtain additional financing. There can be no assurance that any
such refinancing or asset sales would be possible or that any additional
financing could be obtained, particularly in view of the Company's high level of
debt following the Merger and the fact that substantially all of its assets will
be pledged to secure the borrowings under the New Credit Facility and other
secured obligations.
The Company's high level of debt will have several important effects on its
future operations, including the following: (a) the Company will have
significant cash requirements to service debt, reducing funds available for
operations and future business opportunities and increasing the Company's
vulnerability to adverse general economic and industry conditions; (b) the
financial covenants and other restrictions contained in the New Credit Facility
and other agreements relating to the Company's senior indebtedness and in the
New F4L Indentures will require the Company to meet certain financial tests and
will restrict its ability to borrow additional funds, to dispose of assets or to
pay cash dividends; and (c) because of the Company's debt service requirements,
funds available for working capital, capital expenditures, acquisitions and
general
22
<PAGE> 32
corporate purposes, may be limited. The Company's leveraged position may
increase its vulnerability to competitive pressures. The Company's continued
growth depends, in part, on its ability to continue its expansion and store
conversion efforts, and, therefore, its inability to finance capital
expenditures through borrowed funds could have a material adverse effect on the
Company's future operations. Moreover, any default under the documents governing
the indebtedness of the Company could have a significant adverse effect on the
market value of the New F4L Notes.
ABILITY TO ACHIEVE ANTICIPATED COST SAVINGS
Management of the Company has estimated that approximately $90 million of
annualized net cost savings can be achieved over a four year period as a result
of integrating the operations of Ralphs and Food 4 Less. See "Business -- The
Merger." The cost savings estimates have been prepared solely by members of the
management of each company. The estimates necessarily make numerous assumptions
as to future sales levels and other operating results, the availability of funds
for capital expenditures as well as general industry and business conditions and
other matters, many of which are beyond the control of the Company. Several of
the cost savings estimates are premised on the assumption that certain levels of
efficiency presently maintained by either Food 4 Less or Ralphs can be achieved
by the combined Company following the Merger. Other estimates are based on a
management consensus as to what levels of purchasing and similar efficiencies
should be achievable by an entity the size of the Company. Certain of the
estimates relating to the consolidation of warehousing and distribution
facilities assume the completion of certain capital expenditures to expand the
capacity of the continuing facilities. It is anticipated that $117 million in
Merger-related capital expenditures and $50 million of other non-recurring costs
will be required to complete store conversions, integrate operations and expand
warehouse facilities over the four year period following the Merger, without
which the estimated cost savings may not be fully achievable. Because the
assumptions underlying the cost savings estimates are numerous and detailed,
management believes that it would be impractical to specify all such assumptions
in this Prospectus and Solicitation Statement. However, management also believes
that all such assumptions are reasonable in light of existing business
conditions and prospects. Investors are cautioned that the actual cost savings
realized by the Company may vary considerably from the estimates contained
herein and that undue reliance should not be placed upon such estimates. There
also can be no assurance that unforeseen costs and expenses or other factors
will not offset the projected cost savings in whole or in part.
REGIONAL ECONOMIC CONDITIONS
Following the consummation of the Merger, a substantial percentage of the
Company's business (representing approximately 90% of pro forma sales) will be
conducted in Southern California. Southern California began to experience a
significant economic downturn in 1991 and has only recently begun a mild
recovery. The economy in Southern California has been affected by substantial
job losses in the defense and aerospace industries and other adverse economic
trends. These adverse regional economic conditions have resulted in declining
sales levels at Ralphs and Food 4 Less in recent periods. For the 52 weeks ended
June 25, 1994, and the 52 weeks ended January 30, 1994, Food 4 Less and Ralphs
experienced 6.9% and 5.8% declines, respectively, in comparable store sales as
compared with the comparable period in the prior year, primarily reflecting the
weak economy in Southern California, lower levels of price inflation in certain
food product categories, and increased competitive store openings in Southern
California. For the 12 weeks ended September 17, 1994 and the 36 weeks ended
October 9, 1994, Food 4 Less and Ralphs experienced 5.8% and 3.8% declines,
respectively, in comparable store sales. Although the declines in comparable
store sales have begun to moderate in recent months, and management believes
that sales trends will continue to be favorable, there can be no assurance that
this trend will continue or that substantial future declines in same store sales
will not occur. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
COMPETITION
The supermarket industry is highly competitive and characterized by narrow
profit margins. The Company's competitors in each of its operating divisions
include national and regional supermarket chains,
23
<PAGE> 33
independent and specialty grocers, drug and convenience stores, and the newer
"alternative format" food stores, including warehouse club stores, deep discount
drug stores and "super centers." Supermarket chains generally compete on the
basis of location, quality of products, service, price, product variety and
store condition. The Company regularly monitors its competitors' prices and
adjusts its prices and marketing strategy as management deems appropriate in
light of existing conditions. Some of the Company's competitors have greater
financial resources than the Company and could use these resources to take steps
which could adversely affect the Company's competitive position. See
"Business -- Competition."
CORPORATE STRUCTURE; EFFECTS OF ASSET ENCUMBRANCES
Following the consummation of the Merger, a significant portion of the
Company's operating income will be generated by its subsidiaries. As a result,
the Company will rely on distributions or advances from its subsidiaries to
provide a portion of the funds necessary to meet its debt service obligations,
including the payment of principal and interest on the New F4L Notes. Should the
Company fail to satisfy any payment obligation under the New F4L Notes, the
holders would have a direct claim therefor against the Subsidiary Guarantors
pursuant to their Guarantees (as defined). However, the capital stock of, and
substantially all of the assets of, the Subsidiary Guarantors will be pledged to
secure the obligations of the Company and such subsidiaries under the New Credit
Facility and other secured obligations. The New F4L Indentures will limit, but
not prohibit, the ability of the Company and its subsidiaries to incur
additional secured indebtedness. In the event of a default under the New Credit
Facility (or any other secured indebtedness), the lenders thereunder would be
entitled to a claim on the assets securing such indebtedness which is prior to
any claim of the holders of the New F4L Notes. Accordingly, there may be
insufficient assets remaining after payment of prior secured claims (including
claims of lenders under the New Credit Facility) to pay amounts due on the New
F4L Notes.
In addition, if a court were to avoid the Guarantees under fraudulent
conveyance laws or other legal principles or, by the terms of such Guarantees,
the obligations thereunder were reduced as necessary to prevent such avoidance,
or the Guarantees were released, the claims of other creditors of the Subsidiary
Guarantors, including trade creditors, would to such extent have priority as to
the assets of such Subsidiary Guarantors over the claims of the holders of the
New F4L Notes. The Guarantees of the New F4L Notes by any Subsidiary Guarantor
will be released upon the sale of such Subsidiary Guarantor or upon the release
by the lenders under the New Credit Facility of such Subsidiary Guarantor's
Guarantee of the Company's obligation under the New Credit Facility. The New F4L
Indentures limit the ability of the Company and its subsidiaries to incur
additional indebtedness and to enter into agreements that would restrict the
ability of any subsidiary to make distributions, loans or other payments to the
Company. However, these limitations are subject to certain exceptions. See "--
Fraudulent Conveyance Risks" and "Description of the New F4L Notes."
CONTROL OF THE COMPANY
Following completion of the Merger, the FFL Merger and the Reincorporation
Merger, all of the Company's outstanding common stock will be held by New
Holdings. Pro forma for the Merger and certain related events, affiliates of
Yucaipa and Apollo will have beneficial ownership of approximately 37.2% and
33.1%, respectively, of the outstanding capital stock of New Holdings. Pursuant
to a new stockholders' agreement (the "1995 Stockholders Agreement") which will
be entered into by new equity investors and certain current FFL stockholders and
Holdings warrantholders, upon completion of the Merger, New Holdings and the
Company will have boards consisting of nine and ten members, respectively, and
Yucaipa, Apollo and BT Investment Partners, Inc. ("BTIP") will have the right to
elect six (seven in the case of the Company), two and one director(s),
respectively, to each board. Under the 1995 Stockholders Agreement, unless and
until New Holdings has effected an initial public offering of its equity
securities meeting certain criteria, New Holdings and its subsidiaries,
including the Company, may not take certain actions without the approval of at
least two of the three New Holdings directors which the new equity investors are
entitled to elect, including but not limited to certain mergers, sale
transactions, transactions with affiliates, issuances of capital stock and
payments of dividends on or repurchases of capital stock. As a result of the
ownership structure of the Company and the contractual rights described above,
the voting and management control of
24
<PAGE> 34
the Company is highly concentrated. Yucaipa, acting with the consent of Apollo,
has the ability to direct the actions of the Company with respect to matters
such as the payment of dividends, material acquisitions and dispositions and
other extraordinary corporate transactions. Yucaipa will be a party to a
consulting agreement with the Company, pursuant to which Yucaipa will render
certain management and advisory services to the Company, and will receive fees
for such services. Yucaipa will also receive certain fees in connection with the
consummation of the Merger, including a $24 million advisory fee payable upon
the closing of the Merger. In addition, as a result of the Merger, certain
officers and former officers of Ralphs will redeem the EARs for $22.8 million in
cash and will cancel certain options to purchase common stock of RSI for
$880,000. An additional $10 million of EARs, however, will be reinvested in New
Holdings by such officers and former officers. Yucaipa will also be reimbursed
for (i) any losses incurred upon the resale of the $10 million principal amount
of Seller Debentures which may be put to it pursuant to the Put Agreement and
(ii) its expenses in connection with the Merger and the related transactions. In
addition, on the Closing Date the Company and EJDC will enter into a Consulting
Agreement, pursuant to which EJDC will act as a consultant to the Company with
respect to certain real estate and general commercial matters for a period of
five years from the Closing Date in exchange for the payment of a one-time
consulting fee of $9 million. See "Certain Relationships and Related
Transactions," "Principal Stockholders" and "Description of Capital Stock."
SUBORDINATION OF THE NEW F4L SENIOR SUBORDINATED NOTES
The payment of principal, premium, if any, and interest on, and any other
amounts owing in respect of, the New F4L Senior Subordinated Notes will be
subordinated to the prior payment in full of all existing and future Senior
Indebtedness, including indebtedness under the New Credit Facility and the F4L
Senior Notes. Each Subsidiary Guarantor's Guarantee will also be subordinated in
right of payment to Senior Indebtedness of the Subsidiary Guarantors ("Guarantor
Senior Indebtedness"). Guarantor Senior Indebtedness will include all existing
and future indebtedness not expressly subordinated to other indebtedness,
including indebtedness represented by the Guarantee of such Subsidiary Guarantor
under the New Credit Facility and the F4L Senior Notes. As of September 17,
1994, on a pro forma basis, after giving effect to the Merger and the Financing
(and certain related assumptions), the aggregate outstanding amount of Senior
Indebtedness of the Company (excluding Company Guarantees of certain Guarantor
Senior Indebtedness) would have been approximately $1,554.8 million and the
aggregate outstanding amount of Guarantor Senior Indebtedness of the Subsidiary
Guarantors (excluding Guarantees by Subsidiary Guarantors of certain Senior
Indebtedness of the Company) would have been approximately $16.0 million and the
Company would have had $218.2 million available to be borrowed under the New
Revolving Facility. The New F4L Senior Subordinated Note Indenture will limit,
but not prohibit, the issuance by the Subsidiary Guarantors of additional
indebtedness which is Guarantor Senior Indebtedness. See "Description of the New
F4L Notes -- Guarantees." In the event of the bankruptcy, liquidation,
dissolution, reorganization or other winding up of the Company, the assets of
the Company will be available to pay obligations on the New F4L Senior
Subordinated Notes only after all Senior Indebtedness has been paid in full, and
there may not be sufficient assets remaining to pay amounts due on any or all of
the New F4L Senior Subordinated Notes. In addition, under certain circumstances,
the Company may not pay principal of, premium, if any, or interest on, or any
other amounts owing in respect of, the New F4L Senior Subordinated Notes, or
purchase, redeem or otherwise retire the New F4L Senior Subordinated Notes, if a
payment default or a non-payment default exists with respect to certain Senior
Indebtedness and, in the case of a non-payment default, a payment blockage
notice has been received by the New F4L Senior Subordinated Note Trustee (as
defined). See "Description of the New F4L Notes -- Subordination of the New F4L
Senior Subordinated Notes."
FRAUDULENT CONVEYANCE RISKS
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or avoid the New F4L
Notes or any Guarantee in favor of other existing or future creditors of the
Company or a Subsidiary Guarantor.
If a court in a lawsuit on behalf of any unpaid creditor of the Company or
a representative of the Company's creditors were to find that, at the time the
Company issued the New F4L Senior Notes or the New F4L Senior Subordinated
Notes, the Company (x) intended to hinder, delay or defraud any existing or
future
25
<PAGE> 35
creditor or contemplated insolvency with a design to prefer one or more
creditors to the exclusion in whole or in part of others or (y) did not receive
fair consideration or reasonably equivalent value for issuing such New F4L Notes
and the Company (i) was insolvent, (ii) was rendered insolvent by reason of such
distribution, (iii) was engaged or about to engage in a business or transaction
for which its remaining assets constituted unreasonably small capital to carry
on its business, or (iv) intended to incur, or believed that it would incur,
debts beyond its ability to pay such debts as they matured, such court could
void such New F4L Notes and void such transactions. Alternatively, in such
event, claims of the holders of such New F4L Notes could be subordinated to
claims of the other creditors of the Company.
The Company's obligations under the New F4L Notes will be guaranteed by the
Subsidiary Guarantors. To the extent that a court were to find that (x) a
Guarantee was incurred by a Subsidiary Guarantor with intent to hinder, delay or
defraud any present or future creditor or the Subsidiary Guarantor contemplated
insolvency with a design to prefer one or more creditors to the exclusion in
whole or in part of others or (y) such Subsidiary Guarantor did not receive fair
consideration or reasonably equivalent value for issuing its Guarantee and such
Subsidiary Guarantor (i) was insolvent, (ii) was rendered insolvent by reason of
the issuance of such Guarantee, (iii) was engaged or about to engage in a
business or transaction for which the remaining assets of such Subsidiary
Guarantor constituted unreasonably small capital to carry on its business, or
(iv) intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured, the court could void or subordinate
such Guarantee in favor of the Subsidiary Guarantor's creditors. Among other
things, a legal challenge of a Guarantee on fraudulent conveyance grounds may
focus on the benefits, if any, realized by the Subsidiary Guarantor as a result
of the issuance by the Company of the applicable New F4L Notes.
To the extent any Guarantees were avoided as a fraudulent conveyance or
held unenforceable for any other reason, holders of the New F4L Notes would
cease to have any claim in respect of such Subsidiary Guarantor and would be
creditors solely of the Company and any Subsidiary Guarantor whose Guarantee was
not avoided or held unenforceable. In such event, the claims of the holders of
the applicable New F4L Notes against the issuer of an invalid Guarantee would be
subject to the prior payment of all liabilities and preferred stock claims of
such Subsidiary Guarantor. There can be no assurance that, after providing for
all prior claims and preferred stock interests, if any, there would be
sufficient assets to satisfy the claims of the holders of the applicable New F4L
Notes relating to any voided portions of any of the Guarantees.
Based upon financial and other information currently available to it,
management of the Company believes that the New F4L Notes and the Guarantees are
being incurred for proper purposes and in good faith and that the Company and
each Subsidiary Guarantor (i) is solvent and will continue to be solvent after
issuing the New F4L Notes or its Guarantees, as the case may be, (ii) will have
sufficient capital for carrying on its business after such issuance, and (iii)
will be able to pay its debts as they mature. See "Management's Discussions and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
ABSENCE OF ESTABLISHED PUBLIC MARKET FOR THE NEW F4L NOTES
There are no established markets for the New F4L Notes and there can be no
assurance as to the liquidity of any markets that may develop for the New F4L
Notes, the ability of holders of the New F4L Notes to sell their New F4L Notes,
or the price at which holders would be able to sell their New F4L Notes. Future
trading prices of the New F4L Notes will depend on many factors, including,
among other things, prevailing interest rates, the Company's operating results
and the market for similar securities. The Dealer Managers have advised the
Company that they currently intend to make a market in the New F4L Notes.
However, the Dealer Managers are not obligated to do so and any market-making
may be discontinued at any time without notice.
26
<PAGE> 36
POTENTIAL ADVERSE EFFECTS OF THE EXCHANGE OFFERS AND THE SOLICITATION ON HOLDERS
OF UNTENDERED OLD F4L NOTES
There currently is a limited trading market for the Old F4L Notes, which
from time to time trade in the over-the-counter market. See "Market Prices of
the Old F4L Notes." To the extent that Old F4L Notes are tendered and accepted
for exchange in the Exchange Offers the trading market for the remaining Old F4L
Notes may become even more limited. A debt security with a smaller outstanding
principal amount available for trading (a smaller "float") may command a lower
price than would a comparable debt security with a greater float. Therefore, the
market price for the Old F4L Notes not exchanged may be adversely affected to
the extent that the principal amount of the Old F4L Notes tendered pursuant to
the Exchange Offers reduces the float. The reduced float may also tend to make
the trading price more volatile. Holders of unexchanged Old F4L Notes may
attempt to obtain quotations for the Old F4L Notes from their brokers; however,
there can be no assurance that any trading market will exist for the Old F4L
Notes following consummation of the Exchange Offers. The extent of the public
market for the Old F4L Notes following consummation of the Exchange Offers will
depend upon, among other things, the remaining outstanding principal amount of
the Old F4L Notes after the Exchange Offers, the number of holders remaining at
such time and the interest in maintaining a market in the Old F4L Notes on the
part of securities firms.
EFFECT OF THE PROPOSED AMENDMENTS ON HOLDERS THAT DO NOT EXCHANGE
If the Exchange Offers are consummated and the Proposed Amendments become
operative, holders of Old F4L Notes that are not exchanged pursuant to the
Exchange Offers for any reason will no longer be entitled to the benefits of
certain of the restrictive covenants contained in the Old F4L Indentures after
they have been modified by the Proposed Amendments. The modification of the
restrictive covenants would permit the Company to take actions that could
increase the credit risks with respect to the Company faced by such holders or
that could otherwise be adverse to the interest of such holders. See "The
Proposed Amendments."
27
<PAGE> 37
THE MERGER AND THE FINANCING
On September 14, 1994, Food 4 Less and its parent company, Holdings, and
FFL entered into the Merger Agreement with RSI and the stockholders of RSI.
Pursuant to the terms of the Merger Agreement, Food 4 Less will, subject to
certain conditions being satisfied or waived, be merged with and into RSI
pursuant to the RSI Merger. Immediately following the RSI Merger, RGC, which is
currently a wholly-owned subsidiary of RSI, will merge with and into RSI
pursuant to the RGC Merger, and RSI will change its name to Ralphs Grocery
Company. Prior to the Merger, FFL will merge with and into Holdings which will
be the surviving corporation in the FFL Merger. Immediately following the FFL
Merger, Holdings will change its jurisdiction of incorporation by merging into a
newly-formed, wholly-owned subsidiary, New Holdings, incorporated in Delaware,
pursuant to the Reincorporation Merger. As a result of the Merger, the FFL
Merger and the Reincorporation Merger, the Company will become a wholly-owned
subsidiary of New Holdings. Upon consummation of the RSI Merger and RGC Merger,
the New F4L Notes and any outstanding Old F4L Notes not tendered into the
Exchange Offers will be the obligations of the Company. Conditions to the
consummation of the RSI Merger include the receipt of regulatory approvals and
other necessary consents and completion of financing. The purchase price for RSI
is approximately $1.5 billion, including the assumption of debt. The
consideration payable to the stockholders of RSI consists of $425 million in
cash and $100 million principal amount of the Seller Debentures to be issued by
New Holdings. New Holdings will use $150 million of cash received from the New
Equity Investment, together with $100 million principal amount of the Seller
Debentures, to acquire approximately 48% of the capital stock of RSI immediately
prior to consummation of the RSI Merger. New Holdings will then contribute the
$250 million of purchased shares of RSI stock to Food 4 Less, and pursuant to
the RSI Merger the remaining shares of RSI stock will be acquired for $275
million in cash. Pursuant to an agreement (the "Put Agreement") entered into in
connection with the execution of the Merger Agreement, the Edward J. DeBartolo
Corporation, an Ohio corporation ("EJDC"), which currently owns approximately
60.3% of the outstanding common stock of RSI, will have the right to put to
Yucaipa, which controls Food 4 Less, on the closing date of the Merger (the
"Closing Date"), up to $10 million aggregate principal amount of Seller
Debentures acquired by EJDC in connection with the Merger, at a purchase price
equal to their principal amount. Yucaipa also will be reimbursed for (i) any
losses incurred upon the resale of the $10 million principal amount of Seller
Debentures which may be put to it pursuant to the Put Agreement and (ii) its
expenses in connection with the Merger and the related transactions. In
addition, on the Closing Date the Company and EJDC will enter into a Consulting
Agreement, pursuant to which EJDC will act as a consultant to the Company with
respect to certain real estate and general commercial matters for a period of
five years from the Closing Date in exchange for the payment of a consulting fee
of $9 million.
As currently contemplated, the Merger will be financed through the
following transactions:
- Borrowings of up to $750 million aggregate principal amount pursuant to
the New Term Loans under the New Credit Facility to be provided by a
syndicate of banks led by Bankers Trust. The New Credit Facility will
also provide for the $325 million New Revolving Facility, $23.4 million
of which is anticipated to be drawn at closing.
- The issuance of up to $400 million of New F4L Senior Notes pursuant to
the Public Offering.
- The issuance of preferred stock in a private placement by New Holdings to
a group of investors led by Apollo and including affiliates of BT
Securities and CS First Boston and other institutional investors,
yielding cash proceeds of $150 million pursuant to the New Equity
Investment. Concurrently with the New Equity Investment, the New Equity
Investors will purchase outstanding shares of New Holdings capital stock
from a stockholder of New Holdings for a purchase price of $57.7 million.
See "Description of Capital Stock -- New Equity Investment."
- The exchange by Food 4 Less pursuant to the RGC Exchange Offer of (a) up
to $450 million aggregate principal amount of the Old RGC Notes for up to
$450 million aggregate principal amount of the New RGC Notes plus $10.00
in cash per $1,000 principal amount exchanged, together with the
solicitation of consents from the holders of the Old RGC Notes to certain
amendments to the Old RGC Indentures. It is a condition to the RGC
Exchange Offer that at least 80% of the outstanding principal amount of
the Old RGC Notes are exchanged pursuant to the RGC Exchange Offer.
28
<PAGE> 38
- The Exchange Offers made hereunder to holders of Old F4L Notes to tender
for exchange such Old F4L Notes for New F4L Notes and the Exchange
Payment, together with the solicitation of consents from such holders to
the Proposed Amendments to the Old F4L Indentures.
- The purchase by New Holdings of approximately 48% of the outstanding
common stock of RSI for an aggregate consideration of $250 million,
consisting of the proceeds of the New Equity Investment and $100 million
principal amount of the Seller Debentures followed by the contribution of
such common stock of RSI to Food 4 Less. Pursuant to the RSI Merger the
remaining shares of RSI stock will be acquired for $275 million in cash.
- The assumption by the Company, pursuant to the RGC Merger, of
approximately $157.7 million of other indebtedness of RGC and Food 4
Less.
- The solicitation of certain consents pursuant to the Holdings Consent
Solicitation from the holders of the Holdings Discount Notes to certain
amendments to the Holdings Discount Note Indenture.
The following table illustrates the sources and uses of funds to consummate
the Merger, assuming the transaction occurs as of February 1, 1995. This
presentation assumes that $360 million principal amount of Old RGC Notes is
tendered into the RGC Exchange Offers and $256 million principal amount of Old
F4L Notes is tendered into the Exchange Offers, in each case representing 80% of
the outstanding aggregate principal amount of such securities. The presentation
also assumes that the remaining $90 million of Old RGC Notes not tendered into
the RGC Exchange Offers are repurchased after the Closing Date pursuant to the
Change of Control Offer. Although management believes such assumptions are
reasonable under the circumstances, actual sources and uses may differ from
those set forth below depending upon the outcome of the RGC Exchange Offers and
the Exchange Offers.
SOURCES AND USES
(in millions)
<TABLE>
<S> <C> <C> <C>
CASH SOURCES CASH USES
- --------------------------------------------- ---------------------------------------------
New Term Loans(a).................. $ 750.0 Purchase RSI Common Stock(g)....... $ 425.9
New Revolving Facility(b).......... 23.4 Purchase Old RGC Notes(h).......... 90.9
Repay Ralphs 1992 Credit
New F4L Senior Notes(c)............ 400.0 Agreement.......................... 296.0
New Equity Investment(d)........... 150.0 Repay F4L Credit Agreement......... 170.0
Pay Accrued Interest(i)............ 16.1
Pay EAR Liability(j)............... 22.8
Repay Mortgage Indebtedness(k)..... 187.0
Fees and Expenses(l)............... 114.7
--------
Total Cash Sources............ $1,323.4 Total Cash Uses.................... $1,323.4
======= =======
NON-CASH SOURCES NON-CASH USES
- --------------------------------------------- ---------------------------------------------
New F4L Senior Notes(e)............ $ 140.0 Old F4L Senior Notes Exchanged..... $ 140.0
Assumed Old F4L Senior Notes....... 35.0 Assumed Old F4L Senior Notes....... 35.0
New F4L Senior Subordinated Old F4L Senior Subordinated Notes
Notes............................ 116.0 Exchanged.......................... 116.0
Assumed Old F4L Senior Subordinated Assumed Old F4L Senior Subordinated
Notes............................ 29.0 Notes............................ 29.0
New RGC Notes...................... 360.0 Old RGC Notes Exchanged............ 360.0
Assumed Capital Leases and Other Assumed Capital Leases and Other
Debt............................. 157.7 Debt............................... 157.7
Seller Debentures(e)............... 100.0 Purchase RSI Common Stock(f)....... 100.0
-------- --------
Total Non-Cash Sources........ $ 937.7 Total Non-Cash Uses................ $ 937.7
======= =======
</TABLE>
- ---------------
(a) Food 4 Less has accepted a commitment letter from Bankers Trust pursuant to
which Bankers Trust has agreed, subject to certain conditions, to provide
the Company up to a maximum aggregate amount of $1,075 million of financing
under the New Credit Facility. It is anticipated that the New Credit
Facility will be syndicated to a number of financial institutions for whom
Bankers Trust
29
<PAGE> 39
will act as agent. The New Credit Facility will provide for (i) the New Term
Loans in the aggregate amount of up to $750 million, comprised of the $375
million Tranche A Loan, the $125 million Tranche B Loan, the $125 million
Tranche C Loan, and the $125 million Tranche D Loan, and (ii) the $325
million New Revolving Facility. See "Description of the New Credit
Facility."
(b) The New Revolving Facility will provide for a $325 million line of credit
which will be available for working capital requirements and general
corporate purposes. Up to $150 million of the New Revolving Facility may be
used to support standby letters of credit. The letters of credit will be
used to cover workers' compensation contingencies and for other purposes
permitted under the New Revolving Facility. The Company anticipates that
letters of credit for approximately $101 million will be issued under the
New Revolving Facility at closing, in replacement of existing letters of
credit, primarily to satisfy the State of California's requirements relating
to workers compensation self-insurance.
(c) Represents New F4L Senior Notes issued pursuant to the Public Offering. If
Food 4 Less receives tenders in excess of the Minimum Tender in the RGC
Exchange Offers, Food 4 Less may elect to decrease the amount of New F4L
Senior Notes being offered pursuant to the Public Offering.
(d) Does not include the $10 million equity contribution by Ralphs management.
See note (j) below. Concurrently with the New Equity Investment, certain
existing stockholders of New Holdings (formerly stockholders of FFL),
including affiliates of George Soros, will sell outstanding shares of New
Holdings stock to CLH, which in turn will sell such shares to the New Equity
Investors for an aggregate purchase price of $57.7 million (which represents
the same price per share as will be paid in the New Equity Investment). In
connection with the New Equity Investment, the New Equity Investors will
contribute the common stock so acquired to New Holdings in consideration for
newly-issued, preferred shares. See "Description of Capital Stock -- New
Equity Investment."
(e) Represents New F4L Senior Notes issued pursuant to the F4L Senior Notes
Exchange Offer, which will be part of the same issue as the New F4L Senior
Notes issued pursuant to the Public Offering.
(f) In connection with the RSI Merger, New Holdings will issue $100 million
principal amount of the Seller Debentures as part of the purchase price for
the RSI common stock, up to $10 million of which may be put to Yucaipa on
the Closing Date at a purchase price equal to their principal amount
pursuant to the Put Agreement. In addition, Yucaipa will be reimbursed by
the Company for (i) any losses incurred upon the resale of the $10 million
principal amount of Seller Debentures which may be put to it pursuant to the
Put Agreement and (ii) its expenses in connection with the Merger and the
related transactions. See "Certain Relationships and Related
Transactions -- Food 4 Less."
(g) Includes $425 million to be paid in cash to stockholders of RSI and $0.9
million to be paid in cash to holders of RSI management stock options. See
"Executive Compensation -- New Management Stock Option Plan and Management
Investment."
(h) Represents purchase of Old RGC Notes tendered pursuant to the Change of
Control Offer, which will occur up to 90 days following the Merger. A
portion of the proceeds of the Public Offering will be available to fund the
purchase of Old RGC Notes pursuant to the Change of Control Offer. To the
extent that any such Old RGC Notes are not tendered pursuant to the Change
of Control Offer, any excess proceeds from the Public Offering will be used
to repay borrowings under the New Credit Facility.
(i) Represents accrued interest payable on all debt securities assumed to be
tendered in the RGC Exchange Offers and the Exchange Offers.
(j) Represents payments to Ralphs management with respect to the cancellation of
outstanding EARs in connection with the Merger. Ralphs management will
receive New Holdings stock options in exchange for the cancellation of the
remaining EAR liability of $10 million. See "Executive
Compensation -- Equity Appreciation Rights Plan."
(k) Represents the repayment of outstanding mortgage indebtedness of Ralphs in
the principal amount of $174.6 million, plus the estimated amount of the
prepayment fees payable with respect thereto.
(l) Includes an advisory fee of $24 million to be paid to Yucaipa upon the
closing of the Merger. See "Certain Relationships and Related
Transactions -- Food 4 Less."
For additional information, see "Description of the New Credit Facility," "The
RGC Exchange Offers and the Public Offering" and "Description of Holding Company
Indebtedness."
30
<PAGE> 40
PRO FORMA CAPITALIZATION
The following table sets forth the pro forma combined capitalization of the
Company as of September 17, 1994, adjusted to give effect to the Merger and the
Financing (and certain related assumptions) and the application of the proceeds
therefrom. This presentation assumes that $360 million principal amount of Old
RGC Notes is tendered into the RGC Exchange Offers, and $256 million principal
amount of Old F4L Notes is tendered into the Exchange Offers. The presentation
also assumes that the remaining $90 million of Old RGC Notes not tendered into
the RGC Exchange Offers are repurchased after the Closing Date pursuant to the
Change of Control Offer. The table should be read in conjunction with the
Unaudited Pro Forma Combined Financial Statements and the historical
consolidated financial statements of Ralphs and Food 4 Less and related notes
thereto included elsewhere in this Prospectus and Solicitation Statement.
<TABLE>
<CAPTION>
PRO FORMA
CAPITALIZATION
---------------
(IN MILLIONS)
<S> <C>
Cash...................................................................................... $ 62.7
========
Short-term and current portion of long-term debt:
New Term Loans.......................................................................... $ 3.8
Other indebtedness...................................................................... 21.5
--------
Total short-term and current portion of long-term debt........................... $ 25.3
========
Long-term debt:
New Term Loans(a)....................................................................... $ 746.2
New Revolving Facility(b)............................................................... 5.8
Other indebtedness...................................................................... 114.4
New F4L Senior Notes(c)................................................................. 540.0
Old F4L Senior Notes.................................................................... 35.0
New RGC Notes(d)........................................................................ 360.0
New F4L Senior Subordinated Notes....................................................... 116.0
Old F4L Senior Subordinated Notes....................................................... 29.0
--------
Total long-term debt............................................................. 1,946.4
--------
Stockholder's equity:
Common stock, $.01 par value............................................................ 0.0
Additional paid-in capital.............................................................. 424.1
Notes receivable(e)..................................................................... (0.6)
Retained deficit........................................................................ (171.8)
Treasury stock.......................................................................... (2.5)
--------
Total stockholder's equity............................................................ 249.2
--------
Total capitalization............................................................. $2,195.6
========
</TABLE>
- ---------------
(a) Food 4 Less has accepted a commitment letter from Bankers Trust pursuant
to which Bankers Trust has agreed, subject to certain conditions, to provide
the Company up to a maximum aggregate amount of $1,075 million of financing
under the New Credit Facility. It is anticipated that the New Credit
Facility will be syndicated to a number of financial institutions for whom
Bankers Trust will act as agent. The New Credit Facility will provide for
(i) the New Term Loans in the aggregate amount of up to $750 million,
comprised of the $375 million Tranche A Loan, the $125 million Tranche B
Loan, the $125 million Tranche C Loan and the $125 million Tranche D Loan,
and (ii) the $325 million New Revolving Facility. See "Description of the
New Credit Facility."
(b) The New Revolving Facility will provide for a $325 million line of credit
which will be available for working capital requirements and general
corporate purposes. Up to $150 million of the New Revolving Facility may be
used to support standby letters of credit. The letters of credit will be
used to cover workers' compensation contingencies and for other purposes
permitted under the New Revolving Facility. The Company anticipates that
letters of credit for approximately $101 million will be issued under the
New Revolving Facility at closing, in replacement of existing letters of
credit, primarily to satisfy the State of California's requirements relating
to workers' compensation self-insurance.
(c) Includes New F4L Senior Notes issued pursuant to both the Public Offering
and the F4L Senior Notes Exchange Offer.
(d) In accordance with the terms of the Old RGC Indentures, holders of Old RGC
Notes not exchanged for New RGC Notes pursuant to the RGC Exchange Offers
will be entitled to have such Old RGC Notes repurchased by the Company
pursuant to the Change of Control Offer, which will occur up to 90 days
following the Merger. A portion of the proceeds of the Public Offering will
be available to fund the purchase of Old RGC Notes pursuant to the Change of
Control Offer. To the extent that any such Old RGC Notes are not tendered
pursuant to the Change of Control Offer, any excess proceeds from the Public
Offering will be used to repay borrowings under the New Credit Facility.
(e) Represents notes receivable from shareholders of Holdings with respect to
the purchase of Holdings' common stock. See "Executive Compensation -- Food
4 Less Stock Plan."
31
<PAGE> 41
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements of the
Company for the 52 weeks ended June 25, 1994 and as of and for the 12 weeks
ended September 17, 1994, give effect to the Merger and the Financing (and
certain related assumptions set forth below) and the application of the proceeds
therefrom as if such transactions occurred on June 27, 1993, with respect to the
pro forma operating and other data, and as of September 17, 1994, with respect
to the pro forma balance sheet data. Such pro forma information combines the
results of operations of Food 4 Less for the 52 weeks ended June 25, 1994 and
the results of operations and balance sheet data as of and for the 12 weeks
ended September 17, 1994, with the results of operations of Ralphs for the 52
weeks ended July 17, 1994 and the results of operations and balance sheet data
as of and for the 12 weeks ended October 9, 1994, respectively. For information
regarding the Merger and the Financing, see "The Merger and the Financing."
The pro forma adjustments are based upon the assumption that all conditions
to the consummation of the Exchange Offers are satisfied, including the
following: (i) $360 million aggregate principal amount of Old RGC Notes are
tendered into the RGC Exchange Offers and (ii) $256 million aggregate principal
amount of Old F4L Notes are tendered into the Exchange Offers. The presentation
also assumes that the remaining $90 million of Old RGC Notes not tendered into
the RGC Exchange Offers are repurchased following the Closing Date pursuant to
the Change of Control Offer and that $400 million principal amount of New F4L
Senior Notes are issued pursuant to the Public Offering. In addition, the
unaudited pro forma combined financial statements have been prepared based upon
the assumption that upon consummation of the Merger, the Company will divest or
close 32 stores.
The pro forma adjustments are based upon currently available information
and upon certain assumptions that management believes are reasonable. The Merger
will be accounted for by the Company as a purchase of Ralphs by Food 4 Less and
Ralphs' assets and liabilities will be recorded at their estimated fair market
values at the date of the Merger. The adjustments included in the unaudited pro
forma combined financial statements represent the Company's preliminary
determination of these adjustments based upon available information. There can
be no assurance that the actual adjustments will not differ significantly from
the pro forma adjustments reflected in the pro forma financial information.
The unaudited pro forma combined financial statements are not necessarily
indicative of either future results of operations or results that might have
been achieved if the foregoing transactions had been consummated as of the
indicated dates. The unaudited pro forma combined financial statements should be
read in conjunction with the historical consolidated financial statements of
Food 4 Less and Ralphs, together with the related notes thereto, included
elsewhere in this Prospectus and Solicitation Statement.
32
<PAGE> 42
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
52 WEEKS ENDED
--------------------------
RALPHS FOOD 4 LESS
(HISTORICAL) (HISTORICAL)
(UNAUDITED) (AUDITED)
JULY 17, JUNE 25, PRO FORMA PRO FORMA
1994 1994 ADJUSTMENTS COMBINED
----------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Sales........................................... $2,709.7 $2,585.2 $(241.4)(a) $5,053.5
Cost of sales................................... 2,076.3 2,115.9 (194.7)(a) 4,005.3
4.2 (b)
2.8 (c)
0.8 (d)
-------- -------- ------- --------
Gross profit............................... 633.4 469.3 (54.5) 1,048.2
Selling, general and administrative expenses.... 465.9 388.8 (36.4)(a) 829.9
8.1 (b)
1.4 (d)
1.6 (e)
0.5 (f)
Amortization of excess cost over net assets
acquired...................................... 11.0 7.7 11.0 (g) 29.7
Provision for restructuring..................... 2.4 0.0 -- 2.4
Provision for postretirement benefits........... 3.2 0.0 -- 3.2
-------- -------- ------- --------
Operating income........................... 150.9 72.8 (40.7) 183.0
Other expenses:
Interest expense -- cash...................... 93.2 57.0 74.4 (h) 224.6
Interest expense -- non-cash.................. 9.4 5.8 -- 15.2
Amortization of debt issuance costs........... 6.4 5.5 (0.2)(h) 11.7
Loss on disposal of assets...................... 1.8 -- -- 1.8
Provision for earthquake loss................... 11.0 4.5 -- 15.5
-------- -------- ------- --------
Earnings (loss) before income tax
provision................................ 29.1 (0.0) (114.9) (85.8)
Income tax expense (benefit).................... (108.0) 2.7 105.3 (i) --
-------- -------- ------- --------
Net earnings (loss)(o)..................... $ 137.1 $ (2.7) $(220.2) $ (85.8)
======== ======== ======= ========
Preferred stock accretion....................... -- 8.8 (8.8)(j) --
Earnings (loss) applicable to common
shares................................... $ 137.1 $ (11.5) $(211.4) $ (85.8)
======== ======== ======= ========
Ratio of earnings to fixed charges(k)...... 1.2x 1.0x --
======== ======== ========
Other Data:
EBITDA(as defined)(l)(o)...................... $ 228.1 $ 130.5 $ (16.1)(m) $ 342.5
EBITDA margin(n).............................. 8.4% 5.0% 6.8%
</TABLE>
See Notes to Unaudited Pro Forma Combined Statement of Operations
33
<PAGE> 43
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS -- CONTINUED
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
12 WEEKS ENDED
---------------------------
RALPHS FOOD 4 LESS
(HISTORICAL) (HISTORICAL)
(UNAUDITED) (UNAUDITED)
OCTOBER 9, SEPTEMBER 17, PRO FORMA PRO FORMA
1994 1994 ADJUSTMENTS COMBINED
----------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Sales.......................................... $ 615.4 $ 598.7 $ (53.3)(a) $1,160.8
Cost of sales.................................. 476.6 495.7 (44.4)(a) 929.2
1.0 (b)
0.0 (c)
0.3 (d)
------- ------- ------- --------
Gross profit.............................. 138.8 103.0 (10.2) 231.6
Selling, general and administrative expenses... 104.8 88.1 (8.2)(a) 187.6
1.9 (b)
0.5 (d)
0.4 (e)
0.1 (f)
Amortization of excess cost over net assets
acquired..................................... 2.6 1.8 2.6 (g) 7.0
Provision for restructuring.................... 0.0 0.0 -- 0.0
Provision for postretirement benefits.......... 0.6 0.0 -- 0.6
------- ------- ------- --------
Operating income.......................... 30.8 13.1 (7.5) 36.4
Other expenses:
Interest expense -- cash..................... 22.3 13.4 17.6 (h) 53.3
Interest expense -- non-cash................. 2.0 1.3 -- 3.3
Amortization of debt issuance costs.......... 1.4 1.3 0.0 (h) 2.7
Loss (gain) on disposal of assets.............. 0.8 (0.5) -- 0.3
Provision for earthquake loss.................. 0.0 0.0 -- 0.0
------- ------- ------- --------
Earnings (loss) before income tax
provision............................... 4.3 (2.4) (25.1) (23.2)
Income tax expense (benefit)................... 0.0 0.9 (0.9)(i) 0.0
------- ------- ------- --------
Net earnings (loss)(o).................... $ 4.3 $ (3.3) $ (24.2) $ (23.2)
======= ======= ======= ========
Preferred stock accretion...................... -- 2.4 (2.4)(j) --
Earnings (loss) applicable to common
shares.................................. $ 4.3 $ (5.7) $ (21.8) $ (23.2)
======= ======= ======= ========
Ratio of earnings to fixed charges(k)..... 1.1x -- --
======= ======= ========
Other Data:
EBITDA (as defined)(l)(o).................... $ 52.0 $ 29.7 $ (2.2)(m) $ 79.5
EBITDA margin(n)............................. 8.5% 5.0% 6.9%
</TABLE>
See Notes to Unaudited Pro Forma Combined Statement of Operations.
34
<PAGE> 44
NOTES TO UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
(a) Reflects the anticipated closing or divestiture of 32 stores. Does not give
effect to the closure of 2 Food 4 Less stores open at October 1, 1994 which
were closed subsequent to September 17, 1994.
(b) Represents the additional depreciation expense associated with the purchase
price allocation to property, plant and equipment of $160.0 million based on
the current estimate of fair market value. Property, plant and equipment is
being depreciated over an average useful life of 13 years. Depreciation
expense has been allocated among cost of sales and selling, general and
administrative expenses.
(c) Reflects the elimination of Ralphs historical LIFO provision.
(d) Reflects depreciation expense associated with approximately $36.8 million of
additional fixed assets required for the conversion of 23 Ralphs stores to
the Food 4 Less warehouse format and 122 Alpha Beta, Boys and Viva stores to
the Ralphs format.
(e) Reflects additional Yucaipa management fees ($2.0 million for the 52 weeks
ended June 25, 1994 and $0.5 million for the 12 weeks ended September 17,
1994) and the elimination of an annual guarantee fee ($0.4 million for the
52 weeks ended June 25, 1994 and $0.1 million for the 12 weeks ended
September 17, 1994) paid by Ralphs to EJDC.
(f) Reflects increased compensation resulting from new employment agreements
with certain of the current executive officers of Ralphs.
(g) Reflects the amortization of the excess of cost over net assets acquired in
the Merger ($22.0 million for the 52 weeks ended June 25, 1994 and $5.1
million for the 12 weeks ended September 17, 1994) and elimination of
Ralphs' historical amortization ($11.0 million for the 52 weeks ended June
25, 1994 and $2.5 million for the 12 weeks ended September 17, 1994).
Amortization has been calculated on the straight line basis over a period of
40 years.
(h) The following table presents a reconciliation of pro forma interest expense
and amortization of deferred financing costs:
<TABLE>
<CAPTION>
52 WEEKS 12 WEEKS
ENDED ENDED
JUNE 25, 1994 SEPTEMBER 17, 1994
------------- ------------------
<S> <C> <C>
Historical interest expense -- cash........................................ $150.2 $ 35.7
------ ------
Plus: Interest on borrowings under:
New Credit Facility.................................................... 74.6 16.3
New F4L Senior Notes................................................... 44.0 10.1
New RGC Notes.......................................................... 41.4 9.5
Other bank fees........................................................ 3.5 0.8
Other debt............................................................. 4.2 2.7
Less: Interest on borrowings under:
Old bank term loans:
Ralphs............................................................... (21.3) (5.4)
Food 4 Less.......................................................... (11.5) (2.5)
Old RGC Notes.......................................................... (43.9) (10.1)
Other debt............................................................. (16.6) (3.8)
------ ------
Pro forma adjustment..................................................... 74.4 17.6
------ ------
Pro forma interest expense -- cash......................................... $224.6 $ 53.3
====== ======
Historical amortization of debt issuance costs............................. $ 11.9 $ 2.7
Plus:
Financing and exchange/consent fees.................................... 8.8 2.0
Other fees and expenses................................................ 2.4 0.6
Less:
Historical financing costs:
Ralphs................................................................. (6.1) (1.4)
Food 4 Less............................................................ (5.3) (1.2)
------ ------
Pro forma adjustment..................................................... (0.2) 0.0
------ ------
Pro forma amortization of debt issuance costs.............................. $ 11.7 $ 2.7
====== ======
</TABLE>
(i) Represents the elimination of the historical income tax benefit of Ralphs
($108.0 million for the 52 weeks ended June 25, 1994) and Food 4 Less
income tax expense ($2.7 million for the 52 weeks ended June 25, 1994 and
$0.9 million for the 12 weeks ended September 17, 1994) given expected pro
forma losses. The Company's ability to recognize income tax benefits may be
limited in accordance with Financial Accounting Standard No. 109
"Accounting for Income Taxes." As such, no income tax benefit has been
reflected in these pro forma financial statements. See "Certain Federal
Income Tax Considerations."
(j) Reflects cancellation of cumulative convertible preferred stock of Food 4
Less held by Holdings.
(k) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of earnings before income taxes, cumulative effect of change in
accounting principles, extraordinary item and fixed charges before
capitalized interest. "Fixed charges" consist of interest expense (including
amortization of self-insurance reserves discount), capitalized interest,
amortization of deferred debt issuance costs and one-third of rental expense
(the portion deemed representative of the interest factor). The Company's
pro forma earnings were inadequate to cover pro forma fixed charges for the
52 weeks ended June 25, 1994 and for the 12 weeks ended September 17, 1994
by approximately $85.8 million and $23.2 million, respectively. However,
such pro forma earnings included non-cash charges of $182.9 million for the
52 weeks ended June 25, 1994 and $41.8 million for the 12 weeks ended
September 17, 1994, primarily consisting of depreciation and amortization.
35
<PAGE> 45
(l) "EBITDA," as defined and presented historically by RGC, represents net
earnings before interest expense, income tax expense (benefit),
depreciation and amortization expense, post-retirement benefits, the LIFO
charge, provision for restructuring, provision for earthquake losses, a
one-time charge for Teamsters Union sick pay benefits, and gains and losses
on disposal of assets. EBITDA is a widely accepted financial indicator of a
company's ability to service debt. However, EBITDA should not be construed
as an alternative to operating income or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of the Company's
operating performance or as a measure of liquidity. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(m) Reflects primarily EBITDA (as defined) associated with closed or divested
stores and the adjustments referred to in notes (e) and (f) above.
(n) EBITDA margin represents EBITDA (as defined) as a percentage of sales.
(o) The unaudited pro forma results of operations and EBITDA for the 52 weeks
ended June 25, 1994 and the 12 weeks ended September 17, 1994 do not include
certain one-time non-recurring costs related to (i) severance payments under
certain employment contracts with Food 4 Less management totalling $1.4
million that are subject to change of control provisions and the achievement
of earnings and sales targets, (ii) costs related to the integration of the
Company's operations which are estimated to be $50.0 million over a
three-year period, (iii) $1.8 million in costs related to the cancellation
of an employment agreement, or (iv) other costs related to warehouse
closures, which costs are not presently determinable.
36
<PAGE> 46
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FOOD 4 LESS
RALPHS (HISTORICAL)
(HISTORICAL) (UNAUDITED)
(UNAUDITED) SEPTEMBER 17, PRO FORMA
OCTOBER 9, 1994 1994 ADJUSTMENTS PRO FORMA
--------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 33.3 $ 29.4 $ 0.0 (a) $ 62.7
Accounts receivable...................... 45.2 25.4 -- 70.6
Inventories.............................. 217.2 210.6 39.9 (b) 467.7
Prepaid expense and other current
assets................................ 18.3 13.4 -- 31.7
-------- ------- ------- --------
Total current assets............. 314.0 278.8 39.9 632.7
Investments................................ 0.0 12.7 12.7
Property, plant and equipment.............. 611.6 370.0 160.0 (c) 1,111.7
(27.9)(d)
(2.0)(e)
Excess of cost over net assets acquired,
net...................................... 368.8 266.1 511.6 (f) 1,146.5
Beneficial lease rights.................... 50.7 0.0 -- 50.7
Deferred debt issuance costs, net.......... 22.7 27.2 76.2 (g) 80.0
(46.1)(h)
Deferred income taxes...................... 113.6 0.0 (113.6)(i) 0.0
Other assets............................... 10.0 23.7 (12.9)(d) 20.8
-------- ------- ------- --------
Total assets..................... $1,491.4 $ 978.5 $ 585.2 $3,055.1
======== ======= ======= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt..... $ 79.9 $ 23.2 $ (77.8)(j) $ 25.3
Short-term debt.......................... 37.4 0.0 (37.4)(k) 0.0
Accounts payable......................... 177.5 176.1 -- 353.6
Accrued expenses......................... 109.3 108.1 (22.1)(l) 201.8
4.7 (d)
1.8 (m)
Current portion of self-insurance
reserves.............................. 28.2 29.5 -- 57.7
-------- ------- ------- --------
Total current liabilities........ 432.3 336.9 (130.8) 638.4
Long-term debt............................. 883.4 495.7 567.3 (n) 1,946.4
Self-insurance reserves.................... 46.0 65.5 -- 111.5
Deferred income taxes...................... 0.0 14.7 -- 14.7
Lease valuation reserve.................... 30.1 0.0 -- 30.1
Other non-current liabilities.............. 84.6 0.0 (33.8)(o) 64.8
11.0 (p)
3.0 (e)
-------- ------- ------- --------
Total liabilities................ 1,476.4 912.8 416.7 2,805.9
-------- ------- ------- --------
Stockholder's equity:
Preferred Stock.......................... 0.0 61.4 (61.4)(q) 0.0
Common Stock............................. 0.3 0.0 (0.3)(t) 0.0
Additional paid-in capital............... 175.2 107.7 61.4 (q) 424.1
10.0 (o)
145.0 (r)
100.0 (s)
(175.2)(t)
Notes receivable from shareholders of
parent................................ 0.0 (0.6) -- (0.6)
Accumulated deficit...................... (160.5) (100.3) (24.2)(u) (171.8)
160.5 (t)
(45.5)(d)
(1.8)(m)
Treasury stock........................... 0.0 (2.5) -- (2.5)
-------- ------- ------- --------
Total stockholder's equity(v).... 15.0 65.7 168.5 249.2
-------- ------- ------- --------
Total liabilities and
stockholder's equity........... $1,491.4 $ 978.5 $ 585.2 $3,055.1
======== ======= ======= ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Balance Sheet.
37
<PAGE> 47
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(a) Reflects gross proceeds received from (i) the New Term Loans, (ii) the New
Revolving Facility, (iii) the New Equity Investment and (iv) the Public
Offering used to retire certain debt and liabilities and to pay financing
costs and other related fees as set forth in the following table:
<TABLE>
<S> <C>
New Term Loans............................................................................ $ 750.0
New Revolving Facility.................................................................... 5.8
New F4L Senior Notes...................................................................... 400.0
New Equity Investment..................................................................... 150.0
Purchase RSI Common Stock................................................................. (425.9)
Repay Ralphs 1992 Credit Agreement........................................................ (296.2)
Repay F4L Credit Agreement................................................................ (140.3)
Purchase Old RGC Notes.................................................................... (90.9)
Pay EAR liability......................................................................... (23.8)
Repay other Ralphs debt................................................................... (191.9)
Accrued Interest.......................................................................... (22.1)
Fees and Expenses......................................................................... (114.7)
-------
Pro forma adjustment.............................................................. $ 0.0
=======
</TABLE>
(b) Reflects the elimination of Ralphs historical LIFO reserve ($17.4 million)
and the write-up of merchandise inventory ($22.5 million); both to reflect
current estimated selling prices less costs of disposal and a reasonable
profit allowance for the selling effort of the acquiring company.
(c) Reflects the estimated write-up to fair value of Ralphs property, plant and
equipment as of the date of the Merger.
(d) Reflects estimated restructuring charge associated with closing 29 Food 4
Less conventional supermarkets or warehouse stores and converting 16 Food 4
Less conventional supermarkets to warehouse stores. Pursuant to the
settlement agreement with the State of California, 24 Food 4 Less (as well
as 3 Ralphs stores) stores must be closed by December 31, 1995. See
"Business -- California Settlement Agreement." Although not required by such
settlement agreement, an additional 5 under-performing stores selected by
the Company also are scheduled to be closed by December 31, 1995. The
restructuring charge consists of write-downs of property, plant and
equipment ($27.9 million), write-off of the Alpha Beta trademark ($8.6
million), write-off of other assets ($4.3 million), lease termination
expenses ($3.1 million), and miscellaneous expense accruals ($1.6 million).
The expected cash payments to be made in connection with the restructuring
charge total $7.1 million. It is expected that such cash payments will be
made by December 31, 1995. No additional expenses are expected to be
incurred in future periods in connection with these closings.
(e) Reflects the anticipated closing of 3 Ralphs stores.
(f) Reflects the excess of costs over the fair value of the net assets of Ralphs
acquired in connection with the Merger ($880.4 million) and the elimination
of Ralphs historical excess of costs over the fair value of the net assets
acquired ($368.8 million). The aggregate purchase price of $525.9 million
plus $54.1 million of costs related to the acquisition was allocated to
assets and liabilities based on management's preliminary estimate of fair
values as of October 9, 1994, as follows:
<TABLE>
<CAPTION>
AMOUNTS IN MILLIONS
<S> <C>
Cash........................................................................... $ 33.3
Receivables.................................................................... 45.2
Inventories.................................................................... 257.1
Other current assets........................................................... 18.3
Property, fixtures and equipment............................................... 771.6
Beneficial lease rights........................................................ 50.7
Goodwill....................................................................... 880.4
Other assets................................................................... 10.7
Current liabilities............................................................ (432.3)
Obligations under capital leases............................................... (58.1)
Long-term debt................................................................. (825.3)
Other non-current liabilities.................................................. (171.6)
--------
$ 580.0
========
A reconciliation of the excess purchase price is as follows:
Purchase price............................................................... $ 580.0
Less historical net book value at October 9, 1994............................ (15.0)
Add historical deferred tax asset............................................ 113.6
Add historical goodwill...................................................... 368.8
Add historical deferred debt costs........................................... 21.9
--------
Excess to be allocated............................................... $1,069.3
========
Excess allocated to:
Inventories.................................................................. $ 39.9
Property, fixtures and equipment............................................. 160.0
Goodwill..................................................................... 880.4
Other non-current liabilities................................................ (11.0)
--------
$1,069.3
========
</TABLE>
(g) Reflects the debt issuance costs associated with the New Credit Facility,
($26.9 million), the RGC Exchange Offers ($4.5 million), the F4L Exchange
Offers ($3.2 million), the Holdings Consent Solicitation ($0.5 million), RGC
Exchange Offers cash payments ($3.6 million), F4L Exchange Offers cash
payments ($5.2 million), the Holdings Consent Solicitation cash payments
($3.1 million), the New F4L Senior Notes ($12.0 million) and other financing
costs ($17.2 million). These amounts have been capitalized as deferred
financing costs.
38
<PAGE> 48
(h) Reflects the elimination of deferred debt issuance costs associated with the
Ralphs 1992 Credit Agreement (as defined) ($7.4 million), the F4L Credit
Agreement (as defined) ($10.4 million), the Old RGC Notes ($10.8 million)
and the Old F4L Notes ($13.8 million) and other indebtedness of RGC and Food
4 Less ($3.7 million) to be repaid in connection with the Merger.
(i) Reflects the elimination of Ralphs deferred tax asset associated with
changes in the financial reporting basis of assets. The combined Company may
be required to record a valuation allowance on all or some deferred tax
assets in compliance with Financial Accounting Standard No. 109 "Accounting
for Income Taxes." This determination may be based, in part, on historical
or expected earnings. For purposes of these pro forma financial statements
it has been assumed that all deferred net tax assets have been fully
reserved.
(j) Reflects the repayment and cancellation of the current maturities of Ralphs
1992 Credit Agreement ($62.5 million), the F4L Credit Agreement ($17.0
million), certain other Ralphs debt ($2.1 million) and the recording of the
current maturities of the New Credit Facility ($3.8 million).
(k) Reflects the repayment of Ralphs' old revolving credit facility.
(l) Reflects the payment of accrued interest on the Ralphs 1992 Credit Agreement
($2.3 million), the F4L Credit Agreement ($0.5 million), the Old RGC Notes
($7.4 million), the Old F4L Notes ($10.8 million) and other indebtedness of
RGC and Food 4 Less ($1.1 million) to be repaid in connection with the
Merger.
(m) Represents the liability to an executive under his employment contract due
to a change of control provision.
(n) Reflects the repayment and cancellation of the Ralphs 1992 Credit Agreement
and the F4L Credit Agreement, and the repayment of certain other Ralphs
debt, and records borrowings under the New Credit Facility as set forth in
the table below:
<TABLE>
<S> <C>
New Term Loans............................................................................ $ 746.2
New Revolving Facility.................................................................... 5.8
New F4L Senior Notes...................................................................... 400.0
Repay Ralphs 1992 Credit Agreement........................................................ (196.3)
Repay F4L Credit Agreement................................................................ (123.3)
Purchase Old RGC Notes.................................................................... (90.0)
Repay other Ralphs debt................................................................... (175.1)
-------
Net pro forma adjustment.......................................................... $ 567.3
=======
</TABLE>
(o) Reflects the payment of a portion of the Ralphs EAR liability ($23.8
million) and the issuance of New Holdings stock options in consideration of
the cancellation of the remaining Ralphs EAR liability ($10.0 million). See
"Executive Compensation -- Equity Appreciation Rights Plan." No future
compensation expense will be recorded as the cancellation of certain EAR
liabilities ($10.0 million) in consideration for the issuance of New
Holdings stock options is deemed to reflect fair value.
(p) Reflects a reserve for Ralphs unfunded defined benefit pension plan,
determined as the difference between the projected benefit obligation of the
plans as compared to the fair value of plan assets, less amounts previously
accrued.
(q) Reflects cancellation of cumulative convertible preferred stock of Food 4
Less held by Holdings.
(r) Reflects the contribution by New Holdings of RSI stock acquired with the
cash proceeds of the New Equity Investment of $150.0 million offset by $5.0
million in related commitment fees.
(s) Reflects the contribution by New Holdings of RSI stock acquired through the
issuance of $100.0 million aggregate principal amount of the Seller
Debentures.
(t) Reflects the elimination of Ralphs historical equity.
(u) Represents the write-off of the historical deferred debt issuance costs of
Food 4 Less related to its refinanced debt.
(v) The unaudited pro forma combined balance sheet as of September 17, 1994 does
not include certain one-time non-recurring costs related to (i) severance
payments under certain employment contracts with Food 4 Less management
totaling $1.4 million that are subject to change of control provisions and
the achievement of earnings and sales targets, (ii) costs related to the
integration of the Company's operations which are estimated to be $50.0
million over a three-year period, (iii) other costs related to warehouse
closures, which costs are not presently determinable, or (iv) any contingent
liability to reimburse Yucaipa in the event it incurs a loss on the resale
of $10 million of Seller Debentures.
39
<PAGE> 49
SELECTED HISTORICAL FINANCIAL DATA OF RALPHS
The following table presents selected historical financial data of RGC (as
the predecessor of RSI) as of and for the 52 weeks ended January 28, 1990, the
53 weeks ended February 3, 1991, and the 52 weeks ended February 2, 1992, and
summary historical financial data of RSI for the 52 weeks ended January 31, 1993
and January 30, 1994, which have been derived from the financial statements of
RSI and RGC audited by KPMG Peat Marwick LLP, independent certified public
accountants. The selected historical financial data of RSI presented below as of
and for the 36 weeks ended October 10, 1993 and October 9, 1994 have been
derived from unaudited interim financial statements of RSI which, in the opinion
of management, reflect all material adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of such data. The
following information should be read in conjunction with the Unaudited Pro Forma
Combined Financial Statements, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical financial
statements of RSI and RGC and related notes thereto included elsewhere in this
Prospectus and Solicitation Statement.
<TABLE>
<CAPTION>
52 WEEKS 53 WEEKS 52 WEEKS 52 WEEKS 52 WEEKS 36 WEEKS 36 WEEKS
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
JANUARY 28, FEBRUARY 3, FEBRUARY 2, JANUARY 31, JANUARY 30, OCTOBER 10, OCTOBER 9,
1990 1991 1992 1993 1994 1993 1994
----------- ------------ ------------ ----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Sales......................... $2,556.1 $2,799.1 $2,889.2 $2,843.8 $2,730.2 $1,874.2 $1,856.3
Cost of sales................. 2,051.1 2,225.4 2,275.2 2,217.2 2,093.7 1,445.2 1,433.0
-------- -------- -------- -------- -------- -------- --------
Gross profit.................. 505.0 573.7 614.0 626.6 636.5 429.0 423.3
Selling, general and
administrative expenses..... 391.0 435.8 456.6 466.7 467.6 319.4 316.0
Provision for equity
appreciation rights......... 26.0 15.3 18.3 -- -- -- --
Amortization of excess of cost
over net assets acquired.... 11.7 11.0 11.0 11.0 11.0 7.6 7.6
Provisions for restructuring,
post retirement benefits and
tax indemnification
payments(a)................. -- 2.2 12.6 10.4 5.8 2.1 1.8
-------- -------- -------- -------- -------- -------- --------
Operating income.............. 76.3 109.4 115.5 138.5 152.1 99.9 97.9
Interest expense(b)......... 130.9 128.5 130.2 125.6 108.8 75.7 77.2
Loss on disposal of assets
and provisions for legal
settlement and earthquake
losses(c)................. 3.1 6.4 13.0 10.1 12.9 0.4 0.8
Income tax expense
(benefit)................... 12.0 12.8 13.5 8.3 (108.0)(d) -- --
Cumulative effect of change in
accounting for
postretirement benefits
other than pensions......... -- (13.1) -- -- -- -- --
Extraordinary item-debt
refinancing, net of tax
benefits.................... -- -- -- (70.6) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings (loss)........... $ (69.7) $ (51.4) $ (41.2) $ (76.1) $ 138.4 $ 23.8 $ 19.9
======== ======== ======== ======== ======== ======== ========
Ratio of earnings to fixed
charges(e).................. --(e) --(e) --(e) 1.02x 1.24x 1.27x 1.22x
BALANCE SHEET DATA (end of period):
Working capital surplus
(deficit)................... $ (46.5) $ (93.9) $ (114.2) $ (122.0) $ (73.0) $ (87.5) $ (118.3)
Total assets.................. 1,404.8 1,406.4 1,357.6 1,388.5 1,483.7 1,363.9 1,491.4
Total debt(f)................. 991.0 986.1 941.9 1,029.8 998.9 990.4 1,000.6
Redeemable stock.............. 3.0 3.0 3.0 -- -- -- --
Stockholders' equity
(deficit)................... 35.4 (16.0) (57.2) (133.3) 5.1 (109.5) 15.0
OTHER DATA:
Depreciation and
amortization(g)............. $ 81.6 $ 75.2 $ 76.6 $ 76.9 $ 74.5 $ 51.7 $ 51.9
Capital expenditures.......... 103.5 87.6 50.4 102.7 62.2 46.8 44.5
Stores open at end of
period...................... 142 150 158 159 165 163 168
EBITDA (as defined)(h)........ $ 188.8 $ 207.0 $ 225.8 $ 227.3 $ 230.2 $ 155.9 $ 156.1
EBITDA margin(i).............. 7.4% 7.4% 7.8% 8.0% 8.4% 8.3% 8.4%
</TABLE>
- ---------------
(a) Provisions for restructuring are charges for expenses relating to closing of
Ralphs central bakery operation. The charge reflected the complete
write-down of the bakery building, machinery and equipment, leaseholds,
related inventory and supplies, and providing severance pay to terminated
employees. These charges were $7.1 million and $2.4 million for the 52 weeks
ended January 31, 1993 and the 52 weeks ended January 30, 1994,
respectively. Provision for post retirement benefits other than pensions was
$2.2 million, $2.6 million, $3.3 million, $3.4 million, $2.1 million and
$1.8 million for the 53 weeks ended February 3, 1991, the 52 weeks ended
February 2, 1992, January 31, 1993, and January 30, 1994, and the 36 weeks
ended October 10, 1993 and ended October 9, 1994, respectively. Provision
for tax indemnification payments to Federated were $10.0 million for the 52
weeks ended February 2, 1992.
(b) Net earnings (loss) includes non-cash charges related to the amortization of
deferred debt issuance costs of $4.1 million for the 52 weeks ended January
28, 1990, $4.1 million for the 53 weeks ended February 3, 1991, $5.0 million
for the 52 weeks ended February 2, 1992, $5.5 million for the 52 weeks ended
January 31, 1993, $6.5 million for the 52 weeks ended January 30, 1994 and
$4.5 and $4.3 for the 36 weeks ended October 10, 1993 and October 9, 1994,
respectively.
40
<PAGE> 50
(c) Loss on disposal of assets was $3.1 million, $6.4 million, $13.0 million,
$2.6 million, $1.9 million, $0.4 million and $0.8 million for the 52 weeks
ended January 28, 1990, the 53 weeks ended February 3, 1991, the 52 weeks
ended February 2, 1992, January 31, 1993, and January 30, 1994 and the 36
weeks ended October 10, 1993 and October 9, 1994, respectively. The 52 weeks
ended February 2, 1992 includes approximately $12.2 million representing a
reserve against losses related to the closing of three stores. Provision for
legal settlement was $7.5 million for the 52 weeks ended January 31, 1993.
Provision for earthquake losses was $11.0 million for the 52 weeks ended
January 30, 1994. This represents reserve for losses, net of anticipated
insurance recoveries, resulting from the January 17, 1994 Southern
California earthquake.
(d) Includes recognition of $109.1 million of deferred income tax benefit and
$1.1 million current income tax expense for Fiscal 1993 (see Note 11 of
Notes to Consolidated Financial Statements of Ralphs).
(e) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of earnings before income taxes, cumulative effect of change in
accounting principles, extraordinary items and fixed charges before
capitalized interest. "Fixed charges" consist of interest expense (including
amortization of self-insurance reserves discount), capitalized interest,
amortization of deferred debt issuance costs and one-third of rental expense
(the portion deemed representative of the interest factor). Earnings were
insufficient to cover fixed charges for the 52 weeks ended January 28, 1990,
the 53 weeks ended February 3, 1991 and the 52 weeks ended February 2, 1992
by $57.7 million, $25.5 million and $27.7 million, respectively.
(f) Total debt includes long-term debt, current maturities of long-term debt,
short-term debt and capital lease obligations.
(g) For the 52 weeks ended January 28, 1990, the 53 weeks ended February 3,
1991, the 52 weeks ended February 2, 1992, January 31, 1993, and January 30,
1994 and the 36 weeks ended October 10, 1993 and October 9, 1994,
depreciation and amortization includes amortization of the excess of cost
over net assets acquired of $11.7 million, $11.0 million, $11.0 million,
$11.0 million, $11.0 million, $7.6 million and $7.6 million, respectively.
(h) "EBITDA," as defined and presented historically by RGC, represents net
earnings before interest expense, income tax expense (benefit), depreciation
and amortization expense, provisions for Equity Appreciation Rights,
provision for tax indemnification payments to Federated, provision for
postretirement benefits, the LIFO charge, extraordinary item relating to
debt refinancing, provision for legal settlement, provision for
restructuring, provision for earthquake losses, a one-time charge for
Teamsters Union sick pay benefits and loss on disposal of assets. EBITDA is
a widely accepted financial indicator of a company's ability to service
debt. However, EBITDA should not be construed as an alternative to operating
income or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of Ralphs' operating performance or as a measure
of liquidity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(i) EBITDA margin represents EBITDA (as defined) as a percentage of sales.
41
<PAGE> 51
SELECTED HISTORICAL FINANCIAL DATA OF FOOD 4 LESS
The following table presents selected historical financial data of Food 4
Less as of and for the 53 weeks ended June 30, 1990 and the 52 weeks ended June
29, 1991, June 27, 1992, June 26, 1993 and June 25, 1994 which have been derived
from the financial statements of Food 4 Less audited by Arthur Andersen LLP,
independent public accountants. The summary historical financial data of Food 4
Less presented below as of and for the 12 weeks ended September 18, 1993 and
September 17, 1994 have been derived from unaudited interim financial statements
of Food 4 Less which, in the opinion of management, reflect all material
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation of such data. The following information should be read in
conjunction with the Unaudited Pro Forma Financial Statements, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical financial statements of Food 4 Less and related notes thereto
included elsewhere in this Prospectus and Solicitation Statement.
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED 12 WEEKS ENDED 12 WEEKS ENDED
JUNE 30, JUNE 29, JUNE 27, JUNE 26, JUNE 25, SEPTEMBER 18, SEPTEMBER 17,
1990 1991(A) 1992 1993 1994(B) 1993 1994
-------------- -------------- -------------- -------------- -------------- -------------- --------------
(DOLLARS IN MILLIONS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING
DATA:
Sales........ $1,318.2 $1,606.6 $2,913.5 $2,742.0 $2,585.2 $616.6 $598.7
Cost of
sales...... 1,113.4 1,340.9 2,392.7 2,257.8 2,115.9 504.2 495.7
-------- -------- -------- -------- -------- ------ ------
Gross
profit..... 204.8 265.7 520.8 484.2 469.3 112.4 103.0
Selling,
general,
administrative
and other
expenses... 157.8 213.1 469.7 434.9 388.8 95.7 88.1
Amortization
of excess
cost over
net
assets
acquired... 5.3 5.3 7.8 7.6 7.7 1.8 1.8
-------- -------- -------- -------- -------- ------ ------
Operating
income..... 41.7 47.3 43.3 41.7 72.8 14.9 13.1
Interest
expense(c). 50.8 50.1 70.2 69.8 68.3 15.7 16.0
Loss (gain)
on
disposal
of
assets..... -- 0.6 (1.3) (2.1) -- -- (0.5)
Provision
for
earthquake
losses..... -- -- -- -- 4.5 -- --
Provision
for
income
taxes...... 1.0 2.5 3.4 1.4 2.7 0.3 0.9
Extraordinary
charge..... -- 3.7(d) 4.8(e) -- -- -- --
-------- -------- -------- -------- -------- ------ ------
Net loss..... $ (10.1) $ (9.6) $ (33.8) $ (27.4) $ (2.7) $ (1.1) $ (3.3)
======== ======== ======== ======== ======== ====== ======
Ratio of
earnings
to fixed
charges(f).. --(f) --(f) --(f) --(f) 1.0x --(f) --(f)
BALANCE SHEET DATA (end of period)(g):
Working
capital
surplus
(deficit)... $ (40.5) $ 13.7 $ (66.3) $ (19.2) $ (54.9) $(18.6) $(58.1)
Total
assets...... 574.7 980.0 998.5 957.8 980.1 967.3 978.5
Total
debt(h)..... 360.7 558.9 525.3 538.1 517.9 530.6 518.8
Redeemable
stock....... 5.1 -- -- -- -- -- --
Stockholder's
equity...... 20.6 84.6 50.8 72.9 69.0 71.6 65.7
OTHER DATA:
Depreciation
and
amortization(i) $ 25.8 $ 31.9 $ 54.9 $ 57.6 $ 57.1 $ 13.1 $ 13.0
Capital
expenditures. 36.4 34.7 60.3 53.5 57.5 6.6 16.8
Stores open
at end of
period....... 115 259 249 248 258 248 261
EBITDA (as
defined)(j).. $ 69.5 $ 80.7 $ 103.1 $ 105.9 $ 130.5 $ 29.0 $ 29.7
EBITDA
margin(k).... 5.3% 5.0% 3.5% 3.9% 5.0% 4.7% 5.0%
</TABLE>
- ---------------
(a) Operating data for the 52 weeks ended June 29, 1991 include the results of
Alpha Beta only from June 17, 1991, the date of its acquisition. Alpha
Beta's sales for the two weeks ended June 29, 1991 were $59.2 million.
(b) Operating data for the 52 weeks ended June 25, 1994 include the results of
the Food Barn stores, which were not material, from March 29, 1994, the date
of the acquisition of the Food Barn stores.
(c) Interest expense includes non-cash charges related to the amortization of
deferred financing costs of $4.1 million for the 53 weeks ended June 30,
1990, $5.2 million for the 52 weeks ended June 29, 1991, $6.3 million for
the 52 weeks ended June 27, 1992, $4.9 million for the 52 weeks ended June
26, 1993, $5.5 million for the 52 weeks ended June 25, 1994, $1.2 million
for the 12 weeks ended September 18, 1993 and $1.3 million for the 12 weeks
ended September 17, 1994.
(d) Represents an extraordinary charge of $3.7 million (net of related income
tax benefit of $2.5 million) relating to the refinancing of certain
indebtedness in connection with the Alpha Beta acquisition and the write-off
of related debt issuance costs.
(e) Represents an extraordinary net charge of $4.8 million reflecting the
write-off of $6.7 million (net of related income tax benefit of $2.5
million) of deferred debt issuance costs as a result of the early redemption
of a portion of Food 4 Less' term loan facility under the F4L Credit
Agreement, partially offset by a $1.9 million extraordinary gain (net of a
related income tax expense of $0.7 million) on the replacement of partially
depreciated assets following the civil unrest in Los Angeles.
42
<PAGE> 52
(f) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of loss before provision for income taxes and extraordinary charges,
plus fixed charges. "Fixed charges" consist of interest on all indebtedness,
amortization of deferred debt issuance costs and one-third of rental expense
(the portion deemed representative of the interest factor). Earnings were
insufficient to cover fixed charges for the 53 weeks ended June 30, 1990,
the 52 weeks ended June 29, 1991, June 27, 1992 and June 26, 1993 and the 12
weeks ended September 18, 1993 and September 17, 1994 by approximately $9.1
million, $3.4 million, $25.6 million, $25.9 million, $0.8 million and $2.4
million, respectively. However, such earnings included non-cash charges of
$29.9 million for the 53 weeks ended June 30, 1990, $37.0 million for the 52
weeks ended June 29, 1991, $61.2 million for the 52 weeks ended June 27,
1992 and $62.5 million for the 52 weeks ended June 26, 1993, $14.3 million
for the 12 weeks ended September 18, 1993 and $14.3 million for the 12 weeks
ended September 17, 1994, primarily consisting of depreciation and
amortization.
(g) Balance sheet data as of June 30, 1990 relate to Food 4 Less and include the
effect of the BHC Acquisition, as well as the acquisitions of Bell Markets,
Inc. and certain assets of ABC Market Corp. Balance sheet data as of June
29, 1991, June 27, 1992, June 26, 1993 and September 18, 1993 relate to Food
4 Less and reflect the Alpha Beta acquisition and the financings and
refinancings associated therewith. Balance sheet data as of June 25, 1994
and September 17, 1994 relate to Food 4 Less and reflect the acquisition of
the Food Barn stores.
(h) Total debt includes long-term debt, current maturities of long-term debt and
capital lease obligations.
(i) For the 53 weeks ended June 30, 1990, the 52 weeks ended June 29, 1991, June
27, 1992, June 26, 1993 and June 25, 1994, and the 12 weeks ended September
18, 1993 and September 17, 1994, depreciation and amortization includes
amortization of excess of cost over net assets acquired of $5.3 million,
$5.3 million, $7.8 million, $7.6 million, $7.7 million, $1.8 million and
$1.8 million, respectively.
(j) "EBITDA," as defined and presented historically by Food 4 Less, represents
income before interest expense, depreciation and amortization expense, the
LIFO provision, provision for incomes taxes, provision for earthquake losses
and the one-time adjustment to the Teamsters Union sick pay accrual. EBITDA
is a widely accepted financial indicator of a company's ability to service
debt. However, EBITDA should not be construed as an alternative to operating
income or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of Food 4 Less' operating performance or as a
measure of liquidity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(k) EBITDA margin represents EBITDA (as defined) as a percentage of sales.
43
<PAGE> 53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The combination of Ralphs and Food 4 Less will create the largest
supermarket operator in Southern California with an estimated 264 conventional
format Ralphs stores and an estimated 68 price-impact Food 4 Less warehouse
format stores. The Company will operate an additional 63 stores in Northern
California and certain areas of the Midwest. Management believes that the
Company's dual format strategy will appeal to a broad range of Southern
California consumers and enable the Company to significantly enhance its overall
competitive position. In addition, the Company expects to achieve cost savings
and incremental profitability through the integration of advertising,
administration, purchasing, distribution, manufacturing and other operations.
Due to its increased size, dual format strategy and integration related costs,
the Company believes that its future operating results may not be directly
comparable to the historical operating results of either Ralphs or Food 4 Less.
Certain factors which are expected to affect the future operating results of the
Company (or their comparability to prior periods) are discussed below.
Regional Economic Conditions. In recent periods Ralphs and Food 4 Less have
each been affected by the adverse economic conditions that have existed in
Southern California since approximately 1991. These conditions were exacerbated
by the substantial layoffs in the defense and aerospace industries and by the
civil unrest in Los Angeles in April, 1992. In addition, management estimates
that approximately eight million square feet of supermarket selling space has
been added in Southern California over the past five years. As a result of these
factors and general deflationary pressures in certain food product categories,
Ralphs and Food 4 Less have each experienced declining comparable store sales in
recent periods. Over the last three fiscal years, Food 4 Less' and Ralphs' total
sales declined by 11.3% and 5.5%, respectively. Despite these adverse sales
trends, however, each company has improved its profitability over the same
period as discussed in greater detail below. In addition, comparable store sales
declines have begun to moderate in recent periods, which is consistent with data
indicating a mild recovery in the Southern California economy. Management
believes that its dual format strategy and anticipated cost savings will leave
it well positioned to take advantage of improvements in the regional economy and
growing population and to compete effectively in the Southern California
marketplace. See "Risk Factors -- Regional Economic Conditions."
Integration Costs and Restructuring Charges. The two principal components
of the Company's integration strategy will be (i) the conversion of up to 122 of
Food 4 Less' conventional stores (primarily Alpha Beta stores) to the Ralphs
name and format and the conversion of 16 other Food 4 Less conventional stores
(Boys and Viva) and 23 Ralphs stores to the Food 4 Less price impact warehouse
format; and (ii) the achievement of substantial cost savings through the
consolidation of warehousing, manufacturing and distribution operations and the
elimination of certain other duplicative overhead costs. Management has
estimated that approximately $90 million of net annual cost savings are
achievable by the end of the fourth year of combined operations. Although a
portion of the anticipated cost savings is premised upon the completion of such
capital expenditures, management believes that over 70% of the cost savings
could be achieved without making any Merger-related capital expenditures. See
"Business -- The Merger" and "Risk Factors -- Ability to Achieve Anticipated
Cost Savings." Management believes that approximately $117 million in
Merger-related capital expenditures and $50 million of other non-recurring costs
will be required to complete store conversions, integrate operations and expand
warehouse facilities over this four-year period. Management expects that the
non-recurring integration costs will effectively offset any cost savings in the
first year following the Merger. See "-- Liquidity and Capital Resources." In
addition, management anticipates that certain non-recurring costs associated
with the integration of operations will be recorded as a restructuring charge.
The charge will cover costs associated with the writedown of property and
equipment and related reserves associated with the conversion of certain Food 4
Less conventional supermarkets to warehouse stores and the closure of certain
Food 4 Less conventional stores as well as the write-off of the Alpha Beta
trademark. On December 14, 1994, Food 4 Less and Ralphs entered into a
Settlement Agreement (the "Settlement Agreement") with the State of California.
See "Business -- California Settlement Agreement." Under the Settlement
Agreement, the Company must divest a total of 27 stores (24 Food 4 Less
conventional supermarkets or warehouse stores and
44
<PAGE> 54
3 Ralphs stores). In addition, although not required pursuant to the Settlement
Agreement, an additional 5 under-performing stores selected by the Company are
scheduled to be closed following the Merger. It is anticipated that such
closures and store conversions will be substantially completed by December 31,
1995. The estimated restructuring charge aggregating $45.5 million for the 24
Food 4 Less stores to be divested under the Settlement Agreement, the planned
closures (5 Food 4 Less stores) and the conversion of 16 Food 4 Less
conventional stores to warehouse format stores reflects (i) the writedown of
property, plant and equipment ($27.9 million), (ii) the write-off of Alpha Beta
trademark ($8.6 million), (iii) the write-off of other assets ($4.3 million),
(iv) lease termination expense ($3.1 million), and (v) miscellaneous expense
accruals ($1.6 million). The expected cash payments to be made in connection
with the restructuring charge will total $7.1 million. It is expected that such
cash payments will be made by December 31, 1995. The divestiture of the 3 Ralphs
stores pursuant to the Settlement Agreement will be reflected in the allocation
of the purchase price and therefore will not give rise to any restructuring
charge.
Store Mix. Approximately 28% of the Company's total anticipated number of
stores following the Merger are expected to be warehouse format stores. Because
these stores offer prices that are generally 5-12% below those in Food 4 Less'
conventional stores, they produce lower gross profit margins than an average
conventional supermarket. As a result, the Company's consolidated gross margin
following the Merger is expected to decline from the levels historically
reported by Ralphs. In addition, if the percentage of warehouse stores in the
overall store mix increases following the Merger, as expected, the Company's
consolidated gross margins should also be expected to decline slightly over
time. Because of the reduced SG&A (as defined) costs associated with the
warehouse format stores, management believes that overall profitability of the
warehouse stores is comparable to that of conventional stores.
Purchase Accounting. The Merger will be accounted for as a purchase of
Ralphs by Food 4 Less. As a result, the assets and liabilities of Ralphs will be
recorded at their estimated fair market values on the date the Merger is
consummated. The purchase price in excess of the fair market value of Ralphs'
assets will be recorded as goodwill and amortized over a forty year period. The
purchase price allocation reflected in the pro forma statements is based on
management's preliminary estimates. The actual purchase accounting adjustments
will be determined following the Merger and may vary from the amounts reflected
in the Unaudited Pro Forma Financial Data included elsewhere herein.
Fiscal Year and Restatement of Food 4 Less Financial Statements. Following
the Merger, the Company will adopt Ralphs' fiscal year end for financial
reporting purposes. Ralphs' fiscal year ends on the Sunday closest to January
31. In connection with the preparation of this Prospectus and Solicitation
Statement, Food 4 Less elected to restate its historical financial statements to
conform to Ralphs' classification of certain expenses. The changes primarily
involved the reclassification of certain labor, occupancy and utility costs
associated with product deliveries as cost of goods sold, which were previously
classified as selling, general, administrative and other expense, net. In
addition, depreciation expense, which had been reported separately by Food 4
Less with the amortization of goodwill, was classified as cost of goods sold or
selling, general, administrative and other expense, net, as appropriate. The
amounts aggregated $236.2 million, $224.5 million, $219.5 million and $50.9
million (unaudited) for the fiscal years ended June 27, 1992, June 26, 1993,
June 25, 1994 and the 12 weeks ended September 18, 1993. Food 4 Less has also
classified a portion of its self-insurance costs as interest expense that was
previously recorded in selling, general, administrative and other expense, net.
These self-insurance amounts were reclassified to more completely segregate the
interest component of self-insurance costs arising from discounting long-term
obligations. The amounts reclassified aggregated $5.0 million, $5.9 million,
$5.8 million and $1.4 million (unaudited) for the fiscal years ended June 27,
1992, June 26, 1993, June 25, 1994 and the 12 weeks ended September 18, 1993.
All historical financial information for Food 4 Less included in this Prospectus
and Solicitation Statement reflects these reclassifications. See Note 15 of
Notes to Food 4 Less Consolidated Financial Statements.
45
<PAGE> 55
RESULTS OF OPERATIONS OF RALPHS
The following table sets forth the historical operating results of Ralphs
for the 52 weeks ended February 2, 1992 ("Fiscal 1991"), January 31, 1993
("Fiscal 1992") and January 30, 1994 ("Fiscal 1993") and for the 36 weeks ended
October 10, 1993 and October 9, 1994:
<TABLE>
<CAPTION>
52 WEEKS ENDED 36 WEEKS ENDED
-------------------------------------------------------- ------------------------------------
FEBRUARY 2, JANUARY 31, JANUARY 30, OCTOBER 10, OCTOBER 9,
1992 1993 1994 1993 1994
---------------- ---------------- ---------------- ---------------- ----------------
(IN MILLIONS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales.......................... $2,889.2 100.0% $2,843.8 100.0% $2,730.2 100.0% $1,874.2 100.0% $1,856.3 100.0%
Cost of sales.................. 2,275.2 78.8 2,217.2 78.0 2,093.7 76.7 1,445.2 77.1 1,433.0 77.2
Selling, general and
administrative expenses...... 456.6 15.8 466.7 16.4 467.6 17.1 319.4 17.1 316.0 17.0
Operating income(a)............ 115.5 4.0 138.5 4.9 152.1 5.6 99.9 5.3 97.9 5.3
Net interest expense........... 130.2 4.5 125.6 4.4 108.8 4.0 75.7 4.0 77.2 4.2
Provision for earthquake
losses(b).................... -- -- -- -- 11.0 0.4 -- -- -- --
Income tax expense (benefit)... 13.5 0.4 8.3 0.3 (108.0) (4.0) -- -- -- --
Extraordinary item............. -- -- 70.6 2.5 -- -- -- -- -- --
Net earnings (loss)............ (41.2) (1.4) (76.1) (2.7) 138.4 5.1 23.8 1.3 19.9 1.1
</TABLE>
- ---------------
(a) Operating income reflects charges of $7.1 million in Fiscal 1992 and $2.4
million in Fiscal 1993, for expenses relating to closing of central bakery
operation. The charges reflected the complete write-down of the bakery
building, machinery and equipment, leaseholds, related inventory and
supplies, and providing severance pay to terminated employees.
(b) Represents reserve for losses, net of expected insurance recoveries,
resulting from the January 17, 1994 Southern California earthquake.
COMPARISON OF RALPHS' RESULTS OF OPERATIONS FOR THE 36 WEEKS ENDED OCTOBER 9,
1994 WITH RALPHS' RESULTS OF OPERATIONS FOR THE 36 WEEKS ENDED OCTOBER 10, 1993.
Sales
For the thirty-six weeks ended October 9, 1994, sales were $1,856.3
million, a decrease of $17.9 million or 1.0% from the thirty-six weeks ended
October 10, 1993. During the first three quarters of the fiscal year ending
January 29, 1995 ("Fiscal 1994"), Ralphs opened five new stores (three in Los
Angeles County, one in San Diego County and one in Riverside County), closed two
stores (in conjunction with new stores opening in the same areas), and completed
three store remodels. Comparable store sales decreased 3.8%, which included an
increase of 0.3% for replacement store sales, from $1,855.0 million in the first
three quarters of Fiscal 1993 to $1,784.4 million in the first three quarters of
Fiscal 1994. Ralphs sales continued to be adversely affected by the continuing
softness of the economy in Southern California, continuing competitive new store
and remodeling activity and recent pricing and promotional changes by
competitors. Ralphs continued to take steps to mitigate the impact of the weak
retailing environment in its markets, which included continuing its own new
store and remodeling program and initiating the Ralphs Savings Plan in February
1994, a new marketing campaign specifically designed to enhance customer value.
See "Business -- Advertising and Promotion."
On January 17, 1994, an earthquake in Southern California caused
considerable damage in Los Angeles and surrounding areas. Several Ralphs
supermarkets suffered earthquake damage, with 54 stores closed on the morning of
January 17th. Thirty-four stores reopened within one day and an additional 17
stores reopened within three days. Three stores in the San Fernando Valley area
of Los Angeles suffered major structural damage. All three stores have since
reopened for business, with the last reopening on April 15, 1994. Management
believes that there was some negative impact on sales resulting from the
temporary disruption of business resulting from the earthquake. Ralphs is
partially insured for earthquake losses. The pre-tax financial impact, net of
expected insurance recoveries, is expected to be approximately $11.0 million and
Ralphs reserved for this loss in Fiscal 1993. The gross earthquake loss is
approximately $25.3 million and the expected insurance recovery is approximately
$14.3 million.
46
<PAGE> 56
Cost of Sales
Cost of sales decreased $12.2 million or 0.8% from $1,445.2 million in the
first three quarters of Fiscal 1993 to $1,433.0 million in the first three
quarters of Fiscal 1994. As a percentage of sales, cost of sales increased to
77.2% in the first three quarters of Fiscal 1994 from 77.1% in the first three
quarters of Fiscal 1993. The increase in cost of sales as a percentage of sales
included a one-time charge for Teamsters Union sick pay benefits pursuant to a
new contract ratified in August 1994 with the Teamsters. The total charge was
$2.5 million, of which $2.1 million was included in cost of sales and $0.4
million in selling, general and administrative expense. Increases in cost of
sales were partially offset by savings in warehousing and distribution costs,
reductions in self-insurance costs, pass-throughs of increased operating costs
and increases in relative margins where allowed by competitive conditions.
Warehousing and distribution cost savings were primarily attributable to
Ralphs' ASRS and PSC facilities. The ASRS facility can hold substantially more
inventory and requires fewer employees to operate than does a conventional
warehouse of equal size. This facility has reduced Ralphs' warehousing costs of
non-perishable items markedly, enabling it to take advantage of advance buying
opportunities and minimize "out-of-stocks." Ralphs engages in forward-buy
purchases to take advantage of special prices or to delay the impact of upcoming
price increases by purchasing and warehousing larger quantities of merchandise
than immediately required. The PSC facility has consolidated the operations of
three existing facilities and holds more inventory than the facilities it
replaced, thereby reducing Ralphs' warehouse distribution costs.
Over the last several years, Ralphs has been implementing modifications in
its workers compensation and general liability insurance programs. Ralphs
believes that these modifications have resulted in a significant reduction in
self-insurance costs for Fiscal 1994. Based on a review of the results of these
modifications by Ralphs and its actuaries, adjustments to the accruals for
self-insurance costs were made during the second and third quarters of Fiscal
1994 resulting in reductions of approximately $7.8 million and $3.9 million,
respectively. Of the total $11.7 million reduction in self-insurance costs, $4.3
million is included in cost of sales and $7.4 million is included in selling,
general and administrative expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") decreased $3.4
million or 1.1% from $319.4 million in the first three quarters of Fiscal 1993
to $316.0 million in the first three quarters of Fiscal 1994. As a percentage of
sales, SG&A decreased from 17.1% in the first three quarters of Fiscal 1993 to
17.0% in the first three quarters of Fiscal 1994. The decrease in SG&A was
primarily due to a reduction in contributions to the United Food and Commercial
Workers Union ("UFCW") health care benefit plans, due to an excess reserve in
these plans, a reduction in self-insurance costs, as discussed above, and the
results of cost savings programs instituted by Ralphs. Ralphs is continuing its
expense reduction program. The decrease in SG&A was partially offset by several
factors including increases in union wage rates, a one-time charge for Teamsters
Union sick pay benefits and increased rent expense resulting from new stores,
including fixture and equipment financing.
Ralphs participates in multi-employer pension plans and health and welfare
plans administered by various trustees for substantially all union employees.
Contributions to these plans are based upon negotiated contractual rates. In
both Fiscal 1992 and Fiscal 1993 the multi-employer pension plan was deemed to
be overfunded based upon the collective bargaining agreement then currently in
force. During Fiscal 1993 the agreement called for pension benefits which
resulted in additional required expense. The UFCW health and welfare benefit
plans were overfunded and those employers who contributed to these plans are to
receive a pro rata share of the excess reserve in these health care benefit
plans through a reduction in current maintenance payments. Ralphs' share of the
excess reserve was approximately $24.5 million of which $11.8 million was
recognized in Fiscal 1993 and the remainder will be recognized in Fiscal 1994.
In the first three quarters of Fiscal 1994 $8.7 million of the excess reserve
was recognized. Since employers are required to make contributions to the
benefit funds at whatever level is necessary to maintain plan benefits, there
can be no assurance that plan maintenance payments will remain at current
levels.
47
<PAGE> 57
Operating Income
Operating income in the first three quarters of Fiscal 1994 decreased 2.0%
to $97.9 million from $99.9 million in the first three quarters of Fiscal 1993.
Operating margin, defined as operating income as a percentage of sales, remained
at 5.3% in the first three quarters of Fiscal 1994 and Fiscal 1993. EBITDA,
defined as net earnings before interest expense, income tax expense (benefit),
depreciation and amortization expense, provision for post-retirement benefits,
gain or loss on disposal of assets and a one-time charge for Teamsters Union
sick pay benefits, was 8.4% of sales or $156.1 million in the first three
quarters of Fiscal 1994 and 8.3% of sales or $155.9 million in the first three
quarters of Fiscal 1993.
Net Interest Expense
Net interest expense for the first three quarters of Fiscal 1994 was $77.2
million versus $75.7 million for the first three quarters of Fiscal 1993. Net
interest expense increased primarily as a result of increases in interest rates.
Included as interest expense during the first three quarters of Fiscal 1994 was
$66.5 million, representing interest expense on existing debt obligations,
capitalized leases and a swap agreement. Comparable interest expense for the
first three quarters of Fiscal 1993 was $64.6 million. Also included in net
interest expense for the first three quarters of Fiscal 1994 was $10.7 million
representing certain other charges related to amortization of debt issuance
costs, self-insurance discounts, lease valuation reserves and other
miscellaneous charges (categorized by Ralphs as non-cash interest expense) as
compared to $11.1 million for the first three quarters of Fiscal 1993.
Investment income, which is immaterial, has been offset against interest
expense.
Net Earnings
For the first three quarters of Fiscal 1994, Ralphs reported net earnings
of $19.9 million compared to net earnings of $23.8 million for the first three
quarters of Fiscal 1993. The decrease in net earnings is primarily the result of
decreased operating income and higher interest expense due to increased interest
rates.
Other
In February 1994, the Board of Directors of RGC authorized a dividend of
$10.0 million to be paid to RSI, and the Board of Directors of RSI authorized
distribution of this dividend to its shareholders subject to certain restrictive
covenants in the instruments governing certain of RGC's indebtedness that impose
limitations on the declaration or payment of dividends. RGC's credit agreement,
entered into in 1992 (the "1992 Credit Agreement"), was amended to allow for the
payment of the dividend to RSI for distribution to RSI's shareholders. The fee
for the amendment was approximately $500,000, which was included in interest
expense for the period. The dividend was distributed to the shareholders of RSI
in the second quarter of Fiscal 1994.
COMPARISON OF RALPHS' RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED JANUARY 30,
1994 WITH RALPHS' RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED JANUARY 31, 1993.
Sales
Sales in Fiscal 1993 were $2,730.2 million, a decrease of $113.6 million or
4.0% compared to Fiscal 1992. During Fiscal 1993, Ralphs opened eight new
stores, four in Los Angeles County, two in Orange County and two in Riverside
County, and remodeled six stores. Two of the eight new stores replaced the two
stores closed during the fiscal year. Comparable store sales decreased 5.8%,
which included an increase of 0.6% for the replacement stores, from $2,823.4
million to $2,659.3 million in Fiscal 1993. Ralphs' sales continued to be
adversely affected by the significant recession in Southern California,
continuing competitive new store and remodelling activity and pricing and
promotional changes by competitors.
48
<PAGE> 58
Cost of Sales
Cost of sales decreased $123.5 million or 5.6% from $2,217.2 million in
Fiscal 1992 to $2,093.7 million in Fiscal 1993. As a percentage of sales, cost
of sales declined to 76.7% in Fiscal 1993 from 78.0% in Fiscal 1992. The
decrease in cost of sales as a percentage of sales was the result of savings in
warehousing and distribution costs, the pass-through of increased operating
costs and increases in relative margins where allowed by competitive conditions.
Selling, General and Administrative Expenses
SG&A increased $0.9 million or 0.2% from $466.7 million in Fiscal 1992 to
$467.6 million in Fiscal 1993. As a percentage of sales, SG&A increased from
16.4% in Fiscal 1992 to 17.1% in Fiscal 1993. The increase in SG&A as a
percentage of sales was the result of several factors including the soft sales
environment. Increases in expense were partially offset by cost savings programs
instituted by Ralphs.
Ralphs participates in multi-employer pension plans and health and welfare
plans administered by various trustees for substantially all union employees.
Contributions to these plans are based upon negotiated contractual rates. In
both Fiscal 1992 and Fiscal 1993 the UFCW multi-employer pension plan was deemed
to be overfunded based upon the collective bargaining agreement then currently
in force. During Fiscal 1993 the agreement called for pension benefits which
resulted in additional required expense. The UFCW health and welfare benefit
plans were overfunded and those employers who contributed to these plans are to
receive a pro rata share of the excess reserve in these health care benefit
plans through a reduction in current maintenance payments. Ralphs' share of the
excess reserve was approximately $24.5 million of which $11.8 million was
recognized in Fiscal 1993 and the remainder will be recognized in the fiscal
year ending January 29, 1995. The change in health and welfare plan expenses
resulted from the $11.8 million credit associated with the collective bargaining
agreement as well as a reduction in the current year plan expense due to the
overfunded status of the plan. Since employers are required to make
contributions to the benefit funds at whatever level is necessary to maintain
plan benefits, there can be no assurance that plan maintenance payments will
remain at current levels. Partially offsetting the reductions of health and
welfare maintenance payments was a $6.0 million contract ratification bonus paid
by Ralphs at the conclusion of contract negotiations with the UFCW in Fiscal
1993. The $6.0 million contract ratification payment was an item separate from
either of these plans.
Operating Income
Operating income in Fiscal 1993 increased to $152.1 million from $138.5
million in Fiscal 1992, a 9.8% increase. Operating margin increased in Fiscal
1993 to 5.6% from 4.9% in Fiscal 1992. This increase was primarily the result of
the aforementioned improvements in Ralphs' cost of sales percentage. EBITDA,
defined as net earnings before interest expense, income tax expense (benefit),
depreciation and amortization expenses, post-retirement benefits, the LIFO
charge, extraordinary item relating to debt refinancing, provision for legal
settlement, provision for restructuring, provision for earthquake losses and
loss on disposal of assets, improved to $230.2 million or 8.4% of sales in
Fiscal 1993 from $227.3 million or 8.0% of sales in Fiscal 1992.
Net Interest Expense
Net interest expense for Fiscal 1993 was $108.8 million, compared to $125.6
million for Fiscal 1992. The reduction in net interest expense was attributable
to the refinancing and defeasance of Ralphs 14% Senior Subordinated Debentures
due 2000 (the "14% Debentures") with the proceeds from the issuance of the Old
RGC 9% Notes as the final step in a recapitalization plan initiated on July 30,
1992. Cash interest expense during Fiscal 1993 was $92.8 million compared to
$105.5 million in Fiscal 1992. Also included in interest expense for Fiscal 1993
was $16.0 million representing certain other charges relating to amortization of
debt issuance costs, self-insurance discount, lease valuation reserves and other
miscellaneous charges (categorized by Ralphs as non-cash interest expense) as
compared to $20.1 million for Fiscal 1992. Investment income, which is
immaterial, has been offset against interest expense.
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<PAGE> 59
Earthquake Losses
Several Ralphs stores suffered earthquake damage from the January 17, 1994
earthquake in Southern California and 54 stores were completely shutdown on the
morning of January 17th. Management believes that there was some negative impact
on sales resulting from the temporary disruption of business resulting from the
earthquake. Ralphs is partially insured for earthquake losses. The pre-tax
financial impact, net of expected insurance recoveries, is expected to be
approximately $11.0 million and Ralphs reserved for this loss in Fiscal 1993.
The gross earthquake loss is approximately $25.3 million and the expected
insurance recovery is approximately $14.3 million.
Income Taxes
In Fiscal 1993, Ralphs recorded the incremental impact of The Omnibus
Budget Reconciliation Act of 1993 on net deductible temporary differences and
Ralphs increased its deferred income tax assets by a net amount of $109.1
million. Income tax expense (benefit) for Fiscal 1993 includes recognition of
$109.1 million of deferred income tax benefit and $1.1 million current income
tax expense for Fiscal 1993. See Note 11 of Notes to Ralphs Consolidated
Financial Statements.
Net Earnings
In Fiscal 1993, Ralphs reported net earnings of $138.4 million compared to
a net loss of $76.1 million for Fiscal 1992. This increase in net earnings was
primarily the result of Ralphs' recognition of $109.1 million of deferred income
tax benefit for Fiscal 1993 and the following items recorded in Fiscal 1992: (1)
an extraordinary charge, net of tax benefit, of $70.6 million relating to
Ralphs' recapitalization plan, (2) a provision of $7.1 million made for expenses
related to the closure of the central bakery operation (an additional charge of
$2.4 million was recorded in Fiscal 1993) and (3) a provision of $7.5 million
made for the maximum loss under a judgment rendered against Ralphs.
COMPARISON OF RALPHS' RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED JANUARY 31,
1993 WITH RALPHS' RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED FEBRUARY 2, 1992.
Sales
Fiscal 1992 sales were $2,843.8 million, a decrease of $45.4 million or
1.6% compared to Fiscal 1991. During Fiscal 1992, Ralphs opened six new stores,
three in Los Angeles County, one in Riverside County, one in San Bernardino
County and one in San Diego County, closed five stores and remodeled 23 stores.
Comparable stores sales decreased 3.5%, which included an increase of 0.6% for
replacement stores, from $2,859.4 million to $2,759.1 million in Fiscal 1992.
Cost of Sales
Cost of sales decreased $58.0 million or 2.5% from $2,275.2 million in
Fiscal 1991 to $2,217.2 million in Fiscal 1992. As a percentage of sales, cost
of sales declined to 78.0% in Fiscal 1992 from 78.8% in Fiscal 1991. The
decrease in cost of sales as a percentage of sales was the result of the
pass-through of increased operating costs, an increase in the mix of above
average gross margin products and increases in relative margins where allowed by
competitive conditions.
The Company believes that through achieving cost savings and applying
effective pricing policies, both cost and gross margins can be improved.
However, given the highly competitive nature of the Southern California grocery
market, such cost and gross margin improvements cannot be assured.
Selling, General and Administrative Expenses
SG&A increased $10.1 million or 2.2% from $456.6 million in Fiscal 1991 to
$466.7 million in Fiscal 1992. As a percentage of sales, SG&A increased from
15.8% in Fiscal 1991 to 16.4% in Fiscal 1992. The increase in SG&A as a percent
of sales was the result of several factors including the continuing soft sales
50
<PAGE> 60
environment. Other factors impacting SG&A during Fiscal 1992 were increases in
union wage rates. These expense increases were partially offset by significant
cost savings programs instituted by Ralphs. These programs were intensified in
the third quarter of Fiscal 1992 due to the prolonged period of soft sales
experienced in Southern California.
Operating Income
Operating income in Fiscal 1992 increased to $138.5 million from $115.5
million in Fiscal 1991, a 19.9% increase. Operating margin increased in Fiscal
1992 to 4.9% from 4.0% in Fiscal 1991. This increase was primarily the result of
the aforementioned improvements in Ralphs' cost of sales percentage and the
vesting of then outstanding rights under Ralphs' 1988 Equity Appreciation Rights
Plan. EBITDA, defined as net earnings before interest expense, income tax
expense (benefit), depreciation and amortization expense, provision for Equity
Appreciation Rights, provision for tax indemnification payments to Federated,
provision for post-retirement benefits, the LIFO charge, extraordinary item
relating to debt refinancing, provision for legal settlement, provision for
restructuring and gains and losses on disposal of assets, improved to $227.3
million or 8.0% of sales in Fiscal 1992 from $225.8 million or 7.8% of sales in
Fiscal 1991.
Net Interest Expense
Net interest expense for Fiscal 1992 was $125.6 million, including an
adjustment of $2.3 million related to additional interest on self-insurance,
compared to $130.2 million for Fiscal 1991. On July 30, 1992 Ralphs initiated
its recapitalization plan, which was designed to reduce interest expense and
improve financial flexibility. The first part of the recapitalization plan
consisted of a tender offer for its 14% Debentures (of which $301.9 million were
tendered), the issuance of $300 million Old RGC 10 1/4% Notes, and the new
$470.0 million 1992 Credit Agreement. The 1992 Credit Agreement replaced the
1988 credit agreements (the "1988 Credit Agreements"), which were paid in full,
including termination of existing interest rate swap agreements. Included as
interest expenses during Fiscal 1992 was $105.5 million of cash interest as
compared to $115.8 million for Fiscal 1991. Also included in interest expense
for Fiscal 1992 was $20.1 million representing certain other charges relating to
amortization of debt issuance costs, self-insurance discount, lease valuation
reserves and other miscellaneous charges (categorized by Ralphs as non-cash
interest expense) as compared to $14.4 million for Fiscal 1991. Investment
income, which is immaterial, has been offset against interest expenses.
Recapitalization Charges
In Fiscal 1992 Ralphs incurred a non-recurring after-tax charge of $70.6
million (net of a tax benefit of $4.2 million) in connection with the retirement
of $400.0 million aggregate principal amount of the 14% Debentures and the
write-off of deferred financing costs related to the $400.0 million principal
amount of the 14% Debentures and the 1988 Credit Agreements, charges incurred to
terminate interest rate swap agreements and costs related to a prospective
equity offering. Incurrence of the non-recurring charge resulted in a
substantial reduction in income taxes payable in Fiscal 1992.
Net Loss
In Fiscal 1992, Ralphs reported a net loss of $76.1 million compared to a
loss of $41.2 million for Fiscal 1991. This increase in the loss was primarily
the result of the consummation of the recapitalization plan, which resulted in
an extraordinary charge, net of a tax benefit, of $70.6 million. In addition, a
provision of $7.1 million was made for expenses related to the closing of the
central bakery operation and a provision of $7.5 million was made for the
maximum loss under a judgment rendered against Ralphs in December 1992.
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<PAGE> 61
RESULTS OF OPERATIONS OF FOOD 4 LESS
The following table sets forth the historical operating results of Food 4
Less for the 52 weeks ended June 27, 1992 ("Fiscal 1992"), June 26, 1993
("Fiscal 1993") and June 25, 1994 ("Fiscal 1994"), and for the 12 weeks ended
September 18, 1993 and September 17, 1994:
<TABLE>
<CAPTION>
52 WEEKS ENDED 12 WEEKS ENDED
---------------------------------------------------------- -------------------------------------
JUNE 27, JUNE 26, JUNE 25, SEPTEMBER 18, SEPTEMBER 17,
1992 1993 1994 1993 1994
---------------- ---------------- ---------------- ---------------- ----------------
(IN MILLIONS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales...................... $2,913.5 100.0% $2,742.0 100.0% $2,585.2 100.0% $616.6 100.0% $598.7 100.0%
Gross profit............... 520.8 17.9 484.2 17.7 469.3 18.1 112.4 18.2 103.0 17.2
Selling, general,
administrative and other,
net...................... 469.7 16.1 434.9 15.9 388.8 15.0 95.7 15.5 88.1 14.7
Amortization of excess
costs over net assets
acquired................. 7.8 0.3 7.6 0.3 7.7 0.3 1.8 0.3 1.8 0.3
Operating income........... 43.3 1.5 41.7 1.5 72.8 2.8 14.9 2.4 13.1 2.2
Interest expense........... 70.2 2.4 69.8 2.5 68.3 2.6 15.7 2.6 16.0 2.7
Loss (gain) on disposal of
assets .................. (1.3) -- (2.1) (0.1) -- -- -- -- (0.5) (0.1)
Provision for earthquake
losses................... -- -- -- -- 4.5 0.2 -- -- -- --
Provision for income
taxes.................... 3.4 0.1 1.4 0.1 2.7 0.1 0.3 -- 0.9 0.2
Loss before extraordinary
charge................... (29.0) (1.0) (27.4) (1.0) (2.7) (0.1) (1.1) (0.2) (3.3) (0.6)
Extraordinary charges...... 4.8 0.2 -- -- -- -- -- -- -- --
Net loss................... (33.8) (1.2) (27.4) (1.0) (2.7) (0.1) (1.1) (0.2) (3.3) (0.6)
</TABLE>
COMPARISON OF FOOD 4 LESS' RESULTS OF OPERATIONS FOR THE 12 WEEKS ENDED
SEPTEMBER 17, 1994 WITH FOOD 4 LESS' RESULTS OF OPERATIONS FOR THE 12 WEEKS
ENDED SEPTEMBER 18, 1993
Sales
Sales decreased $17.9 million, or 2.9%, from $616.6 million in the 12 weeks
ended September 18, 1993, to $598.7 million in the 12 weeks ended September 17,
1994, primarily as a result of a 5.8% decline in comparable store sales
partially offset by sales from 18 new stores opened since September 18, 1993.
Management believes that the decline in comparable store sales is attributable
to the continuing softness of the economy in Southern California and, to a
lesser extent, in Food 4 Less' other operating areas, and increased competitive
store openings and remodels in Southern California.
Gross Profit
Gross profit decreased as a percentage of sales from 18.2% in the 12 weeks
ended September 18, 1993, to 17.2% in the 12 weeks ended September 17, 1994. The
decrease in gross profit margin resulted primarily from pricing and promotional
activities related to Food 4 Less' "Total Value Pricing" program, an increase in
the number of warehouse format stores (which have lower gross margins resulting
from prices that are generally 5-12% below the prices in the Food 4 Less'
conventional stores) from 46 at September 18, 1993, to 69 at September 17, 1994,
and the effect of the fixed cost component of gross profit as compared to a
lower sales base. The decrease in gross profit was partially offset by
improvements in product procurement and an increase in vendors' participation in
Food 4 Less' promotional costs.
Selling, General, Administrative and Other Expenses, Net
Selling, general, administrative and other expenses ("SG&A") were $95.7
million and $88.1 million for the 12 weeks ended September 18, 1993 and
September 17, 1994, respectively. SG&A decreased as a percentage of sales from
15.5% to 14.7% for the same periods. Food 4 Less experienced a reduction of
workers' compensation and general liability self-insurance costs of $3.5 million
due to continued improvement in the cost and frequency of claims. The improved
experience was due primarily to cost control programs implemented by Food 4
Less, including awards for stores with the best loss experience, specific
achievable goals for each store, and increased monitoring of third-party
administrators, and, to a lesser extent, a lower
52
<PAGE> 62
sales base which reduced Food 4 Less' exposure. In addition, Food 4 Less
maintained tight control of administrative expenses and store level expenses,
including advertising, payroll (due primarily to increased productivity), and
other controllable store expenses. Because Food 4 Less' warehouse stores have
lower SG&A than conventional stores, the increase in the number of warehouse
stores, from 46 at September 18, 1993, to 69 at September 17, 1994, also
contributed to decreased SG&A as a percentage of sales. The reduction in SG&A as
a percentage of sales was partially offset by the effect of the fixed cost
component of SG&A as compared to a lower sales base.
Food 4 Less participates in multi-employer health and welfare plans for its
store employees who are members of the UFCW. As part of the renewal of the
Southern California UFCW contract in October 1993, employers contributing to
UFCW health and welfare plans are to receive a pro rata share of the excess
reserves in the plans through a reduction of current employer contributions.
Food 4 Less' share of the excess reserves was $24.2 million, of which Food 4
Less recognized $8.1 million in Fiscal 1994 and $4.7 million in the 12 weeks
ended September 17, 1994. The remainder of the excess reserves will be
recognized as the credits are taken in the future.
On August 28, 1994, the Teamsters and Food 4 Less ratified a new contract
which, among other things, provided for the vesting of sick pay benefits
resulting in a one-time charge of $2.1 million.
Interest Expense
Interest expense (including amortization of deferred financing costs)
increased $0.3 million from $15.7 million to $16.0 million for the 12 weeks
ended September 18, 1993 and September 17, 1994, respectively. The increase in
interest expense was due primarily to increasing interest rates on the revolving
credit facility and the term loan portions of the Old F4L Credit Agreement.
These increases were partially offset by the reduction of indebtedness under
such term loan and such revolving credit facility as a result of amortization
payments.
Net Loss
Primarily as a result of the factors discussed above, Food 4 Less' net loss
increased from $1.1 million in the 12 weeks ended September 18, 1993, to $3.3
million in the 12 weeks ended September 17, 1994.
COMPARISON OF FOOD 4 LESS' RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED JUNE 25,
1994 WITH FOOD 4 LESS' RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED JUNE 26,
1993.
Sales
Sales decreased $156.8 million or 5.7% from $2,742.0 million in Fiscal 1993
to $2,585.2 million in Fiscal 1994. The decrease in sales resulted primarily
from a 6.9% decline in comparable store sales. The decline in comparable store
sales primarily reflects (i) the continuing softness of the economy in Southern
California, (ii) lower levels of price inflation in certain key food product
categories, and (iii) competitive factors, including new stores, remodeling and
recent pricing and promotional activity. This decrease in sales was partially
offset by sales from 13 stores opened or acquired during Fiscal 1994.
Gross Profit
Gross profit increased as a percent of sales from 17.7% in Fiscal 1993 to
18.1% in Fiscal 1994. The increase in gross profit margin was attributable to
improvements in product procurement and an increase in vendors' participation in
Food 4 Less' promotional costs. These improvements were partially offset by an
increase in the number of warehouse format stores (which have lower gross
margins resulting from prices that are generally 5-12% below the prices in Food
4 Less' conventional stores) from 45 at June 26, 1993 to 66 at June 25, 1994,
and the effect of the fixed cost component of gross profit as compared to a
lower sales base.
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<PAGE> 63
Selling, General, Administrative and Other Expenses, Net
SG&A was $434.9 million and $388.8 million in Fiscal 1993 and Fiscal 1994,
respectively. SG&A decreased as a percent of sales from 15.9% to 15.0% for the
same periods. Food 4 Less experienced a reduction of self-insurance costs of
$18.2 million due to continued improvement in the cost and frequency of claims.
The improved experience was due primarily to cost control programs implemented
by Food 4 Less, including awards for stores with the best loss experience,
specific achievable goals for each store, and increased monitoring of
third-party administrators, and, to a lesser extent, a lower sales base which
reduced Food 4 Less' exposure. In addition, Food 4 Less maintained tight control
of administrative expenses and store level expenses, including payroll (due
primarily to increased productivity), advertising, and other controllable store
expenses. Because Food 4 Less' warehouse stores have lower SG&A than
conventional stores, the increase in the number of warehouse stores, from 45 at
June 26, 1993 to 66 at June 25, 1994, also contributed to decreased SG&A as a
percentage of sales. The reduction in SG&A as a percentage of sales was
partially offset by the effect of the fixed cost component of SG&A as compared
to a lower sales base.
Food 4 Less participates in multi-employer health and welfare plans for its
store employees who are members of the UFCW. As part of the renewal of the
Southern California UFCW contract in October 1993, employers contributing to
UFCW health and welfare plans are to receive a pro rata share of the excess
reserves in the plans through a reduction of current employer contributions.
Food 4 Less' share of the excess reserves was $24.2 million, of which Food 4
Less recognized $8.1 million in Fiscal 1994 and the remainder of which will be
recognized as the credits are taken in the future. Offsetting the reduction in
employer contributions was a $5.5 million contract ratification bonus and
contractual wage increases.
Interest Expense
Interest expense (including amortization of deferred financing costs)
decreased $1.5 million from $69.8 million to $68.3 million for Fiscal 1993 and
Fiscal 1994, respectively. The decrease in interest expense is due primarily to
reduced borrowings under Food 4 Less' credit agreement dated as of June 17,
1991, as amended (the "F4L Credit Agreement").
Provision for Earthquake Losses
On January 17, 1994, Southern California was struck by a major earthquake
which resulted in the temporary closing of 31 of Food 4 Less' stores. The
closures were caused primarily by loss of electricity, water, inventory, or
structural damage. All but one of the closed stores reopened within a week of
the earthquake. The final closed store reopened on March 24, 1994. Food 4 Less
is insured against earthquake losses (including business interruption), subject
to certain deductibles. The pre-tax financial impact, net of expected insurance
recovery, was approximately $4.5 million.
Net Loss
Primarily as a result of the factors discussed above, Food 4 Less' net loss
decreased from $27.4 million in Fiscal 1993 to $2.7 million in Fiscal 1994.
COMPARISON OF FOOD 4 LESS' RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED JUNE 26,
1993 WITH FOOD 4 LESS' RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED JUNE 27,
1992.
Sales
Sales decreased $171.5 million or 5.9% from $2,913.5 million in Fiscal 1992
to $2,742.0 million in Fiscal 1993, primarily as a result of a 5.1% decline in
comparable store sales and a net reduction in Food 4 Less' total store count of
one store at June 26, 1993 compared to June 27, 1992. Management believes that
the decline in comparable store sales was attributable to (i) the weak economy
in Southern California, and, to a lesser extent, in Food 4 Less' other operating
areas, (ii) lower levels of price inflation in certain key food categories, and
(iii) increased competitive store openings in Southern California.
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<PAGE> 64
Gross Profit
Gross profit decreased as a percent of sales from 17.9% in Fiscal 1992 to
17.7% in Fiscal 1993 primarily as a result of an increase in the number of Food
4 Less warehouse stores (which have lower gross margins resulting from prices
that are generally 5-12% below the prices in Food 4 Less' conventional stores),
from 34 stores in Fiscal 1992 to 45 stores in Fiscal 1993, and as a result of
the fixed cost component of gross profit being compared to a lower sales base,
partially offset by increases in relative margins allowed by competitive
conditions, improvements in the procurement function, and cost savings and
operating efficiencies associated with Food 4 Less' warehousing and
manufacturing facilities.
Selling, General, Administrative and Other Expenses, Net
SG&A was $469.7 million and $434.9 million in Fiscal 1992 and Fiscal 1993,
respectively. SG&A decreased as a percent of sales from 16.1% to 15.9% for the
same periods as a result of tight control of direct store expenses, primarily
payroll costs, the impact in Fiscal 1992 of the $12.8 million non-cash
self-insurance reserve adjustment partially offset by market-wide contractual
increases in union wages, current year increases in workers' compensation costs
primarily associated with the new law which took effect in 1990, and the fixed
cost component of SG&A being compared to a lower sales base.
Interest Expense
Interest expense (including amortization of deferred financing fees) was
$70.2 million for Fiscal 1992 and $69.8 million for Fiscal 1993, respectively.
The decrease in interest expense is due to the reduction of indebtedness as a
result of amortization payments combined with decreasing interest rates on the
term loan under the F4L Credit Agreement, partially offset by higher interest
expense incurred in connection with the Old F4L Senior Notes which replaced
lower cost debt under the F4L Credit Agreement.
Loss Before Extraordinary Charge
Primarily as a result of the factors discussed above, Food 4 Less' loss
before extraordinary charge decreased from $29.0 million in Fiscal 1992 to $27.4
million in Fiscal 1993. Food 4 Less recorded a net extraordinary charge of $4.8
million in Fiscal 1992, reflecting the write-off of certain deferred financing
costs which were partially offset by a gain on the replacement of partially
depreciated assets following the civil unrest in Los Angeles.
LIQUIDITY AND CAPITAL RESOURCES
In order to consummate the Merger, Food 4 Less expects to utilize total new
financing proceeds in the amount of approximately $1.3 billion. Pursuant to the
New Equity Investment, New Holdings (as the successor to Holdings) will issue
capital stock for total cash proceeds of approximately $150 million (excluding a
$5.0 million commitment fee). In addition, Food 4 Less will enter into the New
Credit Facility pursuant to which it will have available up to $750 million of
New Term Loans, all of which is anticipated to be drawn at the Closing Date and
will have available a $325 million New Revolving Facility, of which $23.4
million is anticipated to be drawn at the Closing Date. Food 4 Less will also
issue up to $400 million principal amount of New F4L Senior Notes pursuant to
the Public Offering. The proceeds from the New Credit Facility and the Public
Offering, together with the $150 million proceeds of the New Equity Investment
and $100 million principal amount of the Seller Debentures, will provide the
sources of financing required to consummate the Merger and to repay existing
bank debt of approximately $170 million at Food 4 Less and $296.0 million at
Ralphs and existing mortgage debt of $174.6 million (excluding prepayment fees)
at Ralphs. Proceeds from the New Term Loans and the Public Offering will also be
used to pay the cash portion of the Exchange Offers, the RGC Exchange Offers and
the Holdings Consent Solicitation, as well as the Change of Control Offer, and
accrued interest on all exchanged debt securities in the amount of $16.1 million
(as of February 1, 1995), to pay $22.8 million to the holders of Ralphs Equity
Appreciation Rights and to pay up to $115.6 million of fees and expenses of the
Merger and the Financing. The Company will also assume certain existing
indebtedness of Food 4 Less and Ralphs. Pursuant to the Exchange Offer described
hereunder and the RGC Exchange Offers, Food 4 Less will seek the exchange of at
least 80% of the
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<PAGE> 65
Old RGC Notes for the New RGC Notes and the exchange of at least 80% of the Old
F4L Notes for New F4L Senior Notes and New F4L Senior Subordinated Notes, as the
case may be. The primary purpose of the Exchange Offers described hereunder and
the RGC Exchange Offers is to refinance Food 4 Less' and RGC's existing public
debt securities with longer term public debt securities, to obtain all necessary
consents to consummate the Merger and to eliminate substantially all of the
restrictive covenants in the Old RGC Indentures and Old F4L Indentures.
After the Merger the Company's principal sources of liquidity are expected
to be cash flow from operations, borrowings under the New Revolving Facility and
capital and operating leases. It is anticipated that the Company's principal
uses of liquidity will be to provide working capital, finance capital
expenditures, including the costs associated with the integration of Food 4 Less
and Ralphs, and to meet debt service requirements.
The New Revolving Facility will be a $325 million line of credit which will
be available for working capital requirements and general corporate purposes. Up
to $150 million of the New Revolving Facility may be used to support standby
letters of credit. The letters of credit will be used to cover workers'
compensation contingencies and for other purposes permitted under the New Credit
Facility. The Company anticipates that letters of credit for approximately $101
million will be drawn under the New Revolving Facility at closing, in
replacement of existing letters of credit, primarily to satisfy the State of
California's requirements relating to workers compensation self-insurance. The
New Revolving Facility will be non-amortizing and will have a six-year term. The
Company will be required to reduce loans outstanding under the New Revolving
Facility to $75 million for a period of not less than 30 consecutive days during
each consecutive 12-month period. Assuming that the Merger closes on February 1,
1995, giving effect to currently anticipated borrowings and letter of credit
issuances, the Company's remaining borrowing availability under the New
Revolving Facility would have been approximately $200.6 million. Pursuant to the
New Credit Facility, the New Term Loans will be issued in four tranches: (i)
Tranche A, in the amount of $375 million, will have a six-year term; (ii)
Tranche B, in the amount of $125 million, will have a seven-year term; (iii)
Tranche C, in the amount of $125 million, will have an eight-year term; and,
(iv) Tranche D, in the amount of $125 million, will have a nine-year term. The
New Term Loans will require quarterly amortization payments aggregating $3.8
million in the first year, $48.8 million in the second year and increasing
thereafter. The New Credit Facility will be guaranteed by New Holdings and each
of the Company's subsidiaries and secured by liens on substantially all of the
unencumbered assets of the Company and its subsidiaries and by a pledge of New
Holdings' stock in the Company. The New Credit Facility will contain financial
covenants which are expected to require, among other things, the maintenance of
specified levels of cash flow and stockholder's equity. See "Description of the
New Credit Facility."
Standard & Poor's has publicly announced that, upon consummation of the
Merger, it intends to assign a new rating to the Old RGC Notes. Such new rating
assignment, if implemented, would constitute a Rating Decline under the Old RGC
Indentures. The consummation of the Merger (which is conditioned on, among other
things, successful consummation of the Other Debt Financing Transactions and the
Bank Financing, which itself is conditioned upon receipt of the Minimum Tender)
and the resulting change in composition of the Board of Directors of RGC,
together with the anticipated Rating Decline would constitute a Change of
Control Triggering Event under the Old RGC Indentures. Upon such a Change of
Control Triggering Event the Company would be obligated to make the Change of
Control Offer following the Merger for all outstanding Old RGC Notes at 101% of
the principal amount thereof ($90.9 million, assuming $90 million of Old RGC
Notes are outstanding following the Merger) plus accrued and unpaid interest to
the date of repurchase. A portion of the proceeds from the Public Offering will
be available to fund the purchase of Old RGC Notes tendered pursuant to the
Change of Control Offer.
Management anticipates that significant capital expenditures will be
required following the Merger in connection with the integration of Ralphs and
Food 4 Less. In order to implement the Company's store format strategy, up to
122 conventional stores currently operated by Food 4 Less will be converted to
the Ralphs format and 16 conventional stores (primarily Boys and Viva) and 23
Ralphs will be converted to the Food 4 Less warehouse format. An additional 18
Ralphs and Food 4 Less warehouse stores are scheduled to be opened during
calendar 1995. Other anticipated Merger-related capital expenditures are
expected to include the expansion of Ralphs' ASRS and PSC facilities in order to
support the additional volume of the Food 4
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Less stores. It is estimated that the gross capital expenditures to be made by
the Company in the first fiscal year following the closing will be approximately
$159 million (or $110 million net of expected capital leases), of which
approximately $98.0 million relate to ongoing expenditures for new stores,
equipment and maintenance and approximately $61.0 million relate to store
conversions and other Merger-related and non-recurring items. An additional $33
million of Merger-related and non-recurring capital expenditure items (or $22
million net of expected capital leases) are anticipated to be incurred in the
second year following the consummation of the Merger. Management expects that
these expenditures will be financed primarily through cash flow from operations
and capital leases.
Ralphs cash flow from operating activities was $43.5 million for the 36
weeks ended October 9, 1994 and $104.0 million for Fiscal 1993. Food 4 Less
generated approximately $87.8 million of cash from operating activities during
the 52-week period ended June 25, 1994 and $9.5 million of cash from operating
activities during the 12 weeks ended September 17, 1994 (as compared to $29.1
million during the 12 weeks ended September 18, 1993). The decrease in cash from
operating activities is due primarily to changes in operating assets and
liabilities. The Company anticipates that one of the principal uses of cash in
its operating activities will be inventory purchases. However, supermarket
operators typically require small amounts of working capital since inventory is
generally sold prior to the time that payments to suppliers are due. This
reduces the need for short-term borrowings and allows cash from operations to be
used for non-current purposes such as financing capital expenditures and other
investing activities. Consistent with this pattern, Ralphs and Food 4 Less had
working capital deficits of $118.3 million and $58.1 million at October 9, 1994
and September 17, 1994, respectively.
Ralphs cash used in investing activities was $45.5 million during Fiscal
1993 and $38.2 million during the thirty-six weeks ended October 9, 1994. These
amounts reflected increased capital expenditures related to store remodels and
new store openings (including store acquisitions) and, to a lesser extent,
expansion of other warehousing, distribution and manufacturing facilities and
equipment, including data processing and computer systems. For the 52 weeks
ended June 25, 1994, Food 4 Less' cash used in investing activities was $55.8
million. Investing activities consisted primarily of capital expenditures of
$57.5 million, partially offset by $9.3 million of sale/leaseback transactions,
and $11.1 million of costs in connection with the acquisition of ten former
"Food Barn" stores. For the 12 weeks ended September 17, 1994, Food 4 Less' cash
used in investing activities was $14.0 million. Investing activities consisted
primarily of capital expenditures of $16.8 million, partially offset by $2.1
million of sale/leaseback transactions. The capital expenditures, net of the
proceeds from sale/leaseback transactions, and the Food Barn acquisition costs
were financed with cash provided by operating activities.
Ralphs and FFL have significant net operating loss carryforwards for
regular federal income tax purposes. As a result of the Merger and the New
Equity Investment, the Company's ability to utilize such loss carryforwards in
future periods will be limited to approximately $15.6 million per year with
respect to FFL net operating loss carryforwards and approximately $15.0 million
per year with respect to Ralphs' net operating loss carryforwards. The Company
does not expect the Merger to materially adversely affect any of its other tax
assets. The Company will be a party to a tax sharing agreement with New Holdings
and the subsidiaries of the Company. Pursuant to the tax sharing agreement,
payments by the Company will not exceed the amount it would be required to pay
if its consolidated liability was calculated on a separate company basis. See
"Certain Relationships and Related Transactions." The Company will continue to
be a party to an indemnification agreement with Federated and certain other
parties. See Note 1 of Notes to Consolidated Financial Statements of Ralphs
Supermarkets, Inc. Pursuant to the terms of such agreement, Ralphs will make
annual tax payments of $1.0 million in 1995 and 1996 and a final tax payment of
$5.0 million in 1997.
Following the Merger, the Company will be a wholly-owned subsidiary of New
Holdings. New Holdings will have outstanding $103.6 million aggregate principal
amount of the Holdings Discount Notes (with an accreted value of $61.4 million)
as of September 17, 1994 and following the Merger, New Holdings will have an
additional $100.0 million principal amount of the Seller Debentures outstanding.
New Holdings is a holding company which will have no assets other than the
capital stock of the Company. New Holdings will be required to commence
semi-annual cash payments of interest on the Holdings Discount Notes on June 15,
1998 in the amount of approximately $15.8 million per annum. New Holdings will
also be required to
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commence semi-annual cash payments of interest on the Seller Debentures
commencing five years from their date of issuance in the amount of $24.4 million
per annum. Subject to the limitations contained in its debt instruments, the
Company intends to make dividend payments to New Holdings in amounts which are
sufficient to permit New Holdings to service its cash interest requirements. The
Company may pay other dividends to New Holdings in connection with certain
employee stock repurchases and for routine administrative expenses.
Following the consummation of the Merger and the Financing, the Company
will be highly leveraged. Based upon current levels of operations and
anticipated cost savings and future growth, the Company believes that its cash
flow from operations, together with available borrowings under the New Revolving
Facility and its other sources of liquidity (including leases), will be adequate
to meet its anticipated requirements for working capital, capital expenditures,
integration costs and interest payments. There can be no assurance, however,
that the Company's business will continue to generate cash flow at or above
current levels or that future costs savings and growth can be achieved. See
"Risk Factors -- Leverage and Debt Service."
Interest Rate Protection Agreements
Ralphs and Food 4 Less currently are parties to certain interest rate
protection agreements required under the terms of their existing bank
indebtedness. In connection with the New Credit Facility, these interest rate
protection agreements will be replaced by a new agreement which will be
finalized prior to the closing of the Merger. The Company will be exposed to
credit loss in the event of nonperformance by the counterparty to the interest
rate protection agreement. However, the Company does not anticipate
nonperformance by such counterparty.
The following details the impact of Ralphs' hedging activity on its
weighted average interest rate for each of the last three fiscal years of
Ralphs:
<TABLE>
<CAPTION>
WITH WITHOUT
HEDGE HEDGE
-------- --------
<S> <C> <C>
1991............................................ 11.87% 11.52%
1992............................................ 10.52% 10.22%
1993............................................ 8.96% 8.96%
</TABLE>
The following details the impact of Food 4 Less' hedging activity on its
weighted average interest rate for each of the last three fiscal years of Food 4
Less:
<TABLE>
<CAPTION>
WITH WITHOUT
HEDGE HEDGE
-------- --------
<S> <C> <C>
1992............................................ 10.28% 10.52%
1993............................................ 10.07% 10.03%
1994............................................ 10.10% 10.09%
</TABLE>
Effects of Inflation
The Company's primary costs, inventory and labor, are affected by a number
of factors that are beyond its control, including inflation, availability and
price of merchandise, the competitive climate and general and regional economic
conditions. As is typical of the supermarket industry, Ralphs and Food 4 Less
have generally been able to maintain margins by adjusting their retail prices,
but competitive conditions may from time to time render the Company unable to do
so while maintaining its market share.
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BUSINESS
THE MERGER
The combination of Ralphs Grocery Company and Food 4 Less Supermarkets,
Inc. will create the largest food retailer in Southern California. Pro forma for
the Merger, the Company will operate approximately 332 Southern California
stores with an estimated 26% market share among the area's supermarkets. The
Company will operate the second largest conventional supermarket chain in the
region under the "Ralphs" name and the largest warehouse supermarket chain in
the region under the "Food 4 Less" name. In addition, the Company will operate
approximately 24 conventional format stores and 39 warehouse format stores in
Northern California and the Midwest. On a pro forma basis giving effect to the
Merger, the Company would have had sales, operating income and EBITDA (as
defined) of approximately $5.1 billion, $183 million and $343 million,
respectively, for the twelve months ending June 25, 1994.
TWO LEADING COMPLEMENTARY FORMATS
In Southern California the Company plans to convert up to 122 conventional
stores currently operated by Food 4 Less to the "Ralphs" name and format and 39
Ralphs and Food 4 Less conventional stores to the "Food 4 Less" name and
warehouse format. As a result, and pro forma for the Merger, Ralphs will be the
region's second largest conventional format supermarket chain, with 264 stores
and Food 4 Less will be the region's largest warehouse format supermarket chain
with 68 stores. The Ralphs stores will continue to emphasize a broad selection
of merchandise, high quality fresh produce, meat and seafood and service
departments, including bakery and delicatessen departments in most stores. The
Company's conventional stores will also benefit from Ralphs' strong private
label program and its strengths in merchandising, store operations and systems.
Passing on format-related efficiencies, the Company's price impact warehouse
format stores will continue to offer consumers the lowest overall prices while
still providing product selections comparable to conventional supermarkets.
Management believes the Food 4 Less warehouse format has demonstrated its appeal
to a wide range of demographic groups in Southern California and offers a
significant opportunity for future growth. The Company plans to open nine new
Food 4 Less warehouse stores and 21 new Ralphs stores over the next two years.
Management believes the consolidation of its formats will improve the
Company's ability to adapt its stores' merchandising strategy to the local
markets in which they operate while achieving cost savings and other
efficiencies. These conversions will be effected in three phases which the
Company believes will be completed within the first 18 months of combined
operation.
Phase 1. Food 4 Less is currently in the process of converting 16 of its
conventional format stores operated under the names "Viva," "Alpha Beta" and
"Boys" into Food 4 Less warehouse format supermarkets. These conversions have
already begun at the rate of two stores per week. Management expects that each
such conversion will take up to eight weeks to complete and may require the
store to be closed for up to two weeks during such period. Management believes
that these Phase 1 conversions, which were planned independently, will be
completed prior to the consummation of the Merger at a cost of approximately $1
million per store.
Phase 2. Following the Merger, the Company plans to begin converting up to
122 conventional format stores currently operated by Food 4 Less under the names
"Viva," "Alpha Beta" and "Boys" into Ralphs conventional format stores. It is
anticipated that these conversions will be completed at the rate of
approximately 10 stores per week. Management expects that the Company will be
able to substantially complete each conversion without closing the store.
Management believes that these Phase 2 conversions will be completed within the
first 12-16 weeks of the Company's combined operation at a cost of approximately
$75,000 per store.
Phase 3. Following the Merger, the Company also plans to convert 23
conventional Ralphs format stores into Food 4 Less warehouse format stores.
Management expects that each such conversion will take up to eight weeks and may
require the store to be closed for up to two weeks during such period.
Management believes that these Phase 3 conversions will be completed within the
first 18 months of the Company's combined operation at a cost of approximately
$1 million per store.
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The following table summarizes the store formats to be operated by the
Company in Southern California both before and after giving effect to the
conversion program:
<TABLE>
<CAPTION>
PRO FORMA NUMBER OF
ACTUAL STORES(1)
---------- -------------------------
OCTOBER 1, PRIOR TO FOLLOWING
STORE FORMATS 1994 CONVERSION CONVERSION
-------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Ralphs Conventional............................... 168 165 264
Food 4 Less Warehouse............................. 30 29 68
Alpha Beta Conventional........................... 129 105 0
Viva Conventional................................. 15 13 0
Boys Conventional................................. 24 20 0
--- --- ---
Total........................................... 366 332 332
</TABLE>
- ---------------
(1) Pro forma store numbers give effect to the anticipated Merger-related
divestiture or closing of 32 stores open at October 1, 1994 and the closure
of two additional Food 4 Less conventional stores.
Ralphs Conventional Format. Following completion of the store conversions
described above, and pro forma for the Merger, the Company will operate 264
Ralphs stores in Southern California. Management believes these conversions will
enhance Ralphs' market position and competitive advantages. Converted stores
will benefit from Ralphs strengths in merchandising, store operations, systems
and technology. Although all Ralphs stores use the Ralphs name and are operated
under a single format, each store is merchandised to appeal to the local
community it serves. Ralphs' substantial supermarket product selection is a
significant aspect of its marketing efforts: Ralphs stocks between 20,000 and
30,000 merchandise items in its stores, including approximately 2,800 private
label products, representing 17.3% of sales (excluding meat, service
delicatessen and produce items) during Fiscal 1993. Ralphs stores offer
name-brand grocery products; quality and freshness in its produce, meat,
seafood, delicatessen and bakery products; and broad selection in all
departments. Most existing Ralphs stores offer service delicatessen departments,
on-premises bakery facilities and seafood departments. Ralphs emphasizes store
ambiance and cleanliness, fast and friendly service, the convenience of debit
and credit card payment (including in-store branch banks) and 24-hour operations
in most stores.
Food 4 Less' 168 conventional supermarkets, currently operated under the
names "Alpha Beta," "Boys" and "Viva," are located throughout densely populated
areas of Los Angeles and surrounding counties, including both suburban and urban
neighborhoods. Food 4 Less' merchandising strategy for conventional stores has
been tailored to the community each store services, but has emphasized customer
service, quality of merchandise, and a large variety of product offerings in
modern store environments. Of Food 4 Less' 168 conventional supermarkets, up to
122 are intended to be converted to the "Ralphs" name and format, 16 will be
converted to the "Food 4 Less" warehouse format and the remainder are expected
to be closed or sold.
Food 4 Less Warehouse Format. Following completion of the store conversions
described above, and pro forma for the Merger, the Company will operate 68 Food
4 Less warehouse stores in Southern California. The conversions will
substantially accelerate the growth of the Food 4 Less format and will enhance
the Company's position as the largest operator of warehouse supermarkets in
Southern California. In addition to the conversions, the Company plans to
continue its rapid growth of the Food 4 Less format by opening nine new
warehouse format stores over the next two years, including five stores in San
Diego, a new market for Food 4 Less. Management believes the expansion of
warehouse format stores will create efficiencies in warehousing, distribution,
and administrative functions.
Food 4 Less' warehouse format stores target the price-conscious segment of
the market, encompassing a wide range of demographic groups in both urban and
suburban areas. Food 4 Less attempts to offer the lowest overall prices in its
marketing areas by passing savings on to the consumer while providing the
product selection associated with a conventional format. Savings are achieved
through labor efficiencies and lower overhead and advertising costs associated
with the warehouse format. In-store operations are designed to allow customers
to perform certain labor-intensive services usually offered in conventional
supermarkets. For example, merchandise is presented on warehouse style racks in
full cartons, reducing labor intensive unpacking, and customers bag their own
groceries. Labor costs are also reduced since the stores generally do
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not have service departments such as delicatessens, bakeries and fresh seafood
departments, although they do offer a complete line of fresh meat, fish, produce
and baked goods. Additionally, labor rates are generally lower than in
conventional supermarkets.
The Food 4 Less format generally consists of large facilities constructed
with high ceilings to accommodate warehouse racking with overhead pallet
storage. Wide aisles accommodate forklifts and, compared to conventional
supermarkets, a higher percentage of total store space is devoted to retail
selling because the top of the warehouse-style grocery racks on sales floors are
used to store inventory. This reduces the need for large backroom storage. The
Food 4 Less warehouse format supermarkets have brightly painted walls and
inexpensive signage in lieu of more expensive graphics. In addition, a "Wall of
Values" located at the entrance of each store presents the customer with a
selection of specially priced merchandise.
SUBSTANTIAL COST SAVINGS OPPORTUNITIES
Management believes that approximately $90 million of net annual cost
savings will be achieved by the end of the fourth full year of combined
operations. It is also anticipated that approximately $117 million in
Merger-related capital expenditures and $50 million of other non-recurring costs
will be required to complete store conversions, integrate operations and expand
warehouse facilities over the same period. Although a portion of the anticipated
cost savings is premised upon the completion of such capital expenditures,
management believes that over 70% of the cost savings could be achieved without
making any Merger-related capital expenditures. The following anticipated
savings are based on estimates and assumptions made by the Company that are
inherently uncertain, though considered reasonable by the Company, and are
subject to significant business, economic and competitive uncertainties and
contingencies, all of which are difficult to predict and many of which are
beyond the control of management. There can be no assurance that such savings
will be achieved. The sum of the components of the estimated cost savings
exceeds $90 million; however, management has made an offsetting adjustment to
reflect its expectation that a portion of the savings will be reinvested in the
Company's operations. See "Risk Factors -- Ability to Achieve Anticipated Cost
Savings."
Reduced Advertising Expenses. As a result of the consolidation of
conventional format stores in Southern California under the "Ralphs" name, the
Company will eliminate advertising associated with Food 4 Less' existing Alpha
Beta, Boys and Viva formats. Because Ralphs' current advertising program now
covers the Southern California region, the Company will be able to expand the
number of Ralphs stores without significantly increasing advertising costs.
Management estimates that annual advertising cost savings of approximately $28
million will be achieved in the first full year of combined operations.
Reduced Store Operations Expense. Management expects to reduce store
operations costs as a result of both reduced labor and benefit costs and reduced
non-labor expenses. Projected labor and benefit cost savings are based primarily
on Ralphs' labor scheduling system, which has reduced Ralphs' labor costs
relative to those of Food 4 Less. Other labor savings will result from the
reduction of certain high-cost labor as a result of changed manufacturing,
warehouse and distribution practices, and productivity enhancements resulting
from the installation of Ralphs store level systems.
Non-labor expense reductions are based primarily on the installation of
Ralphs' computerized energy management equipment in Food 4 Less stores which
will require significant capital expenditures. The expense savings associated
with the use of this equipment is based on Ralphs' historical experience. Other
significant non-labor expense reductions are projected to come from improved
safety programs, increased cardboard baling revenues, changes to guard and
shoplift agent programs and a reduction in supply and packaging costs. Total
labor and non-labor operational savings estimated at approximately $21 million
annually are anticipated to be achieved by the fourth full year of combined
operation.
Increased Volume Purchasing Efficiencies. Management has identified
approximately $19 million of cost savings it believes can be achieved as a
result of purchasing efficiencies. These efficiencies consist primarily of (i)
savings from increased discounts and allowances as a result of the combined
volume of the two companies; (ii) an improvement in the terms of vendor
contracts for products carried in the Company's stores on an exclusive or
promoted basis; and (iii) savings from the conversion of some
less-than-truckload shipping
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quantities to full truckload quantities. These savings are anticipated to be
achieved by the second full year of combined operation.
Warehousing and Distribution Efficiencies. The consolidation of the
Company's warehousing and distribution facilities will result in lower outside
storage, transportation and labor costs. The Company plans facility additions at
one Ralphs facility to accommodate the additional volume as a result of such
consolidation. Management anticipates improvements in the areas of automation,
inventory management and handling, delivering, scheduling and route optimization
and worker safety. In addition, the Company plans to close two existing
facilities, which will result in lower occupancy expenses. Management believes
that annual savings of approximately $16 million associated with warehousing and
distribution will be achieved, before giving effect to capital expenditures in
connection with facilities expansions and facility closing costs. Such savings
are expected to be achieved by the third full year of combined operations.
Consolidated Manufacturing. Ralphs and Food 4 Less operate manufacturing
facilities that produce similar products or have excess capacity. Through the
consolidation of meat, bakery, dairy and other manufacturing and processing
operations, and the discontinuance of external purchases of certain goods that
can be manufactured internally, management believes that annual cost savings of
approximately $11 million can be achieved. In each instance, management has
identified the facilities best suited to the needs of the combined company and
has estimated the expense savings associated with each consolidation. The
combined company will utilize a 316,000 square foot bakery and a 25,722 square
foot milk processing plant, located at Food 4 Less' La Habra facility, and a
28,000 square foot milk processing plant, a 9,000 square foot ice cream
processing plant, and a 23,000 square foot delicatessen kitchen located at
Ralphs' Compton facilities. Previously, Ralphs purchased bakery products
externally and Food 4 Less purchased ice cream and delicatessen items
externally. Management also plans to utilize Ralphs' third party meat
processors, which have historically provided Ralphs with a full line of
prefabricated and retail cuts of beef, to produce meat for Food 4 Less stores.
Management anticipates that manufacturing expense savings will be achieved by
the second full year of combined operation.
Consolidated Administrative Functions. The Company expects to achieve
savings from the elimination of redundant administrative staff, the
consolidation of management information systems and a decreased reliance on
certain outside services and consultants. To reduce headcount, the Company plans
to target several functions for consolidation, including accounting, marketing,
management information systems, and administration and human resources. The
Company plans to eliminate a data processing center, which is anticipated to
result in savings in the areas of equipment, software, headcount and outside
programmer fees. The Company also plans to eliminate the use of third party
administrators to handle workers compensation and general liability claims.
Management estimates that annual savings of approximately $15 million associated
with consolidating administrative functions will be achieved by the second full
year of combined operation.
EXPERIENCED MANAGEMENT TEAM
The executive officers of the Company have extensive experience in the
supermarket industry. The strength of Ralphs management expertise is evidenced
by Ralphs' reputation for quality and service, its technologically advanced
systems, strong store operations and high historical EBITDA margins. The Food 4
Less management team will provide valuable experience in operating warehouse
supermarkets and in effectively integrating companies into a combined operation.
Following the acquisition of Alpha Beta in 1991, Food 4 Less management
successfully integrated Alpha Beta with its existing Southern California
operations and (within three years) achieved annual cost savings in excess of
$40 million (compared to a pre-acquisition estimate of approximately $33
million). See "Management."
WAREHOUSING AND DISTRIBUTION
The combined Company will utilize Ralphs' technologically advanced
warehousing and distribution systems, which include a 17 million cubic foot
high-rise automated storage and retrieval system warehouse (the "ASRS") for
non-perishable items and a 5.4 million cubic foot perishable service center (the
"PSC") designed for processing, storing and distributing all perishable items.
These facilities will provide the Company
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<PAGE> 72
with substantial operating benefits, including: (i) enhanced turnover to further
improve the freshness and quality of in-store products, (ii) additional
opportunities in forward buying programs and (iii) an increase in the percentage
of inventory supplied by the Company's own warehousing and distribution system.
Management believes the consolidation of these operations will enable the
Company to meet the combined inventory requirements of all stores with fewer
employees and lower operating and occupancy-related expenses.
In November 1987, Ralphs opened the 17 million cubic foot highrise ASRS
warehouse for non-perishable items in the Atwater district of Los Angeles, at a
cost of approximately $50 million. This facility significantly increased
capacity and improved the efficiency of Ralphs' warehouse operations. The
automated warehouse has a ground floor area of 170,000 square feet and capacity
of approximately 50,000 pallets. Guided by computer software, ten-story high
cranes move pallets from the receiving dock to programmed locations in the ASRS
warehouse while recording the location and time of storage. Goods are retrieved
and delivered by the cranes to conveyors leading to the adjacent grocery
"picking" warehouse where individual store orders are filled and shipped. The
Company plans to utilize existing unused capacity to accommodate additional
volume resulting from the consolidation. The ASRS facility can hold
substantially more inventory and requires fewer employees to operate than a
conventional warehouse of equal size. This facility has reduced Ralphs'
warehousing costs of non-perishable items markedly, enabling it to take
advantage of advance buying opportunities and minimize "out-of-stocks." The
Company plans to close two existing Ralphs warehouse facilities in Los Angeles
and Carson, California, each of which is currently operated on a short-term
lease, pending expansion of Ralphs' ASRS warehouse.
In mid-1992, Ralphs opened the 5.4 million cubic foot PSC facility in
Compton, California, designed to process and store all perishable products. This
facility cost approximately $35 million and has provided Ralphs with the ability
to deliver perishable products to its stores on a daily basis, thereby improving
the freshness and quality of these products. The facility contains an energy
efficient refrigeration system and a computer system designed to document the
location and anticipated delivery time of all inventory. The PSC has
consolidated the operations of three existing facilities and holds more
inventory than the facilities it replaced, thereby reducing Ralphs' warehouse
distribution costs. The Company also plans to expand the PSC facility to
accommodate additional volume resulting from the consolidation.
Most Ralphs stores and Food 4 Less Southern California stores are located
within approximately a one-hour drive from Ralphs' distribution and warehousing
facilities. This geographical concentration, combined with Ralphs' efficient
order system, shortens the lead time between the placement of a merchandise
order and its receipt.
Food 4 Less currently operates a centralized manufacturing, warehouse and
office facility in La Habra, California which it leases from Alpha Beta's former
parent corporation. The La Habra facility measures 1,378,083 total square feet
over 75 acres and, in addition to serving warehousing, distribution and office
functions, houses manufacturing operations which include a bakery and a
creamery. The La Habra facility is operated pursuant to a long-term lease which
expires in 2001. The La Habra facility is expected to be used as a secondary
source of supply for the Company's stores.
Food 4 Less is party to a joint venture with a subsidiary of Certified
Grocers of California, Ltd. which operates a general merchandise warehouse in
Fresno, California. Management is evaluating the role of such warehouse in the
operation of the combined Company.
MANUFACTURING
Ralphs' manufacturing operations produce a variety of dairy and other
products, including fluid milk, ice cream, yogurt and bottled waters and juices
as well as packaged ice, cheese and salad preparations. Ralphs contracts with
meat processors to provide a full line of prefabricated and retail cuts of beef.
Ralphs ceased its bakery operations during the second quarter of Fiscal 1993 at
its 102,000 square foot facility in Los Angeles. Food 4 Less' La Habra facility
includes a full-line bakery as well as a creamery and certain other
manufacturing operations.
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<PAGE> 73
The following table sets forth information concerning the principal
manufacturing and processing facilities expected to be owned and operated by the
Company:
<TABLE>
<CAPTION>
FACILITY SQUARE FEET LOCATION
----------------------------------------------- ----------- ----------
<S> <C> <C>
Milk processing................................ 28,000 Compton
Ice cream processing........................... 9,000 Compton
Delicatessen kitchen........................... 23,000 Compton
Bakery......................................... 316,000 La Habra
Milk processing................................ 25,722 La Habra
</TABLE>
Management believes that Ralphs' manufacturing facilities and the La Habra
bakery can accommodate the volume requirements of the Company, after planned
expenditures of approximately $3.0 million over the next year.
PRIVATE LABEL PROGRAM
Through its private label program, Ralphs offers approximately 2,800 items
under the "Ralphs," "Private Selection," "Perfect Choice" and "Plain Wrap" brand
names. These products provide quality comparable to that of national brands at
prices 20-30% lower. Gross margins on private label goods are generally higher
than on national brands. Management believes its private label program is one of
the most successful programs in the supermarket industry, representing 17.3% of
sales (excluding meats, service delicatessen and produce items) during the
twelve months ended July 17, 1994. This figure has grown in the past few years,
and management intends to continue the growth of its private label program in
the future.
Food 4 Less has entered into several private label licensing arrangements
which allow it to exclusively utilize recognized brand names in connection with
certain goods it manufactures or purchases from others, including "Carnation"
and "Sunnyside Farms" (dairy products) and "Van de Kamps" (baked goods). In
addition, Food 4 Less has entered into an agreement to distribute private label
dry grocery and frozen products under the "Sunny Select" and "Grocers Pride"
labels and has established its own private label, "Equality," for health and
beauty aid products. Food 4 Less actively promoted its private label products
during fiscal 1994, and management believes that the additional variety,
superior quality and promotional program resulted in an overall increase in
private label sales and corresponding gross margins. It is expected that the
Company will continue the Carnation, Van de Kamps and certain of its other
licensing agreements following the Merger.
EXPANSION AND DEVELOPMENT
As a result of Ralphs' 122-year history and Alpha Beta's 91-year history in
Southern California, the Company will have valuable and well established store
locations, many of which are in densely populated metropolitan areas.
Additionally, the Company will have a technologically advanced store base.
During the five years ended June 25, 1994, on a combined basis, Ralphs and Food
4 Less opened 74 new stores and remodeled 211 stores. Approximately 84% of the
Company's stores have been opened or remodeled in the last five years.
The Company plans to expand the Southern California Division by acquiring
existing stores and constructing new ones. The Company intends to continue to
focus its new store construction and store conversion efforts during calendar
1995 and future years primarily within existing marketing areas. Such efforts
will encompass both of the Company's store formats, namely Food 4 Less and
Ralphs. To this end, the Company plans to continue its store expansion program
in Southern California by opening 17 new stores during calendar 1995 (including
three Food 4 Less stores which will be located in San Diego, a new market for
Food 4 Less), and additional stores in subsequent years. Moreover, in connection
with the Merger, the Company plans to convert approximately 16 conventional
stores currently managed by Food 4 Less and approximately 23 stores currently
managed by RGC to the "Food 4 Less" name and warehouse format, as Food 4 Less
stores have proven to have a strong appeal to value-conscious consumers across a
wide range of demographic groups. See "-- The Merger -- Two Leading
Complementary Formats." Remodeling activity in Southern California will be
focused on the conventional format stores, including 13 planned major remodels
of
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<PAGE> 74
such stores during calendar 1995. The Company's expansion, remodel and
conversion efforts have required, and will continue to require, the funding of
significant capital expenditures. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
During the last five fiscal years, Ralphs has opened 46 new stores and
remodeled 87 stores at a cost of approximately $283.6 million. A majority of
these new and remodeled stores offer expanded produce and European-style seafood
departments, service delicatessens, fresh bakeries and a broad selection of
general merchandise. With enhanced decor reflecting contemporary interior
design, these stores are designed to provide a quality shopping experience. At
the end of Fiscal 1993, 133 of Ralphs' 165 total stores were newly built or
remodeled within the past five fiscal years. While Ralphs has sold or closed 15
stores during the last five fiscal years, the number of Ralphs' stores has
increased from 142 stores at January 28, 1990 to 165 stores at January 30, 1994.
During the last five fiscal years, in Southern California Food 4 Less has
acquired or opened 172 stores (which includes 142 stores acquired in connection
with the acquisition of Alpha Beta) and remodeled 113 stores. Since its
acquisition of Alpha Beta in 1991, Food 4 Less has undertaken an extensive
program of store remodels, conversions and additions, which have resulted in a
substantially improved store base. During Fiscal 1994, Food 4 Less spent
approximately $50.7 million on capital improvements in Southern California.
Additionally, since the Alpha Beta acquisition, Food 4 Less has converted 11
Southern California stores from conventional formats to the warehouse format. As
Food 4 Less has remodeled existing stores, opened new larger stores and closed
smaller, marginally performing stores, there has been a net reduction in store
count, from 209 stores to 196 stores from the year ended June 29, 1991 ("Fiscal
1991") to the end of Fiscal 1994, but an increase in average store size. The
average square feet per store has increased from 28,700 at the end of Fiscal
1991 to 30,500 at the end of Fiscal 1994. During the last five fiscal years, 29
stores have been closed or sold (including five stores which closed as a result
of the April 1992 civil unrest in Los Angeles).
The Company will select most new store sites from developers' proposals
after such proposals have been researched and analyzed by the Company's
personnel. Each site will be monitored for population shifts, zoning changes,
traffic patterns, and nearby new construction and competitors' stores in an
effort to determine sales potential. The Company will actively participate with
developers in order to attain the Company's objectives for the site, including
adequate parking and complementary co-tenant mix. Remodeling involves enhancing
a store's decor through fixture replacement, upgrading of service departments
and improvements to lighting systems. In order to minimize the disruptive effect
on sales, most stores will be kept open during the remodeling period. The
primary objectives of remodeling will be to improve the attractiveness of
stores, increase sales of higher margin product categories and to increase
selling area where feasible.
Remodelings and openings, among other things, are subject to the
availability of developers' financing, agreements with developers and landlords,
local zoning regulations, construction schedules and other factors, including
costs, often beyond the Company's control. Accordingly, there can be no
assurance that the schedule will be met. Further, the Company expects increasing
competition for new store sites, and it is possible that this competition might
adversely affect the timing of its new store opening program.
ADVERTISING AND PROMOTION
Ralphs' marketing strategy is to provide a combination of wide product
selection, quality and freshness of perishable products, competitive prices and
double coupons supporting Ralphs' advertising theme "Everything You Need. Every
Time You Shop." In February 1994, Ralphs launched the Ralphs Savings Plan, a new
marketing campaign designed to enhance customer value. The Ralphs Savings Plan
is comprised of six major components: Guaranteed Low Prices ("GLPs"), Price
Breakers, Big Buys, Multi-Buys, Ralphs Brand Products and Double Coupons. GLPs
guarantee low prices on certain high volume items that are surveyed and updated
every four weeks. Price Breakers are weekly advertised items that offer
significant savings. Big Buys are club size items at prices competitive to club
store prices and Multi-Buys offer Ralphs shoppers the opportunity to purchase
club store quantities of regular sized items at prices competitive to club store
prices. In conjunction with this new campaign Ralphs' private label offering of
approximately 2,800 products provides value to the customer. In the second
quarter of 1994, Ralphs began more aggressively promoting perishables
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<PAGE> 75
through weekly ad features and lower prices. In addition, Ralphs increased the
number of storewide GLPs. Further, a mailer program was intensified to highlight
the perishable pricing and increased GLPs.
Ralphs stores promote sales through the use of product coupons, consisting
of manufacturers' coupons and Ralphs' own promotional coupons. Ralphs offers a
double coupon program in all stores with Ralphs matching the price reduction
offered by the manufacturer. Ralphs also generates store traffic through weekly
advertised specials, special sales promotions such as discounts on recreational
activities, seasonal and holiday promotions, increased private label selection,
club pack items and exclusive product offerings. Current advertising by Ralphs
has substantially the same market coverage as Food 4 Less and it is expected
that following the Merger duplicative advertising can be eliminated.
The Food 4 Less warehouse stores utilize print and radio advertising which
emphasizes Food 4 Less' low-price leadership, rather than promoting special
prices on individual items. The Food 4 Less warehouse stores also utilize weekly
advertising circulars, customized to local communities, which highlight the
merchandise offered in each store.
INFORMATION SYSTEMS AND TECHNOLOGY
Ralphs' management utilizes technology and industrial engineering methods
to enhance operating efficiency. Every checkout lane in every Ralphs store has a
point of sale terminal. Information from these terminals is utilized to allocate
shelf space, select merchandise based on the buying patterns of each store,
reduce out-of-stocks and increase efficiency at the checkstand and in the
warehouses. Industrial engineering methods are used to schedule labor thereby
improving productivity at the store level and in warehousing and distribution
operations.
Ralphs was the first supermarket chain in the western United States to
adopt scanning in all of its stores and has upgraded this equipment through the
purchase of IBM 4680 point-of-sale computers. All Ralphs stores use laser
scanning equipment, operating through an integrated computer system, to scan the
Universal Product Code, which provides prices and descriptions for most
products.
Ralphs has a Uniform Communications Standard purchase order system that
electronically links Ralphs to major suppliers via computer. This system has
enabled the automated processing of purchase orders which management believes
reduces the lead time required for product purchases. In Fiscal 1994, Ralphs
completed installation of an industry standard, direct store delivery receiving
system for goods delivered directly by vendors. This system allows the receipt
of each order to be recorded electronically, thereby confirming product retail
price and purchase authorization. This system has reduced the incidence of
billing errors and unauthorized deliveries.
Industrial engineering standards have been established for all major work
functions in Ralphs stores, ranging from stocking to checkout. Performance of
each major department in each store is measured weekly against these standards.
Similar measurements are made in Ralphs' distribution, warehouse and
manufacturing operations. Ralphs believes that its application of qualitative
methods to the operation of the business has given it a competitive advantage
and has better enabled management to run its business efficiently and to control
costs.
The Company plans to convert the Food 4 Less management information systems
to the Ralphs management information systems. Ralphs stores that will be
converted to the Food 4 Less format will continue to use the Ralphs programs.
NORTHERN CALIFORNIA AND MIDWESTERN DIVISIONS
The Northern California Division of Food 4 Less operates 19 conventional
supermarkets in the greater San Francisco Bay Area under the names "Cala" and
"Bell," and six warehouse format stores under the "Foods Co." name. Management
believes that the Northern California Division has excellent store locations in
the city of San Francisco that are very difficult to replicate. The Midwestern
Division of Food 4 Less operates 38 stores, of which 33, including ten former
"Food Barn" stores which Food 4 Less acquired in March 1994, are warehouse
format stores operated under the "Food 4 Less" name, and five of which are
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conventional supermarkets operated under the "Falley's" name. Of these 38
stores, 34 are located in Kansas and four are located in Missouri. Management
believes the Food 4 Less warehouse format stores are the low-price leaders in
each of the markets in which they compete. The Northern California Division's
conventional store strategy is to attract customers through its convenient
locations, broad product line and emphasis on quality and service and its
advertising and promotion strategy highlights the reduced price specials offered
in its stores. In contrast, the Company's warehouse format stores, operated
under the Food 4 Less name in the Midwestern Division and the Foods Co. name in
the Northern California Division, emphasize lowest overall prices rather than
promoting special prices on individual items. The Northern California Division's
conventional stores range in size from approximately 8,900 square feet to 32,800
square feet, and average approximately 19,400 square feet. The Northern
California Division's warehouse stores range in size from approximately 30,000
square feet to 59,600 square feet, and average approximately 37,900 square feet.
The Midwestern Division's warehouse format stores range in size from
approximately 8,800 square feet to 60,200 square feet and average approximately
37,300 square feet.
The Northern California Division purchases merchandise from a number of
suppliers; however, approximately 40% of its purchases are made through
Certified Grocers of California, Ltd. ("Certified"), a food distribution
cooperative, pursuant to supply contracts. The Northern California Division does
not operate its own warehouse facilities, relying instead on direct delivery to
its stores by Certified and other vendors. Food 4 Less' Southern California
warehouse facilities supply a portion of the merchandise sold in the Northern
California Division stores, and it is expected that, following completion of the
Merger, the Company's Southern California warehouses will continue to do so.
The Midwestern Division's primary supplier is Associated Wholesale Grocers
("AWG"), a member-owned wholesale grocery cooperative based in Kansas City. The
Midwestern Division does not operate a central warehouse, but purchases
approximately 73% of the merchandise sold in its stores from AWG. Management
believes that, as AWG's largest single customer, the Midwestern Division has
significant buying power, allowing it to provide a broader product line more
economically than it could if it maintained its own full-line warehouse. The
Midwestern Division produces approximately 50% of all case-ready fresh meat
items sold in its stores at its central meat plant located in Topeka, Kansas.
In fiscal 1990, the Northern California Division initiated a remodeling
program to upgrade its stores and to increase profitability. Food 4 Less
remodeled 15 stores during the past five fiscal years, and opened five new
stores during the past four fiscal years. During fiscal 1994, Food 4 Less opened
one new warehouse store, converted three existing stores to the warehouse format
and remodeled one conventional format store. The Company has closed 4 stores
during the past five fiscal years and increased its number of stores from 22 at
the end of the fiscal year ended June 30, 1990 to 24 at the end of the fiscal
year ended June 25, 1994. The average square feet per store has increased from
20,000 at the end of fiscal 1990 to 23,300 at the end of fiscal 1994. The
Company plans to open one additional warehouse format store and remodel two
conventional format stores during fiscal 1995. Management plans to further
expand the Northern California Division in the future by acquiring existing
stores and constructing new stores, including warehouse stores. The Northern
California Division Food 4 Less warehouse stores were renamed "Foods Co." in
fiscal 1994 following the sale by Food 4 Less of exclusive rights to use the
"Food 4 Less" name in Northern California to Fleming Companies, Inc. See
"Licensing Operations."
The Company intends to focus its Midwestern Division expansion primarily on
its Food 4 Less operations. While Food 4 Less expects to construct new stores,
it may also expand operations by purchasing existing Food 4 Less stores from
unaffiliated licensees, or by acquiring existing supermarkets and converting
them to the Food 4 Less warehouse format. The acquisition in March 1994 of ten
warehouse stores formerly operated as "Food Barn" stores increased the
Midwestern Division's Food 4 Less warehouse store count from 23 at June 26, 1993
to 33 at June 25, 1994. During the last five fiscal years, the Midwestern
Division has opened 3 new stores, acquired 13 stores, closed one store and
remodeled 10 stores.
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COMPETITION
The supermarket industry is highly competitive and characterized by narrow
profit margins. The Company's competitors in each of its operating divisions
include national and regional supermarket chains, independent and specialty
grocers, drug and convenience stores, and the newer "alternative format" food
stores, including warehouse club stores, deep discount drug stores and "super
centers." Supermarket chains generally compete on the basis of location, quality
of products, service, price, product variety and store condition. The Company
regularly monitors its competitors' prices and adjusts its prices and marketing
strategy as management deems appropriate in light of existing conditions. Some
of the Company's competitors have greater financial resources than the Company
and could use these resources to take steps which could adversely affect the
Company's competitive position.
The Southern California stores compete with several large national and
regional chains, principally Albertsons, Hughes, Lucky, Smith's, Stater Bros.,
and Vons, and with smaller independent supermarkets and grocery stores as well
as warehouse clubs and other "alternative format" food stores. The Northern
California Division competes with large national and regional chains,
principally Lucky and Safeway, and with independent supermarket and grocery
store operators and other retailers, including "alternative format" stores. The
Midwestern Division's supermarkets compete with several national and regional
supermarket chains, principally Albertsons and Dillons, as well as independent
and "alternative format" stores such as Hypermarket USA. Food 4 Less positions
its Food 4 Less warehouse format supermarkets as the overall low-price leader in
each marketing area in which they operate. In addition, management believes that
Ralphs is a leading competitor in many of its marketing areas, based on its
strong customer franchise, desirable store locations, technology and efficient
distribution systems.
EMPLOYEES
RALPHS
At July 17, 1994, Ralphs had 6,052 full-time and 8,755 part-time employees
as follows:
<TABLE>
<CAPTION>
EMPLOYEE TYPE UNION NON-UNION TOTAL
--------------------------------------------- ------ --------- ------
<S> <C> <C> <C>
Hourly....................................... 13,487 250 13,737
Salaried..................................... -- 1,070 1,070
------ ----- ------
Total employees.................... 13,487 1,320 14,807
</TABLE>
Of Ralphs' 14,807 total employees at July 17, 1994, 13,487 were covered by
union contracts principally with the UFCW. The table below sets forth
information regarding Ralphs' union contracts which cover more than 100
employees.
<TABLE>
<CAPTION>
UNION NUMBER OF EMPLOYEES COVERED DATE OF EXPIRATION
- ---------------------------------- -------------------------------- -------------------
<S> <C> <C>
UFCW 10,506 clerks and meatcutters October 6, 1996
International Brotherhood of 1,607 drivers and warehousemen September 13, 1998
Teamsters
Hotel Employees and Restaurant
Employees 906 September 10, 1995
Hospital and Service Employees 323 Los Angeles January 19, 1997
66 San Diego April 20, 1997
</TABLE>
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FOOD 4 LESS
At June 25, 1994, Food 4 Less had a total of 5,728 full-time and 8,959
part-time employees as follows:
<TABLE>
<CAPTION>
EMPLOYEE TYPE UNION NON-UNION TOTAL
----------------------------------------------- ------ --------- ------
<S> <C> <C> <C>
Hourly......................................... 11,882 1,907 13,789
Salaried....................................... -- 898 898
------ ----- ------
Total employees...................... 11,882 2,805 14,687
</TABLE>
Of Food 4 Less' 14,687 total employees at June 25, 1994, 11,882 were
covered by union contracts, principally with UFCW. The table below sets forth
information regarding Food 4 Less' union contracts which cover more than 100
employees.
<TABLE>
<CAPTION>
NUMBER OF DATE OF
UNION EMPLOYEES COVERED EXPIRATION
- ---------------------------------------------- -------------------------- ---------------------
<S> <C> <C>
UFCW.......................................... 7,908 Southern California October 6, 1996
clerks and meatcutters
Hospital and Service Employees................ 299 Southern California January 19, 1997
store porters
International Brotherhood of Teamsters........ 886 Southern California September 13, 1998
produce drivers
and warehousemen
UFCW.......................................... 971 Northern California February 28, 1995(a)
clerks and meatcutters
UFCW.......................................... 1,532 Southern California February 25, 1996
clerks and meatcutters
Bakery and Confectionery Workers.............. 192 Southern California July 8, 1995
bakers
</TABLE>
- ---------------
(a) Certain of such employees are covered by contracts expiring on March 4, 1995
or June 2, 1996.
Pursuant to their collective bargaining agreements, both Ralphs and Food 4
Less contribute to various union-sponsored, multi-employer pension plans.
The terms of most collective bargaining agreements that cover employees of
conventional stores operated by Food 4 Less are substantially identical to the
terms of the corresponding collective bargaining agreements of Ralphs. The terms
of each company's collective bargaining agreements generally will remain in
effect following the Merger, although it is expected that, as a result of
current negotiations, Ralphs' collective bargaining agreements will apply to all
Company stores converted to the Ralphs name and format, and the collective
bargaining agreements that cover employees of Food 4 Less warehouse format
stores will apply to all Company stores converted to the Food 4 Less name and
warehouse format.
Management believes that both Ralphs and Food 4 Less have good relations
with their employees.
LICENSING OPERATIONS
Food 4 Less owns the "Food 4 Less" trademark and service mark and licenses
the "Food 4 Less" name for use by others. In Fiscal 1994, earnings from
licensing operations were approximately $270,000. An exclusive license with the
right to sublicense the "Food 4 Less" name in all areas of the United States
except Arkansas, Iowa, Illinois, Minnesota, Nebraska, North Dakota, South
Dakota, Wisconsin, the upper peninsula of Michigan, certain portions of Kansas,
Missouri, and Tennessee has been granted to Fleming Companies, Inc. ("Fleming"),
a major food wholesaler and retailer. In August of 1993, Food 4 Less amended
(the "Amendment") its licensing agreement with Fleming to give Fleming exclusive
use of the Food 4 Less name in Northern California and Food 4 Less exclusive use
in Southern California. Fleming paid Food 4 Less a fee of $1.9 million for the
Amendment. With the exception of Northern California, and subject to the
Amendment and certain proximity restrictions, Food 4 Less retains the right to
open and operate its own "Food 4 Less" warehouse supermarkets throughout the
United States. As of June 25, 1994, there were 158 Food 4 Less warehouse
supermarkets in 20 states, including the 61 stores owned or leased and operated
by
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Food 4 Less. Of the remaining 97 stores, Fleming operates three under license,
67 are operated under sublicenses from Fleming and 27 are operated by other
licensees.
PROPERTIES
At October 1, 1994, Ralphs and Food 4 Less operated a total of 429 stores,
as set forth in the table below:
<TABLE>
<CAPTION>
NUMBER OF
SUPERMARKETS
-------------- TOTAL SELLING
OWNED LEASED SQUARE FEET SQUARE FEET
----- ------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Southern California..................... 49 317(a) 12,929 9,174
Northern California..................... -- 25 610 424
Midwestern.............................. 2(b) 36 1,357 1,025
-- --- ------ ------
Total......................... 51 378(c) 14,896 10,623
== === ====== ======
</TABLE>
- ---------------
(a) Includes 17 stores located on real property subject to a ground lease.
(b) Includes one store that is partially owned and partially leased.
(c) The average remaining term (including renewal options) of Ralphs' and Food 4
Less' supermarket leases is 27 years.
The number of Ralphs and Food 4 Less stores by size classification as of October
1, 1994 is as follows:
<TABLE>
<CAPTION>
AVERAGE GROSS SQUARE FEET AVERAGE SELLING SQUARE FEET NUMBER OF STORES
TOTAL SQUARE --------------------------- --------------------------- -----------------------------------
FEET RALPHS FOOD 4 LESS RALPHS FOOD 4 LESS RALPHS FOOD 4 LESS TOTAL
- ---------------- ----------- ----------- ----------- ----------- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
8,800 - 15,599 -- 13,175 -- 9,478 -- 8 8
15,600 - 25,000 21,867 21,740 16,709 14,880 3 92 95
25,001 - 30,000 27,926 26,966 19,725 18,633 15 37 52
30,001 - 35,000 32,993 32,574 24,204 23,247 31 51 82
35,001 - 40,000 37,254 36,804 27,053 26,272 32 27 59
40,001 - 45,000 43,264 42,329 31,422 30,038 59 12 71
45,001 - 50,000 46,356 48,037 33,185 34,572 15 11 26
50,001 - 84,280 68,400 55,056 48,466 37,814 13 23 36
</TABLE>
At October 1, 1994, the Company also operated 20 distribution, warehouse
and administrative facilities and five manufacturing and processing facilities,
14 of which are owned and 11 of which are leased. Certain of the facilities are
expected to be sold, closed or subleased following completion of the Merger. See
"-- Warehousing and Distribution."
Ralphs' distribution and warehouse facilities include the 17 million cubic
foot ASRS warehouse for nonperishable items that Ralphs opened in November 1987
and the 5.4 million cubic foot PSC facility for the processing and storage of
perishable products opened in mid-1992. Food 4 Less operates two warehouse
facilities: The largest of such facilities is Food 4 Less' central office,
manufacturing and warehouse complex in La Habra, California, which occupies
approximately 1.4 million total square feet over 75 acres. Food 4 Less has
entered into a lease of the La Habra property which expires in 2001 (and which
may be extended for up to 15 years at the election of Food 4 Less), with
American Food and Drug, Inc. ("AFDI"), a subsidiary of American Stores Company,
and has an option to purchase such property. Rent on the La Habra property was
$6.3 million in Fiscal 1994. Four of Food 4 Less' supermarkets are also leased
from AFDI. In addition to the La Habra facility, Food 4 Less leases a 321,000
square foot warehouse in Los Angeles. This warehouse, which was formerly owned
by Food 4 Less, was the subject of a sale leaseback arrangement entered into by
Food 4 Less in August 1990. For information regarding the Company's plan to
consolidate its warehouse facilities following completion of the Merger, see
"-- The Merger -- Substantial Cost Savings Opportunities -- Warehousing and
Distribution Efficiencies."
LEGAL PROCEEDINGS
In December 1992, three California state antitrust class action suits were
commenced in Los Angeles Superior Court against RGC and Food 4 Less and other
major supermarket chains located in Southern California, alleging that they
conspired to refrain from competing in the retail market for fluid milk and to
fix the retail price of fluid milk above competitive prices. Specifically, class
actions were commenced by Diane
70
<PAGE> 80
Barela and Neila Ross, Ron Moliare and Paul C. Pfeifle on December 7, December
14, and December 23, 1992, respectively. The Court has yet to certify any of
these classes. A demurrer to the complaints was denied. RGC had reached an
agreement in principle to settle these cases, however no settlement agreement
was signed. Food 4 Less is continuing to actively defend these suits and Ralphs
has elected to defer any further settlement discussions until after the
consummation of the Merger. The Company does not believe that the resolution of
these cases will have a material adverse effect on its future financial
condition. Any settlement would be subject to court approval.
On March 25, 1991, George A. Koteen Associates, Inc. ("Koteen Associates")
commenced an action in San Diego Superior Court alleging that RGC breached an
alleged utility rate consulting agreement. In December 1992, a jury returned a
verdict of approximately $4.9 million in favor of Koteen Associates and in March
1993, attorney's fees and certain other costs were awarded to the plaintiff. RGC
has appealed the judgment and fully reserved in Fiscal 1992 against an adverse
judgment.
In April 1994, RGC was served with a complaint filed by over 240 former
employees at Ralphs' bakery in the Atwater district of Los Angeles (the "Bakery
Plaintiffs"). The action was commenced in the United States District Court for
the Central District of California, and, among other claims, the Bakery
Plaintiffs alleged that RGC breached its collective bargaining agreement and
violated the Workers Adjustment Retraining Notification Act (the "WARN Act")
when it downsized and subsequently closed the bakery. In their complaint, the
Bakery Plaintiffs are seeking damages for lost wages and benefits as well as
punitive damages. The Bakery Plaintiffs also named RGC and two of its management
employees in fraud, conspiracy and emotional distress causes of action. In
addition, the Bakery Plaintiffs sued their union local for breach of its duty of
fair representation and other alleged misconduct, including fraud and
conspiracy. The defendants have answered the complaint and discovery is ongoing.
Trial is set for February, 1996, and RGC is vigorously defending this suit.
Management believes, based on its assessment of the facts, that the resolution
of this case will not have a material effect on the Company's financial position
or results of operations.
In addition, Food 4 Less and Ralphs are defendants in a number of other
cases currently in litigation or potential claims encountered in the normal
course of business which are being vigorously defended. In the opinion of
management, the resolutions of these matters will not have a material effect on
Food 4 Less' or Ralphs' financial position or results of operations.
CALIFORNIA SETTLEMENT AGREEMENT
On December 14, 1994, Food 4 Less and Ralphs entered into a Settlement
Agreement (the "Settlement Agreement") with the State of California to settle
potential antitrust and unfair competition claims the State of California
asserted against Ralphs and Food 4 Less relating to the effects of the Merger on
supermarket competition in Southern California (the "State Claims"). Without
admitting any liability in connection with the State Claims, Food 4 Less and
Ralphs agreed in the Settlement Agreement to divest 27 specific stores in
Southern California. Under the Settlement Agreement, the Company must divest 14
stores by June 30, 1995, and the balance of 13 stores by December 31, 1995. The
Company also agreed not to acquire new stores from third parties in the six
Southern California areas specified in the Settlement Agreement for five years
following the date of the Settlement Agreement. If the Company fails to divest
the required stores by the two dates set forth in the Settlement Agreement, the
Company has agreed not to object to the appointment of a trustee to effect the
required sales. The Settlement Agreement also requires the Company to pay the
reasonable fees and costs of the attorneys and experts of the State of
California associated with its review.
GOVERNMENT REGULATION
Ralphs and Food 4 Less are subject to regulation by a variety of
governmental agencies, including, but not limited to, the California Department
of Alcoholic Beverage Control, the California Department of Agriculture, the
U.S. Food and Drug Administration, the U.S. Department of Agriculture and state
and local health departments. In addition, the Merger and the New Equity
Investment are subject to the review of the Federal Trade Commission and may not
be consummated prior to the expiration of the applicable waiting period imposed
by the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
71
<PAGE> 81
ENVIRONMENTAL MATTERS
In January 1991, the California Regional Water Quality Control Board for
the Los Angeles Region (the "Regional Board") requested that Ralphs conduct a
subsurface characterization of Ralphs' Atwater property. This request was part
of an ongoing effort by the Regional Board, in connection with the U.S.
Environmental Protection Agency (the "EPA"), to identify contributors to
groundwater contamination in the San Fernando Valley. Significant parts of the
San Fernando Valley, including the area where Ralphs' Atwater property is
located, have been designated federal Superfund sites requiring response actions
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, because of regional groundwater contamination. On June 18,
1991, the EPA made its own request for information concerning the Atwater
property. Since that time, the Regional Board has requested further
investigations by Ralphs. Ralphs has conducted the requested investigations and
has reported the results to the Regional Board. Approximately 25 companies have
entered into a Consent Order (EPA Docket No. 94-11) with the EPA to investigate
and design a remediation system for contaminated groundwater beneath an area
which includes the Atwater property. Ralphs is not a party to that Consent
Order, but is cooperating with requests of the subject companies to allow
installation of monitoring or recovery wells on Ralphs' property. Based upon
available information, management does not believe this matter will have a
material adverse effect on the Company's financial condition or results of
operations.
Ralphs has removed several underground storage tanks and remediated soil
contamination at the Atwater property. Although the possibility of other
localized contamination from prior operations or adjacent properties exists at
the Atwater property, management does not believe that the costs of remediating
such contamination will be material to the Company.
Apart from the Atwater property, the Company has recently had environmental
assessments performed on a significant portion of Ralphs' facilities and Food 4
Less' facilities, including warehouse and distribution facilities. The Company
believes that any responsive actions required at the examined properties as a
result of such assessments will not have a material adverse effect on its
financial condition or results of operations.
Ralphs has incurred approximately $4.5 million in non-recurring capital
expenditures for the mandated conversion of refrigerants during 1994. Food 4
Less may incur some additional capital expenditures for such conversion. Other
than these expenditures, neither Ralphs nor Food 4 Less has incurred material
capital expenditures for environmental controls during the previous three years,
nor does management anticipate incurring such expenditures during the current
fiscal year or the succeeding fiscal year.
At the time that Food 4 Less acquired Alpha Beta in 1991, it learned that
certain underground storage tanks located on the site of the La Habra facility
may have released hydrocarbons. In connection with the acquisition of Alpha Beta
the seller (who is also the lessor of the La Habra facility) agreed to retain
responsibility, subject to certain limitations, for remediation of the release.
Ralphs and Food 4 Less are subject to a variety of environmental laws,
rules, regulations and investigative or enforcement activities, as are other
companies in the same or similar business. The Company believes it is in
substantial compliance with such laws, rules and regulations. These laws, rules,
regulations and agency activities change from time to time, and such changes may
affect the ongoing business and operations of the Company.
72
<PAGE> 82
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the persons
who are expected to serve as the executive officers and directors of the Company
and New Holdings following the consummation of the Merger.
<TABLE>
<CAPTION>
YEARS OF SUPERMARKET
INDUSTRY SERVICE
----------------------------
NAME AGE POSITION MANAGERIAL POSITIONS TOTAL
- ------------------------- --- ----------------------------------- -------------------- -----
<S> <C> <C> <C> <C>
Ronald W. Burkle 42 Director and Chairman of the Board 19 24
of New Holdings and the Company
Byron E. Allumbaugh 63 Director and Chief Executive 36 36
Officer of New Holdings and the
Company
George G. Golleher 46 Director and Vice Chairman of New 21 21
Holdings and the Company
Alfred A. Marasca 53 Director of the Company and 29 37
President and Chief Operating
Officer of New Holdings and the
Company
Joe S. Burkle 71 Director and Executive Vice 44 48
President of New Holdings and the
Company
Greg Mays 48 Executive Vice President of New 21 21
Holdings and the Company
Terry Peets 50 Executive Vice President of New 17 17
Holdings and the Company
Jan Charles Gray 47 Senior Vice President, General 19 31
Counsel and Secretary of New
Holdings and the Company
Alan J. Reed 48 Senior Vice President and Chief 21 21
Financial Officer of New Holdings
and the Company
Patrick L. Graham 45 Director of New Holdings and the -- --
Company
Mark A. Resnik 47 Director of New Holdings and the -- --
Company
</TABLE>
Ronald W. Burkle has been a Director and the Chairman of the Board and
Chief Executive Officer of Food 4 Less since its inception in 1989. Mr. Burkle
co-founded Yucaipa in 1986 and has served as Director, Chairman of the Board,
President and Chief Executive Officer of FFL since 1987 and of Holdings since
1992. From 1986 to 1988, Mr. Burkle was Chairman and Chief Executive Officer of
Jurgensen's, a Southern California gourmet food retailer. Before joining
Jurgensen's, Mr. Burkle was a private investor in Southern California. Mr.
Burkle is the son of Joe S. Burkle.
Byron E. Allumbaugh has been Chairman of the Board and Chief Executive
Officer of Ralphs since 1976 and a Director since 1988. He also is a Director of
the H.F. Ahmanson Company, El Paso Natural Gas Company and Ultramar, Inc.
George G. Golleher has been a Director of Food 4 Less since its inception
in 1989 and has been the President and Chief Operating Officer of Food 4 Less
since January 1990. From 1986 through 1989 Mr. Golleher served as Senior Vice
President, Finance and Administration, of The Boys Markets, Inc. Prior to
joining The Boys Markets, Inc. in 1984, Mr. Golleher served as Vice President
and Chief Financial Officer of Mayfair Markets, Inc. from 1983 to 1984.
Alfred A. Marasca has been President, Chief Operating Officer and a
Director of Ralphs since February 1994 and he was President from February 1993
to February 1994, Executive Vice President, Retail from 1991 until 1993 and
Executive Vice President, Marketing from 1985 to 1991.
73
<PAGE> 83
Joe S. Burkle has been a Director and Executive Vice President of Food 4
Less since its inception in 1989 and has been Chief Executive Officer of
Falley's, Inc. since 1987. Mr. Burkle began his career in the supermarket
industry in 1946, and served as President and Chief Executive Officer of Stater
Bros. Markets, a Southern California supermarket chain. Prior to 1987, Mr.
Burkle was a private investor in Southern California. Mr. Burkle is the father
of Ronald W. Burkle.
Greg Mays has been Executive Vice President -- Finance and Administration,
and Chief Financial Officer of Food 4 Less and of Holdings since December 1992.
From 1989 until 1991, Mr. Mays was Chief Financial Officer of Almac's, Inc. and,
from 1991 to December 1992, President and Chief Financial Officer of Almac's.
From April 1988 to June 1989, Mr. Mays was Chief Financial Officer of Food 4
Less of Modesto, Inc. and Cala Foods, Inc.
Terry Peets has been Executive Vice President of Ralphs since February
1994. He was Senior Vice President, Marketing from 1991 to February 1994, Senior
Vice President, Merchandising from 1990 to 1991, Group Vice President,
Merchandising from 1988 to 1990 and Group Vice President, Store Operations from
1987 to 1988.
Jan Charles Gray has been Senior Vice President, General Counsel and
Secretary of Ralphs since 1988. He was Senior Vice President and General Counsel
from 1985 to 1988 and Vice President and General Counsel from 1978 to 1985.
Alan J. Reed has been Senior Vice President and Chief Financial Officer of
Ralphs since 1988. He was Senior Vice President, Finance from 1985 to 1988 and
Vice President, Finance from 1983 to 1985.
Patrick L. Graham joined Yucaipa as a general partner in January 1993.
Prior to that time he was a Managing Director in the corporate finance
department of Libra Investments, Inc. from 1992 to 1993 and PaineWebber Inc.
from 1990 to 1992. From 1982 to 1990, he was a Managing Director of the
corporate finance department of Drexel Burnham Lambert Incorporated and an
Associate Director in the corporate finance department of Bear Stearns & Co.,
Inc.
Mark A. Resnik has been a Director and the Vice President and Secretary of
Food 4 Less since its inception in 1989, co-founded Yucaipa in 1986 and has been
a Director, Vice President and Secretary of FFL since 1987. From 1986 until
1988, Mr. Resnik served as a Director, Vice President and Secretary for
Jurgensen's. From 1983 through 1986, Mr. Resnik served as a Director, Vice
President and General Counsel of Stater Bros. Markets.
Two members will be nominated to the Board of Directors of each of the
Company and New Holdings by Apollo, one member will be nominated to the Board of
Directors of each of the Company and New Holdings by BTIP, six members will be
nominated to the Board of Directors of New Holdings and seven members will be
nominated to the Board of Directors of the Company by Yucaipa, pursuant to the
terms of the 1995 Stockholders Agreement. See "Description of Capital
Stock -- New Equity Investment."
All directors of the Company will hold office until the election and
qualification of their successors. Executive officers of the Company will be
chosen by the Board of Directors of the Company will serve at its discretion. It
is anticipated that the Company will not pay any fees or remuneration to its
directors for service on the board or any board committee, but that the Company
will reimburse directors for their ordinary out-of-pocket expenses incurred in
connection with attending meetings of the Board of Directors.
74
<PAGE> 84
EXECUTIVE COMPENSATION
EMPLOYMENT AGREEMENTS
Concurrently with the consummation of the Merger, the Company will enter
into employment agreements with certain of the current executive officers of
Ralphs and Food 4 Less. It is expected that Byron E. Allumbaugh, George G.
Golleher, Alfred A. Marasca, as well as other executive officers of the Company,
will enter into three-year employment contracts with the Company and that the
existing employment contracts, if any, of such officers will be cancelled.
New Allumbaugh Agreement. The employment agreement between the Company and
Byron Allumbaugh, 63, is expected to provide for a salary of $1 million for the
first year and $1.25 million for the second year. If Mr. Allumbaugh continues as
the Chief Executive Officer during the third year following the Merger, he would
be entitled to a salary of $2 million and if he is employed in another capacity
then he would be entitled to a salary of $1.25 million for the third year. Mr.
Allumbaugh will be entitled to a bonus equal to his salary in each year if
certain prescribed earnings targets (the "Earnings Targets") for the year are
reached. If the Company completes an initial public offering of capital stock
during the first two years of Mr. Allumbaugh's employment, Mr. Allumbaugh will
remain Chief Executive Officer for one year after the public offering. If the
public offering is anticipated to occur during the third year of Mr.
Allumbaugh's employment agreement, Mr. Allumbaugh will resign as Chief Executive
Officer six months prior to the intended date of the public offering but will
continue to be employed at the lesser compensation level provided in his
employment agreement until its termination.
New Golleher Agreement. Food 4 Less is currently a party to a five-year
employment agreement with George G. Golleher providing for annual base
compensation of $350,000, plus employee benefits and an incentive bonus
calculated in accordance with a formula based on Food 4 Less' earnings. Under
the employment agreement, Mr. Golleher may terminate his employment agreement in
the event of a change of control of Food 4 Less, in which case he is entitled to
receive all of the salary and benefits provided under the agreement for the
remaining term thereof, notwithstanding the termination of his employment. In
connection with the consummation of the Merger the Food 4 Less board of
directors has authorized the payment of a special bonus to George Golleher in a
lump sum amount equal to the base salary due him under the remaining term of his
employment agreement. As a condition of the payment of such bonus, Mr.
Golleher's existing employment agreement will be cancelled, and he will enter
into a new agreement containing terms to be mutually agreed upon between Food 4
Less and Mr. Golleher. The new employment agreement is expected to provide for
an annual salary of $500,000 plus a bonus equal to his salary in each year if
the Earnings Targets are reached.
New Marasca Agreement. The employment agreement between the Company and
Alfred Marasca is expected to provide for a salary of $500,000 per annum and an
annual bonus equal to his salary if the Earnings Targets for the year are
reached.
General Provisions of the New Employment Agreements. The new employment
agreements are expected to provide generally that the Company may terminate the
agreement for cause or upon the failure of the employee to render services to
the Company for a continuous period to be agreed upon by the Company and the
employee because of the employee's disability. In addition, the employee's
services may be suspended upon notice by the Company and in such event the
employee will continue to be compensated by the Company during the remainder of
the term of the agreement subject to certain offsets if the employee becomes
engaged in another business.
Existing Food 4 Less Employment Agreements. Food 4 Less entered into
employment agreements with 24 officers providing for their employment for a
one-year term commencing on the date of a change of control of Food 4 Less.
These agreements provide for the payment of an incentive bonus calculated in
accordance with Food 4 Less policies, and certain of the agreements provide for
the payment of a special bonus payable upon a change of control (provided
certain financial performance targets have been met). These agreements will
become effective upon the consummation of the Merger. Greg Mays, who will be an
Executive Vice President of the Company, will be entitled to receive a base
salary of not less than $250,000 and a special
75
<PAGE> 85
bonus of $150,000 (provided certain financial performance targets have been
met). It is anticipated that some, but not all, of these employment agreements
will be replaced by new employment agreements with the Company.
Joe Burkle Consulting Agreement. Food 4 Less has a consulting agreement
with Joe S. Burkle providing for compensation of $3,000 per week, pursuant to
which Mr. Burkle provides the management and consulting services of an executive
vice president. The agreement has a five-year term, which is automatically
renewed on January 1 of each year for a five-year term unless sixty days' notice
is given by either party; provided that if Food 4 Less terminates Mr. Burkle's
services for reasons other than for good cause, the payments due under the
agreement continue for the balance of the term. It is expected that the Company
will assume Mr. Burkle's consulting agreement upon the consummation of the
Merger.
EQUITY APPRECIATION RIGHTS PLAN
RGC has 1,500,000 EARs outstanding that were granted under the RGC 1988
Equity Appreciation Rights Plan, as amended (the "EAR Plan"). The outstanding
EARs are held by 36 officers and former officers of Ralphs, including Byron
Allumbaugh, Alfred Marasca, Alan Reed, Jan Charles Gray and Terry Peets. All
outstanding EARs are vested in full and not subject to forfeiture by the
holders, except in the event a holder's employment is terminated for cause
within the meaning of the EAR Plan. The outstanding EARs represent the right to
receive, in the aggregate, 15% of the increase of the appraised value of RGC's
equity at the time of exercise over a base value of $120 million. Concurrently
with the consummation of the Merger, the outstanding EARs will be redeemed for
$22.8 million in cash. An additional $10 million of EAR payments that would
otherwise be payable upon consummation of the Merger will be cancelled in
exchange for the issuance of the Reinvestment Options (as defined). See "-- New
Management Stock Option Plan and Management Investment" and "Description of
Capital Stock -- New Equity Investment." The price to redeem the EARs is based
on a $517 million valuation (the maximum valuation possible under the EAR Plan)
of RGC's equity.
NEW MANAGEMENT STOCK OPTION PLAN AND MANAGEMENT INVESTMENT
Upon the consummation of the Merger, certain members of Ralphs' management
and Food 4 Less' management will be entitled to receive options to purchase
common stock of New Holdings (the "New Options"). The New Options will have a
term of ten years and the exercise price with respect to each New Option will be
$10 per share, which is equal to the price paid by the New Equity Investors for
the New Equity Investment. The New Options will represent 7.5% of the total
equity of New Holdings, and will be allocated as follows: New Options
representing 1.5%, 0.5% and 0.5% of the total equity of New Holdings will be
granted to Byron Allumbaugh, George Golleher and Alfred Marasca, respectively
(the "Tier One Options"). The Tier One Options will be fully vested upon
issuance and will be immediately exercisable. New Options for an additional 2.5%
of the total equity of New Holdings will be granted to certain other management
employees of the Company (the "Tier Two Options"). Fifty percent (50%) of the
Tier Two Options granted to each holder will vest immediately upon issuance and
10% will vest each year thereafter. In addition, New Options representing an
aggregate of 2.5% of the total equity of New Holdings will be issued to holders
of EARs in exchange for the cancellation of $10 million of the EAR payments
which would otherwise be payable upon consummation of the Merger (the
"Reinvestment Options"). The value of the EAR payments cancelled will be
credited against the exercise price for each Reinvestment Option. The
Reinvestment Options will be fully vested upon issuance and will be immediately
exercisable.
Certain of Ralphs' officers, including Messrs. Allumbaugh, Marasca, Reed,
Gray and Peets, currently hold options to purchase common stock of RSI. These
options will be cancelled for cash payments aggregating $880,000 in connection
with the Merger.
Each holder of New Options (collectively, the "Management Shareholders")
will also execute a management shareholder agreement with New Holdings
(collectively, the "Management Shareholder Agreements"). The Management
Shareholder Agreements generally will provide New Holdings with a right of first
refusal in the event of proposed sales of New Holdings stock acquired by the
Management
76
<PAGE> 86
Shareholders upon the exercise of New Options and have an option, exercisable
following any termination for cause of a Management Shareholder's employment or
if the Management Shareholder commences employment with a competitor, to
repurchase at Fair Market Value (as defined in the Management Shareholder
Agreements) any New Holdings stock acquired by such Management Shareholder upon
the exercise of New Options. Each Management Shareholder Agreement will contain
certain rights of the Management Shareholders to participate in sales by Yucaipa
of New Holdings stock and certain obligations of the Management Shareholders to
sell their New Holdings stock in the case of a sale for cash of all of the
outstanding capital stock of New Holdings. Finally, the Management Shareholders
will be required to vote their New Holdings stock to elect to the New Holdings
Board of Directors the directors nominated by Yucaipa, Apollo and BTIP under New
Holdings' 1995 Stockholders Agreement. See "Description of Capital Stock -- 1995
Stockholders Agreement." The Management Shareholders Agreements, and all rights
and obligations of the Management Shareholders thereunder described above, will
terminate upon an initial public offering of New Holdings common stock meeting
certain criteria.
SUMMARY COMPENSATION TABLE -- RALPHS
The following Summary Compensation Table sets forth information concerning
the compensation of the Chief Executive Officer and the other four most highly
compensated executive officers of Ralphs who are expected to serve as executive
officers of the Company, whose total annual salary and bonus exceeded $100,000
for the year ended January 30, 1994.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-------------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS(#) COMPENSATION($)(1)
- --------------------------- ----- -------- -------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Byron E. Allumbaugh, 1993 645,000 387,000 N/A 38,575
Chairman and 1992 620,000 372,000 587,753 31,886
Chief Executive Officer 1991 580,000 348,000 N/A N/A
Alfred A. Marasca, 1993 340,000 204,000 N/A 18,177
President 1992 296,260 148,125 308,812 11,485
1991 280,500 140,000 N/A N/A
Alan J. Reed, 1993 222,500 111,250 N/A 12,904
Senior Vice President, 1992 211,250 105,625 154,406 9,569
Finance and 1991 196,260 98,125 N/A N/A
Chief Financial Officer
Jan Charles Gray, 1993 207,500 103,750 N/A 13,584
Senior Vice President, 1992 196,250 98,125 154,406 13,593
General Counsel and 1991 181,250 90,625 N/A N/A
Secretary
Terry Peets, 1993 192,500 96,250 N/A 10,337
Senior Vice President, 1992 182,500 91,250 154,406 10,237
Marketing 1991 171,250 85,625 N/A N/A
</TABLE>
- ---------------
(1) Represents (i) insurance premiums and the dollar value of the remainder of
premiums paid under the Senior Executive Supplemental Benefit Plan and (ii)
RGC's contributions under the Ralphs Thrift Incentive Plan. The respective
amounts paid for Messrs. Allumbaugh, Marasca, Reed, Gray and Peets are as
follows: (A) insurance premiums: $18,500, $8,890, $6,662, $7,250 and $4,210;
(B) dollar value of the remainder of premiums: $18,500, $6,600, $4,025,
$4,500 and $4,210; (C) incentive plan contributions: $1,575, $2,687, $2,217,
$1,834 and $1,917.
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<PAGE> 87
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1994 AND FISCAL YEAR-END OPTION/SAR
VALUES -- RALPHS
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR-END(#) FISCAL YEAR-END($)
ACQUIRED --------------------- --------------------
ON EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (#)(1) REALIZED($) UNEXERCISABLE(2) UNEXERCISABLE(3)(4)
---- ----------- ----------- --------------------- --------------------
<S> <C> <C> <C> <C>
Byron E. Allumbaugh............. 70,000 1,961,646 235,102/ 0/
562,651 5,884,935
Alfred A. Marasca............... 9,000 252,212 61,762/ 0/
319,050 2,017,692
Alan J. Reed.................... 7,000 196,165 30,882/ 0/
179,524 1,569,316
Jan Charles Gray................ 5,000 140,118 30,882/ 0/
163,524 1,120,939
Terry Peets..................... 5,000 140,118 30,882/ 0/
163,524 1,120,939
</TABLE>
- ---------------
(1) Represents EARs exercised under the EAR Plan.
(2) Each number represents the aggregate number of options and EARs outstanding,
as currently exercisable/unexercisable. Options and EARs were granted under
different plans, not in tandem. All EARs are free standing.
(3) Represents value of EARs, based on a value of $28.0235 per EAR at the time
of exercise. Outstanding options are not currently in-the-money, based on
current estimates of the fair market value of the Common Stock.
(4) A portion of the EARs will be redeemed in connection with the Merger and the
remaining EARs will be cancelled in exchange for the issuance of the
Reinvestment Options by New Holdings, based upon their maximum possible
valuation of $39.70 per EAR (or $517 for the total equity of RGC). For
purposes of such redemptions and cancellations, the value of outstanding
EARs held by Messrs. Allumbaugh, Marasca, Reed, Gray and Peets is expected
to equal approximately $8.0 million, $2.7 million, $2.1 million, $1.7
million and $1.5 million, respectively.
RALPHS' RETIREMENT PLANS
Retirement Plan. The Ralphs Grocery Company Retirement Plan (the
"Retirement Plan") is a defined benefit pension plan for salaried and hourly
nonunion employees with at least one year of credited service (1,000 hours).
Ralphs makes annual contributions to the Retirement Plan in such amounts as are
actuarially required to fund the benefits payable to participants in accordance
with the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Supplemental Executive Retirement Plan. To allow Ralphs' retirement program
to provide benefits based upon a participant's total compensation and without
regard to other ERISA or tax code pension plan limitations, eligible executive
employees of Ralphs participate in the Ralphs Grocery Company Supplemental
Executive Retirement Plan and, after December 31, 1993, the Ralphs Grocery
Company Retirement Supplement Plan (collectively, the "Supplemental Plan"). The
Supplemental Plan also modifies the benefit formula under the Retirement Plan in
other respects. Benefits provided under the Supplemental Plan were improved
effective April 9, 1994.
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<PAGE> 88
The following table sets forth the combined estimated annual benefits
payable in the form of a (single) life annuity under both the Retirement Plan
and the Supplemental Plan (unreduced by the cash surrender value of any life
insurance policies) to a participant in both plans who is retiring at a normal
retirement date of January 1, 1994 for the specified final average salaries and
years of credited service.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
------------------------------------------------------------
FINAL AVERAGE SALARY 15 20 25 30 35
- -------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 19,484 $ 25,978 $ 32,473 $ 38,967 $ 45,462
200,000 41,984 55,978 69,973 83,967 97,962
300,000 84,763 113,017 141,271 169,526 169,526
400,000 114,763 153,017 191,271 229,526 229,526
600,000 174,763 233,017 291,271 349,526 349,526
800,000 234,763 313,017 391,271 469,526 469,526
1,000,000 294,763 393,017 491,271 589,526 589,526
1,200,000 354,763 473,017 591,271 709,526 709,526
</TABLE>
Messrs. Allumbaugh, Marasca, Reed, Gray and Peets have completed 36, 37,
21, 31 and 17 years of credited service, respectively. Compensation covered by
the Supplemental Plan includes both salary and bonus. The calculation of
retirement benefits generally is based on average compensation for the highest
three years of the ten years preceding retirement. The benefits earned by a
participant under the Supplemental Plan are reduced by any benefits which the
participant has earned under the Retirement Plan and may be offset under certain
circumstances by the cash surrender value of life insurance policies maintained
by Ralphs pursuant to the split dollar life insurance agreements entered into by
Ralphs and the executive. Benefits are not subject to any deduction for social
security offset.
It is currently anticipated, although there can be no assurance, that
Ralphs and Food 4 Less salaried employees will participate in the Retirement
Plan and other existing Ralphs benefit plans following the Merger. These plans
are currently being evaluated to determine the feasibility of such
participation.
SUMMARY COMPENSATION TABLE -- FOOD 4 LESS
The following Summary Compensation Table sets forth information concerning
the compensation of the Chief Executive Officer and the other three most highly
compensated executive officers of Food 4 Less who are expected to serve as
executive officers of the Company, whose total annual salary and bonus exceeded
$100,000 for services rendered in all capacities to Food 4 Less and its
subsidiaries for Fiscal 1994.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(4)($)
--------------------------- ---- --------- -------- ------------------
<S> <C> <C> <C> <C>
Ronald W. Burkle, Chairman and................ 1994 -- -- --
Chief Executive Officer(1) 1993 -- -- --
1992 -- -- --
George G. Golleher,........................... 1994 500,000 500,000 3,937
President 1993 500,000 500,000 --
1992 500,000 235,000 5,300
Greg Mays, Executive Vice-President........... 1994 250,000 150,000 --
Finance/Administration and 1993 108,000 75,000 --
Chief Financial Officer(2) 1992 -- -- --
Joe Burkle,................................... 1994 196,000 50,000 --
Executive Vice President(3) 1993 156,000 -- --
1992 156,000 -- --
</TABLE>
- ---------------
(1) Ronald W. Burkle and Mark A. Resnik, Vice President and Secretary of Food 4
Less, provide services to Food 4 Less pursuant to a management agreement
between Yucaipa and Food 4 Less. See "Certain Relationships and Related
Transactions." Pursuant to this management agreement, Food 4 Less paid
Yucaipa and an affiliate of Yucaipa $2.4 million in the fiscal year ended
June 25, 1994 for the services of Messrs. Ronald Burkle and Resnik and other
Yucaipa personnel. Such payments to Yucaipa and its affiliate are not
reflected in the table set forth above.
(2) During fiscal 1993, Greg Mays became Executive Vice
President-Finance/Administration and Chief Financial Officer.
(3) Mr. Joe Burkle provides services to Food 4 Less pursuant to a consulting
agreement. See " -- Employment Agreements."
(4) The amounts shown in this column represent annual payments by Food 4 Less to
the Employee Profit Sharing and Retirement Program of Food 4 Less for the
benefit of Mr. Golleher.
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<PAGE> 89
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION -- FOOD 4 LESS
Food 4 Less does not have a board committee performing the functions of a
compensation committee. Ronald W. Burkle, Chief Executive Officer of Food 4
Less, and George G. Golleher, President of Food 4 Less, made decisions with
regard to Food 4 Less' executive officer compensation for Fiscal 1994.
FOOD 4 LESS STOCK PLAN
As of June 25, 1994, certain employees of Food 4 Less (the "Management
Stockholders") collectively owned approximately 4.5% of Holdings' outstanding
common stock which they acquired under the management stock plan of Food 4 Less.
Pursuant to this plan, the Board of Directors of Holdings from time to time has
offered common stock of Holdings for sale to selected employees at a price and
for consideration (which may include a promissory note) determined at the
discretion of the Board. Management Stockholders who have purchased shares are
party to a Management Stockholders Agreement (the "Stockholders Agreement") with
Holdings, a Stockholder Voting Agreement and Proxy (the "Voting Agreement"), and
such other documents as Holdings may require. The Stockholders Agreement
prohibits the transfer of any of the Management Stockholder's common stock for a
period of four years from the date of its original issuance (although such date
may, in the case of certain Management Stockholders who were shareholders of
BHC, relate back to the date that shares were issued to them by BHC) other than
transfers to certain family members and heirs or pursuant to a registration
statement. The Management Stockholder's shares may be purchased by Holdings if,
(a) prior to the fourth anniversary of their issuance, the Management
Stockholder's employment terminates for any reason, or (b) after such fourth
anniversary, the Management Stockholder wishes to sell his/her common stock to a
third party. The shares vest over a three or four-year period for purposes of
the repurchase price determination, which may result in a more favorable price
for vested stock than for unvested stock, but the shares do not vest in any
other sense. In the event of the death or permanent disability of the Management
Stockholder, each Management Stockholder has an irrevocable option for one year
to require Holdings to purchase all (or a portion) of his common stock in the
manner and on the terms set forth in the Stockholders Agreement; provided,
however, that the Management Stockholder may exercise such option in the event
of death or disability only to the extent that Holdings or Food 4 Less has
insurance, under which Holdings or Food 4 Less is the named beneficiary, with
respect to such event. Additionally, if shareholders holding at least fifty
percent (50%) of the issued and outstanding common stock of Holdings agree to
sell to a third party more than eighty percent (80%) of the shares of common
stock then held by them, then upon the demand of such selling stockholders, each
Management Stockholder must sell to such third party the same percentage of his
common stock as is proposed to be sold by the selling stockholders.
Under the Voting Agreement, Ronald W. Burkle, George G. Golleher and
Yucaipa Capital Advisors, Inc. have sole voting control over the shares of
common stock owned by the other Management Stockholders until December 31, 2001
(unless extended by such Management Stockholders). Messrs. Burkle and Golleher
also have rights which vary in certain respects from the rights of the other
Management Stockholders under the Stockholders Agreement. Among other
differences, Messrs. Burkle and Golleher have (i) rights to subscribe to
offerings of additional shares of the common stock of Holdings, (ii) "piggyback"
registration rights in the event of a public offering of common stock (if and to
the extent permitted by Holdings' underwriter) and (iii) "tag-along" rights to
participate in certain sales of common stock of Holdings. In addition, Mr.
Golleher has the right to be elected to the Board of Directors of Holdings so
long as he beneficially owns shares of common stock of Holdings.
The Stockholders Agreement terminates automatically, in the case of Messrs.
Burkle and Golleher, upon a change of control of Holdings or upon an
underwritten public offering of Holdings' common stock (subject to certain
exceptions). In the case of the other Management Stockholders, the Stockholders
Agreement terminates on the tenth anniversary of the original share issuance.
As of July 25, 1994, there was outstanding $0.6 million principal amount of
notes receivable from certain Management Stockholders, representing loans for
the purchase of Holdings' common stock. The notes are due over various periods,
bear interest at the bank "prime" lending rate, and are secured by such common
stock.
Pursuant to the Reincorporation Merger, New Holdings will succeed to the
rights and obligations of Holdings under the Food 4 Less stock plan. It is
expected that following the Merger, equity issuances to management will cease to
be made under the Food 4 Less stock plan and instead will be made under the New
Holdings option plan. See "-- New Management Stock Option Plan and Management
Investment."
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<PAGE> 90
PRINCIPAL STOCKHOLDERS
The information in the following table gives effect to (i) the Merger and
the Financing and (ii) the FFL Merger and the Reincorporation Merger. The
information in the following table assumes that the outstanding stock options of
RSI have been cancelled, that certain new stock options of New Holdings have
been granted to management and that certain warrants to purchase New Holdings
common stock have been issued to institutional investors who currently hold
warrants to purchase common stock of Holdings. Based on such assumption and
giving effect to the foregoing events, the following table sets forth the
ownership of common stock and Series A Preferred Stock and Series B Preferred
Stock of New Holdings by each person who to the knowledge of Food 4 Less will
own 5% or more of New Holdings' outstanding voting stock, by each person who
will be a director or named executive officer of the Company, and by all
executive officers and directors of the Company as a group. Share amounts and
percentage ownership information set forth for the Series A Preferred Stock and
Series B Preferred Stock are subject to change pending finalization of the
Financing.
<TABLE>
<CAPTION>
SERIES A SERIES B
COMMON PREFERRED PREFERRED
STOCK(1)(2) STOCK(1) STOCK(1)
------------------ ----------------- ----------------- PERCENTAGE PERCENTAGE
NUMBER NUMBER NUMBER OF TOTAL OF ALL
OF OF OF VOTING OUTSTANDING
BENEFICIAL OWNER(3) SHARES % SHARES % SHARES % POWER STOCK
------------------- ---------- ----- ---------- ---- --------- ---- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Yucaipa and affiliates:
The Yucaipa
Companies(4)(5)........ 14,547,447 57.7% -- -- -- -- 33.9% 31.6%
Ronald W. Burkle(4)(6)... 2,094,792 10.4% -- -- -- -- 5.5% 5.1%
George G. Golleher
(2)(4)(6).............. 461,971 2.3% -- -- -- -- 1.2% 1.1%
10000 Santa Monica
Boulevard, Los Angeles,
California 90067
---------- ----- ---- ----
Total................ 17,104,210 67.8% -- -- -- -- 39.9% 37.2%
Byron E. Allumbaugh(2)..... 600,000 3.0% -- -- -- -- 1.6% 1.5%
Alfred A. Marasca(2)....... 200,000 1.0% -- -- -- -- 0.5% 0.5%
Greg Mays(7)............... -- -- -- -- -- -- -- --
Apollo Advisors, L.P.(8)
2 Manhattanville Road
Purchase, NY 10577....... 1,282,454 6.3% 12,271,049 69.4% -- -- 35.8% 33.1%
BT Investment Partners,
Inc.(9)
130 Liberty Street
New York, NY 10006....... 508,737 2.5% 900,000 5.1% 3,100,000 100% 3.7% 11.0%
Other New Equity Investors
as a group(10)........... 4,500,000 25.5% -- -- 11.9% 11.0%
All directors and executive
officers as a group (15
persons)(2)(4)(5)(6)..... 17,904,210 71.0% -- -- -- -- 41.7% 38.9%
</TABLE>
- ---------------
(1) Gives effect to (i) a stock split to be effected with respect to the
outstanding common stock of Holdings prior to the Merger, (ii) the
conversion (in connection with the FFL Merger) of the outstanding common
stock of FFL into newly-issued common stock of Holdings in an amount which
will preserve the proportionate ownership interests of FFL's stockholders,
and of the equity holders of Holdings, in the combined Company, (iii) the
conversion (in connection with the Reincorporation Merger) of the
outstanding common stock, and warrants to acquire common stock, of Holdings
into New Holdings common stock and warrants, (iv) the issuance by New
Holdings of 17,671,049 shares of Series A Preferred Stock and 3,100,000
shares of Series B Preferred Stock in connection with the New Equity
Investment and the concurrent exchange of outstanding shares of common stock
acquired by the New Equity Investors from an existing stockholder, and (v)
the assumed exercise of the outstanding warrants to acquire New Holdings
common stock issued to the former Holdings warrantholders in connection with
the Reincorporation Merger.
(2) Gives effect to the exercise of Tier One Options to be issued to Byron E.
Allumbaugh, George G. Golleher and Alfred A. Marasca under a new management
stock option plan to be adopted prior to completion of the Merger, covering
600,000, 200,000 and 200,000 shares, respectively. Does not give effect to
the exercise of (a) Tier Two Options to purchase up to 1,000,000 shares of
New Holdings common stock to be issued at the discretion of the Board of
Directors to certain management employees of the Company, under such stock
option plan, concurrently with or following completion of the Merger or (b)
Reinvestment Options to purchase up to 1,000,000 shares of New Holdings
common stock to be issued to holders of EARs in exchange for the
cancellation of $10 million of the EAR payments which would otherwise be
payable upon consummation of the Merger. See "Executive Compensation -- New
Management Stock Option Plan and Management Investment."
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<PAGE> 91
(3) Except as otherwise indicated, each beneficial owner has the sole power to
vote, as applicable, and to dispose of all shares of Common Stock or Series
A Preferred Stock or Series B Preferred Stock owned by such beneficial
owner.
(4) Represents shares owned by The Yucaipa Companies, F4L Equity Partners,
L.P., FFL Partners, Yucaipa Capital Fund and Yucaipa/F4L Partners. These
entities are affiliated partnerships which are controlled, directly or
indirectly, by Ronald W. Burkle. Following completion of the Merger, the
foregoing entities will be parties to a stockholders agreement with other
New Holdings investors which will give to Yucaipa the right to elect a
majority of the directors of New Holdings. See "Description of Capital
Stock -- 1995 Stockholders Agreement."
(5) Share amount and percentages shown for Yucaipa include a warrant to
purchase 5,000,000 shares of New Holdings Common Stock, exercisable at
$31.25 per share, to be issued to Yucaipa concurrently with the completion
of the Merger and the Financing. See "Description of Capital
Stock -- Yucaipa Warrant."
(6) Certain management stockholders who own in the aggregate 903,244 shares of
Common Stock (pro forma for the events and assumptions described above)
have entered into a Stockholder Voting Agreement and Proxy pursuant to
which Ronald W. Burkle, George G. Golleher and Yucaipa Capital Advisors,
Inc. have sole voting control over the shares currently owned by such
management stockholders until December 31, 2002 (unless extended by such
stockholders). See "Executive Compensation -- Food 4 Less Stock Plan." The
903,244 shares have been included, solely for purposes of the above table,
in the share amounts shown for Mr. Burkle but not for Mr. Golleher. Neither
Messrs. Burkle and Golleher nor Yucaipa Capital Advisors, Inc. have the
power to dispose of, or any other form of investment power with respect to,
such shares. Messrs. Burkle and Golleher have sole voting and investment
power with respect to 1,191,548 and 461,971 shares of Common Stock they
respectively own (including, in the case of Mr. Golleher, 200,000 shares
issuable upon the exercise of Tier One Options).
(7) Mr. Mays owns 8,871 of the 903,244 shares of Common Stock which are subject
to the Stockholder Voting Agreement and Proxy described in note (6) above.
(8) Represents shares owned by one or more entities managed by or affiliated
with Apollo Advisors, L.P., together with certain affiliates or designees
of Apollo.
(9) Represents shares owned by BTIP, Bankers Trust New York Corporation and BT
Securities Corporation. Bankers Trust New York Corporation and BT
Securities Corporation are affiliated with BTIP. BTIP expressly disclaims
beneficial ownership of all shares owned by Bankers Trust New York
Corporation and BT Securities Corporation.
(10) Includes certain institutional investors, other than Apollo and BTIP, which
will purchase Series A Preferred Stock of New Holdings in connection with
the Financing. Pursuant to the 1995 Stockholders Agreement, certain
corporate actions by New Holdings and its subsidiaries will require the
consent of a majority of the directors whom the New Equity Investors,
including Apollo and BTIP, are entitled to elect to the New Holdings Board
of Directors. See "Description of Capital Stock -- 1995 Stockholders
Agreement." Such investors do not affirm the existence of a "group" within
the meaning of Rule 13d-5 under the Exchange Act, and expressly disclaim
beneficial ownership of all New Holdings shares except for those shares
held of record by each such investor or its nominees.
DESCRIPTION OF CAPITAL STOCK
Following is a description of the capital stock of the Company and New
Holdings to be authorized and outstanding upon completion of the Merger, the FFL
Merger and the Reincorporation Merger, including the terms of the New Equity
Investment to be made in New Holdings in connection with the closing of the
Merger.
THE COMPANY
Upon completion of the Merger, the authorized capital stock of the Company
will consist of 1,600,000 shares of common stock, $.01 par value per share, of
which 1,513,938 shares will be outstanding. All of such outstanding shares will
be owned by New Holdings. There will be no public trading market for the common
stock of the Company. The indentures that will govern outstanding debt
securities of the Company will contain certain restrictions on the payment of
cash dividends with respect to the Company's common stock. In addition, it is
expected that the New Credit Facility will also restrict such payments. Subject
to the limitations contained in the New Credit Facility and such indentures,
holders of common stock of the Company will be entitled to dividends when and as
declared by the Board of Directors from funds legally available therefor, and
upon liquidation, will be entitled to share ratably in any distribution to
holders of common stock. All holders of common stock will be entitled to one
vote per share on any matter coming before the stockholders for a vote.
NEW HOLDINGS
Following completion of the FFL Merger, the Reincorporation Merger, the
Merger and the New Equity Investment, (i) the authorized capital stock of New
Holdings will consist of 60,000,000 shares of common
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<PAGE> 92
stock, $.01 par value, 25,000,000 shares of Series A Preferred Stock, $.01 par
value, and 25,000,000 shares of Series B Preferred Stock, $.01 par value, (ii)
17,224,313 shares of common stock, 17,671,049 shares of Series A Preferred Stock
and 3,100,000 shares of Series B Preferred Stock will be outstanding and held by
approximately 100 holders of record, (iii) 2,004,638 shares of common stock will
be reserved for issuance upon the exercise of outstanding warrants held by
institutional investors, and (iv) 3,000,000 shares of common stock will be
reserved for issuance upon the exercise of the New Options. See "Executive
Compensation -- New Management Stock Option Plan and Management Investment." An
additional 5,000,000 shares of common stock will be reserved for issuance upon
the exercise of an outstanding warrant to be issued upon closing of the Merger
to an affiliate of Yucaipa. See "Yucaipa Warrant" below.
There is no public trading market for the capital stock of New Holdings,
nor will any such market exist following completion of the Merger. New Holdings
does not expect in the foreseeable future to pay any dividends on its capital
stock. Holders of common stock of New Holdings are entitled to dividends when
and as declared by the Board of Directors of New Holdings from funds legally
available therefor, and upon liquidation, are entitled to share ratably in any
distribution to holders of common stock. All holders of New Holdings common
stock are entitled to one vote per share on any matter coming before the
stockholders for a vote.
The Series A Preferred Stock initially will have an aggregate liquidation
preference of $176,710,490, or $10 per share, which will accrete at the rate of
7.5% per annum until the fifth anniversary of the date of issuance, and
thereafter will remain constant. The accretion of the liquidation preference
will not affect the conversion ratio of the Series A Preferred Stock or
otherwise have any effect on the economic interest of the preferred stockholders
other than in the event New Holdings is liquidated or dissolved. Aside from
priority in respect of liquidation, the holders of the Series A Preferred Stock
will have in all respects the same rights, including with respect to voting and
dividends, as the holders of New Holdings common stock have, and will vote
together with the common stock as a single class on all matters submitted for
stockholder vote. Each share of Series A Preferred Stock initially will be
convertible at the option of the holder thereof into one share of New Holdings
common stock. Upon consummation of an initial public offering of New Holdings
equity securities which meets certain criteria, each share of Series A Preferred
Stock will automatically convert into one share of common stock of New Holdings.
The Series B Preferred Stock initially will have an aggregate liquidation
preference of $31,000,000, or $10 per share, which will accrete at the rate of
7.5% per annum until the fifth anniversary of the date of issuance, and
thereafter will remain constant. The accretion of the liquidation preference
will not affect the conversion ratio of the Series B Preferred Stock or
otherwise have any effect on the economic interest of the preferred stockholders
other than in the event New Holdings is liquidated or dissolved. The holders of
Series B Preferred Stock generally will not be entitled to vote on any matters,
except as required by the Delaware General Corporation Law. Each share of Series
B Preferred Stock initially will be convertible at the option of the holder
thereof into one share of New Holdings common stock upon the occurrence of a
Change of Control (as defined in the New F4L Indentures). See "Description of
the New F4L Notes." Upon consummation of an initial public offering of New
Holdings equity securities which meets certain criteria, each share of Series B
Preferred Stock will automatically convert into one share of common stock of New
Holdings.
The initial aggregate liquidation preference of the Series A Preferred
Stock and the Series B Preferred Stock may vary from the amounts set forth above
depending on whether New Holdings determines to increase the number of shares it
may sell pursuant to the New Equity Investment, and depending on whether certain
existing equity holders of FFL and Holdings exercise preemptive rights to
participate in the New Equity Investment.
Upon any transfer or sale of shares of either Series A Preferred Stock or
Series B Preferred Stock, such shares may be converted (subject to certain
conditions) at the option of the holder into shares of the other series. Each
share of Series A Preferred Stock and Series B Preferred Stock will have
identical rights with respect to dividends and distributions, provided that if
dividends are declared which are payable in voting securities of New Holdings,
New Holdings will make available to each holder of Series A Preferred Stock and
Series B Preferred Stock, at such holder's request, dividends consisting of
non-voting securities of New
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<PAGE> 93
Holdings which are otherwise identical to the voting securities and which are
convertible into or exchangeable for such voting securities on the same terms as
those by which the Series B Preferred Stock is convertible into New Holdings
common stock.
NEW EQUITY INVESTMENT
Concurrently with the issuance of the New Notes and the closing of the
Merger, certain existing stockholders of New Holdings, including affiliates of
George Soros, will sell 5,771,049 outstanding shares of common stock of New
Holdings to CLH, which in turn will sell such shares to the New Equity Investors
for an aggregate purchase price of $57.7 million. New Holdings will then issue
17,671,049 shares of Series A Preferred Stock and 3,100,000 shares of Series B
Preferred Stock in a private placement to a group of investors led by Apollo and
including affiliates of BT Securities and CS First Boston and other
institutional investors (the "New Equity Investors") for an aggregate
consideration of $150 million plus the contribution to New Holdings of the
shares of common stock purchased from CLH in the secondary sale transaction. The
shares of Series A Preferred Stock and Series B Preferred Stock acquired by the
New Equity Investors will represent approximately 43% in the aggregate of the
fully diluted common equity of New Holdings. See "Principal Stockholders."
The $150 million cash proceeds from the issuance of Series A Preferred
Stock and Series B Preferred Stock will be applied by New Holdings as set forth
under "The Merger and the Financing."
Food 4 Less has accepted a commitment letter (the "Equity Commitment") from
Apollo pursuant to which Apollo has agreed (subject to certain conditions) to
purchase up to $150 million of the Series A Preferred Stock to be offered by New
Holdings as part of the New Equity Investment. In consideration of its Equity
Commitment, Apollo will receive a fee of $5 million from the Company upon the
closing of the Merger. The Company anticipates that the remainder of the Series
A Preferred Stock and Series B Preferred Stock so offered will be purchased by
affiliates of lenders and other financial institutions which have provided
financing to the Company, including BTIP, which is an affiliate of Bankers
Trust, by affiliates of CS First Boston and by certain other investors. The
amounts of New Holdings stock expected to be held by Apollo, affiliates of
Bankers Trust and all other holders of 5% or more of New Holdings' outstanding
stock following completion of the Merger and the Financing are set forth above
under "Principal Stockholders."
1995 STOCKHOLDERS AGREEMENT
Under the terms of the 1995 Stockholders Agreement (which is expected to be
entered into by New Holdings, Yucaipa and its affiliates, the New Equity
Investors and other stockholders), the New Equity Investors will be entitled to
nominate three directors to the Board of Directors of each of New Holdings and
the Company (the "Series A Directors"), of which two directors will be nominees
of Apollo and one director will be a nominee of BTIP. The 1995 Stockholders
Agreement will give to Yucaipa the right to nominate six directors of New
Holdings and seven directors of the Company, and the boards of New Holdings and
the Company will consist of a total of nine and ten directors, respectively. The
numbers of directors which may be nominated by the foregoing stockholders will
be reduced if such stockholders cease to own certain specified percentages of
their initial holdings. Unless and until New Holdings has effected an initial
public offering of its equity securities meeting certain criteria, New Holdings
and its subsidiaries may not take certain actions without the approval of a
majority of the Series A Directors, including but not limited to certain
mergers, sale transactions, transactions with affiliates, issuances of capital
stock and payments of dividends on or repurchases of capital stock. In addition,
the New Equity Investors will have certain "demand" and "piggyback" registration
rights with respect to their Series A Preferred Stock and Series B Preferred
Stock, as well as the right to participate, on a pro rata basis, in sales by
Yucaipa of the New Holdings stock it holds. In certain circumstances, Yucaipa
will have the right to compel the participation of the New Equity Investors and
other stockholders in sales of all the outstanding shares of New Holdings stock.
The Company intends to seek the agreement of the current stockholders of
FFL and warrantholders of Holdings to become party to the 1995 Stockholders
Agreement, which would grant to such holders certain rights thereunder in
replacement of two existing stockholders agreements among FFL and its
stockholders
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<PAGE> 94
entered into in 1987 and 1991, respectively, and an agreement among Holdings and
its warrantholders executed in 1992.
YUCAIPA WARRANT
Upon closing of the Merger, New Holdings has agreed to issue to Yucaipa a
warrant to purchase up to 5,000,000 shares of New Holdings common stock. The
initial exercise price of such warrant will be $31.25 per share. Such warrant
will be exercisable on a cashless basis at the election of Yucaipa in the event
New Holdings completes an initial public offering of equity securities meeting
certain criteria, or in connection with certain sale transactions involving New
Holdings, in either case effected on or prior to the fifth anniversary of the
Closing Date. The expiration date of such warrant, and the deadline for such
triggering transactions, may be extended from the fifth to the seventh
anniversary of the Closing Date if New Holdings meets certain financial
performance goals prior to such fifth anniversary. The cashless exercise
provisions of such warrant allow the holder to exercise it without the payment
of cash consideration, provided that New Holdings will withhold from the shares
otherwise issuable upon exercise thereof a number of shares having a fair market
value as of the exercise date equal to the exercise price.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RALPHS
In connection with the acquisition of a majority of RSI's common stock in
February 1992, EJDC agreed to guarantee RGC's obligations as a self-insurer of
worker's compensation liabilities in the State of California (the "EJDC
Guaranty"). In consideration of the EJDC Guaranty, RGC unconditionally agreed to
reimburse EJDC for any payments made under the EJDC Guaranty and for the cost of
insurance up to $200,000 to cover liabilities incurred pursuant to the EJDC
Guaranty. Further, RGC agreed to pay EJDC a guarantee fee of $33,500 for each
month the EJDC Guaranty was in effect ($402,000 was paid in Fiscal 1993).
Concurrently with the completion of the Merger, the EJDC Guaranty will be
terminated, and RGC will cease to pay any guarantee fee to EJDC or to reimburse
it for the cost of insurance. However, RGC will continue to be obligated to
reimburse EJDC for any payments which EJDC could in the future be required to
make under the EJDC Guaranty in respect of prior claims. Moreover, FFL has
undertaken for the benefit of EJDC to maintain, until the fifth anniversary of
the closing of the Merger, bank letters of credit, insurance or other security
for the workers' compensation claims for which EJDC could have liability under
the EJDC Guaranty.
In connection with the bankruptcy reorganization of Federated and its
affiliates, Federated agreed to pay certain potential tax liabilities relating
to RGC as a member of the affiliated group of companies comprising Federated and
its subsidiaries. In consideration thereof, RSI and RGC agreed to pay Federated
a total of $10 million, payable $1 million on each of February 3, 1992, 1993,
1994, 1995 and 1996 and $5 million on February 3, 1997. The five $1 million
installments are to be paid by RGC and the $5 million payment is the joint
obligation of RSI and RGC. In the event Federated is required to pay certain tax
liabilities, RSI and RGC have agreed to reimburse Federated up to an additional
$10 million, subject to certain adjustments. This additional obligation, if any,
is the joint and several obligation of RSI and RGC. Pursuant to the terms of the
Merger Agreement, the $5 million payment and the potential $10 million payment
will be paid in cash. See Note 1 of Notes to Ralphs Consolidated Financial
Statements.
In addition, EJDC and the other current holders of Common Stock of RSI are
parties to an agreement providing for various aspects of corporate governance
(the "Ralphs Registration Rights and Governance Agreement") relating to Ralphs.
Pursuant to the Ralphs Registration Rights and Governance Agreement, RGC is
obligated to provide RSI, by dividend, pursuant to a services agreement or
otherwise, with funds sufficient to enable RSI to perform its duties as the
holding company of RGC's stock and to perform its obligations set forth in the
Ralphs Registration Rights and Governance Agreement. The Ralphs Registration
Rights and Governance Agreement will be cancelled concurrently with the closing
of the Merger.
FOOD 4 LESS
Yucaipa provides certain management and financial services to Food 4 Less
and its subsidiaries pursuant to a consulting agreement. The services of Ronald
Burkle, Mark Resnik and Patrick Graham, acting in their
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capacities as directors and officers, and the services of other Yucaipa
personnel are provided to Food 4 Less pursuant to this agreement. All of such
individuals are partners of Yucaipa. Yucaipa's consulting agreement provides for
annual management fees currently equal to $2 million plus an additional amount
based on Food 4 Less' performance. Upon completion of the Merger, the consulting
agreement will be amended to provide for an annual management fee payable by the
Company to Yucaipa in the amount of $4 million, with no additional amounts
payable based on performance. In addition, the Company may retain Yucaipa in an
advisory capacity in connection with certain acquisitions or sale transactions,
in which case the Company will pay Yucaipa an advisory fee. The agreement has a
five-year term, which is automatically renewed on January 1 of each year for a
five-year term unless ninety days' notice is given by either party. The
agreement may be terminated at any time by the Company, provided that Yucaipa
will be entitled to full monthly payments under the agreement for the remaining
term thereof, unless the Company terminates for cause pursuant to the terms of
the agreement. Yucaipa may terminate the agreement if the Company fails to make
a payment due thereunder, or if there occurs a change of control (as defined in
the agreement) of the Company, and upon any such termination Yucaipa will be
entitled to full monthly payments for the remainder of the five-year period
commencing on the closing of the Merger. Pursuant to the agreement, Food 4 Less
paid Yucaipa a total of $2.4 million, $3.8 million and $2 million in management
and advisory fees for the fiscal years ended June 25, 1994, June 26, 1993 and
June 27, 1992 respectively.
The Yucaipa consulting agreement also provides that upon closing of the
Merger, Yucaipa will be entitled to receive an advisory fee from the Company in
the amount of $24 million, plus reimbursement of expenses in connection with the
Merger and the related transactions. At the option of Yucaipa, up to $5 million
of such fee may be paid in the form of common stock of New Holdings. See
"Description of Capital Stock." In consideration of its commitment to purchase
Series A Preferred Stock of New Holdings, Apollo will receive a fee of $5
million from the Company upon the closing of the Merger. See "Description of
Capital Stock--New Equity Investment." In addition, upon closing of the Merger,
Yucaipa anticipates that it will pay a fee of approximately $3.5 million to
Soros Fund Management in consideration of advisory services which Soros Fund
Management has rendered since 1991. The Company has no responsibility for such
payment by Yucaipa.
In connection with the execution of the Merger Agreement, Yucaipa entered
into the Put Agreement with EJDC, pursuant to which EJDC will be entitled to put
up to $10 million aggregate principal amount of Seller Debentures to Yucaipa on
the Closing Date. The Yucaipa consulting agreement will provide that the Company
will reimburse Yucaipa for any loss and expenses incurred by Yucaipa upon the
resale of such Seller Debentures to any unaffiliated third party. Yucaipa has
advised the Company that it intends to resell the Seller Debentures on the
Closing Date or as soon thereafter as practicable. The agreement will also
require Yucaipa to contribute any profit realized upon the resale of such Seller
Debentures within such period to the capital of the Company.
FFL files a consolidated federal income tax return, under which the federal
income tax liability of FFL and its subsidiaries (which since June 23, 1989
includes Food 4 Less) is determined on a consolidated basis. FFL has entered
into a federal income tax sharing agreement with Food 4 Less and certain of its
subsidiaries (the "Tax Sharing Agreement"). The Tax Sharing Agreement provides
that in any year in which Food 4 Less is included in any consolidated tax
liability of FFL and has taxable income, Food 4 Less will pay to FFL the amount
of the tax liability that Food 4 Less would have had on such due date if it had
been filing a separate return. Conversely, if Food 4 Less generates losses or
credits which actually reduce the consolidated tax liability of FFL and its
other subsidiaries, FFL will credit to Food 4 Less the amount of such reduction
in the consolidated tax liability. In the event any state and local income taxes
are determinable on a combined or consolidated basis, the Tax Sharing Agreement
provides for a similar allocation between FFL and Food 4 Less of such state and
local taxes. By operation of the FFL Merger and the Reincorporation Merger, New
Holdings will succeed to the rights and obligations of FFL under the Tax Sharing
Agreement.
Management believes that the terms of the transactions described above are
or were fair to Food 4 Less and are or were on terms at least as favorable to
Food 4 Less as those which could be obtained from unaffiliated parties (assuming
that such transactions could be effected with such parties).
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THE EXCHANGE OFFERS AND SOLICITATION
BACKGROUND AND PURPOSES OF THE EXCHANGE OFFERS AND SOLICITATION
The Exchange Offers and the Solicitation, together with the financing and
solicitation transactions described under "The Merger and the Financing," are
part of the transactions required to consummate the Merger of Food 4 Less with
and into RSI. Immediately following the RSI Merger, RGC, a wholly-owned
subsidiary of RSI, will merge into RSI and RSI will change its name to Ralphs
Grocery Company.
As a result of the Merger, the New F4L Notes, any Old F4L Notes not
tendered for exchange pursuant to the Exchange Offers, the New RGC Notes, any
Old RGC Notes not tendered pursuant to the RGC Exchange Offer, and the
indebtedness incurred pursuant to the New Credit Facility will be the
obligations of the Company. In connection with the consummation of the Merger,
Food 4 Less is making the Exchange Offers and the RGC Exchange Offer to (i)
extend the maturities of the existing long-term debt securities of Food 4 Less
and RGC by exchanging such securities for new longer-term securities and (ii)
establish uniform covenants in the New F4L Notes and the New RGC Notes in order
to simplify the capital structure of the Company. The Exchange Offers afford Old
F4L Noteholders an opportunity to elect to participate in the long-term
capitalization of the Company.
Food 4 Less is also seeking Consents to the Proposed Amendments in the
Solicitation. The primary purpose of the Proposed Amendments is to permit the
consummation of the Merger and to eliminate substantially all of the restrictive
covenants in the Old F4L Indentures. See "The Proposed Amendments." If adopted
by the holders of a majority in aggregate principal amount of each of the
outstanding Old F4L Senior Notes and the outstanding Old F4L Senior Subordinated
Notes, the Proposed Amendments will become effective immediately prior to the
consummation of the Merger, upon Food 4 Less' acceptance of properly tendered
Old F4L Notes for exchange pursuant to the Exchange Offers.
TERMS OF THE EXCHANGE OFFERS
Upon the terms and subject to the conditions set forth herein and in the
accompanying applicable Letter of Transmittal, Food 4 Less is hereby offering
(A) to holders of the Old F4L Senior Notes to exchange for each $1,000 principal
amount of Old F4L Senior Notes exchanged, $1,000 principal amount of New F4L
Senior Notes plus $5.00 in cash, and (B) to holders of the Old F4L Senior
Subordinated Notes to exchange for each $1,000 principal amount of Old F4L
Senior Subordinated Notes exchanged, $1,000 principal amount of New F4L Senior
Subordinated Notes plus $20.00 in cash, in each case plus accrued and unpaid
interest to the date of exchange.
The offers by Food 4 Less to exchange Old F4L Senior Notes and Old F4L
Senior Subordinated Notes are referred to herein as the "F4L Senior Note
Exchange Offer" and the "F4L Senior Subordinated Note Exchange Offer,"
respectively, and are referred to herein individually as the applicable
"Exchange Offer" and collectively as the "Exchange Offers." Each Exchange Offer
constitutes a separate exchange offer by Food 4 Less. Food 4 Less reserves the
right to extend, delay, accept, amend or terminate either or both of the
Exchange Offers, and any extension, delay, acceptance, amendment, termination or
expiration of an Exchange Offer shall apply only to such Exchange Offer to which
such extension, delay, acceptance, amendment, termination or expiration relates.
Satisfaction of the conditions to the Exchange Offer shall be determined
separately with respect to each Exchange Offer. Consummation of each Exchange
Offer is subject to consummation of the other Exchange Offer. All references
herein to the Exchange Offers shall be deemed to include the Solicitation.
Noteholders who wish to tender their Old F4L Notes pursuant to the
applicable Exchange Offer and consent to the Proposed Amendments must complete
the Letter of Transmittal and the table therein entitled "Description of Old F4L
Notes." Nominees or other record holders of Old F4L Notes that hold Old F4L
Notes for more than one beneficial owner are entitled to make multiple elections
pursuant to the Letter of Transmittal that reflect the election of each of the
beneficial owners for whom they are exchanging Old F4L Notes. In order to make
such multiple elections, nominees or other record holders should properly
complete the table under the box entitled "Election on Behalf of Multiple
Beneficial Owners." See "-- Procedures for Tendering and Consenting."
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Holders of Old F4L Notes who desire to tender Old F4L Notes in an Exchange
Offer will be required to consent to the Proposed Amendments. See "-- The
Consent Solicitation," "-- Conditions," "The Proposed Amendments," "Comparison
of Old F4L Senior Notes and New F4L Senior Notes" set forth in Appendix A hereto
and "Comparison of Old F4L Senior Subordinated Notes and New F4L Senior
Subordinated Notes" set forth in Appendix B hereto. THE TENDER OF OLD F4L NOTES
BY THE HOLDER THEREOF PURSUANT TO THE APPLICABLE EXCHANGE OFFER WILL CONSTITUTE
THE CONSENT OF SUCH TENDERING HOLDER TO THE PROPOSED AMENDMENTS WITH RESPECT TO
SUCH OLD F4L NOTES.
Old F4L Notes may be tendered and will be accepted for exchange only in
denominations of $1,000 principal amount and integral multiples thereof. Holders
must tender all of their Old F4L Senior Notes or Old F4L Senior Subordinated
Notes, as the case may be, if any are tendered pursuant to the applicable
Exchange Offer. Food 4 Less shall be deemed to have accepted validly tendered
Old F4L Notes in the Exchange Offers and validly delivered Consents in the
Solicitation when, as and if Food 4 Less has given oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering holders of Old F4L Notes for the purposes of receiving the New F4L
Notes and the Exchange Payment from the Company. In the event Food 4 Less
increases the consideration offered for the Old F4L Notes in the Exchange Offer,
such increased consideration will be paid with regard to all Old F4L Notes
accepted in the Exchange Offer, including those accepted before the announcement
of such increase. The New F4L Notes will be delivered (and payments in cash of
accrued and unpaid interest thereon and the accompanying Exchange Payment will
be made) in exchange for Old F4L Notes accepted in the Exchange Offers promptly
after acceptance on the applicable Expiration Date.
As of January 1, 1995, (i) $175 million aggregate principal amount of the
Old F4L Senior Notes was outstanding and (ii) $145 million aggregate principal
amount of the Old F4L Senior Subordinated Notes was outstanding.
Concurrently with the Exchange Offers and the Solicitation, Food 4 Less is
offering up to $400 million of New F4L Senior Notes pursuant to the Public
Offering. The Public Offering is expected to price five Business Days preceding
the Expiration Date. CONSUMMATION OF EACH EXCHANGE OFFER IS CONDITIONED ON,
AMONG OTHER THINGS, THE CONSUMMATION OF THE PUBLIC OFFERING. There can be no
assurance that such condition or the other conditions to the Exchange Offers
will be satisfied. See "-- Conditions." As a result of the Merger, the New F4L
Notes will become the obligations of the Company.
Although it has no obligation to do so, the Company reserves the right in
the future to seek to acquire Old F4L Notes not tendered in the Exchange Offers
by means of open market purchases, privately negotiated acquisitions, subsequent
exchange or tender offers, redemptions or otherwise, at prices or on terms which
may be higher or lower or more or less favorable than those in the Exchange
Offers. The terms or any such purchases or offers could differ from the terms of
the Exchange Offers.
Holders of Old F4L Notes who tender in the Exchange Offers will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Consent and Letter of Transmittal, transfer taxes with respect to the
exchange of Old F4L Notes pursuant to the Exchange Offers. Food 4 Less will pay
all charges and expenses, other than certain applicable taxes, in connection
with the Exchange Offers. See "-- Fees and Expenses."
No appraisal rights are available to Old F4L Noteholders in connection with
the Exchange Offers.
THE CONSENT SOLICITATION
Concurrently with the Exchange Offers, Food 4 Less is soliciting Consents
in the Solicitation from holders of each of the Old F4L Senior Notes and the Old
F4L Senior Subordinated Notes with respect to the Proposed Amendments to the Old
F4L Indentures. The Exchange Offers are subject to, among other things, the
condition that the Requisite Consents (i.e., Consents of holders representing at
least a majority in aggregate principal amount of each of the outstanding Old
F4L Senior Notes and Old F4L Senior
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Subordinated Notes held by persons other than Food 4 Less and its affiliates)
shall have been received and not revoked on or prior to the Expiration Date.
HOLDERS OF OLD F4L NOTES WHO DESIRE TO ACCEPT THE APPLICABLE EXCHANGE OFFER MUST
CONSENT TO THE PROPOSED AMENDMENTS. The Proposed Amendments will only become
operative upon consummation of the Exchange Offers. The primary purpose of the
Proposed Amendments is to permit the Merger and to eliminate substantially all
of the restrictive covenants in the Old F4L Indentures.
The Proposed Amendments for each of the Old F4L Senior Notes and the Old
F4L Senior Subordinated Notes require the consent of holders of at least a
majority in aggregate principal amount of each of the Old F4L Senior Notes and
the Old F4L Senior Subordinated Notes, in each case not owned by Food 4 Less or
its affiliates. In addition, in order for any of the Proposed Amendments to
become effective, a Supplemental Indenture amending each of the Old F4L Senior
Note Indenture and the Old F4L Senior Subordinated Note Indenture must be
executed by the Company and the applicable Old Trustee. See "The Proposed
Amendments," "Comparison of Old F4L Senior Notes and New F4L Senior Notes" set
forth in Appendix A hereto and "Comparison of Old F4L Senior Subordinated Notes
and New F4L Senior Subordinated Notes" set forth in Appendix B hereto.
Upon receipt of the Requisite Consents from holders of Old F4L Senior Notes
or holders of Old F4L Senior Subordinated Notes, Food 4 Less will certify in
writing to the Old F4L Senior Note Trustee or the Old F4L Senior Subordinated
Note Trustee (together, the "Old Trustees"), as the case may be, that the
Requisite Consents to the adoption of the Proposed Amendments have been received
with respect to such issue of Old F4L Notes. Upon receipt of such certification,
all Consents to the Proposed Amendments theretofore received with respect to
such issue of Old F4L Notes will be irrevocable. Except as set forth under
"-- Guaranteed Delivery Procedure," Consents from tendering holders of Old F4L
Notes will not be counted towards determining whether Food 4 Less has received
the Requisite Consents unless Food 4 Less is prepared to accept the tender of
Old F4L Notes to which such Consents relate. In addition, Consents with respect
to any Old F4L Notes will not be counted if the tender of such holders' Old F4L
Notes is defective, unless Food 4 Less waives such defect. After receipt by the
Old F4L Senior Note Trustee or the Old F4L Senior Subordinated Note Trustee of,
among other things, certification by Food 4 Less that the Requisite Consents
with respect to the Old F4L Senior Notes or the Old F4L Senior Subordinated
Notes, as the case may be, have been received, Food 4 Less and the applicable
Old Trustee will execute a supplemental indenture to evidence the adoption of
the Proposed Amendments relating to the applicable indenture under which such
Old F4L Notes were issued (each a "Supplemental Indenture"). Upon the acceptance
by Food 4 Less of the Requisite Consents from holders of Old F4L Senior Notes or
Old F4L Senior Subordinated Notes and the execution of the applicable
Supplemental Indenture, such Supplemental Indenture will immediately become
effective. Although the Proposed Amendments relating to an issue of Old F4L
Notes will become effective upon certification that the Requisite Consents from
holders of the applicable Old F4L Notes have been received, such Proposed
Amendments will not be operative until Food 4 Less has accepted for exchange all
Old F4L Notes validly tendered and not withdrawn. The Company will not be
obligated to issue the New F4L Senior Notes or the New F4L Senior Subordinated
Notes pursuant to the Exchange Offers unless, among other things, the Requisite
Consents to the adoption of the Proposed Amendments have been received from both
the Old F4L Senior Noteholders and the Old F4L Senior Subordinated Noteholders.
See "-- Conditions."
If the Proposed Amendments become effective, (i) the Exchange Agent, as
soon as practicable, will transmit a copy of the applicable Supplemental
Indenture to all registered holders of Old F4L Notes which remain outstanding,
and (ii) non-tendering holders will hold their Old F4L Notes under the
applicable Old F4L Indenture as amended by the Proposed Amendments, whether or
not that holder consented to the Proposed Amendments. Consents given by holders
of Old F4L Notes tendered but rejected by Food 4 Less pursuant to an Exchange
Offer will not be counted for the purpose of determining whether the Requisite
Consents have been obtained.
Only a registered holder of Old F4L Notes (the "Registered Holder") can
effectively deliver a Consent to the Proposed Amendments. Pursuant to the terms
of the Old F4L Indentures, subsequent transfers of Old F4L Notes on the
applicable security register for such Old F4L Notes will not have the effect of
revoking any
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Consent theretofore given by the Registered Holder of such Old F4L Notes, and
such Consents will remain valid unless revoked by the transferee holder in
accordance with the procedures described under the heading "-- Withdrawal of
Tenders and Revocation of Consents."
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
Each Exchange Offer and the Solicitation will expire at 12:00 Midnight, New
York City time, on , 1995 (the "Expiration Date"), unless extended by
Food 4 Less. Food 4 Less reserves the right to extend either Exchange Offer or
the Solicitation, at its discretion, in which event the term "Expiration Date"
shall mean the latest time and date at which such Exchange Offer or the
Solicitation, as the case may be, as so extended by Food 4 Less, shall expire.
Food 4 Less expects to extend the Expiration Date to a date that is five
Business Days following the pricing of the Public Offering. Food 4 Less shall
notify the Exchange Agent of any extension by oral or written notice and shall
make a public announcement thereof, each prior to 9:00 a.m., New York City time,
on the next Business Day after the previously scheduled Expiration Date. Such
announcement may state that Food 4 Less is extending such Exchange Offer or the
Solicitation, as the case may be, for a specified period or on a daily basis.
Food 4 Less also expressly reserves the right, at any time or from time to
time, to extend the period of time during which an Exchange Offer or the
Solicitation, as the case may be, is open. There can be no assurance that Food 4
Less will exercise its right to extend either Exchange Offer or the
Solicitation. During any extension of an Exchange Offer all Old F4L Notes
previously tendered pursuant thereto and not withdrawn will remain subject to
such Exchange Offer and may be accepted for exchange by Food 4 Less at the
expiration of such Exchange Offer subject to the right, if any, of a tendering
holder to withdraw its Old F4L Notes. See "-- Withdrawal of Tenders and
Revocation of Consents."
Each of the Company and Food 4 Less, as the case may be, also expressly
reserve the right, subject to applicable law and the terms of the Exchange
Offers and to the extent not inconsistent with the terms of the Merger, the
Other Debt Financing Transactions, the Bank Financing or the New Equity
Investment, (i) to delay the acceptance for exchange of any Old F4L Notes or,
regardless of whether such Old F4L Notes were theretofore accepted for exchange,
to delay the exchange of any Old F4L Notes pursuant to an Exchange Offer and to
terminate such Exchange Offer and not accept for exchange any Old F4L Notes not
theretofore accepted for exchange, upon the failure of any of the conditions to
such Exchange Offer specified herein to be satisfied, by giving oral or written
notice of such delay or termination to the Exchange Agent and (ii) at any time,
or from time to time, to amend either of the Exchange Offers in any respect.
Except as otherwise provided herein, withdrawal rights with respect to Old F4L
Notes tendered pursuant to an Exchange Offer will not be extended or reinstated
as a result of an extension or amendment of such Exchange Offer, as applicable.
See "-- Withdrawal of Tenders and Revocation of Consents." The reservation by
Food 4 Less of the right to delay acceptance for exchange of Old F4L Notes is
subject to the provisions of Rule 14e-1(c) under the Exchange Act, which
requires that Food 4 Less (or the Company as successor by Merger) pay the
consideration offered or return the Old F4L Notes deposited by or on behalf of
holders thereof promptly after the termination or withdrawal of an Exchange
Offer.
Any extension, delay, termination or amendment of either Exchange Offer
will be followed as promptly as practicable by a public announcement thereof.
Without limiting the manner in which Food 4 Less may choose to make a public
announcement of any extension, delay, termination or amendment of an Exchange
Offer, Food 4 Less shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by issuing a release to the
Dow Jones News Service, except in the case of an announcement of an extension of
an Exchange Offer, in which case Food 4 Less shall have no obligation to
publish, advertise or otherwise communicate such announcement other than by
issuing a notice of such extension by press release or other public
announcement, which notice shall be issued no later than 9:00 a.m., New York
City time, on the next Business Day after the previously scheduled Expiration
Date.
If Food 4 Less shall decide to decrease the amount of Old F4L Notes being
sought in either Exchange Offer or to increase or decrease the consideration
offered to holders of Old F4L Notes, and if, at the time that notice of such
increase or decrease is first published, sent or given to holders of Old F4L
Notes in the manner
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specified above, such Exchange Offer is scheduled to expire at any time earlier
than the expiration of a period ending on the tenth Business Day from and
including the date that such notice is first so published, sent or given, then
such Exchange Offer will be extended for such purposes until the expiration of
such period of ten Business Days. As used in this Prospectus and Solicitation
Statement, "Business Day" has the meaning set forth in Rule 14d-1 (and
applicable to Regulation 14E) under the Exchange Act.
If Food 4 Less makes a material change in the terms of either Exchange
Offer or the information concerning either Exchange Offer, or waives any
condition to either Exchange Offer that results in a material change to the
circumstances of such Exchange Offer, then Food 4 Less will disseminate
additional exchange offer or tender offer materials to the extent required under
the Exchange Act and will extend such Exchange Offer to the extent required in
order to permit holders of Old F4L Notes adequate time to consider such
materials. The minimum period during which a tender offer must remain open
following material changes in the terms of the offer or information concerning
the offer, other than a change in price or percentage of securities sought, will
depend upon the specific facts and circumstances, including the relative
materiality of the terms or information.
CONDITIONS
Food 4 Less will not be required to accept any Old F4L Notes for exchange,
and may terminate or amend either or both of the Exchange Offers, as provided
herein, before the acceptance of any Old F4L Notes, if either of the Exchange
Offers has not been consummated. In addition, notwithstanding any other
provision of the Exchange Offers or the Solicitation, Food 4 Less shall not be
required to accept any Old F4L Notes for exchange or any Consents, and may
terminate, extend or amend either or both Exchange Offers or the Solicitation
and may postpone, subject to Rule 14e-1 under the Exchange Act, the acceptance
of Old F4L Notes so tendered and Consents so delivered, whether or not any other
Old F4L Notes or Consents have theretofore been accepted for exchange pursuant
to the applicable Exchange Offer, if, on or prior to the Expiration Date, any of
the following conditions exist:
(i) the Minimum Tender shall not have been validly tendered for
exchange (or shall have been withdrawn);
(ii) the Requisite Consents shall not have been validly delivered (or
shall have been revoked);
(iii) all conditions precedent to the Merger shall not have been
satisfied or waived, in Food 4 Less' sole discretion;
(iv) any of the Other Debt Financing Transactions (including the
Public Offering) shall not have been consummated;
(v) either the Bank Financing or the New Equity Investment shall not
have been consummated;
(vi) either of the Supplemental Indentures containing the Proposed
Amendments shall not have been executed;
(vii) there shall have been any action taken or threatened, or any
statute, rule, regulation, judgment, order, stay, decree or injunction
proposed, sought, promulgated, enacted, entered, enforced or deemed
applicable to either Exchange Offer by or before any local, state, federal
or foreign government or governmental regulatory or administrative agency
or authority or by any court or tribunal, domestic or foreign, which (a)
challenges or seeks to restrain or prohibit the making or consummation of
either Exchange Offer or the exchange of Old F4L Notes pursuant to the
Exchange Offers, (b) in the sole judgment of Food 4 Less, might directly or
indirectly prohibit, prevent, restrict or delay consummation of either
Exchange Offer or otherwise relates in any manner to either Exchange Offer,
(c) seeks to make illegal the acceptance of Old F4L Notes for exchange
pursuant to either Exchange Offer, (d) makes the
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Solicitation illegal, (e) might, in the sole judgment of Food 4 Less,
adversely affect the financing of either Exchange Offer, the Merger, the
Other Debt Financing Transactions, the Bank Financing or the New Equity
Investment or the transactions contemplated thereby, or (f) in the sole
judgment of Food 4 Less, could materially adversely affect the business,
condition (financial or otherwise), income, operations, properties, assets,
liabilities or prospects of Food 4 Less (or the Company, after giving
effect to the Merger) and its subsidiaries, taken as a whole, or materially
impair the contemplated benefits of the Exchange Offers and the
Solicitation to Food 4 Less (or the Company, after giving effect to the
Merger);
(viii) there shall have occurred or be likely to occur any event
affecting the business or financial affairs of Food 4 Less (or the Company,
after giving effect to the Merger) that, in the sole judgment of Food 4
Less, (a) would or might prohibit, prevent, restrict or delay consummation
of either Exchange Offer, or (b) will, or is reasonably likely to,
materially impair the contemplated benefits to Food 4 Less (or the Company,
after giving effect to the Merger) of the Exchange Offers and the
Solicitation or otherwise result in the consummation of either Exchange
Offer not being in the best interests of Food 4 Less or (c) might be
material to holders of Old F4L Notes in deciding whether to accept either
Exchange Offer or the Solicitation;
(ix) there shall have occurred: (a) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange
or in the over-the-counter market (whether or not mandatory); (b) any
significant adverse change in the price of either of the Old F4L Senior
Notes or the Old F4L Senior Subordinated Notes; (c) a material impairment
in the trading market for debt securities generally; (d) a declaration of a
banking moratorium or any suspension of payments in respect of banks by
federal or state authorities in the United States (whether or not
mandatory); (e) a declaration of a national emergency or commencement of a
war, armed hostilities or other national or international crisis directly
or indirectly involving the United States; (f) any limitation (whether or
not mandatory) by any governmental or regulatory authority on, or any other
event that in the sole judgment of Food 4 Less might affect, the nature or
extension of credit by banks or other financial institutions; (g) any
significant change in United States currency exchange rates or a suspension
of, or limitation on, the markets therefor (whether or not mandatory); (h)
any significant adverse change in United States securities or financial
markets; or (i) in the case of any of the foregoing existing at the time of
the commencement of the Exchange Offers, in the sole judgment of Food 4
Less, a material acceleration, escalation or worsening thereof;
(x) either of the Old F4L Trustees shall have objected in any respect
to, or taken any action that could, in the sole judgment of Food 4 Less,
adversely affect the consummation of either Exchange Offer or the
Solicitation or Food 4 Less' ability to obtain the Consents or to effect
any of the Proposed Amendments, or shall have taken any action that
challenges the validity or effectiveness of the procedures used by Food 4
Less in soliciting the Consents (including the form thereof) or in the
making of either Exchange Offer or the acceptance for exchange of any of
the Old F4L Notes; or
(xi) the Registration Statement has not been declared effective or a
stop order has been issued in connection therewith.
The foregoing conditions are for the sole benefit of Food 4 Less and may be
asserted by Food 4 Less in its sole discretion regardless of the circumstances
giving rise to any such condition (including any action or inaction by Food 4
Less) and may be waived by Food 4 Less, in whole or in part, at any time and
from time to time in its sole discretion. If any of the foregoing events shall
have occurred, Food 4 Less may, subject to applicable law, (i) terminate the
applicable Exchange Offer or the Solicitation and return all Old F4L Notes
tendered pursuant to such Exchange Offer or the Solicitation to the tendering
holders, (ii) extend the applicable Exchange Offer or the Solicitation and
retain all tendered Old F4L Notes until the extended Expiration Date, (iii)
amend the terms of the applicable Exchange Offer or the Solicitation or modify
the consideration to be paid by Food 4 Less (or the Company as successor by
merger) pursuant to such Exchange Offer or the Solicitation or (iv) waive the
unsatisfied condition or conditions with respect to such Exchange Offer or the
Solicitation and accept all validly tendered Old F4L Notes. See "-- Expiration
Date; Extensions; Termination; Amendments" and "-- Procedures for Tendering and
Consenting." The failure by Food 4 Less
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at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time. Any determination by Food 4 Less
concerning the events described in this section shall be final and binding upon
all persons.
PROCEDURES FOR TENDERING AND CONSENTING
The tender by a holder of Old F4L Notes pursuant to one of the procedures
set forth below will constitute an agreement between such holder and Food 4 Less
in accordance with the terms and subject to the conditions set forth herein and
in the Letter of Transmittal.
Old F4L Notes may be tendered and will be accepted for exchange only in
denominations of $1,000 principal amount and integral multiples thereof. To be
tendered effectively pursuant to the Exchange Offers, (i) the properly completed
Letter of Transmittal, including a valid and unrevoked Consent (or facsimile(s)
thereof), duly executed by the registered holder thereof with any required
signature guarantee(s), together with the certificates for tendered Old F4L
Notes in proper form for transfer, or any book-entry transfer into the Exchange
Agent's account at DTC, MSTC or PDTC (each as defined) of Old F4L Notes tendered
electronically, and any other documents required by the Letter of Transmittal,
must be received by the Exchange Agent at one of its addresses set forth below
prior to 12:00 Midnight, New York City time, on the Expiration Date, or (ii) the
tendering holder must comply with the guaranteed delivery procedure set forth
under the heading "-- Guaranteed Delivery Procedure."
THE BLUE CONSENT AND LETTER OF TRANSMITTAL SHOULD BE USED TO TENDER ALL OLD
F4L NOTES.
LETTERS OF TRANSMITTAL AND OLD F4L NOTES SHOULD BE SENT TO THE EXCHANGE
AGENT AND NOT TO FOOD 4 LESS, RGC OR THE DEALER MANAGERS NOR TO EITHER OF THE
TRUSTEES UNDER THE INDENTURES RELATING TO THE OLD F4L NOTES.
A HOLDER OF OLD F4L NOTES WHO DESIRES TO TENDER INTO THE APPLICABLE
EXCHANGE OFFER WITH RESPECT TO ANY OLD F4L SENIOR NOTES OR OLD F4L SENIOR
SUBORDINATED NOTES MUST TENDER ALL OF SUCH HOLDERS' OLD F4L SENIOR NOTES OR OLD
F4L SENIOR SUBORDINATED NOTES, AS THE CASE MAY BE.
Holders of Old F4L Notes will not be able to validly tender in the Exchange
Offers unless they consent to the Proposed Amendments. Tendering holders who
sign the Letter of Transmittal shall be deemed to have consented to the Proposed
Amendments.
All signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old F4L Notes tendered or withdrawn, as the case may be, pursuant
thereto are tendered (i) by a registered holder of Old F4L Notes (which term,
for purposes of the Letter of Transmittal, shall include any participant in DTC,
MSTC or PDTC whose name appears on a security position listing as the owner of
Old F4L Notes) who has not completed the box entitled "Special Issuance and
Payment Instructions" or "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution. If Old F4L Notes
are registered in the name of a person other than the signer of a Letter of
Transmittal or a notice of withdrawal, as the case may be, or if payment is to
be made or certificates for unexchanged Old F4L Notes are to be issued or
returned to a person other than the registered holder, then the Old F4L Notes
must be endorsed by the registered holder, or be accompanied by a written
instrument or instruments of transfer or exchange in form satisfactory to Food 4
Less duly executed by the registered holder, with such signatures guaranteed by
an Eligible Institution. In the event that signatures on a Letter of Transmittal
(or other document) are required to be guaranteed, such guarantee must be by a
firm that is a member of a registered national securities exchange or a member
of the National Association of Securities Dealers, Inc. (the "NASD") or by a
commercial bank or trust company having an office in the United States (each of
the foregoing being an "Eligible Institution").
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THE METHOD OF DELIVERY OF OLD F4L NOTES AND OTHER DOCUMENTS TO THE EXCHANGE
AGENT IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT AS OTHERWISE
PROVIDED PURSUANT TO "-- GUARANTEED DELIVERY," DELIVERY WILL BE DEEMED MADE WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. Instead of effecting delivery by mail
it is recommended that tendering Old F4L Noteholders use an overnight or hand
delivery service. If such delivery is by mail, it is recommended that holders
use registered mail, properly insured, with return receipt requested. In all
cases, sufficient time should be allowed to ensure delivery to the Exchange
Agent prior to 12:00 Midnight, New York City time, on the Expiration Date.
Tendering holders should indicate in the applicable box in the Letter of
Transmittal the name and address to which payments (including accrued and unpaid
interest in cash on the Old F4L Notes and the Exchange Payment), certificates
evidencing New F4L Notes and/or certificates evidencing Old F4L Notes for
amounts not accepted for tender, each as appropriate, are to be issued or sent,
if different from the name and address of the person signing the Letter of
Transmittal. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated and a substitute Form W-9 for such recipient must be completed. If no
such instructions are given, such payments (including accrued and unpaid
interest in cash on the Old F4L Notes and the Exchange Payment), New F4L Notes
or Old F4L Notes not accepted for tender, as the case may be, will be made or
returned, as the case may be, to the registered holder of Old F4L Notes
tendered. Holders of Old F4L Notes who are not registered holders of, and who
seek to tender, Old F4L Notes should (i) obtain a properly completed Letter of
Transmittal for such Old F4L Notes from the registered holder with signatures
guaranteed by an Eligible Institution and obtain and include with such Letter of
Transmittal Old F4L Notes properly endorsed for transfer by the registered
holder thereof or accompanied by a written instrument or instruments of transfer
or exchange from the registered holder with signatures on the endorsement or
written instrument or instruments of transfer or exchange guaranteed by an
Eligible Institution or (ii) effect a record transfer of such Old F4L Notes and
comply with the requirements applicable to registered holders for tendering Old
F4L Notes prior to 12:00 Midnight, New York City time, on the Expiration Date.
Any Old F4L Notes properly tendered prior to 12:00 Midnight, New York City time,
on the Expiration Date accompanied by a properly completed Letter of Transmittal
for such Old F4L Notes will be transferred of record by the registrar either
prior to or as of the Expiration Date at the discretion of Food 4 Less. Food 4
Less has no obligation to transfer any Old F4L Notes from the name of the
registered holder thereof if the Company does not accept for exchange and
payment such Old F4L Notes.
Issuance of New F4L Notes and payment of the Exchange Payment in exchange
for Old F4L Notes will be made only against deposit of the tendered Old F4L
Notes.
Under the federal income tax laws, the Exchange Agent will be required to
withhold and will remit to the United States Treasury 31% of the amount of any
cash payments made to certain holders of Old F4L Notes pursuant to the Exchange
Offers and the Solicitation, and 31% of the interest payments due to certain
holders of New F4L Notes. In order to avoid such backup withholding, each
tendering holder of Old F4L Notes electing to exchange Old F4L Notes pursuant to
an Exchange Offer, and, if applicable, each other payee, must provide the
Exchange Agent with such holder's or payee's correct taxpayer identification
number and certify that such holder or payee is not subject to such backup
withholding by completing the Substitute Form W-9 accompanying the Letter of
Transmittal. In general, if a holder or payee is an individual, the taxpayer
identification number is the Social Security number of such individual. If the
Exchange Agent is not provided with the correct taxpayer identification number,
the holder or payee may be subject to a $50 penalty imposed by the Internal
Revenue Service. Certain holders or payees (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order to satisfy the Exchange Agent
that a foreign individual qualifies as an exempt recipient, such holder or payee
must submit a statement, signed under penalty of perjury, attesting to that
individual's exempt status. Such statements can be obtained from the Exchange
Agent. For further information concerning backup withholding and instructions
for completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if Old F4L Notes are held in more than one name), consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
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Failure to complete the Substitute Form W-9 will not, by itself, cause Old
F4L Notes tendered pursuant to the Exchange Offers to be deemed invalidly
tendered, but may require the Exchange Agent to withhold 31% of the amount of
any payments made. Backup withholding is not an additional federal income tax.
Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained provided that the
required information is furnished to the Internal Revenue Service.
All questions as to the form of all documents and the validity (including
the time of receipt), eligibility, acceptance and withdrawal of tendered Old F4L
Notes will be determined by Food 4 Less, in its sole discretion, which
determination shall be final and binding. Food 4 Less expressly reserves the
absolute right to reject any and all tenders not in proper form and to determine
whether the acceptance of or payment by it for such tenders would be unlawful.
Food 4 Less also reserves the absolute right, subject to applicable law, to
waive or amend any of the conditions to either Exchange Offer or the
Solicitation or to waive any defect or irregularity in the tender of any of the
Old F4L Notes. None of Food 4 Less, the Company, the Exchange Agent, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification. No tender of Old F4L Notes
will be deemed to have been validly made until all defects and irregularities
with respect to such Old F4L Notes have been cured or waived. Any Old F4L Notes
received by the Exchange Agent that are not properly tendered and as to which
irregularities have not been cured or waived will be returned by the Exchange
Agent to the appropriate tendering holder as soon as practicable. Food 4 Less'
interpretation of the terms and conditions of the Exchange Offers and the
Solicitation (including the Letter of Transmittal and the Instructions thereto)
will be final and binding on all parties.
The Exchange Agent will seek to establish accounts with respect to the Old
F4L Notes at The Depository Trust Company ("DTC"), the Midwest Securities
Transfer Company ("MSTC"), and the Philadelphia Depository Trust Company ("PDTC"
and, together with DTC and MSTC, collectively referred to herein as the
"Book-Entry Transfer Facilities") for the purpose of the Exchange Offers within
two New York Stock Exchange Inc. ("NYSE") trading days. Any financial
institution that is a participant in any of the Book-Entry Transfer Facilities'
systems may make book-entry delivery of Old F4L Notes by causing DTC, MSTC or
PDTC to transfer such Old F4L Notes into the Exchange Agent's account in
accordance with such Book-Entry Transfer Facility's procedure for such transfer.
However, although delivery of Old F4L Notes may be effected through book-entry
transfer into the Exchange Agent's account at DTC, MSTC or PDTC, the Letter of
Transmittal (or facsimile thereof), together with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to, and received or confirmed by, the Exchange Agent at one of its addresses set
forth on the back cover of this Prospectus and Solicitation Statement prior to
12:00 Midnight, New York City time, on the Expiration Date, except as otherwise
provided below under the heading "Guarantee Delivery Procedure." Old F4L Notes
will not be deemed surrendered for exchange until such documents are received by
the Exchange Agent and delivery of such documents to a Book-Entry Transfer
Facility will not constitute valid delivery to the Exchange Agent. FOOD 4 LESS
UNDERSTANDS THAT THE BOOK-ENTRY TRANSFER FACILITIES WILL MAKE ARRANGEMENTS FOR
EXECUTION OF LETTERS OF TRANSMITTAL TO ACCOMMODATE BENEFICIAL OWNERS THAT DESIRE
TO TENDER OLD F4L NOTES IN THE EXCHANGE OFFERS. HOWEVER, FOOD 4 LESS UNDERSTANDS
THAT THE BOOK-ENTRY TRANSFER FACILITIES WILL NOT ARRANGE FOR THE EXECUTION OF
LETTERS OF TRANSMITTAL WITH RESPECT TO THE SOLICITATION, UNLESS THE OLD F4L
NOTES ARE ALSO TENDERED IN THE EXCHANGE OFFERS. HOLDERS MAY CONTACT THE EXCHANGE
AGENT AT ANY OF THE ADDRESSES SET FORTH ON THE BACK COVER PAGE HEREOF FOR
INFORMATION REGARDING WITHDRAWAL OF OLD F4L NOTES FROM A BOOK-ENTRY TRANSFER
FACILITY.
GUARANTEED DELIVERY PROCEDURE
If a registered holder of Old F4L Notes desires to tender such Old F4L
Notes and consent to the Proposed Amendments, and the Old F4L Notes are not
immediately available, or if time will not permit such holder's Old F4L Notes or
any other required documents to be delivered to the Exchange Agent prior to
12:00 Midnight, New York City time, on the Expiration Date, then such Old F4L
Notes may nevertheless be
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tendered for exchange and Consents may be effected if all of the following
guaranteed delivery procedure conditions are met:
(i) the tender for exchange and Consent is made by or through an
Eligible Institution;
(ii) prior to 12:00 Midnight, New York City time, on the Expiration
Date, the Exchange Agent receives from such Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by telegram,
telex, facsimile transmission, mail or hand delivery) substantially in the
form provided by Food 4 Less, that contains a signature guaranteed by an
Eligible Institution in the form set forth in such Notice of Guaranteed
Delivery, unless such tender is for the account of an Eligible Institution
(in which case no signature guarantee shall be required), and sets forth
the name and address of the holder of Old F4L Notes and the principal
amount of Old F4L Notes tendered for exchange, states that the tender is
being made thereby and guarantees that, within five NYSE trading days after
the date of execution of the Notice of Guaranteed Delivery, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed,
together with the Old F4L Notes and any required signature guarantees and
any other documents required by such Letter of Transmittal, will be
deposited by the Eligible Institution with the Exchange Agent; and
(iii) all tendered Old F4L Notes, or a confirmation of a book-entry
transfer of such Old F4L Notes into the Exchange Agent's applicable account
at a Book-Entry Transfer Facility as described above, as well as the Letter
of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, and all other documents
required by such Letter of Transmittal, shall be received by the Exchange
Agent within five NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
THE YELLOW NOTICE OF GUARANTEED DELIVERY SHOULD BE USED IN CONNECTION WITH
TENDERS OF ALL OLD F4L NOTES.
Notwithstanding any other provision hereof, the exchange of Old F4L Notes
pursuant to an Exchange Offer will in all cases be made only after timely
receipt by the Exchange Agent of certificates for such Old F4L Notes and the
Letter of Transmittal (or facsimile thereof) in respect thereof, properly
completed and duly executed, together with any required signature guarantees and
any other documents required by such Letter of Transmittal.
ACCEPTANCE OF OLD F4L NOTES FOR EXCHANGE; DELIVERY OF NEW F4L NOTES AND PAYMENT
OF THE EXCHANGE PAYMENT
Upon the terms and subject to the conditions of the Exchange Offers and the
Solicitation, Food 4 Less will accept all Old F4L Notes validly tendered prior
to 12:00 Midnight, New York City time, on the Expiration Date and not validly
withdrawn. The acceptance for exchange of Old F4L Notes validly tendered and not
validly withdrawn and the delivery of New F4L Notes and the payment of the
Exchange Payment (and any accrued and unpaid interest on the Old F4L Notes) will
be made as promptly as practicable after the Expiration Date. Subject to rules
promulgated pursuant to the Exchange Act, Food 4 Less expressly reserves the
right to delay acceptance of any of the Old F4L Notes or to terminate either of
the Exchange Offers or the Solicitation and not accept for exchange any Old F4L
Notes not theretofore accepted if any of the conditions set forth under the
heading "-- Conditions" shall not have been satisfied or waived by Food 4 Less.
The Company will deliver New F4L Notes and make payments in cash (including
accrued and unpaid interest on the Old F4L Notes and the Exchange Payment) in
exchange for Old F4L Notes pursuant to the Exchange Offers promptly following
acceptance of the Old F4L Notes. In all cases, exchange for Old F4L Notes
accepted for exchange pursuant to the applicable Exchange Offer will be made
only after timely receipt by the Exchange Agent of Old F4L Notes (or
confirmation of book-entry transfer thereof) and a properly completed and
validly executed Letter of Transmittal (or a manually signed facsimile thereof)
and any other documents required thereby.
New F4L Notes will be issued in denominations of $1,000 principal amount
and integral multiples thereof.
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For purposes of the Exchange Offers and the Solicitation, Food 4 Less shall
be deemed to have accepted validly tendered and not properly withdrawn Old F4L
Notes when, as and if Food 4 Less gives oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old F4L Notes for the purposes of receiving the cash and New F4L Notes from
the Company and transmitting the cash and New F4L Notes to the tendering
holders. Under no circumstances will any additional amount be paid by the
Company or the Exchange Agent by reason of any delay in making such payment or
delivery.
All questions as to the validity, form, eligibility (including the time of
receipt), acceptance and withdrawal of tendered Old F4L Notes will be resolved
by Food 4 Less, whose determination will be final and binding. Food 4 Less
reserves the absolute right to reject any or all tenders that are not in proper
form or the acceptance of which would, in the opinion of counsel for Food 4
Less, be unlawful. Food 4 Less also reserves the right to waive any
irregularities or conditions of tender as to particular Old F4L Notes. Food 4
Less' interpretation of the terms and conditions of the Exchange Offers and the
Solicitation (including the instructions in the Letter of Transmittal) will be
final and binding. Unless waived, any irregularities or defects in connection
with tenders of Old F4L Notes must be cured within such time as Food 4 Less
determines. Neither Food 4 Less, the Company nor the Exchange Agent shall be
under any duty to give notification of irregularities or defects in such tenders
or shall incur any liability for failure to give such notification. Tenders of
Old F4L Notes will not be deemed to have been made until such irregularities
have been cured or waived.
If, for any reason whatsoever, acceptance for exchange of any Old F4L Notes
tendered pursuant to the Exchange Offers is delayed, or Food 4 Less is unable to
accept or exchange Old F4L Notes tendered pursuant to the Exchange Offers, then,
without prejudice to Food 4 Less' and the Company's rights set forth herein, the
Exchange Agent may nevertheless, on behalf of Food 4 Less and subject to rules
promulgated pursuant to the Exchange Act, retain tendered Old F4L Notes, and
such Old F4L Notes may not be withdrawn except to the extent that the tendering
holder of such Old F4L Notes is entitled to withdrawal rights as described
herein. See "-- Withdrawal of Tenders and Revocation of Consents."
If any tendered Old F4L Notes are not accepted for exchange because of an
invalid tender, the occurrence or non-occurrence of certain other events set
forth herein or otherwise, then such unaccepted Old F4L Notes will be returned,
at Food 4 Less' expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date or the termination of the applicable
Exchange Offer therefor.
No alternative, conditional or contingent tenders will be accepted. A
tendering holder, by execution of a Letter of Transmittal, or facsimile thereof,
waives all rights to receive notice of acceptance of such holder's Old F4L Notes
for purchase or exchange.
WITHDRAWAL OF TENDERS AND REVOCATION OF CONSENTS
Tenders of Old F4L Notes pursuant to an Exchange Offer may be withdrawn and
Consents may be revoked at any time until the later of (a) such time as the
Requisite Consents with respect to the applicable issue of Old F4L Notes have
been received and the Supplemental Indenture for such issue has been executed
and (b) [20 Business Days following commencement]. Thereafter, such tenders may
be withdrawn and Consents may be revoked if the Exchange Offer with respect to
such issue of Old F4L Notes is terminated without any Old F4L Notes being
accepted for exchange thereunder. Tendering holders will receive in cash accrued
and unpaid interest on Old F4L Notes accepted for exchange up to, but not
including, the date of such exchange. Interest on the New F4L Notes will accrue
from, and including, the date of such exchange which will be the date of
issuance of the New F4L Notes.
The "Consent Date" for the Old F4L Senior Notes and the Old F4L Senior
Subordinated Notes, as the case may be, will be the date and time on which the
Requisite Consents (Consents of holders representing at least a majority in
aggregate principal amount of the outstanding Old F4L Senior Notes or Old F4L
Senior Subordinated Notes, as the case may be, held by persons other than Food 4
Less and its affiliates) to the Proposed Amendments are delivered by Food 4 Less
to the applicable Old Trustee and the applicable Supplemental Indenture relating
to such Old F4L Notes has been executed. A different Consent Date may be
established with respect to Consents that are received and that relate to the
Old F4L Senior Note Indenture and Consents that are received and that relate to
the Old F4L Senior Subordinated Note Indenture. The
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withdrawal of Old F4L Notes prior to the applicable Consent Date in accordance
with the procedures set forth hereunder will effect a revocation of the related
Consent. Any valid revocation of Consents will automatically render the prior
tender of the Old F4L Notes to which such Consents relate defective and Food 4
Less will have the right, which it may waive, to reject such tender as invalid
and ineffective.
Any holder of Old F4L Notes who has tendered Old F4L Notes or who succeeds
to the record ownership of Old F4L Notes in respect of which such tenders or
Consents previously have been given may withdraw such Old F4L Notes or revoke
such Consents prior to the applicable Consent Date by delivery of a written
notice of withdrawal or revocation, subject to the limitations described herein.
To be effective, a written telegraphic, telex or facsimile transmission (or
delivered by hand or by mail) notice of withdrawal of a tender or revocation of
a Consent must (i) be timely received by the Exchange Agent at one of its
addresses set forth on the back cover hereof or prior to the applicable time
provided herein with respect to the applicable class of Old F4L Notes, (ii)
specify the name of the person having tendered the Old F4L Notes to be withdrawn
or as to which Consents are revoked, the principal amount of such Old F4L Notes
to be withdrawn and, if certificates for Old F4L Notes have been tendered, the
name of the registered holder(s) of such Old F4L Notes as set forth in such
certificates, if different from that of the person who tendered such Old F4L
Notes, (iii) identify the Old F4L Notes to be withdrawn or to which the notice
of revocation relates and (iv)(a) be signed by the holder in the same manner as
the original signature on the Letter of Transmittal or Notice of Guaranteed
Delivery (as the case may be) by which such Old F4L Notes were tendered
(including any required signature guarantees) or (b) be accompanied by evidence
satisfactory to Food 4 Less and the Exchange Agent that the holder withdrawing
such tender or revoking such Consents has succeeded to beneficial ownership of
such Old F4L Notes. If certificates representing Old F4L Notes to be withdrawn
or Consents to be revoked have been delivered or otherwise identified to the
Exchange Agent, then the name of the registered holder and the serial numbers of
the particular certificate evidencing the Old F4L Notes to be withdrawn or
Consents to be revoked and a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution, except in the case of Old F4L Notes
tendered by an Eligible Institution (in which case no signature guarantee shall
be required), must also be so furnished to the Exchange Agent as aforesaid prior
to the physical release of the certificates for the withdrawn Old F4L Notes. If
Old F4L Notes have been tendered or if Consents have been delivered pursuant to
the procedures for book-entry transfer as set forth herein, any notice of
withdrawal or revocation of Consent must also specify the name and number of the
account at the appropriate Book-Entry Transfer Facility to be credited with the
withdrawn Old F4L Notes. Food 4 Less reserves the right to contest the validity
of any revocation. A purported notice of revocation which is not received by the
Exchange Agent in a timely fashion will not be effective to revoke a Consent
previously given.
Any permitted withdrawals of tenders of Old F4L Notes and revocation of
Consents may not be rescinded, and any Old F4L Notes properly withdrawn will
thereafter be deemed not validly tendered and any Consents revoked will be
deemed not validly delivered for purposes of either Exchange Offer; provided,
however, that withdrawn Old F4L Notes may be retendered and revoked Consents may
be redelivered by again following one of the appropriate procedures described
herein at any time prior to 12:00 Midnight, New York City time, on the
Expiration Date.
If Food 4 Less extends an Exchange Offer or is delayed in its acceptance
for exchange of Old F4L Notes or is unable to exchange Old F4L Notes pursuant to
either Exchange Offer for any reason, then, without prejudice to Food 4 Less'
rights under such Exchange Offer, the Exchange Agent may, subject to applicable
law, retain tendered Old F4L Notes on behalf of Food 4 Less, and such Old F4L
Notes may not be withdrawn (subject to Rule 14e-1 under the Exchange Act, which
requires that Food 4 Less deliver the consideration offered or return the Old
F4L Notes deposited by or on behalf of the Old F4L Noteholders promptly after
the termination or withdrawal of an Exchange Offer), except to the extent that
tendering holders are entitled to withdrawal rights as described herein.
All questions as to the validity, form and eligibility (including the time
of receipt) of notices of withdrawal or revocations of Consents will be
determined by Food 4 Less, whose determination will be final and binding on all
parties. None of Food 4 Less, the Exchange Agent, the Dealer Managers or any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or revocation of Consent or incur any
liability for failure to give any such notification.
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LOST OR MISSING CERTIFICATES
If a holder of Old F4L Notes desires to tender an Old F4L Note pursuant to
an Exchange Offer, but the Old F4L Note has been mutilated, lost, stolen or
destroyed, such holder should write to or telephone the appropriate Old Trustee
under the Old F4L Note Indentures at the address listed below, concerning the
procedures for obtaining replacement certificates for such Old F4L Notes,
arranging for indemnification or any other matter that requires handling by such
Old F4L Trustee:
<TABLE>
<S> <C>
Old F4L Senior Notes Trustee: Norwest Bank Minnesota, N.A.
Sixth and Marquette
Minneapolis, Minnesota 55479-0113
Attn: Corporate Trust Department
Old F4L Senior Subordinated Notes United States Trust Company of New York
Trustee: 114 West 47th Street
New York, New York 10036-1532
Attn: Corporate Trust Division
</TABLE>
DEALER MANAGERS
Subject to the terms and conditions set forth in the Dealer Manager
Agreement (the "Dealer Manager Agreement") dated January , 1995, among FFL,
Holdings, Food 4 Less and the Subsidiary Guarantors (together, the "Issuers")
and BT Securities, CS First Boston and DLJ, as dealer managers and solicitation
agents (the "Dealer Managers"), the Issuers have engaged BT Securities, CS First
Boston and DLJ to act as Dealer Managers and Solicitation Agents in connection
with the Exchange Offers, the Solicitation, the RGC Exchange Offers and the
Holdings Consent Solicitation. The Issuers will pay the Dealer Managers, as
compensation for their services as Dealer Managers, a fee equal to (i) 1.0% of
the aggregate principal amount of Old F4L Notes accepted for exchange in the
Exchange Offers, (ii) 1.0% of the aggregate principal amount of Old RGC Notes
accepted for exchange in the RGC Exchange Offers and (iii) 0.5% of the aggregate
principal amount of Old F4L Notes, Old RGC Notes and Holdings Discount Notes in
respect of which a consent is accepted in the Solicitation, the RGC Exchange
Offers and the Holdings Consent Solicitation (other than Old RGC Notes and Old
F4L Notes accepted for exchange in the RGC Exchange Offer and the Exchange
Offer). In addition, the Issuers have agreed to reimburse each of the Dealer
Managers for all of its respective reasonable out-of-pocket expenses, including
the reasonable fees and expenses of its legal counsel, incurred in connection
with the Exchange Offers, the Solicitation, the RGC Exchange Offers and the
Holdings Consent Solicitation. The Issuers have agreed to indemnify each of the
Dealer Managers against certain liabilities in connection with Exchange Offers,
the Solicitation, the RGC Exchange Offers and the Holdings Consent Solicitation,
including liabilities under the federal securities laws, and will contribute to
payments the Dealer Managers may be required to make in respect thereof.
Bankers Trust, an affiliate of BT Securities, has been a co-agent and a
lender under the existing credit agreements of each of RGC and Food 4 Less and
will be administrative agent and a lender under the New Credit Facility. See
"Description of the New Credit Facility." The Dealer Managers will also serve as
underwriters for the Public Offering and will receive customary fees for such
services.
In addition, affiliates of BT Securities and CS First Boston are investing
in the capital stock of FFL pursuant to the New Equity Investment. After giving
effect to the Merger, BTIP will own in the aggregate approximately 900,000
shares of Series A Preferred Stock and approximately 3,100,000 shares of Series
B Preferred Stock and affiliates of CS First Boston will own approximately
1,000,000 shares of Series A Preferred Stock. Affiliates of BTIP additionally
own 508,737 shares of FFL common stock which they had previously acquired. See
"Principal Stockholders" and "Description of Capital Stock."
Each of BT Securities, CS First Boston and DLJ has from time to time
provided investment banking and financial advisory services to one or more of
Food 4 Less, Holdings and RGC and/or their respective affiliates and may
continue to do so in the future. BT Securities, CS First Boston and DLJ have
received customary fees for such services.
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No fees or commission have been or will be paid to any broker, dealer or
other person, other than the Dealer Managers, in connection with the Exchange
Offers, the Solicitation, the RGC Exchange Offers or the Holdings Consent
Solicitation.
EXCHANGE AGENT
Bankers Trust has been appointed as Exchange Agent for the Exchange Offers
and the Solicitation. Questions and requests for assistance, and all
correspondence in connection with the Exchange Offers, the Solicitation, or
requests for additional Letters of Transmittal and any other required documents,
may be directed to the Exchange Agent at one of its addresses and telephone
numbers set forth on the back cover of this Prospectus and Solicitation
Statement.
INFORMATION AGENT
D.F. King & Co., Inc. is serving as Information Agent in connection with
the Exchange Offer and the Solicitation. The Information Agent will assist with
the mailing of this Prospectus and Solicitation Statement and related materials
to holders of Old F4L Notes, respond to inquiries of and provide information to
holders of Old F4L Notes in connection with the Exchange Offers and the
Solicitation and provide other similar advisory services as Food 4 Less may
request from time to time. Requests for additional copies of this Prospectus and
Solicitation Statement, Letters of Transmittal and any other required documents
should be directed to the Dealer Managers or to the Information Agent at one of
its addresses and telephone numbers set forth on the back cover of this
Prospectus and Solicitation Statement.
FEES AND EXPENSES
In addition to the fees and expenses payable to the Dealer Managers, Food 4
Less will pay the Exchange Agent and the Information Agent reasonable and
customary fees for their services (and will reimburse them for their reasonable
out-of-pocket expenses in connection therewith), will pay the reasonable
expenses of holders in delivering their Old F4L Notes to the Exchange Agent and
will pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of this
Prospectus and Solicitation Statement and related documents to the beneficial
owners of the Old F4L Notes and in handling or forwarding tenders for exchange
and payment. In addition, Food 4 Less will indemnify the Exchange Agent and the
Information Agent against certain liabilities in connection with their services,
including liabilities under the federal securities laws.
Food 4 Less will pay all transfer taxes, if any, applicable to the exchange
of Old F4L Notes pursuant to the Exchange Offers. If, however, New F4L Notes or
Old F4L Notes for principal amounts not accepted for tender, or both, are to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered holder of the Old F4L Notes, or if tendered Old F4L Notes
are to be registered in the name of any person other than the person signing the
Letter of Transmittal, or if a transfer tax is imposed for any reason other than
the exchange of Old F4L Notes pursuant to an Exchange Offer, then the amount of
any such transfer tax (whether imposed on the registered holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of such tax or exemption therefrom is not submitted, then the amount of
such transfer tax will be deducted from the Exchange Payment otherwise payable
to such tendering holder. Any remaining amount will be billed directly to such
tendering holder.
The total cash expenditures to be incurred by Food 4 Less in connection
with the Exchange Offers and the Solicitation, other than payments to the Dealer
Managers, but including printing, accounting and legal fees and the fees and
expenses of the Exchange Agent, the Information Agent and the trustees under the
Old F4L Indentures and the New F4L Note Indentures, are estimated to be
approximately $ million.
MISCELLANEOUS
The Exchange Offers are not subject to Section 13(e) of, or Rules 13e-3 or
13e-4 or Regulation 14D promulgated under, the Exchange Act. The Exchange Offers
are being made in compliance with Regulation 14E under the Exchange Act.
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<PAGE> 110
Other than with respect to the Exchange Agent, the Information Agent and
the Dealer Managers, neither Food 4 Less nor any of its affiliates has engaged,
or made any arrangements for, and has no contract, arrangement or understanding
with, any broker, dealer, agent or other person regarding the exchange of Old
F4L Notes hereunder, and no person has been authorized by Food 4 Less, or any of
its affiliates to provide any information or to make any representations in
connection with the Exchange Offers and the Solicitation, other than those
expressly set forth in this Prospectus and Solicitation Statement, and, if so
provided or made, such other information or representations must not be relied
upon as having been authorized by Food 4 Less or any of its affiliates. The
delivery of this Prospectus and Solicitation Statement shall not, under any
circumstances, create any implication that the information set forth herein is
correct as of any time subsequent to the date hereof.
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<PAGE> 111
DESCRIPTION OF THE NEW F4L NOTES
GENERAL
The New F4L Senior Notes will be issued under an indenture (the "New Senior
Note Indenture"), to be dated as of January , 1995, by and among the Company,
the Subsidiary Guarantors and Norwest Bank Minnesota, N.A., as Trustee (the "New
Senior Note Trustee").
The New F4L Senior Subordinated Notes will be issued under an Indenture
(the "New Senior Subordinated Note Indenture", and together with the New Senior
Note Indenture, the "New Indentures") to be dated as of January , 1995, by and
among the Company, the Subsidiary Guarantors and United States Trust Company of
New York, as Trustee (the "New Senior Subordinated Note Trustee," and together
with the New Senior Note Trustee, the "New Trustees").
The following summary of certain provisions of the New F4L Notes and the
New Indentures does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Trust Indenture Act of 1939, as
amended (the "TIA"), and to all of the provisions of the New F4L Notes and the
New Indentures, including the definitions of certain terms therein and those
terms made a part of the New Indentures by reference to the TIA. The definitions
of certain capitalized terms used in the following summary are set forth below
under "-- Certain Definitions." A copy of the forms of the New Indentures may be
obtained from the Company.
The New F4L Notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the New Senior Note Trustee will act as Paying Agent and Registrar for the New
F4L Senior Notes and the New Senior Subordinated Note Trustee will act as Paying
Agent and Registrar for the New F4L Senior Subordinated Notes. The New F4L
Senior Notes and the New F4L Senior Subordinated Notes may be presented for
registration or transfer and exchange at the offices of their respective
Registrar, which for the New F4L Senior Notes initially will be the New Senior
Note Trustee's corporate trust office and for the New F4L Senior Subordinated
Notes initially will be the New Senior Subordinated Note Trustee's corporate
trust office. The Company may change any Paying Agent and Registrar without
notice to holders of either the New F4L Senior Notes (the "Senior Note Holders")
or of the New F4L Senior Subordinated Notes (the "Senior Subordinated Note
Holders," and together with the Senior Note Holders, the "Holders"). The Company
will pay principal (and premium, if any) on the New F4L Senior Notes at the
Senior Note Trustee's corporate office, and will pay principal (and premium, if
any) on the New F4L Senior Subordinated Notes at the New Senior Subordinated
Note Trustee's corporate office, each such office located in New York, New York.
At the Company's option, interest may be paid at the New Senior Note Trustee's
corporate trust office (in the case of interest payments on the New F4L Senior
Notes) or the New Senior Subordinated Note Trustee's corporate trust office (in
the case of interest payments on the New F4L Senior Subordinated Notes) or by
check mailed to the registered address of the relevant Holders.
As used below in this "Description of the New F4L Notes," the "Company"
means Food 4 Less Supermarkets, Inc. (and Ralphs Grocery Company, as survivor of
the Merger), but not any of its subsidiaries.
PRINCIPAL AND MATURITY OF AND INTEREST ON THE NEW F4L SENIOR NOTES
The New F4L Senior Notes will mature on February 1, 2004. The up to $175
million principal amount of New F4L Senior Notes offered hereby will be part of
an issue of up to $575 million aggregate principal amount of New F4L Senior
Notes, up to $400 million aggregate principal amount of which will be issued
pursuant to the Public Offering. Concurrently with the Exchange Offers and the
other financing transactions described herein, Food 4 Less is offering up to
$400 million principal amount of New F4L Senior Notes in the Public Offering.
The Public Offering is expected to price five Business Days preceding the
Expiration Date. The New F4L Senior Notes offered pursuant to the F4L Senior
Notes Exchange Offer will bear interest at a fixed rate per annum equal to the
greater of (a) 11% and (b) the Applicable Treasury Rate (as hereinafter defined)
plus 375 basis points (3.75 percentage points); provided, however, that in no
event will the New F4L Senior Notes offered for exchange hereby bear interest at
a rate per annum that is less than the interest rate on the New F4L Senior Notes
offered pursuant to the Public Offering. The "Applicable Treasury Rate" means
the yield to maturity at the time of computation of United States Treasury
securities with a constant maturity
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(as compiled by, and published in, the most recent Federal Reserve Statistical
Release H.15 (519)) most nearly equal to the average life to stated maturity of
the New F4L Senior Notes; provided, that if the average life to stated maturity
of the New F4L Senior Notes is not equal to the constant maturity of the United
States Treasury security for which a weekly average yield is given, the
Applicable Treasury Rate shall be obtained by linear interpolation (calculated
to the nearest one-twelfth of the year) from the weekly average yields of the
United States Treasury securities for which such yields are given. Interest on
the New F4L Senior Notes will be payable semi-annually on each February 1 and
August 1, commencing on August 1, 1995, to the New F4L Senior Note holders of
record on the immediately preceding January and July . Interest on the New
F4L Senior Notes will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the date of issuance. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
PRINCIPAL AND MATURITY OF AND INTEREST ON THE NEW F4L SENIOR SUBORDINATED NOTES
The New F4L Senior Subordinated Notes are limited in aggregate principal
amount to $145,000,000 and will mature on February 1, 2005. Interest on the New
F4L Senior Subordinated Notes will accrue at the rate of 13.75% per annum and
will be payable semi-annually on each February 1 and August 1, commencing on
August 1, 1995, to the Senior Subordinated Note Holders of record on the
immediately preceding January 15 and July 15. Interest on the New F4L Senior
Subordinated Notes will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the date of issuance. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
OPTIONAL REDEMPTION OF THE NEW F4L SENIOR NOTES
The New F4L Senior Notes will be redeemable, at the option of the Company,
in whole at any time or in part from time to time, on and after February 1,
2000, at the following redemption prices (expressed as percentages of the
principal amount) if redeemed during the twelve-month period commencing on
February 1 of the year set forth below, plus, in each case, accrued and unpaid
interest to the date of redemption:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
------------------- ----------
<S> <C>
2000.............................................. %
2001.............................................. %
2002.............................................. %
2003 and thereafter............................... 100.00%
</TABLE>
In addition, on or prior to February 1, 1998, the Company may, at its
option, use the net cash proceeds of one or more Public Equity Offerings to
redeem up to an aggregate of 35% of the New F4L Senior Notes originally issued,
at a redemption price equal to % of the principal amount thereof, plus accrued
and unpaid interest, if any, to the redemption date. In order to effect the
foregoing redemption with the proceeds of a Public Equity Offering, the Company
shall send the redemption notice not later than 60 days after the consummation
of such Public Equity Offering.
OPTIONAL REDEMPTION OF THE NEW F4L SENIOR SUBORDINATED NOTES
The New F4L Senior Subordinated Notes will be redeemable, at the option of
the Company, in whole at any time or in part, from time to time, on and after
June 15, 1996, at the following redemption prices (expressed as percentages of
the principal amount) if redeemed during the twelve-month period commencing on
June 15 of the year set forth below, plus, in each case, accrued and unpaid
interest to the date of redemption:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
-------------- ----------
<S> <C>
1996.............................................. 106.111%
1997.............................................. 104.583%
1998.............................................. 103.056%
1999.............................................. 101.528%
And thereafter.................................... 100.000%
</TABLE>
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The documents evidencing Senior Indebtedness will restrict the Company's
ability to optionally redeem New F4L Senior Subordinated Notes.
NOTICES AND SELECTION
In the event of a redemption of less than all of the New F4L Senior Notes
or the New F4L Senior Subordinated Notes, as the case may be, such New F4L Notes
will be selected for redemption by the appropriate New Trustee pro rata, by lot
or by any other method that such New Trustee considers fair and appropriate and,
if such New F4L Notes are listed on any securities exchange, by a method that
complies with the requirements of such exchange; provided, however, that any
redemption of the New F4L Senior Notes pursuant to the provisions relating to a
Public Equity Offering shall be made on a pro rata basis. Notice of redemption
will be mailed at least 30 days but not more than 60 days before the redemption
date to each Holder of New F4L Notes to be redeemed at such Holder's registered
address. On and after the redemption date, interest will cease to accrue on New
F4L Notes or portions thereof called for redemption (unless the Company shall
default in the payment of the redemption price or accrued interest). New F4L
Notes that are redeemed by the Company or that are purchased by the Company
pursuant to a Net Proceeds Offer as described under "-- Certain Covenants --
Limitation on Asset Sales" below or pursuant to a Change of Control Offer as
described under "-- Change of Control" below or that are otherwise acquired by
the Company will be surrendered to the appropriate New Trustee for cancellation.
RANKING OF THE NEW F4L SENIOR NOTES
The New F4L Senior Notes will rank senior in right of payment to all
Subordinated Indebtedness of the Company, including the New F4L Senior
Subordinated Notes and the New RGC Notes. The New F4L Senior Notes will rank
pari passu in right of payment with all unsubordinated Indebtedness and other
liabilities of the Company, including borrowings and other obligations of the
Company and its Subsidiaries under the Credit Agreement. The borrowings and
obligations under the Credit Agreement (and the related guarantees) are secured
by substantially all of the assets of the Company and its Subsidiaries, whereas
the New F4L Senior Notes are senior unsecured obligations of the Company and its
Subsidiaries. As of September 17, 1994, on a pro forma basis after giving effect
to the Merger, the aggregate amount of secured Indebtedness and other
obligations of the Company and its Subsidiaries outstanding would have been
approximately $992.7 million (and the Company would have had $218.2 million
available to be borrowed under the Credit Agreement).
SUBORDINATION OF THE NEW F4L SENIOR SUBORDINATED NOTES
The payment of the principal of, premium, if any, and interest on the New
F4L Senior Subordinated Notes will be subordinated in right of payment, as set
forth in the New Senior Subordinated Note Indenture, to the prior payment in
full in cash or Cash Equivalents of all Senior Indebtedness, whether outstanding
on the Issue Date or thereafter incurred, including, with respect to Designated
Senior Indebtedness, any interest accruing subsequent to a bankruptcy or other
similar proceeding whether or not such interest is an allowed claim enforceable
against the Company in a bankruptcy case under Title 11 of the United States
Code.
Upon any distribution of assets of the Company of any kind or character,
whether in cash, property or securities upon any dissolution, winding up, total
or partial liquidation or reorganization or the Company (including, without
limitation, in bankruptcy, insolvency, or receivership proceedings or upon any
assignment for the benefit of creditors or any other marshalling of the
Company's assets and liabilities), the holders of Senior Indebtedness shall
first be entitled to receive payment in full in cash or Cash Equivalents of all
amounts payable under Senior Indebtedness (including, with respect to Designated
Senior Indebtedness, any interest accruing after the commencement of any such
proceeding at the rate specified in the applicable Senior Indebtedness whether
or not such interest is an allowed claim enforceable against the Company in any
such proceeding) before the Holders of New F4L Senior Subordinated Notes will be
entitled to receive any payment with respect to the New F4L Senior Subordinated
Notes (excluding Permitted Subordinated Reorganization Securities), and until
all Obligations with respect to Senior Indebtedness are paid in full in cash or
Cash Equivalents, any distribution to which the Holders of New F4L Senior
Subordinated Notes
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would be entitled (excluding Permitted Subordinated Reorganization Securities)
shall be made to the holders of Senior Indebtedness.
No direct or indirect payment (other than payments previously made pursuant
to the provision described under "-- Defeasance" below) by or on behalf of the
Company of principal of, premium, if any, or interest on the New F4L Senior
Subordinated Notes whether pursuant to the terms of the New F4L Senior
Subordinated Notes or upon acceleration or otherwise shall be made if, at the
time of such payment, there exists a default in the payment of all or any
portion of principal of, premium, if any, or interest on any Designated Senior
Indebtedness or any other Senior Indebtedness which, at the time of
determination, is equal to or greater than $50 million in aggregate principal
amount ("Significant Senior Indebtedness") (and the New Senior Subordinated Note
Trustee has received written notice thereof), and such default shall not have
been cured or waived by or on behalf of the holders of such Designated Senior
Indebtedness or Significant Senior Indebtedness, as the case may be or shall
have ceased to exist, until such default shall have been cured or waived or
shall have ceased to exist or such Designated Senior Indebtedness or Significant
Senior Indebtedness, as the case may be, shall have been discharged or paid in
full, after which the Company shall resume making any and all required payments
in respect of the New F4L Senior Subordinated Notes, including any missed
payments.
In addition, during the continuance of any other event of default with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated, upon the earliest to occur of (a) receipt by the New
Senior Subordinated Note Trustee of written notice from the holders of a
majority of the outstanding principal amount of the Designated Senior
Indebtedness or their representative, or (b) if such event of default results
from the acceleration of the New F4L Senior Subordinated Notes, the date of such
acceleration, no such payment (other than payments previously made pursuant to
the provisions described under "-- Defeasance" below) may be made by the Company
upon or in respect of the New F4L Senior Subordinated Notes for a period
("Payment Blockage Period") commencing on the earlier of the date of receipt of
such notice or the date of such acceleration and ending 179 days thereafter
(unless (x) such Payment Blockage Period shall be terminated by written notice
to the New Senior Subordinated Note Trustee from the holders of a majority of
the outstanding principal amount of such Designated Senior Indebtedness or their
representative who delivered such notice or (y) such default is cured or waived,
or ceases to exist or such Designated Senior Indebtedness is discharged or paid
in full), after which the Company shall resume making any and all required
payments in respect of the New F4L Senior Subordinated Notes, including any
missed payments. Notwithstanding anything herein to the contrary, in no event
will a Payment Blockage Period extend beyond 179 days from the date on which
such Payment Blockage Period was commenced. Not more than one Payment Blockage
Period may be commenced with respect to the New F4L Senior Subordinated Notes
during any period of 365 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness initiating such Payment
Blockage Period shall be, or be made, the basis for the commencement of a second
Payment Blockage Period by the holders of such Designated Senior Indebtedness or
their representative whether or not within a period of 365 consecutive days
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days.
If the Company fails to make any payment on the New F4L Senior Subordinated
Notes when due or within any applicable grace period, whether or not on account
of the payment blockage provision referred to above, such failure would
constitute an Event of Default under the New Senior Subordinated Note Indenture
and would enable the holders of New F4L Senior Subordinated Notes to accelerate
the maturity thereof. See "-- Events of Default."
By reason of such subordination, in the event of the insolvency of the
Company, holders of the New F4L Senior Subordinated Notes, may recover less,
ratably, than holders of Senior Indebtedness.
As of September 17, 1994, on a pro forma basis after giving effect to the
Merger, the aggregate principal amount of Senior Indebtedness outstanding
(excluding Company guarantees of certain Guarantor Senior Indebtedness) would
have been approximately $1,554.8 million, the aggregate outstanding amount of
Guarantor Senior Indebtedness of the Subsidiary Guarantors (excluding guarantees
by Subsidiary Guarantors
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of certain Senior Indebtedness of the Company) would have been approximately
$16.0 million, and the Company would have had $218.2 million available to be
borrowed under the New Revolving Facility.
GUARANTEES
Each Subsidiary Guarantor will unconditionally guarantee, jointly and
severally (i) the Company's obligations under the New F4L Senior Notes on a
senior unsecured basis (the "Senior Note Guarantees") and (ii) the Company's
obligations under the New F4L Senior Subordinated Notes on a senior subordinated
unsecured basis (the "Senior Subordinated Note Guarantees", and together with
the Senior Note Guarantees, the "Guarantees"). The Indebtedness represented by
each Senior Subordinated Note Guarantee (including the payment of principal of,
premium, if any, and interest on the New F4L Senior Subordinated Notes) will be
subordinated on the same basis to Guarantor Senior Indebtedness as the New F4L
Senior Subordinated Notes are subordinated to Senior Indebtedness. See
"-- Subordination of the New F4L Senior Subordinated Notes".
Upon (i) the release by the lenders under the Term Loans, related documents
and future refinancings thereof of all guarantees of a Subsidiary Guarantor and
all Liens on the property and assets of such Subsidiary Guarantor relating to
such Indebtedness, or (ii) the sale or disposition (whether by merger, stock
purchase, asset sale or otherwise) of a Subsidiary Guarantor (or substantially
all of its assets) to an entity which is not a subsidiary of the Company, which
is otherwise in compliance with the New Indentures, such Subsidiary Guarantor
shall be deemed released from all its obligations under its Senior Note
Guarantee and its Senior Subordinated Notes Guarantee; provided, however, that
any such termination shall occur only to the extent that all obligations of such
Subsidiary Guarantor under all of its guarantees of, and under all of its
pledges of assets or other security interests which secure, such Indebtedness of
the Company shall also terminate upon such release, sale or transfer.
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor without limitation. Each
of the New Indentures will further provide that a Subsidiary Guarantor may
consolidate with or merge into or sell its assets to a corporation other than
the Company or another Subsidiary Guarantor (whether or not affiliated with the
Subsidiary Guarantor, but subject to the provisions described in the immediately
preceeding paragraph), provided that (a) if the surviving corporation is not the
Subsidiary Guarantor, the surviving corporation agrees to assume such Subsidiary
Guarantor's obligations under its Senior Note Guarantee or its Senior
Subordinated Note Guarantee, as the case may be, and all its obligations under
the applicable New Indenture and (b) such transaction does not (i) violate any
covenants set forth in the applicable New Indenture or (ii) result in a Default
or Event of Default under the applicable New Indenture immediately thereafter
that is continuing.
The obligations of each Subsidiary Guarantor under each of its Senior Note
Guarantee and its Senior Subordinated Note Guarantee are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor (other than liabilities of such
Subsidiary Guarantor under Indebtedness which constitutes Subordinated
Indebtedness with respect to its Senior Note Guarantee or its Senior
Subordinated Note Guarantee, as the case may be) and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Senior Note Guarantee or Senior Subordinated Note Guarantee, as the case may
be, or pursuant to its contribution obligations under the applicable New
Indenture, result in the obligations of such Subsidiary Guarantor under such
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. Each Subsidiary Guarantor that makes a payment or
distribution under a Senior Note Guarantee or Senior Subordinated Note
Guarantee, as the case may be, shall be entitled to a contribution from each
other Subsidiary Guarantor in a pro rata amount based on the Adjusted Net Assets
of each Subsidiary Guarantor.
CHANGE OF CONTROL
Each of the New Indentures will provide that, upon the occurrence of a
Change of Control, each Holder of New F4L Notes issued thereunder will have the
right to require the repurchase of such Holder's New F4L
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<PAGE> 116
Notes pursuant to the offer described below (the "Change of Control Offer"), at
a purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest to the date of repurchase.
Each of the New Indentures will provide that within 30 days following the
date upon which the Change of Control occurred, the Company must send, by first
class mail, a notice to each Holder of New F4L Notes issued under such New
Indenture, with a copy to the applicable New Trustee, which notice shall govern
the terms of the Change of Control Offer. The New Indentures shall require that
notice of an event giving rise to a Change of Control shall be given on the same
date and in the same manner to all Holders. Such notice shall state, among other
things, the purchase date, which must be no earlier than 30 days nor later than
40 days from the date such notice is mailed, other than as may be required by
law (the "Change of Control Payment Date"). Each New Indenture shall provide
that the Change of Control Payment Date under the New Senior Note Indenture with
respect to any Change of Control shall be one business day prior to the Change
of Control Payment Date under the New Senior Subordinated Note Indenture with
respect to such Change of Control. Holders electing to have a New F4L Note
purchased pursuant to a Change of Control Offer will be required to surrender
the New F4L Note, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of the New F4L Note completed, to the applicable Paying Agent at the
address specified in the notice prior to the close of business on the Business
Day prior to the applicable Change of Control Payment Date. Each Change of
Control Offer is required to remain open for at least 20 Business Days and until
12:00 Midnight, New York City time on the applicable Change of Control Payment
Date.
The New Senior Subordinated Note Indenture will further provide that,
notwithstanding the foregoing, prior to the mailing of the notice of a Change of
Control Offer referred to above, within 30 days following a Change of Control
the Company shall either (a) repay in full and terminate all commitments under
Indebtedness under the Credit Agreement to the extent the terms thereof require
repayment upon a Change of Control (or offer to repay in full and terminate all
commitments under all Indebtedness under the Credit Agreement and repay the
Indebtedness owed to each lender which has accepted such offer), or (b) obtain
the requisite consents under the Credit Agreement, the terms of which require
repayment upon a Change of Control, to permit the repurchase of the New F4L
Senior Subordinated Notes as provided above. The Company shall first comply with
the covenant in the immediately preceding sentence before it shall be required
to repurchase New F4L Senior Subordinated Notes pursuant to the provisions
described above. The Company's failure to comply with the covenants described in
this paragraph shall constitute an Event of Default under the New Indentures.
In addition, the New F4L Senior Subordinated Note Indenture will provide
that prior to purchasing New F4L Senior Subordinated Notes tendered in a Change
of Control Offer, the Company shall purchase all New F4L Senior Notes (or
permitted refinancing thereof) which it is required to purchase by reason of
such Change of Control pursuant to the provisions of the New F4L Senior Note
Indenture, as in effect on the Issue Date.
The Company must comply with Rule 14e-1 under the Exchange Act and any
other applicable provisions of the federal securities laws in connection with a
Change of Control Offer.
CERTAIN COVENANTS
Except as otherwise specified below, each of the New Indentures will
contain, among other things, the following covenants:
Limitation on Restricted Payments. Each of the New Indentures will provide
that the Company shall not, and shall cause each of its Subsidiaries not to,
directly or indirectly, make any Restricted Payment if, at the time of such
proposed Restricted Payment, or after giving effect thereto, (a) a Default or an
Event of Default shall have occurred and be continuing, (b) the Company could
not incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the covenant described under "-- Limitation on Incurrences of
Additional Indebtedness" below or (c) the aggregate amount expended for all
Restricted Payments, including such proposed Restricted Payment (the amount of
any Restricted Payment, if other than cash, to be the fair market value thereof
at the date of payment as determined in good faith by the Board of Directors of
the Company), subsequent to the Issue Date, shall exceed the sum of (i) 50% of
the aggregate Consolidated Net Income (or if such aggregate Consolidated Net
Income is a loss, minus 100% of such loss)
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of the Company earned subsequent to the Issue Date and on or prior to the date
of the proposed Restricted Payment (the "Reference Date") plus (ii) 100% of the
aggregate Net Proceeds received by the Company from any person (other than a
Subsidiary of the Company) from the issuance and sale (including upon exchange
or conversion for other securities of the Company) subsequent to the Issue Date
and on or prior to the Reference Date of Qualified Capital Stock (excluding (A)
Qualified Capital Stock paid as a dividend on any Capital Stock or as interest
on any Indebtedness and (B) any Net Proceeds from issuances and sales financed
directly or indirectly using funds borrowed from the Company or any Subsidiary,
until and to the extent such borrowing is repaid), plus (iii) 100% of the
aggregate net cash proceeds received by the Company as capital contributions to
the Company after the Issue Date, plus (iv) $25 million.
The New Indentures will provide that if no Default or Event of Default
shall have occurred and be continuing as a consequence thereof, the provisions
set forth in the immediately preceding paragraph will not prevent (1) the
payment of any dividend within 60 days after the date of its declaration if the
dividend would have been permitted on the date of declaration, (2) the
acquisition of any shares of Capital Stock of the Company or the repurchase,
redemption or other repayment of any Subordinated Indebtedness in exchange for
or solely out of the proceeds of the substantially concurrent sale (other than
to a Subsidiary) of shares of Qualified Capital Stock of the Company, (3) the
repurchase, redemption or other repayment of any Subordinated Indebtedness in
exchange for or solely out of the proceeds of the substantially concurrent sale
(other than to a Subsidiary) of Subordinated Indebtedness of the Company with an
Average Life equal to or greater than the then remaining Average Life of the
Subordinated Indebtedness repurchased, redeemed or repaid, and (4) Permitted
Payments; provided, however, that the declaration of each dividend paid in
accordance with clause (1) above, each acquisition, repurchase, redemption or
other repayment made in accordance with, or of the type set forth in, clause (2)
above, and each payment described in clause (iii), (iv), (v), (vi) or (vii) of
the definition of the term "Permitted Payments" shall each be counted for
purposes of computing amounts expended pursuant to subclause (c) in the
immediately preceding paragraph, and no amounts expended pursuant to clause (3)
above or pursuant to clause (i) or (ii) of the definition of the term "Permitted
Payments" shall be so counted; provided further that to the extent any payments
made pursuant to clause (vii) of the definition of the term "Permitted Payments"
are deducted for purposes of computing the Consolidated Net Income of the
Company, such payments shall not be counted for purposes of computing amounts
expended as Restricted Payments pursuant to subclause (c) in the immediately
preceding paragraph.
Limitation on Incurrences of Additional Indebtedness. Each of the New
Indentures will provide that the Company shall not, and shall not permit any of
its Subsidiaries, directly or indirectly, to incur, assume, guarantee, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for the payment of (collectively "incur") any Indebtedness other
than Permitted Indebtedness; provided, however, that if no Default with respect
to payment of principal of, or interest on, the New F4L Notes issued under such
New Indenture or Event of Default under such New Indenture shall have occurred
and be continuing at the time or as a consequence of the incurrence of any such
Indebtedness, the Company may incur Indebtedness if immediately before and
immediately after giving effect to the incurrence of such Indebtedness the
Operating Coverage Ratio of the Company would be greater than 2.0 to 1.0;
provided further a Subsidiary may incur Acquired Indebtedness to the extent such
Indebtedness could have been incurred by the Company pursuant to the immediately
preceding proviso.
In addition, the New Senior Note Indenture will provide that neither the
Company nor any Subsidiary Guarantor will, directly or indirectly, in any event
incur any Indebtedness that by its terms (or by the terms of any agreement
governing such Indebtedness) is subordinated to any other Indebtedness of the
Company or such Subsidiary Guarantor, as the case may be, unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such Indebtedness) made expressly subordinate to the New F4L Senior Notes or the
Senior Note Guarantee of such Subsidiary Guarantor, as the case may be, to the
same extent and in the same manner as such Indebtedness is subordinated pursuant
to subordination provisions that are most favorable to the holders of any other
Indebtedness of the Company or such Subsidiary Guarantor, as the case may be.
Limitation on Liens. Each of the New Indentures will provide that the
Company shall not and shall not permit any Subsidiary to create, incur, assume
or suffer to exist any Liens upon any of their respective assets
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unless the New F4L Notes issued thereunder are equally and ratably secured by
the Liens covering such assets, except for (i) in the case of the New Senior
Subordinated Note Indenture, Liens on assets of the Company securing Senior
Indebtedness and Liens on assets of a Subsidiary Guarantor which, at the time of
incurrence, secure Guarantor Senior Indebtedness, (ii) existing and future Liens
securing Indebtedness and other obligations of the Company and its Subsidiaries
under the Credit Agreement and related documents or any refinancing or
replacement thereof in whole or in part permitted under the applicable New
Indenture, (iii) Permitted Liens, (iv) Liens securing Acquired Indebtedness;
provided that such Liens (x) are not incurred in connection with, or in
contemplation of the acquisition of the property or assets acquired and (y) do
not extend to or cover any property or assets of the Company or any Subsidiary
other than the property or assets so acquired, (v) Liens to secure Capitalized
Lease Obligations and certain other Indebtedness that is otherwise permitted
under the applicable New Indenture; provided that (A) any such Lien is created
solely for the purpose of securing such other Indebtedness representing, or
incurred to finance, refinance or refund, the cost (including sales and excise
taxes, installation and delivery charges and other direct costs of, and other
direct expenses paid or charged in connection with, the purchase (whether
through stock or asset purchase, merger or otherwise) or construction) or
improvement of the property subject thereto (whether real or personal, including
fixtures and other equipment), (B) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such costs and (C) such Lien does
not extend to or cover any other property other than such item of property and
any improvements on such item; (vi) Liens existing on the Issue Date (after
giving effect to the Merger); (vii) Liens in favor of the New Trustees under the
New Indentures and any substantially equivalent Lien granted to any trustee or
similar institution under any indenture for Indebtedness permitted to be
incurred under such New Indenture; and (viii) any replacement, extension or
renewal, in whole or in part, of any Lien described in this or the foregoing
clauses including in connection with any refinancing of the Indebtedness, in
whole or in part, secured by any such Lien provided that to the extent any such
clause limits the amount secured or the assets subject to such Liens, no
extension or renewal shall increase the amount or the assets subject to such
Liens, except to the extent that the Liens associated with such additional
assets are otherwise permitted hereunder.
Limitation on Asset Sales. Each of the New Indentures will provide that
neither the Company nor any of its Subsidiaries shall consummate an Asset Sale
unless (a) the Company or the applicable Subsidiary receives consideration at
the time of such Asset Sale at least equal to the fair market value of the
assets sold and (b) upon consummation of an Asset Sale, the Company will within
365 days of the receipt of the proceeds therefrom, either: (i) apply or cause
its Subsidiary to apply the Net Cash Proceeds of any Asset Sale to (A) a Related
Business Investment, (B) an investment in properties and assets that replace the
properties and assets that are the subject of such Asset Sale or (C) an
investment in properties and assets that will be used in the business of the
Company and its Subsidiaries existing on the Issue Date or in businesses
reasonably related thereto; (ii) apply or cause to be applied such Net Cash
Proceeds to the permanent repayment of Pari Passu Indebtedness or in the case of
the New Senior Subordinated Note Indenture, Senior Indebtedness; provided,
however, that the repayment of any revolving loan (under the Credit Agreement or
otherwise) shall result in a permanent reduction in the commitment thereunder;
(iii) use such Net Cash Proceeds to secure Letter of Credit Obligations to the
extent the related letters of credit have not been drawn upon or returned
undrawn; or (iv) after such time as the accumulated Net Cash Proceeds equals or
exceeds $20 million, apply or cause to be applied such Net Cash Proceeds to the
purchase of New F4L Notes issued under such New Indenture tendered to the
Company for purchase at a price equal to 100% of the principal amount thereof
plus accrued interest to the date of purchase pursuant to an offer to purchase
made by the Company as set forth below (a "Net Proceeds Offer"); provided,
however, that the Company shall have the right to exclude from the foregoing
provisions Asset Sales subsequent to the Issue Date, (x) the proceeds of which
are derived from the sale and substantially concurrent lease-back of a
supermarket and/or related assets which are acquired or constructed by the
Company or a Subsidiary subsequent to the Issue Date, provided that such sale
and substantially concurrent lease-back occurs within 180 days following such
acquisition or the completion of such construction, as the case may be, and (y)
the proceeds of which in the aggregate do not exceed $20 million; provided
further that pending the utilization of any Net Cash Proceeds in the manner (and
within the time period) described above, the Company may use any such Net Cash
Proceeds to repay revolving loans under the Credit Agreement without a permanent
reduction of the commitment thereunder.
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Each Net Proceeds Offer will be mailed to the record Holders of New F4L
Senior Notes or New F4L Senior Subordinated Notes, as the case may be, as shown
on the register of Holders of such New F4L Notes not less than 325 nor more than
365 days after the relevant Asset Sale, with a copy to the applicable New
Trustee, shall specify the purchase date (which shall be no earlier than 30 days
nor later than 40 days from the date such notice is mailed) and shall otherwise
comply with the procedures set forth in the applicable New Indenture. Upon
receiving notice of the Net Proceeds Offer, Holders of New F4L Senior Notes or
New F4L Senior Subordinated Notes, as the case may be, may elect to tender their
New F4L Notes in whole or in part in integral multiples of $1,000 in exchange
for cash. To the extent Holders properly tender New F4L Senior Notes or New F4L
Senior Subordinated Notes, as the case may be, in an amount exceeding the Net
Proceeds Offer, New F4L Notes of tendering Holders will be repurchased on a pro
rata basis (based on amounts tendered).
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of New F4L Notes pursuant to a Net Proceeds Offer.
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. Each of the New Indentures will provide that the Company shall
not, and shall not permit any Subsidiary to, directly or indirectly, create or
suffer to exist, or allow to become effective any consensual Payment Restriction
with respect to any of its Subsidiaries, except for (a) any such restrictions
contained in (i) the Credit Agreement and related documents as in effect on the
Issue Date as any such payment restriction may apply to any present or future
Subsidiary, (ii) the New Indentures and any agreement in effect at or entered
into on the Issue Date, (iii) Indebtedness of a person existing at the time such
person becomes a Subsidiary (provided that (x) such Indebtedness is not incurred
in connection with, or in contemplation of, such person becoming a Subsidiary,
(y) such restriction is not applicable to any person, or the properties or
assets of any person, other than the person so acquired and (z) such
Indebtedness is otherwise permitted to be incurred pursuant to the provisions of
the covenant described under "-- Limitation on Incurrences of Additional
Indebtedness" above), (iv) secured Indebtedness otherwise permitted to be
incurred pursuant to the provisions of the covenants described under
"-- Limitation on Incurrences of Additional Indebtedness" and "-- Limitation on
Liens" above that limit the right of the debtor to dispose of the assets
securing such Indebtedness; (b) customary non-assignment provisions restricting
subletting or assignment of any lease or other agreement entered into by a
Subsidiary; (c) customary net worth provisions contained in leases and other
agreements entered into by a Subsidiary in the ordinary course of business; (d)
customary restrictions with respect to a Subsidiary pursuant to an agreement
that has been entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Subsidiary; (e) customary provisions
in joint venture agreements and other similar agreements; and (f) restrictions
contained in Indebtedness incurred to refinance, refund, extend or renew
Indebtedness referred to in clause (a) above; provided that the restrictions
contained therein are not materially more restrictive taken as a whole than
those provided for in such Indebtedness being refinanced, refunded, extended or
renewed and (g) Payment Restrictions contained in any other Indebtedness
permitted to be incurred subsequent to the Issue Date pursuant to the provisions
of the covenant described under "-- Limitation on Incurrences of Additional
Indebtedness" above; provided that any such Payment Restrictions are ordinary
and customary with respect to the type of Indebtedness being incurred (under the
relevant circumstances), and, in any event, no more restrictive than the most
restrictive Payment Restrictions in effect on the Issue Date.
Guarantees of Certain Indebtedness. Each of the New Indentures will
provide that the Company shall not permit any of its Subsidiaries to (a) incur,
guarantee or secure through the granting of Liens the payment of any
Indebtedness under the term portion of the Credit Agreement or refinancings
thereof or (b) pledge any intercompany notes representing obligations of any of
its Subsidiaries, to secure the payment of any Indebtedness under the term
portion of the Credit Agreement or refinancings thereof, in each case unless (x)
such Subsidiary, the Company and the New Senior Note Trustee execute and deliver
a supplemental indenture evidencing such Subsidiary's Senior Note Guarantee in
the case of the New Senior Note Indenture and (y) such Subsidiary, the Company
and the New Senior Subordinated Note Trustee execute and deliver a supplemental
indenture evidencing such Subsidiary's Senior Subordinated Note Guarantee in the
case of the New Senior Subordinated Note Indenture.
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Limitation on Transactions with Affiliates. Each of the New Indentures
will provide that neither the Company nor any of its Subsidiaries shall (i)
sell, lease, transfer or otherwise dispose of any of its properties or assets or
issue securities (other than equity securities which do not constitute
Disqualified Capital Stock) to, (ii) purchase any property, assets or securities
(other than equity securities which do not constitute Disqualified Capital
Stock) from, (iii) make any Investment in, or (iv) enter into or suffer to exist
any contract or agreement with or for the benefit of, an Affiliate or
Significant Stockholder (or any Affiliate of such Significant Stockholder) of
the Company or any Subsidiary (an "Affiliate Transaction"), other than (x)
Affiliate Transactions permitted under the following paragraph and (y) Affiliate
Transactions in the ordinary course of business, that are fair to the Company or
such Subsidiary, as the case may be, and on terms at least as favorable as might
reasonably have been obtainable at such time from an unaffiliated party;
provided that (A) with respect to Affiliate Transactions involving aggregate
payments in excess of $1 million and less than $5 million, the Company or such
Subsidiary, as the case may be, shall have delivered an Officers' Certificate to
the applicable New Trustee certifying that such Affiliate Transaction complies
with clause (y) above, (B) with respect to Affiliate Transactions involving
aggregate payments in excess of $5 million and less than $15 million, the
Company or such Subsidiary, as the case may be, shall have delivered an
Officers' Certificate to the applicable New Trustee certifying that such
Affiliate Transaction complies with clause (y) above and that such Affiliate
Transaction has received the approval of a majority of the disinterested members
of the Board of Directors of the Company or the Subsidiary, as the case may be,
or, in the absence of any such approval by the disinterested members of the
Board of Directors of the Company or that the Subsidiary, as the case may be,
that an Independent Financial Advisor has reasonably and in good faith
determined that the financial terms of such Affiliate Transaction are fair to
the Company or such Subsidiary, as the case may be, or that the terms of such
Affiliate Transaction are at least as favorable as might reasonably have been
obtained at such time from an unaffiliated party, and that such Independent
Financial Advisor has provided written confirmation of such determination to the
Board of Directors and (C) with respect to Affiliate Transactions involving
aggregate payments in excess of $15 million, the Company or such Subsidiary, as
the case may be, shall have delivered to the applicable New Trustee, a written
opinion from an Independent Financial Advisor to the effect that the financial
terms of such Affiliate Transaction are fair to the Company or such Subsidiary,
as the case may be, or that the terms of such Affiliate Transaction are at least
as favorable as those that might reasonably have been obtained at the time from
an unaffiliated party.
The provisions of the foregoing paragraph shall not apply to (i) any
Permitted Payment, (ii) any Restricted Payment that is made in compliance with
the provisions of the covenant described under "-- Limitation on Restricted
Payments" above, (iii) reasonable and customary fees and compensation paid to,
and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Subsidiary, as determined by the Board of
Directors of the Company or any Subsidiary or the senior management thereof in
good faith, (iv) transactions exclusively between or among the Company and any
of its wholly-owned Subsidiaries or exclusively between or among such
wholly-owned Subsidiaries, provided such transactions are not otherwise
prohibited by the applicable New Indenture, (v) any agreement as in effect as of
the Issue Date or any amendment thereto or any transaction contemplated thereby
(including pursuant to any amendment thereto) so long as any such amendment is
not disadvantageous to the Holders of the New F4L Senior Notes or New F4L Senior
Subordinated Notes, as the case may be, in any material respect, (vi) the
existence of, or the performance by the Company or any of its Subsidiaries of
its obligations under the terms of, any stockholders agreement (including any
registration rights agreement or purchase agreement related thereto) to which it
(or New Holdings) is a party as of the Issue Date and any similar agreements
which it (or New Holdings) may enter into thereafter; provided, however, that
the existence of, or the performance by the Company or any Subsidiaries of
obligations under any future amendment to, any such existing agreement or under
any similar agreement entered into after the Issue Date shall only be permitted
by this clause (vi) to the extent that the terms of any such amendment or new
agreement are not otherwise disadvantageous to the Holders of the New F4L Senior
Notes or New F4L Senior Subordinated Notes, as the case may be, in any material
respect, (vii) transactions permitted by, and complying with, the provisions of
the covenant described under "-- Limitation on Mergers and Certain Other
Transactions" below and (viii) purchases or sales of goods or services or other
transactions with suppliers, in each case, in the ordinary course of business
(including, without limitation, pursuant to joint venture agreements) and
otherwise in
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compliance with the terms of the applicable New Indenture which are fair to the
Company, in the reasonable determination of the Board of Directors, or are on
terms at least as favorable as might reasonably have been obtained at such time
from an unaffiliated party.
Limitations on Preferred Stock of Subsidiaries. Each of the New Indentures
will provide that the Company will not permit any of its Subsidiaries to issue
any Preferred Stock (other than to the Company or to a wholly-owned Subsidiary)
or permit any person (other than the Company or a wholly-owned Subsidiary) to
own any Preferred Stock of any Subsidiary.
Limitation on Mergers and Certain Other Transactions. Each of the New
Indentures will provide that the Company, in a single transaction or through a
series of related transactions, shall not (i) consolidate with or merge with or
into any other person, or transfer (by lease, assignment, sale or otherwise) all
or substantially all of its properties and assets as an entirety or
substantially as an entirety to another person or group of affiliated persons or
(ii) adopt a Plan of Liquidation, unless, in either case, (1) either the Company
shall be the continuing person, or the person (if other than the Company) formed
by such consolidation or into which the Company is merged or to which all or
substantially all of the properties and assets of the Company as an entirety or
substantially as an entirety are transferred (or, in the case of a Plan of
Liquidation, any person to which assets are transferred) (the Company or such
other person being hereinafter referred to as the "Surviving Person") shall be a
corporation organized and validly existing under the laws of the United States,
any state thereof or the District of Columbia, and shall expressly assume, by an
indenture supplement, all the obligations of the Company under such New
Indenture and the New F4L Notes issued thereunder; (2) immediately after and
giving effect of such transaction and the assumption contemplated by clause (1)
above and the incurrence or anticipated incurrence of any Indebtedness to be
incurred in connection therewith, (A) the Surviving Person shall have a
Consolidated Net Worth equal to or greater than the Consolidated Net Worth of
the Company immediately preceding the transaction and (B) the Surviving Person
could incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the provisions of the covenant described under
"-- Limitation on Incurrences of Additional Indebtedness" above; (3) immediately
before and immediately after and giving effect to such transaction and the
assumption of the obligations as set forth in clause (1) above and the
incurrence or anticipated incurrence of any Indebtedness to be incurred in
connection therewith, no Default or Event of Default shall have occurred and be
continuing; and (4) each Subsidiary Guarantor, unless it is the other party to
the transaction, shall have by supplemental indenture confirmed that its
Guarantee of the obligations of the Company under the New F4L Notes issued under
such New Indenture shall apply, without alteration or amendment as such
Guarantee applies on the date it was granted under the applicable New Indenture
to the obligations of the Company under the applicable New Indenture and the
applicable New F4L Notes to the obligations of the Company or such Person, as
the case may be, under the applicable New Indenture and the applicable New F4L
Notes, after the consummation of such transaction.
Notwithstanding the foregoing, the consummation of the Merger on the Issue
Date need only comply with clauses (1) and (3) of the foregoing paragraph.
Each of the New Indentures will provide that upon any consolidation or
merger or any transfer of all or substantially all of the assets of the Company
or any adoption of a Plan of Liquidation by the Company in accordance with the
foregoing, the surviving person formed by such consolidation or into which the
Company is merged or to which such transfer is made (or, in the case of a Plan
of Liquidation, to which assets are transferred) shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
such New Indenture with the same effect as if such surviving person had been
named as the Company therein; provided, however, that solely for purposes of
computing amounts described in subclause (c) of the first paragraph of the
covenant described under "-- Limitation on Restricted Payments" above, any such
surviving person shall only be deemed to have succeeded to and be substituted
for the Company with respect to periods subsequent to the effective time of such
merger, consolidation or transfer of assets.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise) of all or substantially all of the properties and assets of one or
more Subsidiaries, the Capital Stock of which constitutes all or
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substantially all of the properties and assets of the Company shall be deemed to
be the transfer of all or substantially all of the properties and assets of the
Company.
Limitation on Other Senior Subordinated Indebtedness. The New F4L Senior
Subordinated Note Indenture will provide that neither the Company nor any
Subsidiary Guarantor will, directly or indirectly, incur any Indebtedness
(including Acquired Indebtedness) that is subordinate in right of payment to any
Indebtedness of the Company or such Subsidiary Guarantor, as the case may be,
unless such Indebtedness is either (a) pari passu in right of payment with the
New F4L Senior Subordinated Notes or the Senior Subordinated Guarantee of such
Subsidiary Guarantor, as the case may be, or (b) subordinate in right of payment
to the New F4L Senior Subordinated Notes or the Senior Subordinated Guarantee of
such Subsidiary Guarantor, as the case may be, in the same manner and at least
to the same extent as the New F4L Senior Subordinated Notes are subordinate to
Senior Indebtedness or as such Senior Subordinated Guarantee is subordinated to
Senior Guarantor Indebtedness of such Subsidiary Guarantor, as the case may be.
EVENTS OF DEFAULT
The following events constitute "Events of Default" under each of the New
Indentures: (i) failure to make any interest payment on the applicable New F4L
Notes when due and the continuance of such default for a period of 30 days; (ii)
failure to pay principal of, or premium, if any, on the applicable New F4L Notes
when due, whether at maturity, upon acceleration, redemption, required
repurchase or otherwise; (iii) failure to comply with any other agreement
contained in the applicable New F4L Notes or the applicable New Indenture, if
such failure continues unremedied for 30 days after written notice given by the
applicable New Trustee or the Holders of at least 25% in principal amount of the
applicable New F4L Notes then outstanding (except in the case of a default with
respect to the covenants described under "-- Certain Covenants -- Limitation on
Restricted Payments," "-- Certain Covenants -- Limitations on Asset Sales,"
"-- Change of Control," and "-- Certain Covenants -- Limitations on Merger and
Certain Other Transactions," which shall constitute Events of Default with
notice but without passage of time); (iv) a default under any Indebtedness of
the Company or its Subsidiaries, whether such Indebtedness now exists or shall
hereinafter be created, if both (A) such default either (1) results from the
failure to pay any such Indebtedness at its stated final maturity or (2) relates
to an obligation other than the obligation to pay such Indebtedness at its
stated final maturity and results in the holder or holders of such Indebtedness
causing such Indebtedness to become due prior to its stated maturity and (B) the
principal amount of such Indebtedness, together with the principal amount of any
other such Indebtedness in default for failure to pay principal at stated final
maturity or the maturity of which has been so accelerated, aggregate $20 million
or more at any one time outstanding; (v) any final judgment or order for payment
of money in excess of $20 million shall be entered against the Company or any
Significant Subsidiary and shall not be discharged for a period of 60 days after
such judgment becomes final and nonappealable; (vi) either the Company or any
Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case or proceeding; (b) consents to the entry of an
order for relief against it in an involuntary case or proceeding; (c) consents
to the appointment of a Custodian of it or for all or substantially all of its
property; or (d) makes a general assignment for the benefit of its creditors;
(vii) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (a) is for relief against the Company or any Significant
Subsidiary, in an involuntary case or proceeding; (b) appoints a Custodian of
the Company or any Significant Subsidiary, or for all or any substantial part of
their respective properties; or (c) orders the liquidation of the Company or any
Significant Subsidiary, and in each case the order or decree remains unstayed
and in effect for 60 days; (viii) the lenders under the Credit Agreement shall
commence judicial proceedings to foreclose upon any material portion of the
assets of the Company and its Subsidiaries; or (ix) any of the Guarantees issued
under such New Indenture shall be declared or adjudged invalid in a final
judgment or order issued by any court of governmental authority. In the event of
a declaration of acceleration because an Event of Default set forth in clause
(iv) above has occurred and is continuing, such declaration of acceleration
shall be automatically rescinded and annulled if either (i) the holders of the
Indebtedness which is the subject of such Event of Default have waived such
failure to pay at maturity or have rescinded the acceleration in respect of such
Indebtedness within 90 days of such maturity or declaration of acceleration, as
the case may be, and no other Event of Default has occurred during such 90-day
period which has not been cured or waived, or (ii) such Indebtedness shall have
been discharged
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or the maturity thereof shall have been extended such that it is not then due
and payable, or the underlying default has been cured, within 90 days of such
maturity or declaration of acceleration, as the case may be.
If an Event of Default (other than an Event of Default resulting from
bankruptcy, insolvency, receivership or reorganization of the Company or a
Subsidiary Guarantor) occurs and is continuing under a New Indenture, the New
Trustee under such New Indenture or the Holders of at least 25% in principal
amount of the then outstanding New F4L Notes issued under such New Indenture may
declare due and payable all unpaid principal and interest accrued and unpaid on
the then outstanding New F4L Notes issued under such New Indenture by notice in
writing to the Company and the applicable New Trustee specifying the respective
Event of Default and that it is a "notice of acceleration" (the "Acceleration
Notice"), and the same (i) shall become immediately due and payable or (ii) if
there are any amounts outstanding under the Credit Agreement, shall become due
and payable upon the first to occur of an acceleration under the Credit
Agreement, or five business days after receipt by the Company and the
administrative agent under the Credit Agreement of such Acceleration Notice. If
an Event of Default resulting from certain events of bankruptcy, insolvency,
receivership or reorganization of the Company or a Subsidiary Guarantor shall
occur under a New Indenture, all unpaid principal of and accrued interest on all
then outstanding New F4L Notes issued under such New Indenture shall be
immediately due and payable without any declaration or other act on the part of
the applicable New Trustee or any of the Holders of such New F4L Notes. After a
declaration of acceleration under a New Indenture, subject to certain
conditions, the Holders of a majority in principal amount of the then
outstanding New F4L Notes issued thereunder, by notice to the applicable New
Trustee, may rescind such declaration if all existing Events of Default under
such New Indenture are remedied. In certain cases the Holders of a majority in
principal amount of outstanding New F4L Notes issued under such New Indenture
may waive a past default under such New Indenture and its consequences, except a
default in the payment of or interest on any of the New F4L Notes issued
thereunder.
Each New Indenture provides that if a Default or Event of Default occurs
and is continuing thereunder and if it is known to the applicable New Trustee,
such New Trustee shall mail to each Holder of New F4L Notes issued thereunder
notice of the Default or Event of Default within 90 days after such Default or
Event of Default occurs; provided, however, that, except in the case of a
Default or Event of Default in the payment of the principal of or interest on
any of such New F4L Notes, including the failure to make payment on a Change of
Control Payment Date pursuant to a Change of Control Offer or payment when due
pursuant to a Net Proceeds Offer the applicable New Trustee may withhold such
notice if it in good faith determines that withholding such notice is in the
interest of the Holders of such New F4L Notes.
Each New Indenture provides that no Holder of New F4L Notes issued
thereunder may pursue any remedy thereunder unless the applicable New Trustee
(i) shall have failed to act for a period of 60 days after receiving written
notice of a continuing Event of Default under such New Indenture by such Holder
and a request to act by Holders of at least 25% in principal amount of New F4L
Notes issued under such New Indenture and (ii) has received indemnification
satisfactory to it; provided, however, that such provision does not affect the
right of any Holder to sue for enforcement of any overdue payment of New F4L
Notes issued under such New Indenture.
Each New Indenture provides that two officers of the Company are required
to certify to the applicable New Trustee within 120 days after the end of each
fiscal year of the Company whether or not they know of any Default that occurred
under such New Indenture during such fiscal year and, if applicable, describe
such Default and the status thereof.
DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company discharged with respect to the outstanding New F4L
Senior Notes or the New F4L Senior Subordinated Notes. Such Legal Defeasance
means that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the applicable New F4L Notes except for (i) the
rights of Holders of such New F4L Notes to receive payments in respect of the
principal of, premium, if any, and interest on such New F4L Notes when such
payments are due; (ii) the Company's obligations to issue temporary New F4L
Notes,
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register the transfer or exchange of such New F4L Notes, replace mutilated,
destroyed, lost or stolen New F4L Notes and maintain an office or agency for
payments in respect of such New F4L Notes and money for security payments held
in respect of such New F4L Notes, (iii) the rights, powers, trusts, duties and
immunities of the applicable New Trustee and the Company's obligations in
connection therewith; and (iv) the Legal Defeasance provisions of the New
Indentures. In addition, the Company may, at its option and at any time elect to
have the obligations of the Company released with respect to certain covenants
described above under "-- Certain Covenants" ("Covenant Defeasance"), and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to such New F4L Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance with
respect to either issue of New F4L Notes, (i) the Company must have irrevocably
deposited with the applicable New Trustee, in trust, for the benefit of the
Holders of such New F4L Notes, cash in U.S. dollars, U.S. Government Obligations
(as defined in the New Indentures), or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on the applicable outstanding New F4L Notes to redemption or maturity
provided that the applicable New Trustee shall have been irrevocably instructed
to apply such money or the proceeds of such U.S. Government Obligations to said
payments with respect to the New F4L Notes on the maturity date or such
redemption date, as the case may be, (ii) in the case of Legal Defeasance, the
Company shall have delivered to the applicable New Trustee an opinion of counsel
stating that (A) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling or (B) since the Issue Date, there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel shall confirm that, the
Holders of New F4L Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the
applicable New Trustee an opinion of counsel stating that the Holders of New F4L
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such Covenant Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing under the applicable New
Indenture on the date of such deposit or insofar as clauses (vi) and (vii) under
the first paragraph under "-- Events of Default" above are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under, the applicable New Indenture or any
other material agreement or instrument to which the Company or any Subsidiary
Guarantor is a party or by which it is bound (and in that connection, the New
Trustee shall have received a certificate from the Agent under the Credit
Agreement to that effect with respect to such Credit Agreement if then in
effect); (vi) the Company shall have delivered to the applicable New Trustee an
opinion of counsel to the effect that after the 91st day following the deposit
(A) in the case of the New Senior Subordinated Note Indenture, the trust funds
will not be subject to any rights of holders of Senior Indebtedness or Guarantor
Senior Indebtedness, including, without limitation, those arising under the New
Senior Subordinated Note Indenture, after the 91st day following the deposit and
(B) in the case of each of the New Indentures, after the 91st day following the
deposit the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (vii) the Company shall have delivered to the applicable New
Trustee an Officer's Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of the New F4L Notes over
other creditors of the Company or any Subsidiary Guarantor or with the intent of
defeating, hindering, delaying or defrauding creditors of the Company, any
Subsidiary Guarantor or others; and (viii) the Company shall have delivered to
the applicable New Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent provided for relating to the Legal
Defeasance or Covenant Defeasance, have been complied with.
SATISFACTION AND DISCHARGE
Each New Indenture will be discharged and will cease to be of further
effect as to all outstanding New F4L Notes issued thereunder, when either (a)
all such New F4L Notes theretofore authenticated and
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delivered (except lost, stolen or destroyed New F4L Notes which have been
replaced or paid and New F4L Notes for whose payment money has theretofore been
deposited in trust and thereafter repaid to the Company) have been delivered to
the appropriate New Trustee for cancellation; or (b)(i) all such New F4L Notes
not theretofore delivered to such New Trustee for cancellation have become due
and payable by reason of the making of a notice of redemption or otherwise and
the Company has irrevocably deposited or caused to be deposited with such New
Trustee as trust funds in trust for the purpose an amount of money sufficient to
pay and discharge the entire indebtedness on such New F4L Notes not theretofore
delivered to such New Trustee for cancellation for principal, premium, if any,
and accrued interest to the date of maturity or redemption; (ii) the Company has
paid all sums payable by it under such New Indenture; and (iii) the Company has
delivered irrevocable instructions to the New Trustee under such New Indenture
to apply the deposited money toward the payment of such New F4L Notes at
maturity or the redemption date, as the case may be. In addition, the Company
must deliver an Officers' Certificate and an Opinion of Counsel to the
appropriate New Trustee stating that all conditions precedent to satisfaction
and discharge have been complied with.
MODIFICATION OF THE NEW INDENTURES
Each of the New Indentures and the New F4L Notes issued thereunder may be
amended or supplemented (and compliance with any provision thereof may be
waived) by the Company, the Subsidiary Guarantors, the New Trustee thereunder
and the Holders of not less than a majority in aggregate principal amount of
such New F4L Notes then outstanding, except that (i) without the consent of each
Holder of such New F4L Notes affected, no such amendment, supplement or waiver
may (1) change the principal amount of the applicable New F4L Notes the Holders
of which must consent to an amendment, supplement or waiver of any provision of
the applicable New Indenture, the applicable New F4L Notes or the applicable
Guarantees, (2) reduce the rate or extend the time for payment of interest on
any applicable New F4L Notes, (3) reduce the principal amount of any applicable
New F4L Notes, (4) change the Maturity Date of any applicable New F4L Notes or
the Change of Control Payment Date or alter the redemption provisions in the
applicable New Indenture or the applicable New F4L Notes or the purchase price
in connection with any repurchase of New F4L Notes pursuant to the covenant
described under "-- Change of Control" above in a manner adverse to any Holder
of such New F4L Notes, (5) make any changes in the provisions concerning waivers
of Defaults or Events of Default by Holders or the rights of Holders to recover
the principal of, interest on or redemption payment with respect to any
applicable New F4L Notes, (6) make the principal of, or interest on, any
applicable New F4L Notes payable with anything or in any manner other than as
provided for in the applicable New Indenture, the applicable New F4L Notes and
the applicable Guarantees, (7) waive an Default or Event of Default resulting
from a failure to comply with the covenant described under "-- Change of
Control" above or (8) in the case of the New Senior Subordinated Note Indenture,
modify the subordination provisions of the New Senior Subordinated Note
Indenture (including the related definitions) so as to adversely affect the
ranking of any applicable New F4L Note or Guarantee and (ii) without the consent
of Holders of not less than two thirds in aggregate principal amount of such New
F4L Notes then outstanding, no such amendment, supplement or waiver may release
any Subsidiary Guarantor from any of its Obligations under its applicable
Guarantee or the applicable New Indenture other than in accordance with the
terms of such applicable Guarantee and the applicable New Indenture.
In addition, each of the New Indentures and the New F4L Notes issued
thereunder and the related Guarantees may be amended by the Company, the
Subsidiary Guarantors and the applicable New Trustee (a) to cure any ambiguity,
defect or ambiguity therein; provided that such amendment or supplement does not
adversely affect the rights of any Holder thereof or (b) to make any other
change that does not adversely affect the rights of any Holder thereunder in any
material respect.
THE NEW TRUSTEES
Each New Indenture will provide that the Holders of a majority in principal
amount of the outstanding New F4L Notes issued thereunder may remove the New
Trustee thereunder and appoint a successor trustee with the Company's consent,
by so notifying the trustee to be so removed and the Company. In addition, the
Holders of a majority in principal amount of the outstanding New F4L Notes
issued under a New Indenture
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have the right, subject to certain limitations, to direct the time, method and
place of conducting any proceeding for any remedy available to the New Trustee
under such New Indenture or of exercising any trust or power conferred on such
New Trustee.
Each of the New Indentures will provide that, in case a Default or an Event
of Default has occurred and is continuing thereunder, the New Trustee thereunder
shall exercise such of the rights and powers vested in it by such New Indenture,
and use the same degree of care and skill in the exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of such
person's own affairs. Subject to the latter provision, the New Trustee under
each New Indenture is under no obligation to exercise any of its rights or
powers under the applicable New Indenture at the request, order or direction of
any of the Holders of the New F4L Notes issued thereunder, unless they shall
have offered to such New Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred thereby. If the Company
fails to pay such amounts of principal of, premium, if any, or interest on, the
New F4L Senior Notes or the New F4L Senior Subordinated Notes as shall have
become due and payable upon demand as specified in the applicable New Indenture,
the New Trustee thereunder, at the request of the Holders of a majority in
aggregate principal amount of such New F4L Notes at the time outstanding, and
upon being offered such reasonable indemnity as it may be required against the
costs, expenses and liabilities incurred by it, except as a result of its
negligence or bad faith, shall institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and collect in the
manner provided by law the monies adjudged or decreed to be payable.
Each New Indenture contains limitations on the rights of the New Trustee
thereunder, should it become a creditor of the Company, to obtain payment of
claims in certain cases or to be realized on certain property received by it in
respect of any such claims, securities or otherwise. Each New Trustee is
permitted to engage in other transactions; however, if a New Trustee acquires
any "conflicting interest," it must eliminate such conflict or resign.
REPORTS
Each New Indenture will provide that the Company will deliver to the New
Trustee thereunder within 15 days after the filing of the same with the
Commission, copies of the quarterly and annual report and of the information,
documents and other reports, if any, which the Company is required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act. Each New
Indenture will further provide that, notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company will file with the Commission, to the extent permitted, and
provide the New Trustee under such New Indenture and Holders of the New F4L
Notes issued thereunder with such annual reports and such information, documents
and other reports specified in Sections 13 and 15(d) of the Exchange Act. The
Company will also comply with the other provisions of TIA sec. 314(a).
CERTAIN DEFINITIONS
"Acquired Indebtedness" means (i) with respect to any person that becomes a
Subsidiary of the Company (or is merged into the Company or any of its
Subsidiaries) after the Issue Date, Indebtedness of, such person or any of its
Subsidiaries existing at the time such person becomes a Subsidiary of the
Company (or is merged into the Company or any of its Subsidiaries) and which was
not incurred in connection with, or in contemplation of, such person becoming a
Subsidiary of the Company (or being merged into the Company or any of its
Subsidiaries) and (ii) with respect to the Company or any of its Subsidiaries,
any Indebtedness assumed by the Company or any of its Subsidiaries in connection
with the acquisition of any assets from another person (other than the Company
or any of its Subsidiaries), and which was not incurred by such other person in
connection with, or in contemplation of, such acquisition.
"Adjusted Net Assets" means, with respect to the Guarantee of a Subsidiary
Guarantor at any date, the lesser of the amount by which (x) the fair value of
the property of such Subsidiary Guarantor exceeds the total amount of
liabilities, including, without limitation, contingent liabilities (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date (other than liabilities of such Subsidiary Guarantor under Indebtedness
which constitutes Subordinated Indebtedness with respect to such Guaran-
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tee)), but excluding liabilities under the Senior Note Guarantee of such
Subsidiary Guarantor, in the case of the New Senior Note Indenture, or the
Senior Subordinated Note Guarantee of such Subsidiary Guarantor, in the case of
the New Senior Subordinated Note Indenture, at such date and (y) the present
fair salable value of the assets of such Subsidiary Guarantor at such date
exceeds the amount that will be required to pay the probable liability of such
Subsidiary Guarantor on its debts (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date (other than liabilities
of such Subsidiary Guarantor under Indebtedness which constitutes Subordinated
Indebtedness with respect to such Guarantee) and after giving effect to any
collection from any Subsidiary of such Subsidiary Guarantor in respect of the
obligations of such Subsidiary under the applicable Guarantee), excluding debt
in respect of the Senior Note Guarantee of such Subsidiary Guarantor, in the
case of the New Senior Note Indenture, or the Senior Subordinated Note Guarantee
of such Subsidiary Guarantor, in the case of the New Senior Subordinated Note
Indenture, as they become absolute and matured.
"Affiliate" means, with respect to any person, any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"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 securities, by contract or otherwise; and the terms
"affiliated," "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of the New Indentures, neither BT Securities Corporation
nor any of its Affiliates shall be deemed to be an Affiliate of the Company or
any of its Subsidiaries.
"Asset Sale" means, with respect to any person, any sale, transfer or other
disposition or series of sales, transfers or other dispositions (including,
without limitation, by merger or consolidation or by exchange of assets and
whether by operation of law or otherwise) made by such person or any of its
subsidiaries to any person other than such person or one of its wholly-owned
subsidiaries (or, in the case of a sale, transfer or other disposition by a
Subsidiary, to any person other than the Company or a directly or indirectly
wholly-owned Subsidiary) of any assets of such person or any of its subsidiaries
including, without limitation, assets consisting of any Capital Stock or other
securities held by such person or any of its subsidiaries, and any Capital Stock
issued by any subsidiary of such person, in each case, outside of the ordinary
course of business, excluding, however, any sale, transfer or other disposition,
or series of related sales, transfers or other dispositions (i) involving only
Excluded Assets, (ii) resulting in Net Proceeds to the Company and the
Subsidiaries of $500,000 or less or (iii) pursuant to any foreclosure of assets
or other remedy provided by applicable law to a creditor of the Company with a
Lien on such assets, which Lien is permitted under the New Indentures, provided
that such foreclosure or other remedy is conducted in a commercially reasonable
manner or in accordance with any Bankruptcy Law.
"Average Life" means, as of any date of determination, with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
the number of years from the date of determination to the dates of each
successive scheduled principal payments of such debt security multiplied by the
amount of each such principal payment by (ii) the sum of all such principal
payments.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state or
foreign law for the relief of debtors.
"Board Resolution" means a duly adopted resolution of the Board of
Directors of the Company.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participation or other equivalents (however designated) of corporate
stock, including each class of common stock and preferred stock of such person.
"Capitalized Lease Obligation" means obligations under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations determined in accordance with GAAP.
"Cash Equivalents" means (i) obligations issued or unconditionally
guaranteed by the United States of America or any agency thereof, or obligations
issued by any agency or instrumentality thereof and backed by the full faith and
credit of the United States of America, (ii) commercial paper rated the highest
grade by
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Moody's Investors Service, Inc. and Standard & Poor's Ratings Group and maturing
not more than one year from the date of creation thereof, (iii) time deposits
with, and certificates of deposit and banker's acceptances issued by, any bank
having capital surplus and undivided profits aggregating at least $500 million
and maturing not more than one year from the date of creation thereof, (iv)
repurchase agreements that are secured by a perfected security interest in an
obligation described in clause (i) and are with any bank described in clause
(iii) and (v) readily marketable direct obligations issued by any state of the
United States of America or any political subdivision thereof having one of the
two highest rating categories obtainable from either Moody's Investors Service,
Inc. or Standard & Poor's Ratings Group.
"Change of Control" means the acquisition after the Issue Date, in one or
more transactions, of beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) by (i) any person or entity (other than any Permitted
Holder) or (ii) any group of persons or entities (excluding any Permitted
Holders) who constitute a group (within the meaning of Section 13(d)(3) of the
Exchange Act), in either case, of any securities of New Holdings or the Company
such that, as a result of such acquisition, such person, entity or group
beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act),
directly or indirectly, 40% or more of the then outstanding voting securities
entitled to vote on a regular basis for a majority of the Board of Directors of
the Company (but only to the extent that such beneficial ownership is not shared
with any Permitted Holder who has the power to direct the vote thereof);
provided, however, that no such Change of Control shall be deemed to have
occurred if (A) the Permitted Holders beneficially own, in the aggregate, at
such time, a greater percentage of such voting securities than such other
person, entity or group or (B) at the time of such acquisition, the Permitted
Holders (or any of them) possess the ability (by contract or otherwise) to
elect, or cause the election, of a majority of the members of the Company's
Board of Directors.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such person's common stock, whether
outstanding at the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Consolidated Net Income" means, with respect to any person, for any
period, the aggregate of the net income (or loss) of such person and its
subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (a) the net income of any other person in which such
person or any of its subsidiaries has an interest (which interest does not cause
the net income of such other person to be consolidated with the net income of
such person and its subsidiaries in accordance with GAAP) shall be included only
to the extent of the amount of dividends or distributions actually paid to such
person or such subsidiary by such other person in such period; (b) the net
income of any subsidiary of such person that is subject to any Payment
Restriction shall be excluded to the extent such Payment Restriction actually
prevented the payment of an amount that otherwise could have been paid to, or
received by, such person or a subsidiary of such person not subject to any
Payment Restriction; and (c)(i) the net income (or loss) of any other person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition, (ii) all gains and losses realized on any Asset Sale, (iii)
all gains realized upon or in connection with or as a consequence of the
issuance of the Capital Stock of such person or any of its subsidiaries and any
gains on pension reversions received by such person or any of its subsidiaries,
(iv) all gains and losses realized on the purchase or other acquisition by such
person or any of its subsidiaries of any securities of such person or any of its
subsidiaries, (v) all gains and losses resulting from the cumulative effect of
any accounting change pursuant to the application of Accounting Principles Board
Opinion No. 20, as amended, (vi) all other extraordinary gains and losses, (vii)
(A) all non-cash charges, (B) up to $10 million of severance costs and (C) any
other restructuring reserves or charges (provided, however, that any cash
payments actually made with respect to the liabilities for which such
restructuring reserves or charges were created shall be deducted from
Consolidated Net Income in the period when made), in each case, incurred by the
Company or any of its Subsidiaries in connection with the Merger, including,
without limitation, the divestiture of the Excluded Assets, (viii) losses
incurred by the Company and its Subsidiaries resulting from earthquakes and (ix)
with respect to the Company, all deferred financing costs written off in
connection with the early extinguishment of any Indebtedness, shall each be
excluded.
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"Consolidated Net Worth" means, with respect to any person, the total
stockholders' equity (exclusive of any Disqualified Capital Stock) of such
person and its subsidiaries determined on a consolidated basis in accordance
with GAAP.
"Credit Agreement" means the Credit Agreement, dated as of the Issue Date,
by and among Food 4 Less, certain of its subsidiaries, the Lenders referred to
therein, and Bankers Trust Company, as administrative agent, as the case may be,
amended, extended, renewed, restated, supplemented or otherwise modified (in
whole or in part, and without limitation as to amount, terms conditions,
covenants and other provisions) from time to time, and any agreement governing
Indebtedness incurred to refund or refinance the borrowings and commitments then
outstanding or permitted to be outstanding under such Credit Agreement or such
agreement. The Company shall promptly notify the New Trustees of any such
refunding or refinancing of the Credit Agreement.
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator
or similar official under any Bankruptcy Law.
"Designated Senior Indebtedness" means (i) in the event any Indebtedness is
outstanding under the Credit Agreement, all Senior Indebtedness under the Credit
Agreement and (ii) if no Indebtedness is outstanding under the Credit Agreement,
any other issue of Senior Indebtedness which (a) at the time of the
determination is equal to or greater than $50 million in aggregate principal
amount and (b) is specifically designated in the instrument evidencing such
Senior Indebtedness as "Designated Senior Indebtedness" by the Company.
"Disqualified Capital Stock" means, with respect to any Capital Stock of
such person or its subsidiaries that, by its terms, by the terms of any
agreement related thereto or by the terms of any security, into which it is
convertible, puttable or exchangeable is, or upon the happening of any event or
the passage of time would be, required to be redeemed or repurchased by such
person or its subsidiaries, including at the option of the holder thereof, in
whole or in part, or has, or upon the happening of an event or passage of time
would have, a redemption or similar payment due, on or prior to the Maturity
Date of the New F4L Senior Notes, in the case of the New Senior Note Indenture,
or the New F4L Senior Subordinated Notes, in the case of the New Senior
Subordinated Note Indenture, or any other Capital Stock of such person or its
subsidiaries designated as Disqualified Capital Stock by such person at the time
of issuance; provided, however, that if such Capital Stock is either (i)
redeemable or repurchaseable solely at the option of such person or (ii) issued
to employees of the Company or its Subsidiaries or to any plan for the benefit
of such employees, such Capital Stock shall not constitute Disqualified Capital
Stock unless so designated.
"EBDIT" means, with respect to any person, for any period, the Consolidated
Net Income of such person for such period, plus, in each case to the extent
deducted in computing Consolidated Net Income of such person for such period
(without duplication)(i) provisions for income taxes or similar charges
recognized by such person and its consolidated subsidiaries accrued during such
period, (ii) depreciation and amortization expense of such person and its
consolidated subsidiaries accrued during such period (but only to the extent not
included in fixed charges), (iii) fixed charges of such person and its
consolidated subsidiaries for such period, (iv) LIFO charges (credits) of such
person and its consolidated subsidiaries for such period, (v) the amount of any
restructuring reserve or charge recorded during such period in accordance with
GAAP, including any such reserve or charge related to the Merger, and (vi) any
other non-cash charges reducing Consolidated Net Income for such period
(excluding any such charge which requires an accrual of or a cash reserve for
cash charges for any future period), less, without duplication, (i) non-cash
items increasing Consolidated Net Income of such person for such period in each
case determined in accordance with GAAP and (ii) the amount of all cash payments
made by such person or its subsidiaries during such period to the extent that
such cash payment has been provided for in a restructuring reserve or charge
referred to in clause (v) above (and were not otherwise deducted in the
computation of Consolidated Net Income of such person for such period).
"Exchange Act" means the Securities Exchange Act of 1934, as amended and
the rules and regulations promulgated by the Commission thereunder.
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"Excluded Assets" means assets of the Company required to be disposed of by
applicable regulatory authorities in connection with the Merger.
"Fixed Charges" means, with respect to any person, for any period, the
aggregate amount of (i) interest, whether expensed or capitalized, paid, accrued
or scheduled to be paid or accrued during such period (except to the extent
accrued in a prior period) in respect of all Indebtedness of such person and its
consolidated subsidiaries (including (a) original issue discount on any
Indebtedness (including (without exception), in the case of the Company, any
original issue discount on the applicable New F4L Notes but excluding
amortization of debt issuance costs) and (b) the interest portion of all
deferred payment obligations, calculated in accordance with the effective
interest method, in each case to the extent attributable to such period but
excluding the amortization of debt issuance costs) and (ii) dividend
requirements on Capital Stock of such person and its consolidated subsidiaries
(whether in cash or otherwise (except dividends payable in shares of Qualified
Capital Stock)) paid, accrued or scheduled to be paid or accrued during such
period (except to the extent accrued in a prior period) and excluding items
eliminated in consolidation. For purposes of this definition, (a) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by the Board of Directors of such person (as evidenced by
a Board Resolution) to be the rate of interest implicit in such Capitalized
Lease Obligation in accordance with GAAP, (b) interest on Indebtedness that is
determined on a fluctuating basis shall be deemed to have accrued at a fixed
rate per annum equal to the rate of interest of such Indebtedness in effect on
the date Fixed Charges are being calculated, (c) interest on Indebtedness that
may optionally be determined at an interest rate based upon a factor of a prime
or similar rate, a eurocurrency interbank offered rate, or other rate, shall be
deemed to have been based upon the rate actually chosen, or, if none, then based
upon such optional rate chosen as the Company may designate, and (d) Fixed
Charges shall be increased or reduced by the net cost (including amortization of
discount) or benefit associated with Interest Swap Obligations attributable to
such period. For purposes of clause (ii) above, dividend requirements shall be
increased to an amount representing the pretax earnings that would be required
to cover such dividend requirements; accordingly, the increased amount shall be
equal to a fraction, the numerator of which is the amount of such dividend
requirements and the denominator of which is one (1) minus the applicable actual
combined federal, state, local and foreign income tax rate of such person and
its subsidiaries (expressed as a decimal), on a consolidated basis, for the
fiscal year immediately preceding the date of the transaction giving rise to the
need to calculate Fixed Charges.
"FFL" means Food 4 Less, Inc., a Delaware corporation and its successors,
including, without limitation, Holdings following the FFL Merger and New
Holdings following the Reincorporation Merger.
"FFL Merger" means the merger, prior to the Merger, of FFL and Holdings,
Inc.
"Food 4 Less" means Food 4 Less Supermarkets, Inc., a Delaware corporation,
and its successors, including, without limitation, Ralphs Supermarkets, Inc. (to
be renamed Ralphs Grocery Company following the Merger).
"Foreign Exchange Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
against fluctuations in currency values.
"Guarantor Senior Indebtedness" means, with respect to any Subsidiary
Guarantor, the principal of, premium, if any, and interest on any Indebtedness
of such Subsidiary Guarantor, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Senior Subordinated Note Guarantee of
such Subsidiary Guarantor. Without limiting the generality of the foregoing,
"Guarantor Senior Indebtedness" shall include the principal of, premium, if any,
and interest on all obligations of every nature of such Subsidiary Guarantor
from time to time owed to the lenders under the Credit Agreement, including,
without limitation, the Letter of Credit Obligations and principal of and
interest on, and all fees, indemnities and expenses payable under the Credit
Agreement. Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall
not include (a) Indebtedness evidenced by the Senior Subordinated Note Guarantee
of such Subsidiary Guarantor, (b) Indebtedness that is expressly subordinate or
junior in right of payment to any Indebtedness of such Subsidiary Guarantor, (c)
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to such
Subsidiary
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Guarantor, (d) Indebtedness which is represented by Disqualified Capital Stock,
(e) Obligations for goods, materials or services purchased in the ordinary
course of business or Obligations consisting of trade payables, (f) Indebtedness
of or amounts owed by such Subsidiary Guarantor for compensation to employees or
for services rendered to such Subsidiary Guarantor, (g) any liability for
federal, state, local or other taxes owed or owing by such Subsidiary Guarantor,
(h) Indebtedness of such Subsidiary Guarantor representing a guarantee of
Subordinated Indebtedness or Pari Passu Indebtedness (in each case, with respect
to the New F4L Senior Subordinated Notes or any Senior Subordinated Note
Guarantee) of the Company or any other Subsidiary Guarantor, (i) Indebtedness of
such Subsidiary Guarantor to a Subsidiary of the Company and (j) that portion of
any Indebtedness which is incurred by such Subsidiary Guarantor in violation of
the New Senior Subordinated Note Indenture.
"Holdings" means Food 4 Less Holdings, Inc., a California corporation, and
its successors, including, without limitation, New Holdings following the
Reincorporation Merger.
"Holdings Discount Notes" means the 15.25% Senior Discount Notes due 2004
of Holdings, as the same may be modified or amended from time to time and
refinancings thereof.
"Indebtedness" means with respect to any person, without duplication, (i)
all liabilities, contingent or otherwise, of such person (a) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
person or only to a portion thereof), (b) evidenced by bonds, notes, debentures,
drafts accepted or similar instruments or letters of credit or representing the
balance deferred and unpaid of the purchase price of any property (other than
any such balance that represents an account payable or any other monetary
obligation to a trade creditor (whether or not an Affiliate) created, incurred,
assumed or guaranteed by such person in the ordinary course of business of such
person in connection with obtaining goods, materials or services and due within
twelve months (or such longer period for payment as is customarily extended by
such trade creditor) of the incurrence thereof, which account is not overdue by
more than 90 days, according to the original terms of sale, unless such account
payable is being contested in good faith), or (c) for the payment of money
relating to a Capitalized Lease Obligation; (ii) the maximum fixed repurchase
price of all Disqualified Capital Stock of such person; (iii) reimbursement
obligations of such person with respect to letters of credit; (iv) obligations
of such person with respect to Interest Swap Obligations and Foreign Exchange
Agreements; (v) all liabilities of others of the kind described in the preceding
clause (i), (ii), (iii) or (iv) that such person has guaranteed or that is
otherwise its legal liability; and (vi) all obligations of others secured by a
Lien to which any of the properties or assets (including, without limitation,
leasehold interests and any other tangible or intangible property rights) of
such person are subject, whether or not the obligations secured thereby shall
have been assumed by such person or shall otherwise be such person's legal
liability (provided that if the obligations so secured have not been assumed by
such person or are not otherwise such person's legal liability, such obligations
shall be deemed to be in an amount equal to the fair market value of such
properties or assets, as determined in good faith by the Board of Directors of
such person, which determination shall be evidenced by a Board Resolution). For
purposes of the preceding sentence, the "maximum fixed repurchase price" of any
Disqualified Capital Stock that does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock (or any equity security for which it may be exchanged or
converted), such fair market value shall be determined in good faith by the
Board of Directors of such person, which determination shall be evidenced by a
Board Resolution. For purposes of the New Indentures, Indebtedness incurred by
any person that is a general partnership (other than non-recourse Indebtedness)
shall be deemed to have been incurred by the general partners of such
partnership pro rata in accordance with their respective interests in the
liabilities of such partnership unless any such general partner shall, in the
reasonable determination of the Board of Directors of the Company, be unable to
satisfy its pro rata share of the liabilities of the partnership, in which case
the pro rata share of any Indebtedness attributable to such partner shall be
deemed to be incurred at such time by the remaining general partners on a pro
rata basis in accordance with their interests.
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"Independent Financial Advisor" means a reputable accounting, appraisal or
nationally recognized investment banking firm that is, in the reasonable
judgment of the Board of Directors of the Company, qualified to perform the
tasks for which such firm has been engaged and disinterested and independent
with respect to the Company and its Affiliates.
"Interest Swap Obligation" means any obligation of any person pursuant to
any arrangement with any other person whereby, directly or indirectly, such
person is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a stated notional amount
in exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount; provided that
the term "Interest Swap Obligation" shall also include interest rate exchange,
collar, cap, swap option or similar agreements providing interest rate
protection.
"Investment" by any person in any other person means any investment by such
person in such other person, whether by a purchase of assets, in any transaction
or series of related transactions, individually or in the aggregate, in an
amount greater than $5 million, share purchase, capital contribution, loan,
advance (other than reasonable loans and advances to employees for moving and
travel expenses, as salary advances or to permit the purchase of Qualified
Capital Stock of the Company and other similar customary expenses incurred, in
each case in the ordinary course of business consistent with past practice) or
similar credit extension constituting Indebtedness of such other person, and any
guarantee of Indebtedness of any other person.
"Issue Date" means the date of original issuance of the New F4L Notes under
the New Indentures.
"Letter of Credit Obligations" means Indebtedness of the Company or any of
its Subsidiaries with respect to letters of credit issued pursuant to the Credit
Agreement, and for purposes of the definition of the term "Permitted
Indebtedness" above, the aggregate principal amount of Indebtedness outstanding
at any time with respect thereto, shall be deemed to consist of (a) the
aggregate maximum amount then available to be drawn under all such letters of
credit (the determination of such maximum amount to assume compliance with all
conditions for drawing), and (b) the aggregate amount that has then been paid
by, and not reimbursed to, the issuers under such letters of credit.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property, or a security interest of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, any option or
other agreement to sell which is intended to constitute or create a security
interest, mortgage, pledge or lien, and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction); provided that in no event shall an operating lease be
deemed to constitute a Lien under the New Indentures.
"Maturity Date" means (i) with respect to the New F4L Senior Notes,
February 1, 2004 and (ii) with respect to the New F4L Senior Subordinated Notes,
February 1, 2005.
"Merger" means (i) the merger of Food 4 Less Supermarkets, Inc. into Ralph
Supermarkets, Inc. (with Ralph Supermarkets, Inc. surviving such merger)
pursuant to the Merger Agreement and (ii) immediately following the merger
described in clause (i) of this definition, the merger of Ralphs Grocery Company
into Ralphs Supermarkets, Inc. (with Ralphs Supermarket, Inc. surviving such
merger and changing its name to "Ralphs Grocery Company" in connection with such
merger).
"Merger Agreement" means the Agreement and Plan of Merger, dated September
14, 1994, by and among Holdings, FFL, Food 4 Less, RSI and the Stockholders of
RSI, as such agreement is in effect on the Issue Date.
"Net Cash Proceeds" means the Net Proceeds of any Asset Sale received in
the form of cash or Cash Equivalents.
"Net Proceeds" means (a) in the case of any Asset Sale or any issuance and
sale by any person of Qualified Capital Stock, the aggregate net proceeds
received by such person after payment of expenses, taxes, commissions and the
like incurred in connection therewith (and, in the case of any Asset Sale, net
of the
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amount of cash applied to repay Indebtedness secured by the asset involved in
such Asset Sale), whether such proceeds are in cash or in property (valued at
the fair market value thereof at the time of receipt as determined with respect
to any Asset Sale resulting in Net Proceeds in excess of $5 million in good
faith by the Board of Directors of such person, which determination shall be
evidenced by a Board of Resolution) and (b) in the case of any conversion or
exchange of any outstanding Indebtedness or Disqualified Capital Stock of such
person for or into shares of Qualified Capital Stock of the Company, the sum of
(i) the fair market value of the proceeds received by the Company in connection
with the issuance of such Indebtedness or Disqualified Capital Stock on the date
of such issuance and (ii) any additional amount paid by the Holder to the
Company upon such conversion or exchange.
"New Holdings" means Food 4 Less Holdings, Inc., a Delaware corporation,
and its successors.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Operating Coverage Ratio" means, with respect to any person, the ratio of
(1) EBDIT of such person for the period (the "Pro Forma Period") consisting of
the most recent four full fiscal quarters for which financial information in
respect thereof is available immediately prior to the date of the transaction
giving rise to the need to calculate the Operating Coverage Ratio (the
"Transaction Date") to (2) the aggregate Fixed Charges of such person for the
fiscal quarter in which the Transaction Date occurs and the three fiscal
quarters immediately subsequent to such fiscal quarter (the "Forward Period")
reasonably anticipated by the Board of Directors of such person to become due
from time to time during such period. For purposes of this definition, if the
Transaction Date occurs prior to the first anniversary of the Merger, "EBDIT"
for the Pro Forma Period shall be calculated, in the case of the Company, after
giving effect on a pro forma basis to the Merger as if it had occurred on the
first day of the Pro Forma Period. In addition to, but without duplication of,
the foregoing, for purposes of this definition, "EBDIT" shall be calculated
after giving effect (without duplication), on a pro forma basis for the Pro
Forma Period (but no longer), to (a) any Investment, during the period
commencing on the first day of the Pro Forma Period to and including the
Transaction Date (the "Reference Period"), in any other person that, as a result
of such Investment, becomes a subsidiary of such person, (b) the acquisition,
during the Reference Period (by merger, consolidation or purchase of stock or
assets) of any business or assets, which acquisition is not prohibited by the
applicable New Indenture, and (c) any sales or other dispositions of assets
(other than sales of inventory in the ordinary course of business) occurring
during the Reference Period, in each case as if such incurrence, Investment,
repayment, acquisition or asset sale had occurred on the first day of the
Reference Period. In addition, for purposes of this definition, "Fixed Charges"
shall be calculated after giving effect (without duplication), on a pro forma
basis for the Forward Period, to any Indebtedness incurred or repaid on or after
the first day of the Forward Period and prior to the Transaction Date. If such
person or any of its subsidiaries directly or indirectly guarantees any
Indebtedness of a third person, the Operating Coverage Ratio shall give effect
to the incurrence of such Indebtedness as if such person or subsidiary had
directly incurred such guaranteed Indebtedness.
"operating lease" means any lease the obligations under which do not
constitute Capitalized Lease Obligations.
"Pari Passu Indebtedness" means, with respect to the Company or any
Subsidiary Guarantor, (i) in the case of the New Senior Note Indenture,
Indebtedness of such person which ranks pari passu in right of payment to the
New F4L Senior Notes or the Senior Note Guarantee of such Subsidiary Guarantor,
as the case may be, and (ii) in the case of the New Senior Subordinated Note
Indenture, Indebtedness of such person which ranks pari passu in right of
payment to the New F4L Senior Subordinated Notes or the Senior Subordinated Note
Guarantee of such Subsidiary Guarantor, as the case may be.
"Payment Restriction" means, with respect to a subsidiary of any person,
any encumbrance, restriction or limitation, whether by operation of the terms of
its charter or by reason of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation, on the ability of (i) such subsidiary
to (a) pay dividends or make other distributions on its Capital Stock or make
payments on any obligation, liability or Indebtedness owed to such person or any
other subsidiary of such person, (b) make loans or advances to such person or
any other subsidiary of such person or (c) transfer any of its properties or
assets to
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such person or any other subsidiary of such persons, or (ii) such person or any
other subsidiary of such person to receive or retain any such (a) dividends,
distributions or payments, (b) loans or advances or (c) transfer of properties
or assets.
"Permitted Holder" means (i) Food 4 Less Equity Partners, L.P. and The
Yucaipa Companies, or any entity controlled thereby or any of the partners
thereof, (ii) Apollo Advisors, L.P., Lion Advisors, L.P. or any entity
controlled thereby or any of the partners thereof, (iii) an employee benefit
plan of the Company, or any participant therein or any of its subsidiaries, (iv)
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or any of its subsidiaries or (v) any Permitted Transferee of any
of the foregoing persons.
"Permitted Indebtedness" means (a) Indebtedness of the Company and its
Subsidiaries pursuant to (i) the Term Loans in an aggregate principal amount at
any time outstanding not to exceed $750 million, less the aggregate amount of
all principal repayments thereunder pursuant to and in accordance with the
covenant described under "-- Certain Covenants -- Limitation on Asset Sales"
above subsequent to the Issue Date, and (ii) the revolving credit facility under
the Credit Agreement (and the Company and each Subsidiary (to the extent it is
not an obligor) may guarantee such Indebtedness) in an aggregate principal
amount at any time outstanding not to exceed $325 million, less all permanent
reductions thereunder pursuant to and in accordance with the covenant described
under "-- Certain Covenants -- Limitation on Asset Sales" above, (b)
Indebtedness of the Company or a Subsidiary Guarantor owed to and held by the
Company or a Subsidiary Guarantor; (c) Indebtedness incurred by the Company or
any Subsidiary in connection with the purchase or improvement of property (real
or personal) or equipment or other capital expenditures in the ordinary course
of business (including for the purchase of assets or stock of any retail grocery
store or business) or consisting of Capitalized Lease Obligations provided that
(i) at the time of the incurrence thereof, such indebtedness, together with any
other Indebtedness incurred during the most recently completed four fiscal
quarter period in reliance upon this clause (c) does not exceed, in the
aggregate, 3% of net sales of the Company and its Subsidiaries during the most
recently completed four fiscal quarter period on a consolidated basis
(calculated on a pro forma basis if the date of incurrence is prior to the first
anniversary of the Merger) and (ii) such Indebtedness, together with all then
outstanding Indebtedness incurred in reliance upon this clause (c) does not
exceed, in the aggregate, 3% of the aggregate net sales of the Company and its
Subsidiaries during the most recently completed twelve fiscal quarter period on
a consolidated basis (calculated on a pro forma basis if the date of incurrence
is prior to the third anniversary of the Merger); (d) Indebtedness incurred by
the Company or any Subsidiary in connection with capital expenditures in an
aggregate principal amount not exceeding $150 million in the aggregate, provided
that such capital expenditures relate solely to the integration of the
operations of RSI, Food 4 Less and their respective subsidiaries, as described
in this Prospectus and Solicitation Statement; (e) Indebtedness of the Company
incurred under certain Foreign Exchange Agreements and Interest Swap
Obligations; (f) guarantees incurred in the ordinary course of business by the
Company or a Subsidiary of Indebtedness of any other person in aggregate not to
exceed $25 million at any time outstanding; (g) guarantees by the Company or a
Subsidiary Guarantor of Indebtedness incurred by a wholly-owned Subsidiary
Guarantor so long as the incurrence of such Indebtedness incurred by such
wholly-owned Subsidiary Guarantor is permitted under the terms of the applicable
New Indenture; (h) Refinancing Indebtedness; (i) Indebtedness for letters of
credit relating to workers' compensation claims and self-insurance or similar
requirements in the ordinary course of business; (j) other Indebtedness
outstanding on the Issue Date (after giving effect to the Merger); (k)
Indebtedness arising from guarantees of Indebtedness of the Company or any
Subsidiary or other agreements of the Company or a Subsidiary providing for
indemnification, adjustment of purchase price or similar obligations, in each
case, incurred or assumed in connection with the disposition of any business,
assets or Subsidiary, other than guarantees of Indebtedness incurred by any
person acquiring all or any portion of such bonuses, assets or Subsidiary for
the purpose of financing such acquisition, provided that the maximum aggregate
liability in respect of all such Indebtedness shall at no time exceed the gross
proceeds actually received by the Company and its subsidiaries in connection
with such disposition; (l) obligations in respect of performance bonds and
completion guarantees provided by the Company or any Subsidiary in the ordinary
course of business; and (m) additional Indebtedness of the Company and the
Subsidiary Guarantors in an amount not to exceed $200 million at any time
outstanding.
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"Permitted Investment" by any person means (i) any Related Business
Investment, (ii) Investments in securities not constituting cash or Cash
Equivalents and received in connection with an Asset Sale made pursuant to the
provisions of the covenant described under "-- Certain Covenants -- Limitation
on Asset Sales" above or any other disposition of assets not constituting an
Asset Sale by reason of the $500,000 threshold contained in the definition
thereof, (iii) cash and Cash Equivalents, (iv) Investments existing on the Issue
Date, (v) Investments specifically permitted by and made in accordance with the
provisions of the covenant described under "-- Certain Covenants -- Limitation
on Transactions with Affiliates," (vi) Investments by Subsidiary Guarantors in
other Subsidiary Guarantors and Investments by Subsidiaries which are not
Subsidiary Guarantors in other Subsidiaries which are not Subsidiary Guarantors
and (vii) additional Investments in an aggregate amount not exceeding $5
million.
"Permitted Liens" shall mean (i) Liens for taxes, assessments and
governmental charges or claims not yet due or which are being contested in good
faith by appropriate proceedings promptly instituted and diligently conducted
and if a reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor; (ii) statutory Liens of
landlords and carriers, warehouseman, mechanics, suppliers, materialmen,
repairmen or other like Liens arising in the ordinary course of business,
deposits made to obtain the release of such Liens, and with respect to amounts
not yet delinquent for a period of more than 60 days or being contested in good
faith by an appropriate process of law, and for which a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made; (iii) Liens incurred or pledges or deposits made in the ordinary course of
business to secure obligations under workers' compensation, unemployment
insurance and other types of social security or similar legislation; (iv) Liens
incurred or deposits made to secure the performance of tenders, bids, leases,
statutory obligations, surety and appeal bonds, government contracts,
performance and return of money bonds and other obligations of a like nature
incurred in the ordinary course of business (exclusive of obligations for the
payment of borrowed money); (v) easements, rights-of-way, zoning or other
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances not interfering in any material respect with the business of the
Company or any of its Subsidiaries incurred in the ordinary course of business;
(vi) Liens upon specific items of inventory or other goods and proceeds of any
person securing such person's obligations in respect of bankers' acceptances
issued or created for the account of such person to facilitate the purchase,
shipment or storage of such inventory or other goods in the ordinary course of
business; (vii) Liens securing reimbursement obligations with respect to letters
of credit which encumber documents and other property relating to such letters
of credit and the products and proceeds thereof; (viii) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
nondelinquent customs duties in connection with the importation of goods; (ix)
judgment and attachment Liens not giving rise to a Default or Event of Default;
(x) leases or subleases granted to others not interfering in any material
respect with the business of the Company or any Subsidiary; (xi) Liens
encumbering customary initial deposits and margin deposits, and other Liens
incurred in the ordinary course of business that are within the general
parameters customary in the industry, in each case securing Indebtedness under
Interest Swap Obligations and Foreign Exchange Agreements and forward contracts,
option futures contracts, futures options or similar agreements or arrangements
designed to protect the Company or any Subsidiary from fluctuations in the price
of commodities; (xii) Liens encumbering deposits made in the ordinary course of
business to secure nondelinquent obligations arising from statutory, regulatory,
contractual or warranty requirements of the Company or its Subsidiaries for
which a reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made; (xiii) Liens arising out of consignment or similar
arrangements for the sale of goods entered into by the Company or any Subsidiary
in the ordinary course of business in accordance with past practices; (xiv) any
interest or title of a lessor in the property subject to any lease, whether
characterized as capitalized or operating other than any such interest or title
resulting from or arising out of a default by the Company or any Subsidiary of
its obligations under such lease; (xv) Liens arising from filing UCC financing
statements for precautionary purposes in connection with true leases of personal
property that are otherwise permitted under the applicable Indenture and under
which the Company or any Subsidiary is lessee; (xvi) in the case of the New
Senior Subordinated Note Indenture, Liens on assets of the Company securing
Indebtedness which would constitute Senior Indebtedness but for the provisions
of clause (c) in the third sentence of the definition of Senior Indebtedness and
Liens on assets of a Subsidiary Guarantor securing Indebtedness which would
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constitute Guarantor Senior Indebtedness but for the provisions of clause (c) in
the third sentence of the definition of Guarantor Senior Indebtedness; and
(xvii) additional Liens securing Indebtedness at any one time outstanding not
exceeding the sum of (i) $25 million and (ii) 10% of the aggregate Consolidated
Net Income of the Company earned subsequent to the Issue Date and on or prior to
such time.
"Permitted Payments" means (i) any payment by the Company or any Subsidiary
to The Yucaipa Companies or the principals or any Affiliates thereof for
consulting, management, investment banking or similar advisory services during
such period pursuant to that certain Consulting Agreement, dated as of the Issue
Date, between Food 4 Less, New Holdings and The Yucaipa Companies, (as such
Consulting Agreement may be amended or replaced, so long as any amounts paid
under any amended or replacement agreement do not exceed the amounts payable
under such Consulting Agreement as in effect on the Issue Date), (ii) any
payment by the Company or any Subsidiary pursuant to the Amended and Restated
Tax Sharing Agreement, dated as of June 17, 1991, between Food 4 Less and
certain Subsidiaries, as such Tax Sharing Agreement may be amended from time to
time, so long as the payment thereunder by the Company and its Subsidiaries
shall not exceed the amount of taxes the Company would be required to pay if it
were the filing person for all applicable taxes, (iii) any payment by the
Company or any Subsidiary pursuant to the Transfer and Assumption Agreement,
dated as of June 23, 1989, between Food 4 Less and Holdings, as in effect on the
Issue Date, (iv) any payment by the Company or any Subsidiary (a) in connection
with repurchases of outstanding shares of the Company's or New Holdings Common
Stock following the death, disability or termination of employment of management
stockholders, and (b) of amounts required to be paid by New Holdings, the
Company or any of its Subsidiaries to participants in employee benefit plans
upon termination of employment by such participants, as provided in the
documents related thereto, in an aggregate amount (for both clauses (a) and (b))
not to exceed $10 million in any Yearly Period (provided that any unused amounts
may be carried over to any subsequent Yearly Period subject to a maximum amount
of $20 million in any Yearly Period), (v) from and after June 30, 1998, payments
of cash dividends to New Holdings in an amount sufficient to enable New Holdings
to make payments of interest required to be made in respect of the Holdings
Discount Notes in accordance with the terms thereof in effect on the Issue Date,
(vi) from and after February , 2000, payments of cash dividends to New
Holdings in an amount sufficient to enable New Holdings to make payments of
interest required to be made in respect of the Seller Debentures in accordance
with the terms thereof in effect on the Issue Date, and (vii) dividends or other
payments to New Holdings sufficient to enable New Holdings to perform
accounting, legal, corporate reporting and administrative functions in the
ordinary course of business or to pay required fees and expenses in connection
with the Merger, the FFL Merger, the Reincorporation Merger and the registration
under applicable laws and regulations of its debt or equity securities.
"Permitted Subordinated Reorganization Securities" means securities of the
Company issued in a plan of reorganization in a case under the Bankruptcy Law
relating to the Company which constitutes either (y) Capital Stock (other than
Disqualified Capital Stock with the reference to "Maturity Date" in the
definition of such term modified to relate to the final stated maturity of any
debt securities issued in such plan of reorganization to the holders of
Designated Senior Indebtedness ("Senior Reorganization Securities")) and (z)
debt securities of the Company which are (i) unsecured, (ii) have no scheduled
mandatory amortization thereon prior to the final stated maturity of the Senior
Reorganization Securities and (iii) are subordinated in right of payment to the
Senior Reorganization Securities to at least the same extent as the Securities
are subordinated to Designated Senior Indebtedness.
"Permitted Transferees" means, with respect to any person, (i) any
Affiliate of such person, (ii) the heirs, executors, administrators,
testamentary trustees, legatees or beneficiaries of any such person, (iii) a
trust, the beneficiaries of which, or a corporation or partnership, the
stockholders or general or limited partners of which, include only such person
or his or her spouse or lineal descendants, in each case to whom such person has
transferred the beneficial ownership of any securities of the Company, (iv) any
investment account whose investment managers and investment advisors consist
solely of such person and/or Permitted Transferees of such person and (v) any
investment fund or investment entity that is a subsidiary of such person or a
Permitted Transferee of such person.
"Plan of Liquidation" means, with respect to any person, a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in
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phases or otherwise) (i) the sale, lease, conveyance or other disposition of all
or substantially all of the assets of such person otherwise than as an entirety
or substantially as an entirety and (ii) the distribution of all or
substantially all of the proceeds of such sale, lease, conveyance or other
disposition and all or substantially all of the remaining assets of such person
to holders of Capital Stock of such person.
"Preferred Stock" means, with respect to any person, Capital Stock of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such person, over shares
of Capital Stock of any other class of such person.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of the New Indentures, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act of 1933, as amended,
as interpreted by the Company's chief financial officer or Board of Directors in
consultation with its independent certified public accountants.
"Public Equity Offering" means an underwritten public offering of Common
Stock of the Company or New Holdings pursuant to a registration statement filed
with the Commission in accordance with the Securities Act which public equity
offering results in gross proceeds to the Company or New Holdings, as the case
may be, of not less than $20,000,000; provided, however, that in the case of a
Public Equity Offering by New Holdings, New Holdings contributes to the capital
of the Company net cash proceeds in an amount sufficient to redeem New Notes
called for redemption in accordance with the terms thereof.
"Qualified Capital Stock" means, with respect to any person, any Capital
Stock of such person that is not Disqualified Capital Stock.
"Refinancing Indebtedness" means, with respect to any person, Indebtedness
of such person issued in exchange for, or the proceeds from the issuance and
sale or disbursement of which are used to substantially concurrently repay,
redeem, refund, refinance, discharge or otherwise retire for value, in whole or
in part (collectively, "repay"), or constituting an amendment, modification or
supplement to, or a deferral or renewal of (collectively, an "amendment"), any
Indebtedness of such person existing on the Issue Date or Indebtedness (other
than Permitted Indebtedness, except Permitted Indebtedness incurred pursuant to
clauses (a), (c), (d), (h) and (j) of the definition thereof) incurred in
accordance with the applicable New Indenture (a) in a principal amount (or, if
such Refinancing Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon the acceleration thereof, with an
original issue price) not in excess of (without duplication) (i) the principal
amount or the original issue price, as the case may be, of the Indebtedness so
refinanced (or, if such Refinancing Indebtedness refinances Indebtedness under a
revolving credit facility or other agreement providing a commitment for
subsequent borrowings, with a maximum commitment not to exceed the maximum
commitment under such revolving credit facility or other agreement) plus (ii)
unpaid accrued interest on such Indebtedness plus (iii) premiums, penalties,
fees and expenses actually incurred by such person in connection with the
repayment or amendment thereof and (b) with respect to Refinancing Indebtedness
that repays or constitutes an amendment to Subordinated Indebtedness, such
Refinancing Indebtedness (x) shall not have any fixed mandatory redemption or
sinking fund requirement in an amount greater than or at a time prior to the
amounts and times specified in such repaid or amended Subordinated Indebtedness,
except to the extent that any such requirement applies on a date after the
Maturity Date of the applicable New F4L Notes and (y) shall contain
subordination and default provisions no less favorable in any material respect
to holders of the applicable New F4L Notes than those contained in such repaid
or amended Subordinated Indebtedness.
"Reincorporation Merger" means the merger, prior to the Merger, of Holdings
with and into New Holdings.
"Related Business Investment" means (i) any Investment by a person in any
other person a majority of whose revenues are derived from the operation of one
or more retail grocery stores or supermarkets or any other line of business
engaged in by the Company or any of its Subsidiaries as of the Issue Date; (ii)
any Investment by such person in any cooperative or other supplier, including,
without limitation, any joint venture which is intended to supply any product or
service useful to the business of the Company and its Subsidiaries as it is
conducted as of the Issue Date and as such business may thereafter evolve or
change; and (iii) any capital expenditure or Investment (without regard to the
$5 million threshold in the definition thereof), in
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each case reasonably related to the business of the Company and its Subsidiaries
as it is conducted as of the Issue Date and as such business may thereafter
evolve or change.
"Restricted Debt Prepayment" means any purchase, redemption, defeasance
(including, but not limited to, in substance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, by the Company or a
Subsidiary, prior to the scheduled maturity or prior to any scheduled repayment
of principal or sinking fund payment, as the case may be, in respect of
Subordinated Indebtedness.
"Restricted Payment" means any (i) Stock Payment, (ii) Investment (other
than a Permitted Investment) or (iii) Restricted Debt Prepayment.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Seller Debentures" means the 13% Senior Subordinated Pay-in-Kind
Debentures of New Holdings, as the same may be modified or amended from time to
time and future refinancings thereof.
"Senior Indebtedness" means the principal of, premium, if any, and interest
on any Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Senior Subordinated Notes. Without
limiting the generality of the foregoing, "Senior Indebtedness" shall include
(x) the principal of, premium, if any, and interest on all obligations of every
nature of the Company from time to time owed to the lenders under the Credit
Agreement, including, without limitation, the Letter of Credit Obligations and
principal of and interest on, all fees and expenses payable under the Credit
Agreement, and (y) interest accruing thereon subsequent to the occurrence of any
Event of Default specified in clause (vi) or (vii) under "-- Events of Default"
relating to the Company, whether or not the claim for such interest is allowed
under any applicable Bankruptcy Code. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (a) Indebtedness evidenced by the New F4L Senior
Subordinated Notes, (b) Indebtedness that is expressly subordinate or junior in
right of payment to any Indebtedness of the Company, (c) Indebtedness which,
when incurred and without respect to any election under Section 1111(b) of Title
11, United States Code, is without recourse to the Company, (d) Indebtedness
which is represented by Disqualified Capital Stock, (e) obligations for goods,
materials or services purchased in the ordinary course of business or
obligations consisting of trade payables, (f) Indebtedness of or amounts owed by
the Company for compensation to employees or for services rendered to the
Company, (g) any liability for federal, state, local or other taxes owed or
owing by the Company, (h) Indebtedness of the Company to a Subsidiary of the
Company, and (i) that portion of any Indebtedness which is incurred by the
Company in violation of the New Senior Subordinated Note Indenture.
"Significant Stockholder" means, with respect to any person, any other
person who is the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of more than 10% of any class of equity securities of such person
that are entitled to vote on a regular basis for the election of directors of
such person.
"Significant Subsidiary" means each subsidiary of the Company that is
either (a) a "significant subsidiary" as defined in Rule 1-02(v) of Regulation
S-X under the Securities Act of 1933, as amended, and the Exchange Act (as such
regulation is in effect on the date hereof) or (b) material to the financial
condition or results of operations of the Company and its Subsidiaries taken as
a whole.
"Stock Payment" means, with respect to any person, (a) the declaration or
payment by such person, either in cash or in property, of any dividend on
(except, in the case of the Company, dividends payable solely in Qualified
Capital Stock of the Company), or the making by such person or any of its
subsidiaries of any other distribution in respect of, such person's Qualified
Capital Stock or any warrants, rights or options to purchase or acquire shares
of any class of such Capital Stock (other than exchangeable or convertible
Indebtedness of such person), or (b) the redemption, repurchase, retirement or
other acquisition for value by such person or any of its subsidiaries, directly
or indirectly, of such person's Qualified Capital Stock (and, in the case of a
Subsidiary, Qualified Capital Stock of the Company) or any warrants, rights or
options to purchase or acquire shares of any class of such Capital Stock (other
than exchangeable or convertible Indebtedness of such person), other than, in
the case of the Company, through the issuance in exchange
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therefor solely of Qualified Capital Stock of the Company; provided, however,
that in the case of a Subsidiary, the term "Stock Payment" shall not include any
such payment with respect to its Capital Stock or warrants, rights or options to
purchase or acquire shares of any class of its Capital Stock that are owned
solely by the Company or a wholly-owned Subsidiary.
"Subordinated Indebtedness" means, with respect to the Company or any
Subsidiary Guarantor, (i) in the case of the New Senior Note Indenture,
Indebtedness of such person which is subordinated in right of payment to the New
F4L Senior Notes or the Senior Note Guarantee of such Subsidiary Guarantor, as
the case may be, and (ii) in the case of the New Senior Subordinated Note
Indenture, Indebtedness of such person which is subordinated in right of payment
to the New F4L Senior Subordinated Notes or the Senior Subordinated Note
Guarantee of such Subsidiary Guarantor, as the case may be.
"subsidiary" of any person means (i) a corporation a majority of whose
Capital Stock with voting power, under ordinary circumstances, to elect
directors is, at the date of determination, directly or indirectly, owned by
such person, by one or more subsidiaries of such person or by such person and
one or more subsidiaries of such person or (ii) a partnership in which such
person or a subsidiary of such person is, at the date of determination, a
general partner of such partnership, but only if such person or its subsidiary
is entitled to receive more than fifty percent of the assets of such partnership
upon its dissolution, or (iii) any other person (other than a corporation or a
partnership) in which such person, a subsidiary of such person or such person
and one or more subsidiaries of such person, directly or indirectly, at the date
of determination, has (x) at least a majority ownership interest or (y) the
power to elect or direct the election of a majority of the directors or other
governing body of such person.
"Subsidiary" means any subsidiary of the Company.
"Subsidiary Guarantor" means (i) each of Alpha Beta Company, Bay Area
Warehouse Stores, Inc., Bell Markets, Inc., Cala Co., Cala Foods, Inc., Falley's
Inc., Food 4 Less of California, Inc., Food 4 Less Merchandising, Inc., Food 4
Less GM, Inc., Food 4 Less of Southern California, Inc., (ii) upon consummation
of the Merger, Crawford Stores, Inc., (iii) each of the Company's Subsidiaries
which becomes a guarantor of the New F4L Notes in compliance with the provisions
set forth under "-- Certain Covenants -- Guarantees of Certain Indebtedness,"
and (iv) each of the Company's Subsidiaries executing a supplemental indenture
in which such Subsidiary agrees to be bound by the terms of a New Indenture.
"Term Loans" means the term loan facility under the Credit Agreement.
"Yearly Period" means each fiscal year of the Company; provided that the
first Yearly Period shall begin on the Issue Date and shall end on January 28,
1996.
"The Yucaipa Companies" means The Yucaipa Companies, a California general
partnership.
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MARKET PRICES OF THE OLD F4L NOTES
In general, there has been limited trading of the Old F4L Notes and such
trading has taken place primarily in the over-the-counter market. Prices and
trading volumes of the Old F4L Notes in the over-the-counter market are not
reported and can be difficult to monitor. Quotations for securities that are not
widely traded, such as the Old F4L Notes, may differ from actual trading prices
and should be viewed as approximations. Holders of Old F4L Notes are urged to
contact their brokers with respect to current information regarding the Old F4L
Notes that they hold.
THE PROPOSED AMENDMENTS
OLD F4L SENIOR NOTE INDENTURE
The 10.45% Senior Notes due 2000 of Food 4 Less were issued under an
indenture dated as of April 15, 1992 (the "Old F4L Senior Note Indenture")
between Food 4 Less and Norwest Bank Minnesota, N.A., as trustee (the "Old F4L
Senior Notes Trustee").
In connection with the consummation of the Merger, Food 4 Less is
soliciting Consents from the holders of Old F4L Senior Notes to the Proposed
Amendments. The primary purpose of the Proposed Amendments is to permit the
Merger and to eliminate substantially all of the restrictive covenants in the
Old F4L Senior Note Indenture. Upon receipt of the Requisite Consents, a
supplemental indenture to the Old F4L Senior Note Indenture will be executed
between Food 4 Less and the Old F4L Senior Notes Trustee (the "F4L Senior Note
Supplemental Indenture"). Following the consummation of the Merger, the
obligations of Food 4 Less under the Old F4L Senior Note Indenture and the F4L
Senior Note Supplemental Indenture will be assumed by the Company. The Proposed
Amendments would make the following changes to the Old F4L Senior Note
Indenture:
1. Eliminate the covenant entitled "Maintenance of Net Worth".
2. Eliminate the covenant entitled "Limitation on Change of Control".
3. Eliminate the covenant entitled "Limitation on Restricted Payments".
4. Eliminate the covenant entitled "Limitation on Incurrences of
Additional Indebtedness".
5. Eliminate the covenant entitled "Limitation on Liens".
6. Eliminate the covenant entitled "Limitation on Disposition of Assets".
7. Eliminate the covenant entitled "Limitation on Payment Restrictions
Affecting Subsidiaries".
8. Eliminate the covenant entitled "Limitation on Transactions with
Affiliates".
9. Eliminate the covenant entitled "Guarantees of Certain Indebtedness".
10. Amend the provisions regarding when Food 4 Less may merge, which limits
the ability of Food 4 Less to consolidate or merge with or sell all or
substantially all of its assets to, any other person or entity unless certain
conditions are satisfied, to eliminate the subsections thereof which require
that immediately after giving effect to such transaction and the incurrence of
any indebtedness in connection therewith, Food 4 Less or the surviving entity,
as the case may be, has a Net Worth (as defined) or Operating Coverage Ratio (as
defined) that meets the standards set forth therein.
11. The definitions relating solely to such eliminated covenants will be
eliminated.
The F4L Senior Note Supplemental Indenture will provide that the New Credit
Facility constitutes a refinancing of the Loan Documents (as defined).
The remaining sections of the Old F4L Senior Note Indenture will not be
changed by the Proposed Amendments.
Copies of the Old F4L Senior Note Indenture and the form of the F4L Senior
Note Supplemental Indenture are available from Food 4 Less upon request. For a
description of the covenants being amended or
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eliminated, see "Comparison of Old F4L Senior Notes and New F4L Senior Notes"
set forth in Appendix A hereto.
OLD F4L SENIOR SUBORDINATED NOTE INDENTURE
The 13.75% Senior Subordinated Notes due 2001 of Food 4 Less were issued
under an indenture dated as of June 15, 1991 (the "Old F4L Senior Subordinated
Note Indenture"), between Food 4 Less and United States Trust Company of New
York, as trustee (the "Old F4L Senior Subordinated Notes Trustee").
In connection with the consummation of the Merger, Food 4 Less is
soliciting Consents from the holders of Old F4L Senior Subordinated Notes to the
Proposed Amendments. The primary purpose of the Proposed Amendments is to permit
the Merger and to eliminate most of the restrictive covenants in the Old F4L
Senior Subordinated Note Indenture. Upon receipt of the Requisite Consents, a
supplemental indenture to the Old F4L Senior Subordinated Note Indenture will be
executed between Food 4 Less and the Old F4L Senior Subordinated Notes Trustee
(the "F4L Senior Subordinated Note Supplemental Indenture"). Following the
consummation of the Merger, the obligations of Food 4 Less under the Old F4L
Senior Subordinated Note Indenture and the F4L Senior Subordinated Note
Supplemental Indenture will be assumed by the Company. The Proposed Amendments
would make the following changes to the Old F4L Senior Subordinated Note
Indenture:
1. Eliminate the covenant entitled "Maintenance of Net Worth."
2. Eliminate the covenant entitled "Limitation on Restricted Payments".
3. Eliminate the covenant entitled "Limitation on Incurrences of
Additional Indebtedness".
4. Eliminate the covenant entitled "Limitation on Liens".
5. Eliminate the covenant entitled "Limitation on Disposition of Assets".
6. Eliminate the covenant entitled "Limitation on Payment Restrictions
Affecting Subsidiaries".
7. Eliminate the covenant entitled "Limitation on Transactions with
Affiliates".
8. Eliminate the covenant entitled "Limitation on Change of Control".
9. Eliminate the covenant entitled "Guarantees of Certain Indebtedness."
10. Amend the provisions regarding when Food 4 Less may merge, which limits
the ability of Food 4 Less to consolidate or merge with or sell all or
substantially all of its assets to any other person or entity unless certain
conditions are satisfied, to eliminate the subsections thereof which require
that immediately after giving effect to such transaction and the incurrence of
any indebtedness in connection therewith, Food 4 Less or the surviving entity,
as the case may be, has a Net Worth (as defined) or Operating Coverage Ratio (as
defined) that meets the standards set forth therein.
11. The definitions relating solely to such eliminated covenants will be
eliminated.
The F4L Senior Subordinated Note Supplemental Indenture will provide that
the New Credit Facility constitutes a refinancing of the Loan Documents (as
defined).
The remaining sections of the Old F4L Senior Subordinated Note Indenture
will not be changed by the Proposed Amendments.
Copies of the Old F4L Senior Subordinated Note Indenture and the form of
the F4L Senior Subordinated Note Supplemental Indenture are available from Food
4 Less upon request. For a description of the covenants being amended or
eliminated, see "Comparison of Old F4L Senior Subordinated Notes and New F4L
Senior Subordinated Notes" set forth in Appendix B hereto.
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THE RGC EXCHANGE OFFERS AND THE PUBLIC OFFERING
THE RGC EXCHANGE OFFERS
Concurrently with the Exchange Offers, Food 4 Less is offering to holders
of the Old RGC Notes the opportunity to exchange such Old RGC Notes for New RGC
Notes and $10.00 in cash for each $1,000 principal amount exchanged, plus
accrued and unpaid interest to the date of exchange. The consummation of the RGC
Exchange Offers will occur simultaneously with the consummation of the Exchange
Offers.
The obligation of Food 4 Less to accept for exchange any validly tendered
Old RGC Note is conditioned upon, among other things, the satisfaction or waiver
of certain conditions, including (i) satisfaction of a minimum tender amount
(i.e., at least 80% of the aggregate principal amount of the outstanding Old RGC
Notes being validly tendered and not withdrawn pursuant to the RGC Exchange
Offers prior to the date of expiration); (ii) the receipt of the requisite
consents to certain amendments to the Old RGC Indentures (i.e., consents from
Old RGC Noteholders representing at least a majority in aggregate principal
amount of each issue of Old RGC Notes held by persons other than RGC and its
affiliates) on or prior to the date of expiration; (iii) the satisfaction or
waiver, in Food 4 Less's sole discretion, of all conditions precedent to the
Merger; (iv) the prior or contemporaneous consummation of the Public Offering,
the Holdings Consent Solicitation and the Exchange Offers and the Solicitation
with respect to the Old F4L Notes described herein; and (v) the prior or
contemporaneous consummation of the Bank Financing and the New Equity
Investment.
The terms of the Old RGC 9% Indenture and the Old RGC 10 1/4% Indenture
(collectively, the "Old RGC Indentures") are substantially identical.
Noteholders participating in the RGC Exchange Offers will be required to consent
to certain proposed amendments to the Old RGC Indentures. Such proposed
amendments will modify certain terms of such indentures to permit the Merger and
will eliminate substantially all the restrictive covenants in the Old RGC
Indentures.
The Old RGC Notes. The Old RGC 10 1/4% Notes were originally issued in
July 1992, are currently outstanding in an aggregate principal amount of $300
million and will mature on July 15, 2002. The Old RGC 9% Notes were originally
issued in March 1993, are currently outstanding in an aggregate principal amount
of $150 million and will mature on April 1, 2003. Interest on the Old RGC
10 1/4% Notes accrues at a rate of 10 1/4% per annum and is payable
semi-annually on each January 15 and July 15. Interest on the Old RGC 9% Notes
accrues at a rate of 9% per annum and is payable semi-annually on each April 1
and October 1.
The Old RGC 10 1/4% Notes are subject to redemption at any time on or after
July 15, 1997, at the option of RGC, in whole or in part, on not less than 30
nor more than 60 days' prior notice in amounts of $1,000 or an integral multiple
of $1,000 at the following redemption prices (expressed as percentages of the
principal amount), if redeemed during the 12-month period beginning July 15 of
the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1997...................................................... 105.0%
1998...................................................... 102.5%
1999 and thereafter....................................... 100.0%
</TABLE>
in each case plus accrued and unpaid interest to the redemption date (subject to
the right of holders of record on relevant record dates to receive interest due
on an interest payment date).
The Old RGC 9% Notes are subject to redemption at any time on or after
April 1, 2000, at the option of RGC, in whole or in part, on not less than 30
nor more than 60 days' prior notice in amounts of $1,000 or an integral multiple
of $1,000 at 100% of the principal amount thereof plus accrued interest to the
redemption date (subject to the right of holders of record on relevant record
dates to receive interest due on an interest payment date.)
Standard & Poor's has publicly announced that it intends to assign a new
rating to the Old RGC Notes. Such new rating assignment, if implemented, would
constitute a Rating Decline under the Old RGC Indentures. The consummation of
the Merger (which is conditioned on, among other things, successful
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consummation of the Other Debt Financing Transactions and the Bank Financing,
which itself is conditioned upon receipt of the Minimum Tender) and the
resulting change in composition of the Board of Directors of RGC, together with
the anticipated Rating Decline would constitute a Change of Control Triggering
Event under the Old RGC Indentures. Upon such a Change of Control Triggering
Event the Company would be obligated to make the Change of Control Offer
following the Merger for all outstanding Old RGC Notes at 101% of the principal
amount thereof ($90.9 million, assuming $90 million of Old RGC Notes are
outstanding following the Merger) plus accrued and unpaid interest to the date
of repurchase.
The Old RGC Indentures contain certain covenants, including, but not
limited to, covenants with respect to the following matters: (i) limitation on
incurrence of additional indebtedness; (ii) limitation on dividends and other
restricted payments; (iii) limitation on transactions with affiliates; (iv)
limitation on liens securing subordinated indebtedness; (v) limitation on other
senior subordinated indebtedness; (vi) limitation on preferred stock of
subsidiaries; (vii) limitation on dividend and other payment restrictions
affecting subsidiaries; and (viii) limitation on mergers and sales of assets.
Under the Old RGC Indentures, certain events constitute an event of default
including: (i) the failure to make any principal and interest payment on the Old
RGC Notes when due; (ii) the failure to comply with any other agreement
contained in the Old RGC Indentures or the Old RGC Notes; (iii) a default under
certain indebtedness; (iv) certain final judgments or orders for payments of
money; and (v) certain events occurring under bankruptcy laws.
Upon the consummation of the RGC Exchange Offers, supplemental indentures
to each of the Old RGC 9% Indenture and the Old RGC 10 1/4% Indenture will
become effective, reflecting the proposed amendments to the Old RGC 9% Indenture
and the Old RGC 10 1/4% Indenture. Such supplemental indentures will eliminate
substantially all of the restrictive covenants in the Old RGC Indentures,
including covenants with respect to limitation on indebtedness, limitation on
restricted payments, limitation on transactions with affiliates, limitation on
liens securing subordinated indebtedness, restrictions on preferred stock of
subsidiaries and limitation on dividends and other payment restrictions
affecting subsidiaries. In addition, the Supplemental Indentures will modify the
covenants which limit the ability of RGC to consolidate or merge with, or sell
all or substantially all of its assets, to any other person or entity unless
certain conditions are satisfied, by eliminating the subsections thereof which
require that immediately after giving effect to such transaction on a pro forma
basis RGC or the surviving entity, as the case may be, has a Consolidated
Interest Coverage Ratio (as defined in the Old RGC Note Indentures) for its four
most recently completed fiscal quarters of at least 1.8 to 1.0.
The New RGC Notes. The New RGC Notes will be issued upon consummation of
the RGC Exchange Offer to tendering holders of Old RGC Notes.
The New RGC Notes will bear interest at a fixed rate per annum equal to the
greater of (a) 11.50% and (b) the RGC Applicable Treasury Rate (as hereinafter
defined) plus 425 basis points (4.25 percentage points); provided, however, that
in no event will the New RGC Notes bear interest at a rate per annum that is
less than the interest rate on the New F4L Senior Notes offered pursuant to the
Public Offering plus 50 basis points (0.50 percentage points). The "RGC
Applicable Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled by
and published in the most recent Federal Reserve Statistical Release H.15 (519))
most nearly equal to the average life to stated maturity of the New RGC Notes;
provided, that if the average life to stated maturity of the New RGC Notes is
not equal to the constant maturity of the United States Treasury security for
which a weekly average yield is given, the Treasury Rate shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of the year) from
the weekly average yields of the United States Treasury securities for which
such yields are given. The New RGC Notes will mature on February 1, 2005. On or
after February 1, 2000, the New RGC Notes may be redeemed in whole at any time
or in part from time to time, at the option of the Company, at a redemption
price equal to the applicable percentage of the principal amount thereof set
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<PAGE> 144
forth below, plus accrued and unpaid interest to the redemption date, if
redeemed during the 12 months commencing on February 1 of the years set forth
below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000................................................. %
2001................................................. %
2002 and thereafter.................................. 100 %
</TABLE>
In addition, on or prior to February 1, 1998 the Company may, at its
option, use the net cash proceeds from one or more Public Equity Offerings to
redeem up to an aggregate of 35% of the principal amount of the New RGC Notes
originally issued, at a redemption price equal to % of the principal amount
thereof, plus accrued and unpaid interest, if any, to the redemption date.
The New RGC Note Indenture provides that if a Change of Control (as defined
therein) occurs, each holder will have the right to require the Company to
repurchase such holder's New RGC Notes pursuant to a Change of Control Offer (as
defined therein) at 101% of the principal amount thereof plus accrued interest,
if any, to the date of repurchase.
The New RGC Note Indenture contains certain covenants, including, but not
limited to, covenants with respect to the following matters: (i) limitation on
dividends and other restricted payments; (ii) limitation on incurrences of
additional indebtedness; (iii) limitation on liens; (iv) limitation on asset
sales; (v) limitation on dividend and other payment restrictions affecting
subsidiaries; (vi) limitation on transactions with affiliates; (vii) limitation
on preferred stock of subsidiaries; (viii) limitation on mergers and certain
other transactions; (ix) limitation on other senior subordinated indebtedness;
and (x) limitation on guarantees of certain indebtedness.
The aggregate principal amount of Old RGC Notes and New RGC Notes will be
limited to $450 million at any one time outstanding. The covenants in the
indenture governing the New RGC Notes will be substantially similar to the
covenants in the New F4L Senior Subordinated Note Indenture.
THE PUBLIC OFFERING
Concurrently with the Exchange Offers, Food 4 Less is offering up to $400
million of New F4L Senior Notes pursuant to the Public Offering. The terms of
the New F4L Senior Notes offered pursuant to the Public Offering will be part of
the same issue as the New F4L Senior Notes issued pursuant to the F4L Senior
Notes Exchange Offer. See "Description of the New F4L Notes." The consummation
of the Public Offering and the Exchange Offers will occur simultaneously. It is
a condition to the consummation of the Public Offering that the Exchange Offers
and the RGC Exchange Offers be successfully consummated. Certain proceeds of the
Public Offering are expected to be used to fund the Change of Control Offer. See
"The Merger and the Financing -- Sources and Uses."
DESCRIPTION OF THE NEW CREDIT FACILITY
In connection with the Merger, Food 4 Less will enter into the New Credit
Facility with a syndicate of financial institutions for whom Bankers Trust will
act as agent. All of Food 4 Less' obligations under the New Credit Facility will
be assumed by the Company immediately following the Merger. Food 4 Less has
accepted a commitment letter (the "Commitment Letter") from Bankers Trust
pursuant to which Bankers Trust has agreed, subject to certain conditions, to
provide the Company up to a maximum aggregate amount of $1,075.0 million of
financing under the New Credit Facility. The following is a summary of the
anticipated material terms and conditions of the New Credit Facility. This
summary does not purport to be a complete description of the New Credit Facility
and is subject to the detailed provisions of the loan agreement (the "Loan
Agreement") and various related documents to be entered into in connection with
the New Credit Facility. A draft copy of the Loan Agreement will be available
upon request from Food 4 Less.
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<PAGE> 145
GENERAL
The New Credit Facility will provide for (i) term loans in the aggregate
amount of $750 million, comprised of the $375 million Tranche A Loan, the $125
million Tranche B Loan, the $125 million Tranche C Loan, and the $125 million
Tranche D Loan; and (ii) the $325 million New Revolving Facility under which
working capital loans may be made and commercial or standby letters of credit in
the maximum aggregate amount of up to $150 million may be issued, under which
approximately $101 million of letters of credit are expected to be issued upon
the closing of the Merger.
Proceeds of the New Term Loans, together with proceeds from the New Equity
Investment and the Public Offering will be used to fund the cash requirements
for the acquisition of RSI, refinance existing bank indebtedness of Ralphs and
Food 4 Less, purchase Old RGC 9% Notes and Old RGC 10 1/4% Notes, repay a
portion of other indebtedness, pay holders of the Ralphs EARs and pay various
fees, expenses and other costs associated with the Merger and the Financing. The
New Revolving Facility will be available to provide for the working capital
requirements and general corporate purposes of the Company and to issue
commercial and standby letters of credit to support workers' compensation
contingencies and for other corporate purposes.
INTEREST RATE; FEES
Borrowings under (i) the New Revolving Facility and the Tranche A Loan will
bear interest at a rate equal to the Base Rate (as defined in the Loan
Agreement) plus 1.25% per annum or the reserve adjusted Euro-Dollar Rate (as
defined in the Loan Agreement) plus 2.50% per annum; (ii) the Tranche B Loan
will bear interest at the Base Rate plus 1.75% per annum or the reserve adjusted
Euro-Dollar Rate plus 3.00% per annum; (iii) the Tranche C Loan will bear
interest at the Base Rate plus 2.125% per annum or the reserve adjusted
Euro-Dollar Rate plus 3.375% per annum; and (iv) the Tranche D Loan will bear
interest at the Base Rate plus 2.50% per annum or the reserve adjusted
Euro-Dollar Rate plus 3.75% per annum, in each case as selected by the Company.
Applicable interest rates on Tranche A Loan and the New Revolving Facility and
the fees payable under the New Revolving Facility on letters of credit, will be
reduced by up to 0.50% per annum after the Term Loans have been reduced by such
amounts and if the Company meets certain financial tests. Up to $30 million of
the New Revolving Facility will be available as a swingline facility and loans
outstanding under the swingline facility shall bear interest at the Base Rate
plus 0.75% per annum (subject to adjustment as described in the preceding
sentence). After the occurrence of a default under the New Credit Facility,
interest will accrue at the rate equal to the rate on loans bearing interest at
the rate determined by reference to the Base Rate plus an additional 2.00% per
annum. The Company will pay certain fees on the standby and the commercial
letters of credit and will pay a commitment fee of 0.50% per annum on the
undrawn amount of the Tranche A Loans from the closing of the Merger until the
drawing or termination thereof and on the unused portions of the New Revolving
Facility. The New Credit Facility will require the Company to enter into hedging
agreements to limit its exposure to increases in interest rates for a period of
not less than two years. The New Credit Facility may be prepaid in whole or in
part without premium or penalty.
AMORTIZATION; PREPAYMENTS
The Tranche A Loan will mature six years after the closing of the Merger
and will be subject to amortization, commencing in the fifteenth month after the
closing of the Merger on a quarterly basis in aggregate annual amounts of $45
million in the second year, $75 million in the third year, $80 million in the
fourth year, $85 million in the fifth year, and $90 million in the sixth year.
The Tranche B Loan will mature seven years after the closing of the Merger and
will be subject to amortization on a quarterly basis in aggregate annual amounts
of $1.25 million for the first six years and $117.5 million in the seventh year.
The Tranche C Loan will mature eight years after the closing of the Merger and
will be subject to amortization on a quarterly basis in aggregate annual amounts
of $1.25 million for the first seven years and $116.25 million in the eighth
year. The Tranche D Loan will mature nine years after the closing of the Merger
and will be subject to amortization on a quarterly basis in aggregate annual
amounts of $1.25 million for the first eight years and $115 million in the ninth
year. The New Revolving Facility will mature on the same date as the Tranche A
Loan. The Company will be required to reduce loans outstanding under the New
Revolving Facility to $75 million for a period of not less than 30 consecutive
days during each consecutive 12-month period. The
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Company will be required to make certain prepayments, subject to certain
exceptions, on the New Credit Facility with 75% of Consolidated Excess Cash Flow
(as defined in the Loan Agreement) and with the proceeds from certain asset
sales, issuances of debt and equity securities and any pension plan reversion.
Such prepayments will be allocated pro rata between the Tranche A Loans, Tranche
B Loans, Tranche C Loans and the Tranche D Loans and to scheduled amortization
payments of the Tranche A Loans, the Tranche B Loans, Tranche C Loans, and the
Tranche D Loans pro rata.
GUARANTEES AND COLLATERAL
New Holdings and all active subsidiaries of the Company (including the
Subsidiary Guarantors) will guarantee the Company's obligations under the New
Credit Facility. The Company's obligations and the guarantees of its
subsidiaries will be secured by substantially all personal property of the
Company and its subsidiaries, including a pledge of the stock of all
subsidiaries of the Company. New Holdings' guarantee will be secured by a pledge
of the stock of the Company. The Company's obligations will also be secured by
first priority liens on certain unencumbered real property fee interests of the
Company and its subsidiaries and the Company and its subsidiaries will use their
reasonable economic efforts to provide the lenders with a first priority lien on
certain unencumbered leasehold interests of the Company and its subsidiaries.
COVENANTS
The obligation of the lenders under the New Credit Facility to advance
funds is subject to the satisfaction of certain conditions customary in
agreements of this type. In addition, the Company will be subject to certain
customary affirmative and negative covenants contained in the New Credit
Facility, including, without limitation, covenants that restrict, subject to
specified exceptions, (i) the incurrence of additional indebtedness and other
obligations, (ii) a merger or acquisition, (iii) asset sales, (iv) the granting
of liens, (v) prepayment or repurchase of other indebtedness, (vi) engaging in
transactions with affiliates, or (vii) cash capital expenditures. Certain of
these covenants may be more restrictive than those in favor of holders of the
New F4L Notes as described herein and as set forth in the New F4L Indentures. In
addition, the New Credit Facility will require that the Company maintain certain
specified financial covenants, including a minimum fixed charge coverage, a
minimum EBITDA, a maximum ratio of total debt to EBITDA and a minimum net worth.
EVENTS OF DEFAULT
The New Credit Facility also provides for customary events of default. The
occurrence of any of such events of default could result in acceleration of the
Company's obligations under the New Credit Facility and foreclosure on the
collateral securing such obligations, which could have material adverse results
to holders of the New F4L Notes.
DESCRIPTION OF HOLDING COMPANY INDEBTEDNESS
The Seller Debentures. The Seller Debentures will be issued to the
stockholders of RSI upon consummation of the Merger. The Seller Debentures will
be issued in an aggregate principal amount of $100 million and will mature on a
date to be determined in 2007. The Seller Debentures will be general unsecured
obligations of New Holdings and will be subordinated to the prior payment when
due of all Senior Indebtedness (as defined in the indenture governing the Seller
Debentures (the "Debenture Indenture")). The Seller Debentures will bear
interest at a rate equal to 13.00% per annum. Interest will accrue on the Seller
Debentures beginning from the date of issuance or from the most recent date to
which interest has been paid and will be payable semi-annually in arrears on
each interest payment date. New Holdings will have the option, in its sole
discretion, to issue additional securities ("Secondary Securities") in lieu of a
cash payment of any or all of the interest due for the period prior to the
interest payment date five years after the date of issuance of the Seller
Debentures.
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<PAGE> 147
On or after a date to be determined in 2000, the Seller Debentures may be
redeemed, at the option of New Holdings, in whole at any time or in part from
time to time, at a redemption price equal to the applicable percentage of the
principal amount thereof set forth below, together with accrued interest to the
redemption date, if redeemed during the twelve-month period commencing on a date
to be determined in the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000...................................... 106.500%
2001...................................... 104.875%
2002...................................... 103.250%
2003...................................... 101.625%
2004 and thereafter....................... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to a date to be determined in 1998,
New Holdings may use the net proceeds of an Initial Public Offering (as defined
in the Debenture Indenture) of New Holdings or Food 4 Less to redeem up to 35%
of the Seller Debentures at a redemption price equal to 110% of the principal
amount thereof, plus accrued and unpaid interest to the date of redemption.
In the event of a Change of Control (as defined in the Debenture
Indenture), each holder has the right to require the repurchase of such holder's
Seller Debentures at a purchase price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest to the date of purchase.
The Debenture Indenture will contain certain covenants that, among other
things, limit the ability of New Holdings to enter into certain mergers or
consolidations or incur certain liens or of New Holdings or its subsidiaries to
incur additional indebtedness, pay dividends or make certain other Restricted
Payments (as defined in the Debenture Indenture), or engage in certain
transactions with affiliates. Under certain circumstances, New Holdings will be
required to make an offer to purchase Seller Debentures at a price equal to 100%
of the aggregate principal amount thereof with the proceeds of certain Asset
Sales (as defined in the Debenture Indenture). The Debenture Indenture will
contain certain customary events of default, which will include the failure to
pay interest and principal, the failure to comply with certain covenants in the
Seller Debentures or the Debenture Indenture, a default under certain
indebtedness, the imposition of certain final judgments or warrants of
attachment and certain events occurring under bankruptcy laws.
Pursuant to the terms of the Merger Agreement and a registration rights
agreement to be executed concurrently with the closing of the Merger, New
Holdings is obligated to file a shelf registration statement with the Commission
with respect to the Seller Debentures, use its best efforts to cause such shelf
registration statement to become effective and remain effective for up to three
years, and pay the expenses related thereto. The effectiveness of such shelf
registration statement is a condition to the consummation of the Merger. If New
Holdings fails to comply with its obligations to keep such shelf registration
statement effective, Holdings will be obligated to pay certain liquidated
damages.
The Holdings Discount Notes. The Holdings Discount Notes were issued in
December 1992, are limited in aggregate principal amount to $103.6 million and
will mature on December 15, 2004. The Holdings Discount Notes are unsecured
general obligations of Holdings (and will become unsecured obligations of New
Holdings by operation of the Reincorporation Merger) and bear interest at a rate
equal to 15.25% per annum. The purchase discount on the Holdings Discount Notes
accretes from the date of issuance until December 15, 1997. Interest accrues on
the Holdings Discount Notes beginning December 15, 1997, or from the most recent
date to which interest has been paid, and is payable semi-annually on each June
15 and December 15, commencing on June 15, 1998.
The Holdings Discount Notes are redeemable, at the option of Holdings, in
whole at any time or in part from time to time, on or after December 15, 1997 at
the following redemption prices (expressed as
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percentages of the accreted value) if redeemed during the twelve-month period
commencing on December 15 of the year set forth below, plus, in each case,
accrued and unpaid interest to the date of redemption:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1997...................................... 107.625%
1998...................................... 106.100%
1999...................................... 104.575%
2000...................................... 103.050%
2001...................................... 101.525%
2002 and thereafter....................... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to December 15, 1997, Holdings may use
the net proceeds of an Initial Public Offering (as defined in the Holdings
Discount Note Indenture) of Holdings or Food 4 Less to redeem up to 25% of the
Holdings Discount Notes at redemption prices equal to the sum of (i) the
applicable percentage of the accreted value plus (ii) the Proportionate Share
(as defined in the Holdings Discount Note Indenture) of the Holdings Discount
Notes, if any to the date of redemption if redeemed during the twelve-month
period beginning December 15 of the year set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1992...................................... 120.000%
1993...................................... 117.525%
1994...................................... 115.050%
1995...................................... 112.575%
1996...................................... 110.100%
</TABLE>
In the event of a Change of Control (as defined in the Holdings Discount
Note Indenture), each holder has the right to require the repurchase of such
holder's Holdings Discount Notes at a purchase price equal to 101% of the
accreted value, plus either, (i) if the date of the purchase is prior to
December 15, 1997, the Proportionate Share, if any, with respect to the Holdings
Discount Notes to the date of purchase and (ii) if the date of the purchase is
on or after December 15, 1997, the aggregate principal amount thereof plus
accrued interest, if any, to the date of purchase.
Holdings will make a mandatory sinking fund payment on December 15, 2003,
sufficient to retire 50% of the Holdings Discount Notes, at a redemption price
equal to 100% of the principal amount thereof, together with accrued interest to
the redemption date. Holdings may, at its option, receive credit against such
sinking fund payment for 100% of the principal amount of any Holdings Discount
Notes previously acquired or redeemed by Holdings and surrendered to the Trustee
under the Holdings Discount Note Indenture for cancellation and which were not
previously used as a credit against any other required payment pursuant to the
Holdings Discount Note Indenture.
The Holdings Discount Note Indenture contains certain covenants that, among
other things, limit the ability of Holdings to enter into certain mergers or
consolidations or incur certain liens or of Holdings or its subsidiaries to
incur additional indebtedness, pay dividends or make certain other Restricted
Payments (as defined in the Debenture Indenture), or engage in certain
transactions with affiliates. Under certain circumstances, Holdings will be
required to make an offer to purchase Holdings Discount Notes at a price equal
to 100% of the aggregate principal amount thereof with the proceeds of certain
Asset Sales (as defined in the Debenture Indenture). The Holdings Discount Note
Indenture contains certain customary events of default, including the failure to
pay interest and principal, the failure to comply with certain covenants in the
Holdings Discount Notes or the Holdings Discount Note Indenture, a default under
certain indebtedness, the imposition of certain final judgments or warrants of
attachment and certain events occurring under bankruptcy laws.
Pursuant to the Holdings Consent Solicitation, Holdings is soliciting
consents from, and will make a cash consent payment of $20.00 for each $1,000
principal amount of Holdings Discount Notes for which a consent
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is properly delivered and accepted to, holders of the Holdings Discount Notes
representing at least a majority in aggregate principal amount of such notes to
proposed amendments to the Holdings Discount Note Indenture to permit the
consummation of the Merger and to provide appropriate operating and financial
flexibility to the Company after the Merger. Following the Reincorporation
Merger, New Holdings and the trustee under the Holdings Discount Note Indenture
will execute a supplemental indenture assuming the obligations of Holdings
thereunder. New Holdings and the trustee under the Holdings Discount Note
Indenture will then execute a second supplemental indenture implementing such
proposed amendments to the Holdings Discount Note Indenture after certification
to such trustee that Holdings has received consents from at least a majority in
aggregate principal amount of such notes.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Latham & Watkins, counsel to Food 4 Less ("Counsel"), has advised Food 4
Less that the following discussion expresses their opinion as to the material
federal income tax consequences expected to result from the Exchange Offers and
the Solicitation. Such opinion is based on current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury Regulations,
judicial authority and current administrative rulings and pronouncements of the
Internal Revenue Service (the "Service"), any of which may be altered with
retroactive effect, thereby changing the federal income tax consequences
discussed below. There can be no assurance that the Service will not take a
contrary view, and no ruling from the Service has been or will be sought.
The tax treatment of a holder of Old F4L Notes or New F4L Notes may vary
depending upon such holder's particular situation. Certain holders (including
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) may be subject to special rules not discussed
below. This discussion is limited to those holders who have held the Old F4L
Notes as "capital assets" and who will hold the New F4L Notes as "capital
assets" (generally, property held for investment) within the meaning of Section
1221 of the Code. EACH HOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES OF EXCHANGING, HOLDING AND DISPOSING OF OLD F4L
NOTES AND NEW F4L NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE,
LOCAL OR FOREIGN TAX LAWS.
EXCHANGES OF OLD F4L NOTES FOR NEW F4L NOTES AND EXCHANGE PAYMENTS
GENERAL
Whether the exchange of Old F4L Notes for New F4L Notes and Exchange
Payments will be a recapitalization under the Code will depend in part upon
whether the Old F4L Notes and New F4L Notes are considered to be "securities"
within the meaning of the provisions of the Code governing reorganizations. The
test as to whether a debt instrument is a "security" involves an overall
evaluation of the nature of the debt instrument, with the term of the debt
instrument usually regarded as a significant factor. Generally, a debt
instrument with a term of ten years or more is considered to constitute a
security for purposes of the reorganization provisions of the Code.
Although the treatment of Old F4L Senior Notes and New F4L Senior Notes is
not entirely certain because the stated term of such instruments may be less
than ten years, the Old F4L Senior Notes and New F4L Senior Notes should, and
the Old F4L Senior Subordinated Notes and New F4L Senior Subordinated Notes
will, be treated as "securities" for federal income tax purposes. As a result,
an exchange of Old F4L Notes for New F4L Notes and Exchange Payments pursuant to
the Exchange Offers should constitute a recapitalization for federal income tax
purposes, and exchanging holders of Old F4L Notes who receive New F4L Notes and
Exchange Payments should recognize gain, but not loss, equal to the lesser of
(i) the amount of cash received (other than that portion, if any, attributable
to accrued but unpaid interest on the Old F4L Notes) or (ii) the excess of the
sum of the issue price of the New F4L Notes (or possibly their fair market value
for cash method holders) and the amount of cash (other than that portion, if
any, attributable to accrued but unpaid interest on the Old F4L Notes) received
over the holders' adjusted tax basis in the Old F4L Notes
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<PAGE> 150
surrendered therefor. Such gain will be long-term capital gain if the Old F4L
Notes had been held for more than one year. A holder's initial tax basis in the
New F4L Notes received will equal such holder's adjusted tax basis in the Old
F4L Notes exchanged therefor, increased by any gain recognized as a result of
the exchange and decreased by the amount of cash received.
Because the law is unclear, however, Counsel is unable to opine on whether
the Old F4L Senior Notes or New F4L Senior Notes will be treated as "securities"
for federal income tax purposes. If either the Old F4L Senior Notes or New F4L
Senior Notes were determined not to constitute "securities" for federal income
tax purposes, holders exchanging Old F4L Senior Notes for New F4L Senior Notes
and the Exchange Payment would recognize gain or loss equal to the difference
between the sum of the issue price of the New F4L Senior Notes (or possibly
their fair market value for cash method holders) and the amount of cash received
(other than that portion, if any, attributable to accrued but unpaid interest on
the Old F4L Senior Notes) and the holders' adjusted tax basis on the Old F4L
Senior Notes surrendered therefor. Such gain or loss would generally be
long-term capital gain or loss, provided the Old F4L Senior Notes had been held
for more than one year. It should be noted that restrictions apply to the
deduction of net capital losses. Noncorporate taxpayers may deduct no more than
$3,000 of capital losses from ordinary income and corporations may deduct
capital losses only from capital gains.
ACCRUED INTEREST
Under the terms of the Exchange Offers, accrued interest on tendered Old
F4L Notes up to, but not including, the date on which such Old F4L Notes are
accepted for exchange will be paid in cash promptly after consummation of the
Exchange Offers.
CONSEQUENCES TO HOLDERS OF OLD F4L NOTES NOT PARTICIPATING IN THE EXCHANGE
OFFERS
Although not free from doubt, holders of Old F4L Notes who do not
participate in the Exchange Offers should not recognize any income, gain or loss
for federal income tax purposes as a result of the Proposed Amendments. Because
the law is unclear however, Counsel is unable to opine on whether holders of Old
F4L Notes who do not participate in the Exchange Offers will recognize any such
income, gain or loss. The Service could assert that, due to the adoption of the
Proposed Amendments, such non-participating holders should be treated as having
exchanged their Old F4L Notes for modified Old F4L Notes ("Modified Old F4L
Notes"). The deemed exchange should, however, constitute a recapitalization and
non-participating holders would not recognize any gain or loss as a result of
such deemed exchange. Modified Old F4L Notes may be considered to be issued with
original issue discount if the Old F4L Notes were treated as "traded on an
established securities market" or, in certain circumstances, in the case of a
"potentially-abusive situation." See "-- New F4L Notes -- Original Issue
Discount."
NEW F4L NOTES
STATED INTEREST
Holders of New F4L Notes will be required to include stated interest in
gross income in accordance with their methods of accounting for tax purposes.
ORIGINAL ISSUE DISCOUNT
General Original Issue Discount Rules. The amount of original issue
discount, if any, on a debt instrument is the excess of its "stated redemption
price at maturity" over its "issue price," subject to a statutorily-defined de
minimis exception. The "issue price" of a debt instrument that is part of an
issue of debt instruments a substantial amount of which is issued for money
(such as the New F4L Senior Notes) will be equal to the first price at which a
substantial amount of such debt instruments is sold for money. The "issue price"
of a debt instrument that is not part of an issue of debt instruments a
substantial amount of which is issued for money but is issued in exchange for
another debt instrument (such as the New F4L Senior Subordinated Notes) depends
on whether either debt instrument is treated as "traded on an established
securities market." If neither is so traded, the issue price of the debt
instrument received will be equal to its
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stated principal amount, assuming the debt instrument provides for "adequate
stated interest" (i.e., interest at least at the applicable federal rate), and
will be equal to its "imputed principal amount" (the sum of the present values
of all payments due under the debt instrument, using a discount rate equal to
the applicable federal rate) if either the debt instrument does not provide for
"adequate stated interest" or in the case of a "potentially abusive situation"
(including certain recent sales transactions). If the debt instrument received
is "traded on an established securities market," then its issue price will be
its trading price immediately following issuance. If the exchanged debt
instrument is so traded (but the debt instrument received in exchange therefor
is not), the issue price of the debt instrument received will generally be equal
to the fair market value of the debt instrument exchanged therefor. The "stated
redemption price at maturity" of a debt instrument is the sum of its principal
amount plus all other payments required thereunder, other than payments of
"qualified stated interest" (defined generally as stated interest that is
unconditionally payable in cash or in property (other than debt instruments of
the issuer) at least annually at a single fixed rate that appropriately takes
into account the length of intervals between payments).
In general, a holder of a debt instrument with original issue discount must
include in gross income for federal income tax purposes the sum of the daily
portions of original issue discount with respect to such debt instrument for
each day during the taxable year or portion of a taxable year on which such
holder holds the debt instrument. The daily portion is determined by allocating
to each day of any accrual period (generally, a six month period or a shorter or
longer period from the date of original issuance) a pro rata portion of an
amount equal to the "adjusted issue price" of the debt instrument at the
beginning of the accrual period multiplied by the yield to maturity of the debt
instrument. The "adjusted issue price" is the issue price of the debt instrument
increased by the accrued original issue discount for all prior accrual periods
(and decreased by the amount of cash payments made in all prior accrual periods,
other than qualified stated interest payments). The tax basis of the debt
instrument in the hands of the holder will be increased by the amount of
original issue discount, if any, on the debt instrument that is included in the
holder's gross income and will be decreased by the amount of any cash payments
(other than qualified stated interest payments) received with respect to the
debt instrument, whether such payments are denominated as principal or interest.
Sections 1272 and 1273 of the Code and the Treasury regulations thereunder
provide detailed rules for computing original issue discount.
Notwithstanding the original issue discount rules described in the
preceding paragraphs, a holder of a debt instrument would not be required to
include original issue discount in income if such holder's tax basis in the debt
instrument were to exceed the debt instrument's stated principal amount. In
addition, a holder would be permitted to offset any original issue discount
income by an amount equal to the excess of such holder's tax basis (if less than
or equal to the stated principal amount) over the adjusted issue price of the
debt instrument.
New F4L Senior Notes. Because the New F4L Senior Notes will be part of an
issue a substantial amount of which will be sold in the Public Offering for
money, the issue price of the New F4L Senior Notes received by holders in
exchange for their Old F4L Senior Notes should be equal to the first price at
which a substantial amount of the New F4L Senior Notes is sold pursuant to the
Public Offering. The stated redemption price at maturity of the New F4L Senior
Notes will be equal to their stated principal amount (in that all interest will
be paid on a current basis in cash). As a result, the New F4L Senior Notes will
not be issued with original issue discount unless the first price at which the
New F4L Senior Notes are sold pursuant to the Public Offering is less than the
stated principal amount of the New F4L Senior Notes by more than the de minimis
amount.
New F4L Senior Subordinated Notes. If neither the Old F4L Senior
Subordinated Notes nor the New F4L Senior Subordinated Notes were treated as
"traded on an established securities market," the issue price of the New F4L
Senior Subordinated Notes would be equal to their stated principal amount
(except in the case of a "potentially abusive situation," as discussed above)
and, because the stated redemption price at maturity of the New F4L Senior
Subordinated Notes would also be equal to their stated principal amount (in that
all interest will be paid on a current basis in cash), the New F4L Senior
Subordinated Notes would generally not be issued with original issue discount.
If the New F4L Senior Subordinated Notes were considered to be "traded on an
established securities market," their issue price would be their trading price
immediately following their issuance. If the Old F4L Senior Subordinated Notes,
but not the New F4L Senior
142
<PAGE> 152
Subordinated Notes, were considered to be so traded, then the issue price of the
New F4L Senior Subordinated Notes received would be equal to the fair market
value of the Old F4L Senior Subordinated Notes exchanged therefor. In either
event, if such trading price or fair market value were less than the stated
principal amount of the New F4L Senior Subordinated Notes by more than the de
minimis amount, holders of New F4L Senior Subordinated Notes would be required
to include original issue discount in income.
MARKET DISCOUNT
The Code generally requires holders of "market discount bonds" to treat as
ordinary income any gain realized on the disposition (or gift) of such bonds to
the extent of the market discount accrued during the holder's period of
ownership. A "market discount bond" is a debt obligation purchased at a market
discount subject to a statutory de minimis exception. For this purpose, a
purchase at a market discount includes a purchase at or after the original issue
at a price below the stated redemption price at maturity, or, in the case of a
debt instrument issued with original issue discount, at a price below (a) its
"issue price," plus (b) the amount of original issue discount includible in
income by all prior holders of the debt instrument, minus (c) all cash payments
(other than payments constituting qualified stated interest) received by such
previous holders. The accrued market discount generally equals a ratable portion
of the bond's market discount, based on the number of days the taxpayer has held
the bond at the time of such disposition, as a percentage of the number of days
from the date the taxpayer acquired the bond to its date of maturity.
An exception is made for certain tax-free (and partially tax-free)
exchanges, such as the exchange of Old F4L Notes for New F4L Notes and Exchange
Payments. In such cases, however, on a subsequent disposition of the stock or
securities received in such a non-recognition transaction, gain is treated as
ordinary income to the extent of the market discount accrued prior to the
nontaxable exchange. In that regard, the New F4L Notes received by a holder of
Old F4L Notes will contain accrued market discount to the extent of the market
discount accrued in the Old F4L Notes but not recognized at the time of the
exchange.
AMORTIZABLE BOND PREMIUM
Generally, if the tax basis of an obligation held as a capital asset
exceeds the amount payable at maturity of the obligation, such excess will
constitute amortizable bond premium that the holder may elect to amortize under
the constant interest rate method and deduct over the period from his
acquisition date to the obligation's maturity date. A holder who elects to
amortize bond premium must reduce his tax basis in the related obligation by the
amount of the aggregate deductions allowable for amortizable bond premium.
Amortizable bond premium will be treated under the Code as an offset to interest
income on the related debt instrument for federal income tax purposes, subject
to the promulgation of Treasury regulations altering such treatment.
DISPOSITION
In general, a holder of New F4L Notes will recognize gain or loss upon the
sale, exchange, redemption or other taxable disposition of such New F4L Notes
measured by the difference between (i) the amount of cash and the fair market
value of property received (except to the extent attributable to accrued
interest on the New F4L Notes) and (ii) the holder's tax basis in the New F4L
Notes (as increased by any original issue discount and market discount
previously included in income by the holder and decreased by any amortizable
bond premium, if any, deducted over the term of the New F4L Notes). Subject to
the market discount rules discussed above, any such gain or loss will generally
be long-term capital gain or loss, provided the New F4L Notes had been held for
more than one year.
ELECTION
A holder of New F4L Notes, subject to certain limitations, may elect to
include all interest and discount, if any, on the New F4L Notes in gross income
under the constant yield method. For this purpose, interest includes stated and
unstated interest, acquisition discount, original issue discount, de minimis
market discount and market discount, as adjusted by any acquisition premium.
Such election, if made in respect of a market discount bond, will constitute an
election to include market discount in income currently on all market
143
<PAGE> 153
discount bonds acquired by such holder on or after the first day of the first
taxable year to which the election applies. See "-- Market Discount."
BACKUP WITHHOLDING
A holder of New F4L Notes may be subject to backup withholding at the rate
of 31% with respect to interest paid on and gross proceeds from a sale of the
New F4L Notes unless (i) such holder is a corporation or comes within certain
other exempt categories and, when required, demonstrates this fact or (ii)
provides a correct taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. A holder of New F4L Notes who does
not provide the Company with his or her correct taxpayer identification number
may be subject to penalties imposed by the Service.
The Company will report to the holders of the New F4L Notes and the Service
the amount of any "reportable payments" (including any interest paid on the New
F4L Notes) and any amount withheld with respect to the New F4L Notes during the
calendar year.
TAX CONSEQUENCES TO THE COMPANY
EXCHANGE OFFERS AND SOLICITATION
In general, the consummation of the Exchange Offers and the Solicitation
will result in no material federal income tax consequences to the Company,
except that the Company will recognize cancellation of indebtedness income to
the extent that the adjusted issue price of the Old F4L Notes surrendered by
holders exceeds the sum of (i) the issue price of the New F4L Notes (as
described above under "New F4L Notes -- Original Issue Discount") and (ii) the
amount of the Exchange Payments delivered to holders in exchange therefor. The
Company does not expect to recognize any cancellation of indebtedness income as
a result of the consummation of the Exchange Offers and the Solicitation,
although no assurance can be given in this regard due to the uncertainty
regarding the issue price of the New F4L Notes (see "New F4L Notes -- Original
Issue Discount").
NET OPERATING LOSS CARRYFORWARDS
Under Section 382 of the Code, if a corporation with net operating losses
(a "loss corporation") undergoes an "ownership change," the use of such net
operating losses will be limited annually to the product of the long-term tax
exempt rate (published monthly by the Service) and the value of the loss
corporation's outstanding stock immediately before the ownership change
(excluding certain capital contributions) (the "Section 382 Limitation"). In
general, an "ownership change" occurs if the percentage of the value of the loss
corporation's stock owned by one or more direct or indirect "five percent
shareholders" has increased by more than 50 percentage points over the lowest
percentage of that value owned by such five percent shareholder or shareholders
at any time during the applicable "testing period" (generally the shorter of (i)
the three-year period preceding the testing date or (ii) the period of time
since the most recent ownership change of the corporation).
Both FFL and RSI have significant net operating loss carryforwards for
regular federal income tax purposes. The New Equity Investment and Merger will
trigger ownership changes for both the FFL and RSI affiliate groups for purposes
of Section 382 of the Code. As a result, the use of the FFL and RSI pre-
ownership change net operating loss carryforwards will be limited annually by
the Section 382 Limitation. The annual Section 382 Limitation that will be
applicable to the FFL net operating loss carryforwards is estimated to be
approximately $15.6 million, and the annual Section 382 Limitation that will be
applicable to the RSI net operating loss carryforwards is estimated to be
approximately $15 million.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF OLD F4L NOTES AND NEW
F4L NOTES IN LIGHT OF HIS OR HER PARTICULAR CIRCUMSTANCES AND INCOME TAX
SITUATION. EACH HOLDER OF OLD F4L NOTES AND NEW F4L NOTES
144
<PAGE> 154
SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO
SUCH HOLDER OF THE EXCHANGE OFFERS AND THE SOLICITATION, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
LEGAL MATTERS
The validity of the New F4L Senior Notes and the New F4L Senior
Subordinated Notes to be issued in connection with the Exchange Offers and the
Solicitation will be passed upon for Food 4 Less by Latham & Watkins, Los
Angeles, California. Certain legal matters in connection with the Exchange
Offers and the Solicitation will be passed upon for the Dealer Managers by
Cahill Gordon & Reindel (a partnership including a professional corporation),
New York, New York.
EXPERTS
The consolidated balance sheets of Ralphs Supermarkets, Inc. as of January
31, 1993 and January 30, 1994, and the related consolidated statements of
operations, cash flows and stockholders' equity for the year ended January 31,
1993, the year ended January 30, 1994, and the statements of operations, cash
flows and stockholders' equity of Ralphs Grocery Company for the year ended
February 2, 1992 have been included in this Prospectus and Solicitation
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
The consolidated balance sheets and schedules of Food 4 Less Supermarkets,
Inc. and subsidiaries as of June 26, 1993 and June 25, 1994, and the related
consolidated statements of operations, cash flows and stockholders' equity of
Food 4 Less Supermarkets, Inc. for the 52 weeks ended June 27, 1992, the 52
weeks ended June 26, 1993 and the 52 weeks ended June 25, 1994, and the related
financial statement schedules, included in this Prospectus and Solicitation
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
145
<PAGE> 155
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
RALPHS SUPERMARKETS, INC. (AS SUCCESSOR TO RALPHS GROCERY COMPANY):
Independent Auditors' Report (KPMG Peat Marwick LLP).................................. F-2
Consolidated balance sheets at January 31, 1993, January 30, 1994 and October 9, 1994
(unaudited)......................................................................... F-3
Consolidated statements of operations for the years ended February 2, 1992, January
31, 1993 and January 30, 1994 and the 36 weeks ended October 10, 1993 (unaudited)
and October 9, 1994 (unaudited)..................................................... F-4
Consolidated statements of cash flows for the years ended February 2, 1992, January
31, 1993 and January 30, 1994 and the 36 weeks ended October 10, 1993 (unaudited)
and October 9, 1994 (unaudited)..................................................... F-5
Consolidated statements of stockholders' equity for the years ended February 2, 1992,
January 31, 1993 and January 30, 1994 and the 36 weeks ended October 9, 1994
(unaudited)......................................................................... F-6
Notes to consolidated financial statements............................................ F-7
FOOD 4 LESS SUPERMARKETS, INC.:
Report of Independent Public Accountants (Arthur Andersen LLP)........................ F-26
Consolidated balance sheets as of June 26, 1993, June 25, 1994 and September 17, 1994
(unaudited)......................................................................... F-27
Consolidated statements of operations for the 52 weeks ended June 27, 1992, June 26,
1993 and June 25, 1994 and the 12 weeks ended September 18, 1993 (unaudited) and
September 17, 1994 (unaudited)...................................................... F-29
Consolidated statements of cash flows for the 52 weeks ended June 27, 1992, June 26,
1993 and June 25, 1994 and the 12 weeks ended September 18, 1993 (unaudited) and
September 17, 1994 (unaudited)...................................................... F-30
Consolidated statements of stockholder's equity for the 52 weeks ended June 27, 1992,
June 26, 1993 and June 25, 1994 and the 12 weeks ended September 17, 1994
(unaudited)......................................................................... F-32
Notes to consolidated financial statements............................................ F-33
</TABLE>
F-1
<PAGE> 156
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Ralphs Supermarkets, Inc.:
We have audited the consolidated balance sheets of Ralphs Supermarkets,
Inc. and subsidiary as of January 30, 1994 and January 31, 1993, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended and the statements of operations, stockholders' equity and
cash flows of Ralphs Grocery Company for the year ended February 2, 1992. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ralphs
Supermarkets, Inc. and subsidiary as of January 30, 1994 and January 31, 1993,
and the results of their operations and their cash flows for the years then
ended and the results of operations and cash flows of Ralphs Grocery Company for
the year ended February 2, 1992, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Los Angeles, California
April 8, 1994 (except as to
Note 16, which is as of
September 14, 1994)
F-2
<PAGE> 157
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 30, OCTOBER 9,
1993 1994 1994
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents............................ $ 46,192 $ 55,080 $ 33,305
Accounts receivable.................................. 19,117 30,420 45,182
Inventories.......................................... 207,023 202,354 217,186
Prepaid expenses and other current assets............ 16,543 18,111 18,321
---------- ---------- ----------
Total current assets......................... 288,875 305,965 313,994
Property, plant and equipment, net................... 610,665 601,897 611,642
Excess of cost over net assets acquired, net......... 387,410 376,414 368,801
Beneficial lease rights, net......................... 60,757 55,553 50,733
Deferred debt issuance costs, net.................... 27,999 26,583 22,568
Deferred income taxes................................ -- 109,125 113,639
Other assets......................................... 12,792 8,113 9,985
---------- ---------- ----------
Total assets................................. $1,388,498 $1,483,650 $1,491,362
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt................. $ 66,465 $ 70,975 $ 79,865
Short-term debt...................................... 31,100 -- 37,400
Bank overdrafts...................................... 37,061 37,716 35,784
Accounts payable..................................... 120,709 138,554 141,775
Accrued expenses..................................... 127,788 101,543 109,273
Current portion of self-insurance reserves........... 27,732 30,138 28,209
---------- ---------- ----------
Total current liabilities.................... 410,855 378,926 432,306
Long-term debt....................................... 932,226 927,909 883,377
Self-insurance reserves.............................. 45,247 49,872 46,025
Lease valuation reserve.............................. 35,941 32,575 30,096
Other non-current liabilities........................ 97,526 89,299 84,593
---------- ---------- ----------
Total liabilities............................ 1,521,795 1,478,581 1,476,397
---------- ---------- ----------
Stockholders' equity (deficit):
Common stock, $.01 par value per share Authorized
50,000,000 shares; issued and outstanding,
25,587,280 shares at January 31, 1993, January 30,
1994 and October 9, 1994.......................... 256 256 256
Additional paid-in capital........................... 175,292 175,292 175,292
Accumulated deficit.................................. (308,845) (170,479) (160,583)
---------- ---------- ----------
Total stockholders' equity (deficit)......... (133,297) 5,069 14,965
---------- ---------- ----------
Commitments and contingencies (See Notes 2 and 8)
Total liabilities and stockholders' equity
(deficit).................................. $1,388,498 $1,483,650 $1,491,362
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 158
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTY-SIX THIRTY-SIX
YEAR ENDED YEAR ENDED YEAR ENDED WEEKS ENDED WEEKS ENDED
FEBRUARY 2, 1992 JANUARY 31, 1993 JANUARY 30, 1994 OCTOBER 10, 1993 OCTOBER 9, 1994
------------------ ------------------ ------------------ ------------------ ------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................ $2,889,222 100.0% $2,843,816 100.0% $2,730,157 100.0% $1,874,222 100.0% $1,856,341 100.0%
Cost of sales........ 2,275,237 78.8 2,217,197 78.0 2,093,727 76.7 1,445,171 77.1 1,433,008 77.2
---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
Gross profit....... 613,985 21.2 626,619 22.0 636,430 23.3 429,051 22.9 423,333 22.8
Selling, general
and
administrative
expenses......... 456,602 15.8 466,737 16.4 467,630 17.1 319,417 17.1 316,045 17.0
Provision for
equity
appreciation
rights........... 18,321 0.6 -- -- -- -- -- -- -- --
Amortization of
excess cost over
net assets
acquired......... 10,996 0.4 10,997 0.4 10,996 0.4 7,614 0.4 7,613 0.4
Provision for
restructuring.... -- -- 7,100 0.2 2,374 0.1 -- -- -- --
Provision for post
retirement
benefits other
than pensions.... 2,627 0.1 3,275 0.1 3,370 0.1 2,079 0.1 1,821 0.1
Provision for tax
indemnification
payments to
Federated
Department
Stores, Inc...... 10,000 0.3 -- -- -- -- -- -- -- --
---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
Operating income... 115,439 4.0 138,510 4.9 152,060 5.6 99,941 5.3 97,854 5.3
Other expenses:
Interest expense,
net.............. 130,206 4.5 125,611 4.4 108,755 4.0 75,748 4.0 77,162 4.2
Loss on disposal of
assets........... 12,967 0.5 2,607 0.1 1,940 0.1 422 -- 796 --
Provision for legal
settlement....... -- -- 7,500 0.3 -- -- -- -- -- --
Provision for
earthquake
losses........... -- -- -- -- 11,048 0.4 -- -- -- --
---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
Earnings (loss)
before income taxes
and extraordinary
item............... (27,734) (1.0) 2,792 0.1 30,317 1.1 23,771 1.3 19,896 1.1
Income tax expense
(benefit).......... 13,506 0.4 8,346 0.3 (108,049) (4.0) -- -- -- --
---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
Earnings (loss)
before
extraordinary
item............... (41,240) (1.4) (5,554) (0.2) 138,366 5.1 23,771 1.3 19,896 1.1
Extraordinary
item-debt
refinancing, net of
tax benefit
$4,173............. -- -- (70,538) (2.5) -- -- -- -- -- --
---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
Net earnings
(loss)............. $ (41,240) (1.4)% $ (76,092) (2.7)% $ 138,366 5.1% $ 23,771 1.3% $ 19,896 1.1%
========== ===== ========== ===== ========== ===== ========== ===== ========== =====
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 159
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTY-SIX THIRTY-SIX
YEAR END YEAR END YEAR END WEEKS ENDED WEEKS ENDED
FEBRUARY 2, JANUARY 31, JANUAEY 30, OCTOBER 10, OCTOBER 9,
1992 1993 1994 1993 1994
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)........................... $(41,240) $ (76,092) $ 138,366 $ 23,771 $ 19,896
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization............... 76,552 76,873 74,452 51,704 51,929
Amortization of discounts and deferred debt
issuance costs............................ 8,564 20,978 9,768 6,715 6,322
LIFO charge (credit)........................ 2,829 1,115 (2,054) 2,615 1,897
Loss on sale of assets...................... 12,967 6,841 4,314 422 796
Provision for equity appreciation rights.... 18,321 -- -- -- --
Provision for post-retirement benefits...... 2,627 3,275 3,370 2,079 1,821
Provision for tax indemnification payments
to Federated Department Stores, Inc. ..... 10,000 -- -- -- --
Provision for legal settlement.............. -- 7,500 -- -- --
Other changes in assets and liabilities:
Accounts receivable........................... 20,660 6,376 326 (7) (14,763)
Inventories at replacement cost............... (21,523) (13,682) 6,724 6,058 (16,728)
Prepaid expenses and other current assets..... (4,446) 3,703 (1,658) 1,915 (210)
Other assets.................................. 2,133 (616) 4,449 2,353 (1,993)
Interest payable.............................. (1,448) (13,393) (4,822) (4,226) (11,089)
Accounts payable and accrued liabilities...... 1,606 23,054 (1,622) (771) 23,579
Income taxes payable.......................... 822 (527) (1,480) -- --
Deferred tax asset............................ -- -- (109,125) -- (4,514)
Business interruption credit.................. -- -- (581) -- --
Earthquake losses............................. -- -- (11,048) -- --
Self insurance reserves....................... 6,575 8,456 7,031 3,860 (5,776)
Other liabilities............................. 1,095 (170) (12,407) (6,957) (7,635)
-------- --------- --------- --------- --------
Cash provided by operating activities......... 96,094 53,691 104,003 89,531 43,532
-------- --------- --------- --------- --------
Cash flows from investing activities:
Capital expenditures.......................... (50,355) (102,697) (62,181) (46,827) (44,544)
Proceeds from sale of property, plant and
equipment................................... 8,498 219 16,700 2,968 6,362
-------- --------- --------- --------- --------
Cash used in investing activities............. (41,857) (102,478) (45,481) (43,859) (38,182)
-------- --------- --------- --------- --------
Cash flows from financing activities:
Net borrowings under lines of credit.......... 29,000 2,100 (31,100) (31,100) 37,400
Redemption of preferred stock................. -- (3,000) -- -- --
Capitalized financing and acquisition costs... (573) (22,426) (5,108) (5,717) (246)
Increase (decrease) in bank overdrafts........ (7,193) (8,865) 655 (751) (1,932)
Proceeds from issuance of long-term debt...... 2,000 668,269 150,000 150,000 --
Dividends paid................................ -- -- -- -- (10,000)
Principal payments on long-term debt.......... (75,361) (577,902) (164,081) (157,963) (52,347)
-------- --------- --------- --------- --------
Cash provided by (used in) financing
activities.................................. (52,127) 58,176 (49,634) (45,531) (27,125)
-------- --------- --------- --------- --------
Net increase (decrease) in cash and cash
equivalents................................... 2,110 9,389 8,888 141 (21,775)
Cash and cash equivalents at beginning of
period........................................ 34,693 36,803 46,192 46,192 55,080
-------- --------- --------- --------- --------
Cash and cash equivalents at end of period...... $ 36,803 $ 46,192 $ 55,080 $ 46,333 $ 33,305
======== ========= ========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 160
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
RALPHS RALPHS
SUPERMARKETS, INC. GROCERY COMPANY
-------------------- -------------------- ADDITIONAL
OUTSTANDING COMMON OUTSTANDING COMMON PAID-IN- ACCUMULATED
SHARES STOCK SHARES STOCK CAPITAL DEFICIT TOTAL
----------- ------ ----------- ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT FEBRUARY 3,
1991...................... -- $ -- 100 $ -- $175,548 $(191,513) $(15,965)
Net Loss.................. -- -- -- -- -- (41,240) (41,240)
---------- ---- --- ---- -------- --------- --------
BALANCES AT FEBRUARY 2,
1992...................... -- -- 100 -- 175,548 (232,753) (57,205)
Capitalization of Ralphs
Supermarkets, Inc. .... 25,587,280 256 (100) -- (256) -- --
Net Loss.................. -- -- -- -- -- (76,092) (76,092)
---------- ---- --- ---- -------- --------- --------
BALANCES AT JANUARY 31,
1993...................... 25,587,280 256 -- -- 175,292 (308,845) 133,297)
Net earnings.............. -- -- -- -- -- 138,366 138,366
---------- ---- --- ---- -------- --------- --------
BALANCES AT JANUARY 30,
1994...................... 25,587,280 256 -- -- 175,292 (170,479) 5,069
Net Earnings
(unaudited)............ -- -- -- -- -- 19,896 19,896
Dividends Paid
(unaudited)............ -- -- -- -- -- (10,000) (10,000)
---------- ---- --- ---- -------- --------- --------
BALANCES AT OCTOBER 9, 1994
(unaudited)............... 25,587,280 $256 -- $ -- $175,292 $(160,583) $ 14,965
========== ==== === ==== ======== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 161
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION
At February 2, 1992, Ralphs Grocery Company was an indirect wholly owned
subsidiary of Federated Stores, Inc. ("Federated"). Two wholly owned
subsidiaries of Federated, Federated Holdings III, Inc. ("Holdings III") and
Allied Stores Corporation ("Allied") directly owned the common stock of Ralphs
Grocery Company approximately 84% and 16% respectively. In January 1990 Holdings
III and Allied, and certain other subsidiaries of Federated, each filed
petitions for relief under Chapter 11, Title 11 of the United States Code
("Chapter 11"). In March 1990, Federated filed a petition for relief under
Chapter 11. Pursuant to the plans of reorganization for Federated and certain of
its subsidiaries, Ralphs Supermarkets, Inc. was formed to hold the outstanding
shares of common stock of Ralphs Grocery Company. On February 3, 1992, Holdings
III and Allied contributed their shares of Ralphs Grocery Company to Ralphs
Supermarkets, Inc. in exchange for the issuance by Ralphs Supermarkets, Inc. of
Ralphs Supermarkets, Inc. shares in the same proportion in Ralphs Grocery
Company shares were owned ("Internal Reorganization"). For financial reporting
purposes, this transaction was recorded at predecessor cost. For Federal tax
purposes, a new basis was established at Ralphs Supermarket, Inc. as more fully
described in Note 11.
Under the plans of reorganization for Federated, Holdings III and certain
other subsidiaries of Federated (the "FSI Plan"), all Ralphs Supermarkets, Inc.
shares of common stock held by Holdings III were to be distributed to certain
creditors of Federated and Holdings III, including The Edward J. DeBartolo
Corporation ("EJDC"), Bank of Montreal ("BMO"), Banque Paribas ("BP") and Camdev
Properties Inc. ("Camdev"), and Federated. The FSI Plan was confirmed by the
Bankruptcy Court in January 1992 and was consummated on February 3, 1992. Under
the plan of reorganization of Allied and certain affiliates including Federated
Department Stores, Inc. (the "Allied-Federated Plan"), a portion of Allied's
Holding Company shares were to be distributed to BMO and BP. The
Allied-Federated Plan was confirmed by the Bankruptcy Court in January 1992 and
was consummated shortly after the FSI Plan.
Thus, following consummation of both the FSI Plan and the Allied-Federated
Plan and the transfer on July 19, 1993 of the shares of common stock in Ralphs
Supermarkets, Inc. held by Federated Stores, Inc. to Camdev. The approximate
ownership of Ralphs Supermarkets, Inc. is as follows:
<TABLE>
<CAPTION>
APPROXIMATE PERCENT
OWNERSHIP OF RALPHS
SUPERMARKETS, INC.
COMMON STOCK
AS OF JULY 19, 1993
-------------------
<S> <C>
EJDC................................................ 60.4%
BMO................................................. 10.1%
BP.................................................. 10.1%
Camdev.............................................. 12.8%
Federated Department Stores, Inc. (as successor by
merger to Allied)................................. 6.6%
</TABLE>
Pursuant to certain agreements entered into contemporaneously with the
effectiveness of the FSI Plan and the Allied-Federated Plan, certain income tax
liabilities of Ralphs Grocery Company, Federated, Allied, Federated Department
Stores, Inc. and other affiliates have been settled with the Internal Revenue
Service. In addition, Ralphs Grocery Company and certain affiliates including
Federated Department Stores, Inc., Allied and Federated (the "Affiliated Group")
entered into an agreement (the "Tax Indemnity Agreement") pursuant to which
Federated Department Stores, Inc. agreed to pay certain tax liabilities, if any,
relating to Ralphs Grocery Company being a member of the Affiliated Group. The
Tax Indemnity Agreement provides a formula to determine the amount of additional
tax liabilities through February 3, 1992 that Ralphs Grocery
F-7
<PAGE> 162
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company would be obligated to pay the Affiliated Group. However, such additional
liability, if any, is limited to $10 million subject to certain adjustments.
Under the Tax Indemnity agreement, both Ralphs Supermarkets, Inc. and
Ralphs Grocery Company have agreed to pay Federated Department Stores, Inc. $1
million annually for each of five years starting on February 3, 1992, and an
additional $5 million on February 3, 1997. These total payments of $10 million
have been recorded in the consolidated financial statements at February 2, 1992.
The five $1 million installments are to be paid by Ralphs Grocery Company and
the $5 million is the joint obligation of both Ralphs Supermarkets, Inc. and
Ralphs Grocery Company. Also, in the event Federated Department Stores, Inc. is
required to pay certain tax liabilities on behalf of Ralphs Grocery Company,
both Ralphs Supermarkets, Inc. and Ralphs Grocery Company have agreed to
reimburse Federated Department Stores, Inc. up to an additional $10 million,
subject to certain adjustments. This additional obligation is the joint and
several obligation of both Ralphs Supermarkets, Inc. and Ralphs Grocery Company.
The $5 million payment and the potential $10 million payment may be paid, at the
option of both Ralphs Supermarkets, Inc. and Ralphs Grocery Company, in cash or
newly issued Ralphs Supermarkets, Inc. Common Stock.
In connection with the consummation of the FSI Plan and the
Allied-Federated Plan, Ralphs Grocery Company and certain parties entered into
an agreement (the "Comprehensive Settlement Agreement") pursuant to which the
parties thereto, among other things, agreed to deliver releases to the various
parties to the Comprehensive Settlement Agreement as well as certain additional
parties. Under the Comprehensive Settlement Agreement, Ralphs Grocery Company
received general releases from Allied, Federated, Federated Department Stores,
Inc. and certain other affiliates which released it from any and all claims
which could have been asserted by the parties thereto prior to the effective
dates of FSI Plan and the Allied-Federated Plan other than for claims arising
under the Comprehensive Settlement Agreement, the FSI Plan, the Allied-Federated
Plan and the Tax Indemnity Agreement.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
These consolidated financial statements present the statements of financial
position of Ralphs Supermarkets, Inc. and subsidiary as of January 30, 1994 and
January 31, 1993 and the results of their operations and their cash flows for
the two years then ended. In addition, these consolidated financial statements
present the results of operations and cash flows of Ralphs Grocery Company for
the year ended February 2, 1992. Ralphs Grocery Company is deemed to be the
predecessor entity of Ralphs Supermarkets, Inc. For purposes of these
consolidated financial statements Ralphs Supermarkets, Inc. and Ralphs Grocery
Company will be collectively referred to as "Ralphs".
The interim consolidated financial statements included herein have been
prepared by Ralphs (the "Company") without audit, pursuant to the rules and
regulations promulgated by the Securities and Exchange Commission (the
"Commission"). Certain information and footnote disclosures, normally included
in the financial statements prepared in accordance with generally accepted
accounting principles, have been omitted pursuant to Commission rules and
regulations; nevertheless, Ralphs believes that the disclosures are adequate to
make the information presented not misleading. These consolidated financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in Ralphs Grocery Company's latest annual report
filed on Form 10-K. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the financial
position of Ralphs with respect to the interim financial statements, and of the
results of Ralphs' operations for the thirty-six weeks ended October 9, 1994 and
cash flows for the thirty-six weeks ended October 9, 1994 and the results of
Ralphs' operations for the thirty-six weeks ended October 10, 1993 and cash
flows for the thirty-six weeks ended October 10, 1993,
F-8
<PAGE> 163
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
have been included. The results of operations for the interim periods are not
necessarily indicative of the results for the full year.
(b) Reporting Period
Ralphs' fiscal year ends on the Sunday closest to January 31. Fiscal
year-ends are as follows:
February 2, 1992 (Fiscal 1991)
January 31, 1993 (Fiscal 1992)
January 30, 1994 (Fiscal 1993)
(c) Cash and Cash Equivalents
For purposes of the statements of cash flows, Ralphs considers all highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents.
(d) Inventories
Inventories are stated at the lower cost or market. Cost is determined
primarily using the last-in, first-out (LIFO) method. The replacement cost of
inventories exceeded the LIFO inventory cost by $15.535 million and $17.589
million at January 30, 1994 and January 31, 1993, respectively.
(e) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Property and equipment
held under capital leases are stated at the present value of the minimum lease
payments at the inception of the lease.
Depreciation of plant and equipment is calculated using the straight-line
method over the estimated useful lives of assets. Plant and equipment held under
capital leases and leasehold improvements are amortized using the straight-line
method over the shorter of the lease term or the estimated useful life of the
asset. Useful lives range from 10 to 40 years for buildings and improvements and
3 to 20 years for fixtures and equipment.
Interest is capitalized in connection with the construction of major
facilities. The capitalized interest is recorded as part of the asset to which
it relates and is amortized over the asset's estimated useful life. Interest
cost capitalized during fiscal 1991, 1992 and 1993 was $.510 million, $1.074
million, and $.740 million, respectively.
(f) Deferred Debt Issuance Costs
Direct costs incurred as a result of financing transactions are capitalized
and amortized over the terms of the applicable debt agreements using the
effective interest method.
(g) Pre-opening Costs
Pre-opening costs of new stores are deferred and expensed at the time the
store opens. If a new store is ultimately not opened, the costs are expensed
directly to selling, general and administrative expense at the time it is
determined that the store will not be opened.
F-9
<PAGE> 164
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(h) Self Insurance Reserves
Ralphs is self-insured for a portion of workers' compensation, general
liability and automobile accident claims. Ralphs establishes reserve provisions
based on an independent actuary's review of claims filed and an estimate of
claims incurred but not yet filed.
(i) Excess of Cost Over Net Assets Acquired
The excess of cost over net assets acquired, resulting from the May 3, 1988
acquisition of Ralphs is being amortized using the straight-line method over 40
years. Ralphs assesses the recoverability of this intangible asset by
determining whether the amortization of the asset balance over its remaining
life can be recovered through projected undiscounted operating income (including
interest, depreciation and all amortization expense except amortization of
excess of cost over net assets acquired) over the remaining amortization period
of the excess of cost over net assets acquired. The amount of excess of cost
over net assets acquired impairment, if any, is measured based on projected
discounted future results using a discount rate reflecting Ralphs' average cost
of funds. Accumulated amortization aggregated $52.4 million and $63.4 million at
January 31, 1993 and January 30, 1994, respectively.
(j) Acquired Leases
Beneficial lease rights and lease valuation reserves are recorded as the
net present value of the differences between contractual rents under existing
lease agreements and fair value of entering such lease agreements as of the May
3, 1988 acquisition of Ralphs. All beneficial lease rights and lease valuation
reserves arose solely as a result of the May 3, 1988 acquisition. Adjustments to
the carrying value of these assets would typically occur only through additional
business combinations or in the event of early lease termination. Beneficial
lease rights are amortized using the straight-line method over the terms of the
leases. Lease valuation reserves are amortized using the interest method over
the terms of the leases.
(k) Discounts and Promotional Allowances
Promotional allowances and vendor discounts are recorded as a reduction of
cost of sales in the accompanying statements of operations. Allowance proceeds
received in advance are deferred and recognized over the period earned.
(l) Income Taxes
Through February 2, 1992, Ralphs operated under a tax-sharing agreement
with Federated and was included in the consolidated Federal tax returns of
Federated. Through January 28, 1990, Ralphs was included in the combined state
tax returns of Federated; however, Ralphs filed separate state tax returns
subsequent to January 28, 1990. Under the tax-sharing agreement, tax-sharing
payments were made to Federated based on the amount that Ralphs would be liable
for had Ralphs filed separate tax returns, taking into account applicable
carryback and carryforward provision of the tax laws.
Subsequent to February 2, 1992, Ralphs is responsible for filing tax
returns with the Internal Revenue Service and state taxing authorities. Prior to
February 3, 1992 Ralphs paid alternative minimum tax to Federated under its tax
sharing agreement. As a result of the Internal Reorganization, Ralphs will not
be entitled to offset its future Federal regular tax liability with the payments
made to Federated.
Effective for the fiscal year ended February 2, 1992, Ralphs adopted
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." At the date of adoption such change had no impact on the
consolidated financial results.
F-10
<PAGE> 165
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(m) Postretirement Medical Benefits
Effective for the fiscal year ended February 3, 1991, Ralphs adopted SFAS
106, "Employers' Accounting for Postretirement Benefits other Than Pensions",
which requires that the cost of postretirement benefits other than pensions be
recognized in the financial statements over an employee's service with Ralphs.
(n) Reclassification
Certain amounts in the accompanying financial statements have been
reclassified to conform to the current year's presentation.
(o) Consolidation Policy
The consolidated financial statements include the accounts of Ralphs
Supermarkets, Inc., and its wholly owned subsidiary, Ralphs Grocery Company, and
its wholly owned subsidiary, collectively referred to as the Company. All
material intercompany balances and transactions are eliminated in consolidation.
(p) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
(i) Cash and short-term investments
The carrying amount approximates fair value because of the short
maturity of those instruments.
(ii) Long-term debt
The fair value of Ralphs' long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to Ralphs for debt of the same remaining maturities.
(iii) Interest Rate Swap Agreements
The fair value of interest rate swap agreements is the estimated amount
that Ralphs would receive or pay to terminate the swap agreements at the
reporting date, taking into account current interest rates and the current
credit-worthiness of the swap counterparties.
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows:
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 30,
1993 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land................................................. $ 156,487 $ 159,904
Buildings and improvements........................... 180,639 191,179
Leasehold improvements............................... 149,273 161,341
Fixtures and equipment............................... 349,697 354,626
Capital leases....................................... 69,058 86,964
---------- ----------
905,154 954,014
Less: Accumulated depreciation....................... (266,127) (312,746)
Less: Accumulated capital lease amortization......... (28,362) (39,371)
---------- ----------
Property, plant and equipment, net................... $ 610,665 $ 601,897
========== ==========
</TABLE>
F-11
<PAGE> 166
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) ACCRUED EXPENSES
Accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 30,
1993 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accrued wages, vacation and sick leave............... $ 38,238 $ 34,763
Taxes other than income tax.......................... 13,285 11,084
Interest............................................. 15,912 11,090
Other................................................ 60,353 44,606
----------- -----------
$ 127,788 $ 101,543
========= =========
</TABLE>
(5) LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 30,
1993 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
First mortgage notes payable in monthly installments,
commencing June 1, 1994 of $1,553,000 including
interest at an effective rate of 9.651%; interest
only payable monthly prior to June 1, 1994. Final
payment due June 1, 1999. Secured by land and
buildings with a net book value of $190.8
million............................................ $ 178,482 $ 178,013
Notes payable in varying monthly installments
including interest ranging from 11.5% to 18.96%.
Final payment due through November 30, 1996.
Secured by equipment with a net book value of $30.0
million............................................ 17,920 9,721
Capitalized lease obligations at interest rates
ranging from 7.25% to 14% maturing at various dates
through 2009 (note 6).............................. 54,181 61,150
Note payable to bank................................. 350,000 300,000
Senior Subordinated Debentures, 14% due 2000......... 98,108 --
Initial Notes and Exchange Notes, 9% due 2003........ -- 150,000
Senior Subordinated Debentures, 10 1/4%, due 2002.... 300,000 300,000
----------- -----------
Total long-term debt................................. 998,691 998,884
Less current maturities.............................. (66,465) (70,975)
----------- -----------
Long-term debt....................................... $ 932,226 $ 927,909
========= =========
</TABLE>
During the third quarter of 1992, the Company implemented a
recapitalization plan (the "Recapitalization Plan") which was completed during
the first quarter of 1993 by the Company's offering of $150.0 million aggregate
principal amount of its 9% Senior Subordinated notes due 2003 (the "Initial
Notes") in private placement under the Securities Act of 1933, as amended (the
"Securities Act"). The proceeds of the Initial Notes were used to (i) purchase
for cancellation of $60.0 million aggregate principal amount of the Company's
14% Senior Subordinated Debentures due 2000 (the "14% Subordinated Debentures")
from a noteholder who had made an unsolicited offer to sell such 14%
Subordinated Debentures, (ii) defease the remaining $38.1 million aggregate
principal amount of the 14% Subordinated Debentures, (iii) prepay $36.1 million
of borrowings under the Company's $350.0 million 1992 term loan facility entered
into as part of the Recapitalization Plan and (iv) pay fees and expenses
associated with such transactions and for other
F-12
<PAGE> 167
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purposes. As part of a registration rights agreement entered into with the
initial purchasers of the Initial Notes, the Company agreed to offer to exchange
up to $150.0 million aggregate principal amount of the Exchange Notes for all of
the outstanding Initial Notes (the "Exchange Offer"). The terms of the Exchange
Notes are substantially identical (including principal amount, interest rate and
maturity) in all respects to the terms of the Initial Notes except that the
Exchange Notes are freely transferable by the holders thereof (with certain
exceptions) and are not subject to any covenant upon the Company regarding
registration under the Securities Act. On June 24, 1993, the Company completed
the Exchange Offer exchanging $149.7 million aggregate principal amount of
Exchange Notes for Initial Notes ($.3 million of Initial Notes remain
outstanding).
The note payable to bank and working capital line, under the 1992 Credit
Agreement, are secured by first priority liens on Ralphs' inventory and
receivables, servicemarks and registered trademarks, equipment (other than
equipment located at facilities subject to existing liens in favor of equipment
financiers) and after-acquired real property interests and all existing real
property interests (other than those that are subject to prior encumbrances) and
bears interest at the rates, as selected by Ralphs as follows: (i) 1 3/4% over
the prime rate, or (ii) 2 3/4% over the Eurodollar Rate. Interest calculated
pursuant to (i) above is payable quarterly, otherwise interest is payable
quarterly or at the selected borrowings option maturity. During the 52 weeks
ended January 30, 1994, interest rates under these borrowings ranged from
5.9375% to 7.75%. Ralphs is required to pay an annual administrative fee of
$300,000 pursuant to the 1992 Credit Agreement as well as a commitment fee of
0.5% on the average daily amounts available for borrowing under the $120.0
million working capital credit line.
The 1992 Credit Agreement, which includes a $350.0 million term loan and
$120.0 million working capital credit line, also supports up to $60.0 million of
letters of credit which reduce the available borrowings on the credit line. The
1992 Credit Agreement is subject to quarterly principal payment requirements,
which commenced on March 31, 1993, with payment in full on June 30, 1998. As of
January 30, 1994, $51.1 million of letters of credit were outstanding, with
$68.9 million available under the working capital credit line.
In the fourth quarter of Fiscal 1992, Ralphs entered into an interest rate
cap agreement with an effective date of November 6, 1992 and a three-year
maturity. The interest rate cap agreement hedges the interest rate in excess of
6.5% LIBOR on $105.0 million principal amount against increases in short-term
rates. This agreement satisfies interest rate protection requirements under the
1992 Credit Agreement. In addition to the interest rate cap agreement, Ralphs
entered into an interest rate swap agreement on $150.0 million notional
principal amount. Under the interest rate swap agreement, Ralphs is required to
pay interest based on LIBOR at the end of each six month calculation period and
Ralphs will receive interest payments based on LIBOR at the beginning of each
six month calculation period. This interest rate swap agreement has a three-year
term expiring November 6, 1995. Ralphs is exposed to credit loss in the event of
nonperformance by the other party to the interest rate swap agreement. However,
Ralphs does not anticipate nonperformance by the counterpart.
The following details the impact of the hedging activity on the weighted
average interest rate for each of the last three fiscal years.
<TABLE>
<CAPTION>
WITH HEDGE WITHOUT HEDGE
---------- -------------
<S> <C> <C>
1991........................................ 11.87% 11.52%
1992........................................ 10.52% 10.22%
1993........................................ 8.96% 8.96%
</TABLE>
The Initial Notes and Exchange Notes are unsecured obligations of Ralphs
subordinated in right of payment to amounts due on the aforementioned senior
debt. Interest at 9% is payable each April 1 and October 1 through April 1,
2003, when the notes mature.
F-13
<PAGE> 168
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The 10 1/4% Senior Subordinated Debentures are unsecured obligations of
Ralphs subordinated in right of payment to amounts due on the senior debt.
Interest at 10 1/4% is payable each January 15 and July 15 through July 15,
2002, when the debentures mature.
The aforementioned debt agreements contain various restrictive covenants
pertaining to net worth levels, limitations on additional indebtedness and
capital expenditures, financial ratios and dividends.
The aggregate maturities on long-term debt for each of the five years
subsequent to fiscal 1993 are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
------------
<S> <C>
1994...................................................... $ 70,975
1995...................................................... 81,572
1996...................................................... 83,756
1997...................................................... 81,716
1998...................................................... 50,406
1999 and thereafter....................................... 630,459
--------
$998,884
========
</TABLE>
The fair value of each class of financial instruments (where practical) is
as follows in (000s):
<TABLE>
<S> <C>
Long-term debt........................................... $1,014,634
Interest rate swap agreement............................. $ 1,153
Interest rate cap agreement.............................. $ (19)
</TABLE>
(6) LEASES
Ralphs has leases for retail store facilities, warehouses and manufacturing
plants for periods up to 30 years. Generally, the lease agreements include
renewal options for five years each. Under most leases, Ralphs is responsible
for property taxes, insurance, maintenance and expense related to the lease
property. Certain store leases require excess rentals based on a percentage of
sales at that location. Certain equipment is leased by Ralphs under agreements
ranging from 3 to 15 years. The agreements usually do not include renewal option
provisions.
F-14
<PAGE> 169
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Minimum rental payments due under capital leases and operating leases
subsequent to fiscal 1993 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES TOTAL
-------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1994............................................... $ 17,043 $ 57,264 $ 74,307
1995............................................... 15,172 55,424 70,596
1996............................................... 12,381 53,998 66,379
1997............................................... 11,607 51,124 62,731
1998............................................... 9,286 47,211 56,497
1999 and thereafter................................ 18,247 321,149 339,396
-------- -------- --------
Total minimum lease payments....................... $ 83,736 $586,170 $669,906
======== ========
Less amounts representing interest................. (22,586)
--------
Present value of net minimum lease payments........ 61,150
Less current portion of lease obligations.......... (11,052)
--------
Long-term capital lease obligations................ $ 50,098
========
</TABLE>
Total rent expense is summarized as follows:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
FEBRUARY 2, JANUARY 31, JANUARY 30,
1992 1993 1994
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Capital Leases
Contingent rental............................... $ 2,358 $ 2,443 $ 2,241
Rentals from subleases.......................... (2,133) (2,144) (2,048)
Operating Leases
Minimum rentals................................. 42,156 49,001 54,965
Contingent rentals.............................. 4,081 5,058 3,645
Rentals from subleases.......................... (1,057) (1,123) (1,150)
------- ------- -------
$45,405 $53,235 $57,653
======= ======= =======
</TABLE>
(7) SELF-INSURANCE
Ralphs is a qualified self-insurer in the State of California for worker's
compensation and for automobile liability. For fiscal 1991, 1992 and 1993 self
insurance loss provisions amounted to (in thousands) $25,549, $25,950 and
$30,323, respectively.
(8) COMMITMENTS AND CONTINGENCIES
In December 1992, three California state antitrust class action suits were
commenced in Los Angeles Superior Court against Ralphs and other major
supermarket chains located in Southern California, alleging that they conspired
to refrain from competing in and to fix the price of fluid milk above
competitive prices. Specifically, class actions were commenced by Diane Barela
and Neila Ross, Ron Moliare and Paul C. Pfeifle on December 7, December 14, and
December 23, 1992 respectively. Ralphs intends to vigorously pursue its defense
in these actions.
F-15
<PAGE> 170
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On March 25, 1991, George A. Koteen Associates, Inc. ("Koteen Associates")
commenced an action in San Diego Superior Court alleging that Ralphs breached an
alleged utility rate consulting agreement. In December 1992, a jury returned a
verdict of $4,949,084 in favor of Koteen Associates and in March 1993,
attorney's fees and certain other costs were awarded to the plaintiff. Ralphs
has appealed the judgment and fully reserved in Fiscal 1992 against an adverse
judgement.
Environmental Matters
In January 1991, the California Regional Water Quality Control Board for
the Los Angeles Region (the "Regional Board") requested that Ralphs conduct a
subsurface characterization of Ralphs's Atwater property. This request was part
of an ongoing effort by the Regional Board, in connection with the U.S.
Environmental Protection Agency (the "EPA"), to identify contributors to
groundwater contamination in the San Fernando Valley. Significant parts of the
San Fernando Valley, including the area where Ralphs' Atwater property is
located, have been designated federal Superfund sites requiring response actions
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, because of regional groundwater contamination. On June 18,
1991, the EPA made its own request for information concerning the Atwater
property. Since that time, the Regional Board has requested further
investigations by Ralphs. Ralphs has conducted the requested investigations and
has reported the results to the Regional Board. Approximately 25 companies have
entered into a Consent Order with the EPA to investigate contaminated
groundwater beneath an area which includes the Atwater property. Ralphs is not a
party to that Consent Order, but is cooperating with requests of the subject
companies to allow installation of monitoring or recovery wells on Ralphs'
property. Based upon available information, management does not believe this
matter will have a material adverse effect on Ralphs' financial condition or
results of operations.
Ralphs has removed several underground storage tanks and remediated soil
contamination at the Atwater property. Although the possibility of other
localized contamination from prior operations or adjacent properties exists at
the Atwater property, management does not believe that the costs of remediating
such contamination will be material to Ralphs.
Ralphs has not incurred material capitalizable and noncapitalizable
expenses relating to environmental type issues during the previous three fiscal
years.
Ralphs has not incurred material preventative and remediation costs related
to environmental type issues.
Ralphs is a party to several pending legal proceedings and claims incurred
in the normal course of business. In the opinion of management, based in part on
the advice of counsel, these matters are adequately covered by insurance or will
not have a material effect on Ralphs' financial position or results of
operations.
(9) REDEEMABLE PREFERRED STOCK
Ralphs' non-voting preferred stock consisted of 10,000,000 shares of
authorized $.01 par value preferred stock. At February 3, 1991 and February 2,
1992, 170,000 shares of Class A Preferred Stock and 130,000 shares of Class B
Preferred Stock were issued and outstanding. All of the outstanding shares of
preferred stock were redeemed by Ralphs during February 1992 at their initial
issuance price of $3.0 million.
(10) EQUITY APPRECIATION RIGHTS PLANS
Effective August 26, 1988, Ralphs adopted an Equity Appreciation Plan
("1988 Plan"), whereby certain officers received equity rights representing, in
aggregate, the right to receive 15% of the increase in the appraised value (as
defined in the 1988 Plan) of the Ralphs' equity over an initial value of $120.0
million. The 1988 Plan was amended in January 1992 by agreement among Ralphs and
the Equity Rights holders
F-16
<PAGE> 171
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
("Amended Plan"). Ralphs accrued for the increase in equity appreciation rights
over the contractually defined vesting period (fully accrued in fiscal 1991),
based upon the maximum allowable contractual amount which approximated ending
appraised value.
Under the Amended Plan, all outstanding Equity Rights are vested in full
are no longer subject to forfeiture by the holders, except in the event a
holder's employment is terminated for cause within the meaning of the Amended
Plan. The appraised value of Ralphs' equity is to be determined as of May 1 each
year by an investment banking company engaged for this purpose utilizing the
methodology specified in the Amended Plan (which is unchanged from that
specified in the 1988 Plan); however, under the Amended Plan the appraised value
of Ralphs' equity for purposes of the plan may not be less than $400.0 million
nor exceed $517.0 million. The amount of equity rights redeemable at any given
time is defined in each holders' separate agreement. On exercise of an equity
right, the holder will be entitled to receive a pro rata percentage of any such
increase in appraised value. In addition, the Amended Plan provides for the
possible additional further payment to the holder of each exercised Equity Right
of an amount equal to the "Deferred Value" of such Equity Right as defined in
the Amended Plan. Ralphs did not incur any expense under the Equity Appreciation
Rights Plan in fiscal 1992 and fiscal 1993.
The amount of Equity Rights redeemable for each of the five years
subsequent to fiscal 1993 are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S> <C>
1994...................................................... $ 7,251
1995...................................................... 7,251
1996...................................................... 7,251
1997...................................................... 5,185
1998...................................................... 13,318
-------
$40,256
=======
</TABLE>
(11) INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
FEBRUARY 2, JANUARY 31, JANUARY 30,
1992 1993 1994
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal........................................ $ 9,224 $4,173 $ (2,424)
State.......................................... 4,282 -- 3,500
------- ------ ---------
$13,506 $4,173 $ 1,076
------- ------ ---------
Deferred
Federal........................................ $ -- $ -- $(109,125)
State.......................................... -- -- --
------- ------ ---------
$ -- $ -- $(109,125)
------- ------ ---------
Total income tax expense (benefit)............. $13,506 $4,173 $(108,049)
======= ====== =========
</TABLE>
F-17
<PAGE> 172
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense (benefit) has been classified in the accompanying
statements of operations as follows:
<TABLE>
<CAPTION>
1991 1992 1993
------- ------- ---------
<S> <C> <C> <C>
Earnings before extraordinary items................. $13,506 $ 8,346 $(108,049)
Extraordinary item.................................. -- (4,173) --
------- ------- ---------
Net tax expense (benefit)........................... $13,506 $ 4,173 $(108,049)
======= ======= =========
</TABLE>
The differences between income tax expense and income taxes computed using
the top marginal U.S. Federal income tax rate of 34% for both Fiscal 1991 and
1992 and, for Fiscal 1993, of 35% applied to earnings (loss) before income taxes
(including, in Fiscal 1992, the extraordinary loss of $74.8 million) were as
follows:
<TABLE>
<CAPTION>
52 WEEKS
ENDED 52 WEEKS 52 WEEKS
FEBRUARY ENDED ENDED
2, JANUARY 31, JANUARY 30,
1992 1993 1994
---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Amount of expected expense (benefit) computed
using the statutory Federal rate............... $(9,430) $(24,450) $ 10,611
Utilization of financial operating loss........ -- -- (10,611)
Amortization of excess cost over net assets
acquired.................................... 3,356 3,356 --
State income taxes, net of Federal income tax
benefit..................................... 4,282 -- 3,500
Accounting limitation (recognition) of deferred
tax benefit................................. 6,139 20,041 (109,125)
Alternative minimum tax........................ 9,224 4,173 625
Other, net..................................... (65) 1,053 (3,049)
------- -------- ---------
Total income tax expense (benefit)..... $13,506 $ 4,173 $(108,049)
======= ======== =========
</TABLE>
Ralphs' deferred tax assets, recorded under SFAS 109, were comprised of the
following:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS
ENDED ENDED
JANUARY 31, JANUARY 30,
1993 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deductible intangible assets................................. $ -- $ 56,000
Net operating loss carryforward and tax credit............... 5,907 40,125
Self insurance accrual....................................... 8,951 43,000
Software basis difference and amortization................... 9,320 --
Fees collected in advance.................................... 5,572 --
Property, plant and equipment basis difference and
depreciation............................................... 25,914 21,000
Equity appreciation rights................................... -- 16,000
Favorable lease basis differences............................ -- 16,000
State deferred taxes......................................... -- 17,000
Other........................................................ 16,539 40,000
-------- ---------
72,203 249,125
Less valuation allowance................................... (72,203) (140,000)
-------- ---------
Total.............................................. $ -- $ 109,125
======== =========
</TABLE>
F-18
<PAGE> 173
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes for the thirty-six weeks ended October 9,
1994 and the thirty-six weeks ended October 10, 1993 consists of the following:
<TABLE>
<CAPTION>
36 WEEKS 36 WEEKS
ENDED ENDED
OCTOBER 10, OCTOBER 9,
1993 1994
----------- ----------
(UNAUDITED)
<S> <C> <C>
Federal Income Taxes................................ $ 3,121 $ 836
State Income Taxes.................................. 1,290 3,678
Adjustment to Valuation Allowance for Deferred Tax
Assets............................................ (4,411) (4,514)
------- -------
Total Income Tax Provision.......................... $ -- $ --
======= =======
</TABLE>
On October 15, 1992, Ralphs filed an election with the Internal Revenue
Service under Section 338(h)(10). Under this Section, Ralphs is required to
restate, for Federal tax purposes, its assets and liabilities to fair market
value as of February 3, 1992. The effect of this transaction is to record a new
Federal tax basis to reflect a change of control for Federal tax purposes
resulting from the Internal Reorganization. No change of control for financial
reporting purposes was affected.
In August, 1993, The Omnibus Budget Reconciliation Act of 1993 (the "Act")
was enacted. The Act increased the Federal income tax rate from 34 to 35 percent
for filers whose taxable income exceeded $10.0 million. In the current year, the
effect of the Federal income tax rate change was to increase the net deferred
tax assets. In addition, the Act also provided for the deductibility of certain
intangibles, including costs in excess gross assets acquired.
The Act has significantly impacted the aggregate deferred tax asset
position of Ralphs at January 30, 1994. Ralphs elected to retroactively apply
certain provisions of the Act related to the February 3, 1992 change of control
for Federal tax purposes. As such, approximately $610.7 million in excess of
cost over net assets acquired became fully deductible for Federal tax purposes.
This amount is deductible over 15 years. This excess in the tax basis over the
financial statement basis of excess of cost over net assets acquired aggregated
$153.0 million at January 30, 1994.
During the year ended January 30, 1994, Ralphs has recorded the incremental
impact of the Act on deductible temporary differences and increased its deferred
income tax assets by a net amount of $109.1 million. The decision to reduce the
valuation allowance was based upon several factors. Specific among them, was the
Company's completion of its restructuring plan which effectively reduced
estimated interest expense by approximately $9.0 as compared to the year ended
January 31, 1993. In addition, the January 31, 1993 operating results were
negatively effected by several charges including provisions for restructuring,
legal settlements and a loss on retirement of debt all aggregating approximately
$90 million on a pre-tax basis.
Although there can be no assurance as to future taxable income, the Company
believes that, based upon the above mentioned events, as well as the Company's
expectation of future taxable income, it is more likely than not that the
recorded deferred tax asset will be realized. In order to realize the net
deferred tax asset currently recorded, Ralphs will need to generate sufficient
future taxable income, assuming current tax rates, of approximately $300.0
million.
At January 30, 1994, the Company has Federal net operating loss (NOL)
carryforwards of approximately $115.0 million and Federal and state Alternative
Minimum Tax Credit carryforwards of approximately $2.1 million which can be used
to offset Federal taxable income and regular taxes payable, respectively. The
NOL carryforwards begin expiring in 2008.
F-19
<PAGE> 174
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During the past two fiscal years, the Company has generated Federal taxable
losses of approximately $115.0 million versus financial pre-tax losses of
approximately $42.0 million for the same periods. These differences result
principally from excess tax versus financial amortization on certain intangible
assets (excess of cost over net assets acquired), as well as several other
originating temporary differences.
(12) EMPLOYEE BENEFIT PLANS
Ralphs has a defined benefit pension plan covering substantially all
employees not already covered by collective bargaining agreements with at least
one year of credit service (defined at 1,000 hours). Ralphs' policy is to fund
pension costs at or above the minimum annual requirement.
The following actuarially determined components were included in the net
pension expense:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
FEBRUARY 2, JANUARY 31, JANUARY 30,
1992 1993 1994
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost...................................... $ 1,806 $ 2,076 $ 2,228
Interest cost on projected benefit obligation..... 2,079 2,471 2,838
Actual return on assets........................... (3,291) (2,794) (2,695)
Net amortization and deferral..................... 992 237 (46)
------- ------- -------
Net pension expense............................. $ 1,586 $ 1,990 $ 2,325
======= ======= =======
</TABLE>
The funded status of Ralphs' pension plan, (based on December 31, 1992 and
1993 asset values), is as follows:
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 30,
1993 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................................... $18,608 $29,659
Accumulated benefit obligation.............................. 20,887 29,950
Projected benefit obligation................................ 33,378 42,690
Plan assets at fair value................................... 30,684 32,968
------- -------
Projected benefit obligation in excess of Plan Assets......... (2,694) (9,722)
Unrecognized net gain......................................... (1,959) 4,567
Unrecognized prior service cost............................... 46 (1,778)
Unrecognized net asset........................................ -- --
------- -------
Accrued pension cost........................................ $(4,607) $(6,933)
======= =======
</TABLE>
Service costs for fiscal 1991, 1992 and 1993 were calculated using a rate
of increase in future compensation levels of 6% and discount rate of 8.5%.
Certain assumptions will be revised to reflect future trends in fiscal 1994. The
discount rate will be reduced to 7.75% to reflect current decline in interest
rates and the rate of increase in future compensation levels will be 5% for
fiscal 1994. These changes are not expected to have a material effect on Fiscal
1994 operations. A long-term rate of return on assets of 9% was used for fiscal
1992 and 1993.
Plan assets consist primarily of debt securities, guaranteed interest
contracts and a money market fund. Plan benefits are based primarily on years of
service and on average compensation during the last years of employment.
F-20
<PAGE> 175
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On February 23, 1990, Ralphs adopted a Supplemental Executive Retirement
Plan covering certain key officers of Ralphs. Earned vested benefits under the
Plan were $4,246,300 at December 31, 1992 and $5,075,000 at December 31, 1993.
Under certain circumstances, the cash surrender value of certain split-dollar
life insurance policies purchased under split-dollar life insurance agreement
will offset Ralphs' obligations under the Supplemental Executive Retirement
Plan.
Ralphs participates in multi-employer pension plans and health and welfare
plans administered by various trustees for substantially all union employees.
Contributions to these plans are based upon negotiated contractual rates. The
United Food and Commercial Workers health and welfare benefit plans were
overfunded and those employers who contributed to these plans are to receive a
pro-rata share of the excess reserve in these health care benefit plans through
a reduction in current maintenance payments. Ralphs share of the excess reserve
was approximately $24.5 million of which $11.8 million was recognized in Fiscal
1993 and the remainder will be recognized in Fiscal 1994. Since employers are
required to make contributions to the benefit funds at whatever level is
necessary to maintain plan benefits, there can be no assurance that plan
maintenance payments will remain at current levels.
The expense related to these plans is summarized as follows:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
FEBRUARY 2, JANUARY 31, JANUARY 30,
1992 1993 1994
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Multi-employer pension plans...................... $ 7,370 $ 7,973 $17,687
======= ======= =======
Multi-employer health and welfare................. $73,250 $71,183 $45,235
======= ======= =======
</TABLE>
Ralphs maintains the Ralphs Grocery Company Savings Plan Plus--Prime and
the Ralphs Grocery Savings Plan Plus -- Basic (collectively referred to as the
"401(k) Plan") covering substantially all employees who are not covered by
collective bargaining agreements and who have at least one year of credited
service (defined at 1,000 hours). The 401(k) Plan provided for both pre-tax and
after-tax contributions by participating employees. With certain limitations,
participants may elect to contribute from 1% to 10% of their annual compensation
on a pre-tax basis to the Plan. Ralphs has committed to match a minimum of 20%
of an employee's contribution to the 401(k) Plan that do not exceed 5% of the
employee's compensation. Expenses under the 401(k) Plan for fiscal 1991, 1992
and 1993 were $377,335, $407,961 and $431,774, respectively.
Ralphs has an executive incentive compensation plan which covers
approximately 39 key employees. Benefits to participants are earned based on a
percentage of base compensation upon attainment of a targeted formula of
earnings. Expense under this plan for fiscal 1991, 1992 and 1993 was $2.4
million, $2.5 million and $2.6 million, respectively. Ralphs has also adopted an
incentive plan for certain members of management. Benefits to participants are
earned based on a percentage of base compensation upon attainment of a targeted
formula of earnings. Expense under this plan for fiscal 1991, 1992 and 1993 was
$2.8 million, $2.8 million and $3.0 million, respectively.
The aforementioned incentive plans may be cancelled by the Board of
Directors at any time.
Ralphs sponsors a postretirement medical benefit plan (Postretirement
Medical Plan) covering substantially all employees who are not members of a
collective bargaining agreement and who retire under certain age and service
requirements.
The Postretirement Medical Plan is a traditional type medical plan
providing outpatient, inpatient and various other covered services. Such
benefits are funded from Ralphs' general assets. The calendar year deductible is
$1,180 per individual, indexed to the Medical Consumer Price Index.
F-21
<PAGE> 176
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On February 3, 1991, Ralphs adopted Statement of Financial Accounting
Standards (SFAS) 106, "Employees' Accounting for Postretirement Benefits other
Than Pension," which required that the cost of future benefits under the
Postretirement Medical Plan be recognized in the financial statements over an
employee's service with Ralphs. At the beginning of fiscal 1990, Ralphs elected
to immediately recognize the transition obligation in accordance with the
provision of SFAS 106. Previously, expenses were recognized as paid.
The net periodic cost of the Postretirement Medical Plan includes the
following components:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
FEBRUARY 2, JANUARY 31, JANUARY 30,
1992 1993 1994
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost...................................... $1,323 $1,908 $1,767
Interest cost..................................... 1,304 1,367 1,603
Return on plan assets............................. -- -- --
Net amortization and deferral..................... -- -- --
------ ------ ------
Net postretirement benefit cost................. $2,627 $3,275 $3,370
</TABLE>
The funded status of the postretirement benefit plan is as follows:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS
ENDED ENDED
JANUARY 31, JANUARY 30,
1993 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees...................................................... $ 2,218 $ 1,237
Fully eligible plan participants.............................. 441 357
Other active plan participants................................ 16,675 16,062
Plan assets at fair value..................................... -- --
------- --------
Funded status................................................. (19,334) (17,656)
Plan assets in excess of projected obligations................ -- --
Unrecognized gain (loss)...................................... 1,694 6,302
Unrecognized prior service cost............................... -- --
-------- --------
Accrued postretirement benefit obligation..................... $(21,028) $(23,958)
======== ========
</TABLE>
Service cost was calculated using a medical cost trend of 10.5% for fiscal
1992 and 1993. Certain assumptions will be revised to reflect future trends. The
discount rate will be reduced to 7.75% in 1994 to reflect current decline in
interest rates. The long term rate of return of plan assets is not applicable as
the plan is not funded.
The effect on a one-percent increase in the medical cost trend would
increase the fiscal 1993 service and interest cost of 24%. The accumulated
postretirement benefit obligation at January 30, 1994 would also increase by
31%.
F-22
<PAGE> 177
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) QUARTERLY RESULTS (UNAUDITED)
Quarterly results for fiscal 1992 and 1993 are as follows:
<TABLE>
<CAPTION>
EXTRAORDINARY
ITEM, NET OF NET
GROSS OPERATING INCOME INCOME TAX EARNINGS/
SALES PROFIT INCOME TAXES BENEFIT (LOSS)
-------- ------ --------- ------- ------------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
FY 1992 Quarters
12 weeks ended 04/26/92............. $ 677.0 $146.7 $ 35.1 $ 3.9 $ -- $ 2.2
12 weeks ended 07/19/92............. 660.3 143.5 33.0 3.9 -- 1.7
12 weeks ended 10/11/92............. 631.4 137.0 28.8 1.3 (55.8) (58.6)
16 weeks ended 01/31/93............. 875.1 199.4 41.6 (.8) (14.8) (21.4)
-------- ------ ------ ------- ------ ------
Total....................... $2,843.8 $626.6 $138.5 $ 8.3 $(70.6) $(76.1)
======== ====== ====== ======= ====== ======
FY 1993 Quarters
12 weeks ended 04/25/93............. $ 632.4 $142.4 $ 31.4 $ 1.0 $ -- $ 3.9
12 weeks ended 07/18/93............. 629.0 145.2 36.8 (1.0) -- 12.9
12 weeks ended 10/10/93............. 612.8 141.5 31.7 -- -- 7.0
16 weeks ended 01/30/94............. 856.0 207.4 52.2 (108.0) -- 114.6
-------- ------ ------ ------- ------ ------
Total....................... $2,730.2 $636.5 $152.1 $(108.0) $ -- $138.4
======== ====== ====== ======= ====== ======
</TABLE>
(14) SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
36 WEEKS
52 WEEKS 52 WEEKS 52 WEEKS ENDED 36 WEEKS
ENDED ENDED ENDED OCTOBER ENDED
FEBRUARY 2, JANUARY 31, JANUARY 30, 10, OCTOBER 9,
1992 1993 1994 1993 1994
----------- ----------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Supplemental cash flow disclosures:
Interest paid, net of amounts
capitalized........................... $115,159 $118,391 $93,738 $65,148 $65,969
Income taxes paid........................ $ 12,643 $ 7,169 $ 2,423 $ 2,196 $ 4,750
Capital lease assets and obligations
assumed............................... $ 3,847 $ -- $15,395 $ 92 $17,630
</TABLE>
(15) STOCK OPTION PLAN
On February 3, 1992, 3,162,235 options for Common Stock of the Company were
granted under the Ralphs Non-qualified Stock Option Plan. All options were
vested, but not exercisable, on the date of the grant. Options granted to
certain officers become exercisable at the rate of 20% on each September 30 of
calendar years 1992 through 1996. Options granted to other officers become
exercisable as to 10% of the grant on each of September 30, 1992 and 1993, 15%
on each of September 30, 1994 through September 30, 1997, and 20% on September
20, 1998.
F-23
<PAGE> 178
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the Ralphs Non-qualified Stock Option Plan.
<TABLE>
<CAPTION>
NUMBER OF PRICE
OPTIONS RANGE
--------- ------
<S> <C> <C>
Options Outstanding at January 30, 1994:
Beginning of year............................................. 3,162,235 $20.21
Granted....................................................... -- --
Exercised..................................................... -- --
Cancelled..................................................... -- --
Expired....................................................... -- --
End of year................................................ 3,162,235 $20.21
--------- ------
Exercisable at end of year...................................... 811,760 --
--------- ------
Available for grant at end of year.............................. -- --
--------- ------
Options Outstanding at January 31, 1993:
Beginning of year............................................. -- --
Granted....................................................... 3,162,235 $20.21
Exercised..................................................... -- --
Cancelled..................................................... -- --
Expired....................................................... -- --
--------- ------
End of year................................................ 3,162,235 $20.21
--------- ------
Exercisable at end of year...................................... 405,880 --
--------- ------
Available for grant at end of year.............................. -- --
--------- ------
</TABLE>
The option price for outstanding options at January 30, 1994 assumes a
grant date fair market value of Common Stock of the Company equal to $20.21 per
share, which represents the high end of a range of estimated values of the
Common Stock of the Company on February 3, 1992, the date of the grant.
(16) SUBSEQUENT EVENT (UNAUDITED)
On September 14, 1994 Ralphs entered into a definitive Agreement and Plan
of Merger (the "Merger") with Food 4 Less, Inc. ("FFL"), Food 4 Less Holdings
("FFL Holdings") and Food 4 Less Supermarkets, Inc. ("FFL Supermarkets").
Pursuant to the terms of the Merger Agreement, Ralphs will merge with FFL
Supermarkets and become a wholly-owned subsidiary of FFL Holdings. Conditions to
the consummation of the Merger include, among other things, receipt of
regulatory approvals and other necessary consents and the completion of
financing for the transactions. The consideration price paid for the Company
approximates $1.5 billion, including assumption of debt.
Upon the effectiveness of the Merger, each outstanding share of common
stock, par value $0.01 per share, of Ralphs will be converted into and become a
right to receive (a) approximately $16.61 in cash and (b) approximately $3.91
principal amount of 13% Senior Subordinated Pay-In Kind Debentures due 2006
issued by FFL Holdings (the "Debentures"). This represents aggregate
consideration, payable to the stockholders of the Company of $425 million in
cash and $100 million initial principal amount of Debentures.
F-24
<PAGE> 179
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Upon consummation of the Merger, the operations and activities of Ralphs
will be significantly impacted due to conversions of some existing stores to
Food 4 Less warehouse stores as well as the consolidation of various operating
functions and departments. This consolidation may result in a restructuring
charge for the merged entity. The amount of the restructuring charge is not
presently determinable due to various factors, including uncertainties inherent
in the completion of the Merger; however, the restructuring charge may be
material in relation to the stockholders' equity and financial position of
Ralphs at January 30, 1994 and to the merged entity.
F-25
<PAGE> 180
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholder of Food 4 Less Supermarkets, Inc.:
We have audited the accompanying consolidated balance sheets of Food 4 Less
Supermarkets, Inc. (a Delaware corporation) and subsidiaries (the Company) as of
June 26, 1993 and June 25, 1994, and the related consolidated statements of
operations, stockholder's equity and cash flows for the 52 weeks ended June 27,
1992, the 52 weeks ended June 26, 1993, and the 52 weeks ended June 25, 1994.
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Food 4 Less
Supermarkets, Inc. and subsidiaries as of June 26, 1993 and June 25, 1994, and
the results of their operations and their cash flows for the 52 weeks ended June
27, 1992, the 52 weeks ended June 26, 1993, and the 52 weeks ended June 25, 1994
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
July 29, 1994 (except with respect
to the matter discussed in
Note 14, as to which the date is
September 14, 1994, and with respect to
the matter discussed in Note 15, as to
which the date is October 14, 1994)
F-26
<PAGE> 181
FOOD 4 LESS SUPERMARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JUNE 26, JUNE 25, SEPTEMBER 17,
1993 1994 1994
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 25,089 $ 32,996 $ 29,388
Trade receivables, less allowances of $1,919, $1,386
and $1,318 at June 26, 1993, June 25, 1994 and
September 17, 1994, respectively.................... 22,048 25,039 24,331
Notes and other receivables............................ 1,278 1,312 1,094
Inventories............................................ 191,467 212,892 210,548
Patronage receivables from suppliers................... 2,680 2,875 3,998
Prepaid expenses and other............................. 6,011 6,323 9,437
-------- -------- --------
Total current assets........................... 248,573 281,437 278,796
INVESTMENTS IN AND NOTES RECEIVABLE FROM SUPPLIER
COOPERATIVES:
A.W.G.................................................. 6,693 6,718 6,718
Certified and Other.................................... 6,657 5,984 5,952
PROPERTY AND EQUIPMENT:
Land................................................... 23,912 23,488 23,488
Buildings.............................................. 12,827 12,827 12,827
Leasehold improvements................................. 81,049 97,673 101,634
Store equipment and fixtures........................... 129,178 148,249 150,851
Transportation equipment............................... 31,758 32,259 32,306
Construction in progress............................... 757 12,641 20,369
Leased property under capital leases................... 77,553 78,222 78,222
Leasehold interests.................................... 93,863 93,464 93,473
-------- -------- --------
450,897 498,823 513,170
Less: Accumulated depreciation and amortization........ 96,948 134,089 143,135
-------- -------- --------
Net property and equipment.......................... 353,949 364,734 370,035
OTHER ASSETS:
Deferred financing costs, less accumulated amortization
of $11,611, $17,083 and $18,382 at June 26, 1993,
June 25, 1994 and September 17, 1994,
respectively........................................ 33,778 28,536 27,245
Goodwill, less accumulated amortization of $26,254,
$33,945 and $35,732 at June 26, 1993, June 25, 1994
and September 17, 1994, respectively................ 280,895 267,884 266,097
Other, net............................................. 27,295 24,787 23,643
-------- -------- --------
$957,840 $980,080 $978,486
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE> 182
FOOD 4 LESS SUPERMARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
JUNE 26, JUNE 25, SEPTEMBER 17,
1993 1994 1994
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable....................................... $140,468 $180,708 $ 176,148
Accrued payroll and related liabilities................ 40,319 42,805 43,767
Accrued interest....................................... 5,293 5,474 14,310
Other accrued liabilities.............................. 40,467 53,910 48,782
Income taxes payable................................... 2,053 2,000 1,249
Current portion of self-insurance liabilities.......... 23,552 29,492 29,492
Current portion of long-term debt...................... 12,778 18,314 19,566
Current portion of obligations under capital leases.... 2,865 3,616 3,612
-------- -------- ---------
Total current liabilities................................ 267,795 336,319 336,926
LONG-TERM DEBT........................................... 335,576 310,944 311,457
OBLIGATIONS UNDER CAPITAL LEASES......................... 41,864 39,998 39,186
SENIOR SUBORDINATED DEBT................................. 145,000 145,000 145,000
DEFERRED INCOME TAXES.................................... 22,429 14,740 14,740
SELF-INSURANCE LIABILITIES AND OTHER..................... 72,313 64,058 65,503
COMMITMENTS AND CONTINGENCIES............................ -- -- --
STOCKHOLDER'S EQUITY:
Cumulative convertible preferred stock, $.01 par value,
200,000 shares authorized and 50,000 shares issued
at June 26, 1993, June 25, 1994 and September 17,
1994 (aggregate liquidation value of $53.8 million,
$62.2 million and $64.4 million at June 26, 1993,
June 25, 1994 and September 17, 1994,
respectively)....................................... 50,230 58,997 61,373
Common stock, $.01 par value, 1,600,000 shares
authorized and 1,519,632 shares issued at June 26,
1993, June 25, 1994 and September 17, 1994.......... 15 15 15
Additional paid-in capital............................. 107,650 107,650 107,650
Notes receivable from shareholders of parent........... (714) (586) (586)
Retained deficit....................................... (83,119) (94,586) (100,309)
-------- -------- ---------
74,062 71,490 68,143
Treasury stock: 13,249 shares, 16,732 shares and 16,732
shares of common stock at June 26, 1993, June 25,
1994 and September 17, 1994, respectively........... (1,199) (2,469) (2,469)
-------- -------- ---------
Total stockholder's equity..................... 72,863 69,021 65,674
-------- -------- ---------
$957,840 $980,080 $ 978,486
======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-28
<PAGE> 183
FOOD 4 LESS SUPERMARKETS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FIFTY-TWO FIFTY-TWO FIFTY-TWO TWELVE WEEKS TWELVE WEEKS
WEEKS ENDED WEEKS ENDED WEEKS ENDED ENDED ENDED
JUNE 27, JUNE 26, JUNE 25, SEPTEMBER 18, SEPTEMBER 17,
1992 1993 1994 1993 1994
----------- ----------- ----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SALES...................................... $2,913,493 $2,742,027 $2,585,160 $ 616,616 $ 598,698
COST OF SALES (including purchases from
related parties of $277,812, $204,028,
$175,929, $47,607 and $41,165 for the 52
weeks ended June 27, 1992, June 26, 1993,
and June 25, 1994, and for the 12 weeks
ended September 18, 1993 and September
17, 1994, respectively).................. 2,392,655 2,257,835 2,115,842 504,269 495,656
---------- ---------- ---------- --------- ---------
GROSS PROFIT............................... 520,838 484,192 469,318 112,347 103,042
SELLING, GENERAL, ADMINISTRATIVE AND OTHER,
NET...................................... 469,751 434,908 388,836 95,694 88,152
AMORTIZATION OF EXCESS COST OVER NET ASSETS
ACQUIRED................................. 7,795 7,571 7,691 1,772 1,787
---------- ---------- ---------- --------- ---------
OPERATING INCOME........................... 43,292 41,713 72,791 14,881 13,103
INTEREST EXPENSE:
Interest expense, excluding amortization
of deferred financing costs........... 63,907 64,831 62,778 14,491 14,709
Amortization of deferred financing
costs................................. 6,304 4,901 5,472 1,239 1,299
---------- ---------- ---------- --------- ---------
70,211 69,732 68,250 15,730 16,008
LOSS (GAIN) ON DISPOSAL OF ASSETS.......... (1,364) (2,083) 37 (37) (458)
PROVISION FOR EARTHQUAKE LOSSES............ -- -- 4,504 -- --
---------- ---------- ---------- --------- ---------
LOSS BEFORE PROVISION FOR INCOME TAXES AND
EXTRAORDINARY CHARGES.................... (25,555) (25,936) -- (812) (2,447)
PROVISION FOR INCOME TAXES................. 3,441 1,427 2,700 300 900
---------- ---------- ---------- --------- ---------
LOSS BEFORE EXTRAORDINARY CHARGES.......... (28,996) (27,363) (2,700) (1,112) (3,347)
EXTRAORDINARY CHARGES:
Loss on extinguishment of debt, net of
income tax benefit of $2,484.......... 6,716 -- -- -- --
Gain on partially depreciated assets
replaced by insurance companies, net
of income tax expense of $702......... (1,898) -- -- -- --
---------- ---------- ---------- --------- ---------
NET LOSS................................... $ (33,814) $ (27,363) $ (2,700) $ (1,112) $ (3,347)
========== ========== ========== ========== ==========
PREFERRED STOCK ACCRETION.................. -- 3,882 8,767 2,023 2,376
LOSS APPLICABLE TO COMMON SHARES........... $ (33,814) $ (31,245) $ (11,467) $ (3,135) $ (5,723)
========== ========== ========== ========== ==========
LOSS PER COMMON SHARE:
Loss before extraordinary charges........ $ (20.74) $ (21.52) $ (7.63) $ (2.08) $ (3.81)
Extraordinary charges.................... (3.45) -- -- -- --
---------- ---------- ---------- --------- ---------
Net loss................................. $ (24.19) $ (21.52) $ (7.63) $ (2.08) $ (3.81)
========== ========== ========== ========== ==========
Average Number of Common Shares
Outstanding........................... 1,397,939 1,452,184 1,503,828 1,505,004 1,502,900
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-29
<PAGE> 184
FOOD 4 LESS SUPERMARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
FIFTY-TWO FIFTY-TWO FIFTY-TWO TWELVE TWELVE
WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED
JUNE 27, JUNE 26, JUNE 25, SEPTEMBER 18, SEPTEMBER 17,
1992 1993 1994 1993 1994
----------- ----------- ----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH PROVIDED (USED) BY OPERATING
ACTIVITIES:
Cash received from customers............ $ 2,913,493 $ 2,742,027 $ 2,585,160 $ 616,616 $ 598,698
Cash paid to suppliers and employees.... (2,752,442) (2,711,779) (2,441,353) (586,745) (582,504)
Interest paid........................... (56,234) (58,807) (56,762) (4,367) (5,873)
Income taxes (paid) refunded............ (4,665) 2,971 (247) 1,289 (1,651)
Interest received....................... 1,266 993 903 202 688
Other, net.............................. 4,734 8,093 121 2,093 140
----------- ----------- ----------- --------- ---------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES.............................. 106,152 (16,502) 87,822 29,088 9,498
CASH PROVIDED (USED) BY INVESTING
ACTIVITIES:
Proceeds from sale of property and
equipment............................ 17,395 15,685 11,953 2,486 2,703
Payment for purchase of property and
equipment............................ (60,263) (53,467) (57,471) (6,585) (16,750)
Proceeds (payment) for sale (purchase)
of other assets...................... (4,754) (18) 813 -- --
Business acquisition costs, net of cash
acquired............................. (27,563) -- (11,050) -- --
Receivable received from seller of
business acquired.................... 12,259 -- -- -- --
Other, net.............................. -- -- -- 799 --
----------- ----------- ----------- --------- ---------
NET CASH USED BY INVESTING ACTIVITIES..... (62,926) (37,800) (55,755) (3,300) (14,047)
CASH PROVIDED (USED) BY FINANCING
ACTIVITIES:
Proceeds from issuance of long-term
debt................................. 177,500 26,557 28 -- --
Net increase (decrease) in revolving
loan................................. (23,900) 4,900 (4,900) (4,900) 6,100
Payments of long-term debt.............. (184,389) (14,319) (14,224) (1,955) (4,335)
Proceeds from the issuance of preferred
stock................................ -- 46,348 -- -- --
Proceeds from issuance of common stock,
net.................................. 341 3,652 -- -- --
Purchase of treasury stock, net......... (313) (545) (1,192) -- --
Payments of capital lease obligation.... (2,814) (2,840) (3,693) (667) (816)
Deferred financing costs and other...... (6,656) (8,839) (179) (214) (8)
----------- ----------- ----------- --------- ---------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES.............................. (40,231) 54,914 (24,160) (7,736) 941
----------- ----------- ----------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................. 2,995 612 7,907 18,052 (3,608)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD.................. 21,482 24,477 25,089 25,089 32,996
----------- ----------- ----------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD........................ $ 24,477 $ 25,089 $ 32,996 $ 43,141 $ 29,388
=========== =========== =========== ========= =========
</TABLE>
F-30
<PAGE> 185
FOOD 4 LESS SUPERMARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
FIFTY-TWO FIFTY-TWO FIFTY-TWO TWELVE TWELVE
WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED
JUNE 27, JUNE 26, JUNE 25, SEPTEMBER 18, SEPTEMBER 17,
1992 1993 1994 1993 1994
------------ ------------ ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES:
Net loss................................ $ (33,814) $(27,363) $ (2,700) $ (1,112) $ (3,347)
Adjustments to reconcile net loss to net
cash provided (used) by operating
activities:
Depreciation and amortization........ 61,181 62,541 62,555 14,263 14,301
Extraordinary charge................. 4,818 -- --
Loss (gain) on sale of assets........ (1,364) (4,613) 65 (37) (458)
Equity loss on investments in
supplier cooperative............... 472 207 -- -- 32
Change in assets and liabilities, net
of effects from acquisition of
businesses:
Accounts and notes receivable...... (7,688) 17,145 (3,220) (5,777) (197)
Inventories........................ 202 17,697 (17,125) 7,562 2,344
Prepaid expenses and other......... (2,834) (6,163) (5,717) (3,213) (3,982)
Accounts payable and accrued
liabilities..................... 71,369 (83,286) 55,301 14,573 (1,945)
Self-insurance liabilities......... 15,034 2,935 (3,790) 1,240 3,501
Deferred income taxes.............. 2,033 4,004 2,506 1,289 --
Income taxes payable............... (3,257) 394 (53) 300 (751)
---------- -------- -------- --------- ---------
Total adjustments.................... 139,966 10,861 90,522 30,200 12,845
---------- -------- -------- --------- ---------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES.............................. $ 106,152 $(16,502) $ 87,822 $ 29,088 $ 9,498
========== ======== ======== ========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Purchase of property and equipment
through issuance of capital lease
obligation........................... -- -- $ 2,575 -- --
========== ======== ======== ========= =========
Reduction of goodwill and deferred
income taxes......................... -- -- $ 9,896 -- --
========== ======== ======== ========= =========
Acquisition of businesses:
Fair value of assets acquired........ -- -- $ 11,241 -- --
Net cash paid in acquisition......... -- -- (11,050) -- --
---------- -------- -------- --------- ---------
Liabilities assumed.................. -- -- $ 191 -- --
========== ======== ======== ========= =========
Final purchase price allocation for the
Alpha Beta Acquisition:
Property and equipment valuation
adjustment......................... $ 44,231 -- -- -- --
========== ======== ======== ========= =========
Additional acquisition liabilities... $ 14,305 -- -- -- --
========== ======== ======== ========= =========
Deferred tax benefit................. $ 12,800 -- -- -- --
========== ======== ======== ========= =========
Accretion of preferred stock............ $ -- $ 3,882 $ 8,767 $ 2,023 $ 2,376
========== ======== ======== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-31
<PAGE> 186
FOOD 4 LESS SUPERMARKETS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK TREASURY STOCK
---------------- ------------------ ----------------- TOTAL
NUMBER NUMBER NUMBER SHARE- ADD'L STOCK-
OF OF OF HOLDERS' PAID-IN RETAINED HOLDER'S
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT NOTES CAPITAL (DEFICIT) EQUITY
------ ------- --------- ------ ------- ------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JUNE 29,
1991................... -- $ -- 1,396,878 $14 (1,250) $ (125) $(930) $103,658 $ (18,060) $ 84,557
Net loss............... -- -- -- -- -- -- -- -- (33,814) (33,814)
Issuance of Common
Stock................ -- -- 1,636 -- -- -- (190) 341 -- 151
Purchase of Treasury
Stock................ -- -- -- -- (3,947) (463) 131 -- -- (332)
Sale of Treasury
Stock................ -- -- -- -- 1,560 159 (50) -- -- 109
Payments of
Shareholders'
Notes................ -- -- -- -- -- -- 100 -- -- 100
------ ------- --------- --- ------- ------- ----- -------- --------- --------
BALANCES AT JUNE 27,
1992................... -- -- 1,398,514 14 (3,637) (429) (939) 103,999 (51,874) 50,771
Net loss............... -- -- -- -- -- -- -- -- (27,363) (27,363)
Issuance of Common
Stock................ -- -- 121,118 1 -- -- -- 3,651 -- 3,652
Purchase of Treasury
Stock................ -- -- -- -- (9,612) (770) 225 -- -- (545)
Issuance of Cumulative
Convertible Preferred
Stock................ 50,000 46,348 -- -- -- -- -- -- -- 46,348
Accretion of Preferred
Stock................ -- 3,882 -- -- -- -- -- -- (3,882) --
------ ------- --------- --- ------- ------- ----- -------- --------- --------
BALANCES AT JUNE 26,
1993................... 50,000 50,230 1,519,632 15 (13,249) (1,199) (714) 107,650 (83,119) 72,863
Net loss............... -- -- -- -- -- -- -- -- (2,700) (2,700)
Purchase of Treasury
Stock................ -- -- -- -- (3,483) (1,270) 78 -- -- (1,192)
Payments of
Shareholders'
Notes................ -- -- -- -- -- -- 50 -- -- 50
Accretion of Preferred
Stock................ -- 8,767 -- -- -- -- -- -- (8,767) --
------ ------- --------- --- ------- ------- ----- -------- --------- --------
BALANCES AT JUNE 25,
1994................... 50,000 58,997 1,519,632 15 (16,732) (2,469) (586) 107,650 (94,586) 69,021
Net loss (unaudited)... -- -- -- -- -- -- -- -- (3,347) (3,347)
Accretion of Preferred
Stock (unaudited).... -- 2,376 -- -- -- -- -- -- (2,376) --
------ ------- --------- --- ------- ------- ----- -------- --------- --------
BALANCES AT SEPTEMBER 17,
1994 (unaudited)....... 50,000 $61,373 1,519,632 $15 (16,732) $(2,469) $(586) $107,650 $(100,309) $ 65,674
====== ======= ========= === ======== ======= ===== ======== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-32
<PAGE> 187
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND ACQUISITIONS
Food 4 Less Supermarkets, Inc. (the "Company"), a wholly-owned subsidiary
of Food 4 Less Holdings, Inc. ("Holdings"), is a multiple format supermarket
operator that tailors its retail strategy to the particular needs of the
individual communities it serves. Holdings is a majority-owned subsidiary of
Food 4 Less, Inc. ("FFL"). The Company operates in three geographic areas:
Southern California, Northern California and certain areas of the Midwest. The
Company has three first-tier subsidiaries: Cala Co. ("Cala"), Falley's, Inc.
("Falley's") and Food 4 Less of Southern California, Inc. ("F4L-SoCal"),
formerly known as Breco Holding Company, Inc. ("BHC"). Cala Foods, Inc. ("Cala
Foods") and Bell Markets, Inc. ("Bell") are subsidiaries of Cala, and Alpha Beta
Company ("Alpha Beta") is a subsidiary of F4L-SoCal.
(a) Acquisitions
On March 29, 1994, the Company purchased certain operating assets formerly
owned by Food Barn Stores, Inc. (the "Food Barn Stores") from Associated
Wholesale Grocers, Inc. ("AWG") (the "Food Barn Acquisition") for $11,241,000
(including acquisition costs of $180,000). The financial statements reflect the
preliminary allocation of the purchase price as the purchase price allocation
has not been finalized. The effect of the acquisition was not material to the
Company's financial position and results of operations. Falley's has agreed to
purchase merchandise (as defined) for the Food Barn Stores from AWG through
March 24, 2001. Falley's has pledged its patronage dividends and notes
receivable from AWG as security under this supply agreement.
On June 17, 1991, the Company acquired all of the common stock of Alpha
Beta for $270,513,000 (including acquisition costs of $41,477,000) in a
transaction accounted for as a purchase.
In January 1990, the Company purchased certain operating assets of ABC
Market Corp. ("ABC") for $14,675,000, plus approximately $1,000,000 in fees and
expenses.
On June 30, 1989, the Company acquired Bell for approximately $13,700,000,
which includes $8,000,000 of notes and the assumption of Bell's long-term debt.
The transaction was accounted for as a purchase. Certified Grocers of
California, Ltd. ("Certified") has guaranteed up to $4,000,000 of notes issued
by the Company to the seller in connection with the purchase and the performance
of a lease.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Business
The Company is engaged primarily in the operation of retail supermarkets.
(b) Basis of Presentation
Principles of Consolidation. The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. The results of operations of Alpha Beta, F4L-SoCal (BHC), Bell,
ABC and the Food Barn Stores have been excluded from the consolidated financial
statements prior to their respective acquisition dates. The excess of the
purchase price over the fair value of the net assets acquired is classified as
goodwill. All intercompany transactions have been eliminated in consolidation.
Interim Financial Statements. The consolidated balance sheet of the Company
as of September 17, 1994 and the consolidated statements of operations and cash
flows for the interim periods ended September 17, 1994 and September 18, 1993
are unaudited, but include all adjustments (consisting of only normal recurring
accruals) which the Company considers necessary for a fair presentation of its
consolidated financial position, results of operations and cash flows for these
periods. These interim financial statements do not include all disclosures
required by generally accepted accounting principles, and, therefore, should be
read in conjunction
F-33
<PAGE> 188
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
with the Company's financial statements and notes thereto included herein.
Results of operations for interim periods are not necessarily indicative of the
results for a full fiscal year.
(c) Fiscal Years
The Company's fiscal year is the 52 or 53-week period which ends on the
last Saturday in June. Fiscal years 1994, 1993, and 1992 include 52 weeks.
(d) Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents.
(e) Inventories
Inventories, which consist of grocery products, are stated at the lower of
cost or market. Cost has been principally determined using the last-in,
first-out ("LIFO") method. If inventories had been valued using the first-in,
first-out ("FIFO") method, inventories would have been higher by $13,103,000,
$13,802,000 and $14,822,000 (unaudited) at June 26, 1993, June 25, 1994 and
September 17, 1994, respectively, and gross profit and operating income would
have been greater by $3,554,000, $4,441,000, $699,000, $1,011,000 (unaudited)
and $1,020,000 (unaudited) for the 52 weeks ended June 27, 1992, the 52 weeks
ended June 26, 1993, the 52 weeks ended June 25, 1994, the 12 weeks ended
September 18, 1993, and the 12 weeks ended September 17, 1994, respectively.
(f) Pre-opening Costs
The costs associated with opening new stores are deferred and amortized
over one year following the opening of each new store.
(g) Closed Store Reserves
When a store is closed, the Company provides a reserve for the net book
value of any store assets, net of salvage value, and the net present value of
the remaining lease obligation, net of sublease income. For the 52 weeks ended
June 27, 1992, the 52 weeks ended June 26, 1993, the 52 weeks ended June 25,
1994, the 12 weeks ended September 18, 1993 and the 12 weeks ended September 17,
1994, utilization of this reserve was $4.0 million, $2.4 million, $1.1 million,
$0.2 million (unaudited) and $0.2 million (unaudited), respectively.
(h) Investments in Supplier Cooperatives
The investment in Certified is accounted for on the cost method. There are
certain restrictions on the sale of this investment.
(i) Investment in Food 4 Less of Modesto, Inc.
During the 52 weeks ended June 26, 1993, the Company sold its 20%
investment in Food 4 Less of Modesto, Inc. ("Modesto") for gross proceeds of
$4.5 million, which included a $1.5 million note receivable, resulting in a gain
of $2.5 million. The Company previously accounted for this investment using the
cost method.
F-34
<PAGE> 189
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(j) Property and Equipment
Property and equipment are stated at cost and are depreciated principally
using the straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements.................. 5-40 years
Equipment and fixtures...................... 3-10 years
Property under capital leases and leasehold
interests................................. 3-45 years (lease term)
</TABLE>
(k) Deferred Financing Costs
Costs incurred in connection with the issuance of debt are amortized over
the term of the related debt using the effective interest method.
(l) Goodwill and Covenants Not to Compete
The excess of the purchase price over the fair value of the net assets of
businesses acquired is amortized on a straight-line basis over 40 years
beginning at the date of acquisition. Covenants not to compete, which are
included in Other Assets, are amortized on a straight-line basis over the term
of the covenant.
Current and undiscounted future operating cash flows are compared to
current and undiscounted future goodwill amortization to determine if an
impairment of goodwill has occurred and is continuing. As of June 25, 1994, no
impairment exists.
(m) Income Taxes
On June 27, 1993, the Company prospectively adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes. SFAS 109
is an asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax returns. In
estimating future tax consequences, SFAS 109 generally considers all expected
future events other than enactments of changes in the tax law or rates.
Previously, the Company used the SFAS 96 asset and liability approach that gave
no recognition to future events other than the recovery of assets and settlement
of liabilities at their carrying amounts.
Under SFAS 109, the Company recognizes to a greater degree the future tax
benefits of expenses which have been recognized in the financial statements.
The implementation of SFAS No. 109 did not have a material effect on the
accompanying consolidated financial statements.
(n) Notes Receivable from Shareholders of Parent
Notes receivable from shareholders of parent represent loans to employees
of the Company for purchases of Holdings' stock. The notes are due over various
periods, bear interest at the prime rate, and are secured by each shareholder's
shares of common stock.
(o) Self-Insurance
Certain of the Company's subsidiaries are self-insured for a portion of
workers' compensation, general liability and automobile accident claims. The
Company establishes reserves based on an independent actuary's review of claims
filed and an estimate of claims incurred but not yet filed.
F-35
<PAGE> 190
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(p) Discounts and Promotional Allowances
Promotional allowances and vendor discounts are recorded as a reduction of
cost of sales in the accompanying consolidated statements of operations.
Allowance proceeds received in advance are deferred and recognized over the
period earned.
(q) Provision for Earthquake Losses
On January 17, 1994, Southern California was struck by a major earthquake
which resulted in the temporary closing of 31 of the Company's stores. The
closures were caused primarily by loss of electricity, water, inventory, or
structural damage. All but one of the closed stores reopened within a week of
the earthquake. The final closed store reopened on March 24, 1994. The Company
is insured against earthquake losses (including business interruption), subject
to certain deductibles. The pre-tax financial impact, net of insurance claims,
was approximately $4.5 million. At June 25, 1994, the Company had received all
expected insurance proceeds related to this claim.
(r) Extraordinary Items
For the 52 weeks ended June 27, 1992, the Company classified the write-off
of deferred financing costs associated with the early extinguishment of debt as
an extraordinary item. For the 52 weeks ended June 27, 1992, the Company also
classified the difference between the net book value and replacement cost of
property and equipment destroyed during the April 1992 civil unrest in Los
Angeles and replaced by insurance companies as an extraordinary item. Proceeds
received from insurance companies for business interruption related to the civil
unrest are included as a component of selling, general, administrative and other
expenses.
(s) Loss Per Common Share
Loss per common share is computed based on the weighted average number of
shares outstanding during the applicable period. Fully diluted loss per share
has been omitted as it is anti-dilutive for all periods presented.
(t) Reclassifications
Certain prior period amounts in the consolidated financial statements have
been reclassified to conform to the June 25, 1994 presentation.
(3) PREFERRED STOCK
On December 31, 1992, the Company issued 50,000 shares of $.01 par value
Series A cumulative convertible preferred stock (the "Preferred Stock") with a
liquidation value of $1,000 per share and 121,118 shares of its $.01 par value
common stock (the "Common Stock") to its parent company, Food 4 Less Holdings,
Inc. ("Holdings") in exchange for gross proceeds of $50.0 million. The Preferred
Stock is convertible into common stock at the option of the holder based upon a
conversion price which results in a one-for-one exchange. The Preferred Stock
has a stated dividend rate of $152.50 per share, per annum, and is
anti-dilutive. The Company may pay dividends on or before December 31, 1997 only
by issuing additional shares of Preferred Stock. The Company may redeem the
Preferred Stock at any time after December 31, 1997 for its liquidation value.
At June 25, 1994, the Company had accrued approximately $12,649,000 for the
Preferred Stock dividends earned but not yet declared.
In order to finance the purchase of the Preferred and Common Stock from the
Company, Holdings issued $103.6 million aggregate principal amount of 15.25%
Senior Discount Notes due 2004 (the "Holdings
F-36
<PAGE> 191
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Notes") and 121,118 Common Stock Purchase Warrants (the "Warrants") for gross
proceeds of $50.0 million. No cash interest is payable on the Notes until June
15, 1998.
At the present time, Holdings has no other income or assets other than its
investment in the Company's Common and Preferred Stock and intends to service
the interest payments on the Holdings Notes when they become payable in cash (in
fiscal 1998) through dividends it receives on the Company's capital stock.
(4) LONG-TERM DEBT AND SENIOR SUBORDINATED DEBT
The Company's long-term debt is summarized as follows:
<TABLE>
<CAPTION>
JUNE 26, JUNE 25,
1993 1994
------------ ------------
<S> <C> <C>
Bank Term Loan, principal due quarterly through January
1999, with interest payable monthly in arrears........ $148,478,000 $137,064,000
10.45 percent Senior Notes principal due 2000 with
interest payable semi-annually in arrears............. 175,000,000 175,000,000
Revolving Loan.......................................... 4,900,000 --
10.625 percent first real estate mortgage due 1998,
$12,000 of principal plus interest payable monthly
secured by land and building with a net book value of
$2,122,000............................................ 1,558,000 1,521,000
9.2 to 9.25 percent notes payable, collateralized by
equipment, due September 1994, $67,000 of principal
plus interest payable monthly, plus balloon payment of
$992,000.............................................. 1,772,000 1,103,000
10.8 percent notes payable, collateralized by equipment,
due September 1995, $72,000 of principal plus interest
payable monthly, plus balloon payment of $1,004,000... 2,447,000 1,819,000
10.0 percent secured promissory note, collateralized by
the stock of Bell, due 1996, interest payable
quarterly through June 1996........................... 8,000,000 8,000,000
10.08 percent notes payable, collateralized by
equipment, due November 1996, $34,000 of principal
plus interest payable monthly, plus balloon payment of
$493,000.............................................. 1,515,000 1,242,000
10.15 percent notes payable, collateralized by
equipment, due December 1996, $45,000 of principal and
interest payable monthly, plus balloon payment of
$640,000.............................................. 1,994,000 1,675,000
10.0 percent real estate mortgage due 2000, $8,000 of
principal and interest payable monthly................ 474,000 419,000
Other long-term debt.................................... 2,216,000 1,415,000
------------ ------------
348,354,000 329,258,000
Less -- current portion................................. 12,778,000 18,314,000
------------ ------------
$335,576,000 $310,944,000
============ ============
</TABLE>
In June 1991, the Company and certain of its subsidiaries entered into a
Credit Agreement (the "Credit Agreement") with certain banks, comprised of a
$315,000,000 Term Loan (the "Bank Term Loan") facility, a $70,000,000 Revolving
Loan (the "Revolving Loan") facility and a $55,000,000 standby letter of credit
facility (the "Letter of Credit Facility"). At June 25, 1994, $137,064,000 was
outstanding under the Bank Term Loan, there were no borrowings outstanding under
the Revolving Loan and $48,131,000 of standby letters of credit had been issued
on behalf of the Company. A commitment fee of 1/2 of 1 percent is charged on the
average daily unused portion of the Revolving Loan and the Letter of Credit
Facility; such commitment fees are due quarterly in arrears. Interest on
borrowings under the Bank Term Loan is at the bank's Base Rate (as defined) plus
1.25 percent or the Eurodollar Rate (as defined) plus 2.5 percent. At June 25,
1994, the
F-37
<PAGE> 192
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
weighted average interest rate on the Bank Term Loan was 6.5 percent. In
accordance with certain requirements of the Credit Agreement, the Company
purchased an interest rate cap for a principal amount of approximately $91.4
million on the three-month Libor rate at 5.5% which expires on January 3, 1995.
Quarterly principal installments on the Bank Term Loan continue to December
1998, with $15,580,000 payable in fiscal year 1995, $21,245,000 payable in
fiscal year 1996, $22,661,000 payable in fiscal 1997, $40,489,000 payable in
fiscal 1998, and $37,089,000 payable in fiscal 1999. Interest on borrowings
under the Revolving Loan is at the bank's Base Rate (as defined) plus 1.25
percent. At June 25, 1994, the interest rate on the Revolving Loan was 8.5
percent. To the extent borrowings under the Revolving Loan are not paid earlier,
they are due in June 1996. The common stock of F4L-SoCal, Falley's, Cala and
certain of their direct and indirect subsidiaries has been pledged as security
under the Credit Agreement.
In April 1992, the Company and its wholly-owned subsidiaries issued
$175,000,000 of 10.45 percent Senior Notes (the "Senior Notes"). These notes are
due in two equal sinking fund payments on April 15, 1999 and 2000. They are
general unsecured obligations of the Company and rank senior in right of payment
to all subordinated indebtedness (as defined). The Senior Notes rank "pari
passu" in right of payment with all borrowings and other obligations of the
Company under its bank Credit Agreement; however, the obligations under the
Credit Agreement are secured by substantially all the assets of the Company and
its subsidiaries. The Senior Notes may be redeemed beginning in 1996 at 104.5
percent, declining ratably to 100 percent in 1999. The proceeds received, net of
issuance costs, were used to pay down borrowings under the Bank Term Loan.
Deferred financing costs related to the portion of the Bank Term Loan that was
retired of $6.7 million, net of related tax benefit of $2.5 million, are
classified as an extraordinary item in the Company's consolidated statement of
operations for the 52 weeks ended June 27, 1992.
Scheduled maturities of principal of Long-Term Debt at June 25, 1994 are as
follows:
<TABLE>
<S> <C>
1995................................................... $ 18,314,000
1996................................................... 23,384,000
1997................................................... 32,322,000
1998................................................... 40,701,000
1999................................................... 124,823,000
Later years............................................ 89,714,000
------------
$329,258,000
============
</TABLE>
The Company issued $145,000,000 principal amount of Senior Subordinated
Notes (the "Subordinated Notes") in connection with the acquisition of Alpha
Beta as described in Note 1. The Subordinated Notes bear interest, payable
semi-annually on June 15 and December 15, at an annual rate of 13.75 percent.
The Subordinated Notes are subordinated to all Senior Indebtedness (as defined)
of the Company, and may be redeemed beginning in 1996 at a redemption price of
106 percent. The redemption price declines ratably to 100 percent in 2000.
The debt agreements, among other things, require the Company to maintain
minimum levels of net worth (as defined), to maintain minimum levels of earnings
(as defined), to maintain a hedge agreement to provide interest rate protection,
and to comply with certain ratios related to interest expense (as defined),
fixed charges (as defined), working capital and indebtedness. In addition, the
debt agreements limit, among other things, additional borrowings, dividends on,
and redemption of, capital stock, capital expenditures, incurrence of lease
obligations, and the acquisition and disposition of assets. At June 26, 1993 and
June 25, 1994 the Company was in compliance with the financial covenants of its
debt agreements. At June 25, 1994, dividends and certain other payments are
restricted based on terms in the debt agreements.
F-38
<PAGE> 193
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) LEASES
The Company's operations are conducted primarily in leased properties.
Substantially all leases contain renewal options. Rental expense under operating
leases was as follows:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JUNE 27, JUNE 26, JUNE 25,
1992 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Minimum rents................................. $46,706,000 $44,504,000 $49,788,000
Rents based on sales.......................... 7,656,000 5,917,000 3,806,000
</TABLE>
Following is a summary of future minimum lease payments under operating
leases at June 25, 1994:
<TABLE>
<S> <C>
1995................................................... $ 52,542,000
1996................................................... 48,966,000
1997................................................... 45,325,000
1998................................................... 38,925,000
1999................................................... 34,423,000
Later years............................................ 269,332,000
------------
$489,513,000
============
</TABLE>
The Company has entered into lease agreements for new supermarket sites
which were not in operation at June 25, 1994. Future minimum lease payments
under such operating leases generally begin when such supermarkets open and at
June 25, 1994 are: 1995 -- $5,990,000; 1996 -- $11,772,000; 1997 -- $11,825,000;
1998 -- $11,810,000; 1999 -- $11,819,000; later years -- $218,480,000.
Certain leases qualify as capital leases under the criteria established in
Statement of Financial Accounting Standards No. 13, "Accounting for Leases," and
are classified on the consolidated balance sheets as leased property under
capital leases. Future minimum lease payments for the property under capital
leases at June 25, 1994 are as follows:
<TABLE>
<S> <C>
1995.................................................... $ 7,948,000
1996.................................................... 7,521,000
1997.................................................... 6,995,000
1998.................................................... 6,374,000
1999.................................................... 6,071,000
Later years............................................. 44,108,000
-----------
Total minimum lease payments.................. 79,017,000
Less: amounts representing interest..................... 35,403,000
-----------
Present value of minimum lease payments................. 43,614,000
Less: current portion................................... 3,616,000
-----------
$39,998,000
===========
</TABLE>
Accumulated depreciation related to capital leases was $20,356,000 and
$24,041,000 at June 26, 1993 and June 25, 1994, respectively.
The Company is leasing a distribution facility and four store locations
from the previous owner of Alpha Beta. The agreement contains a purchase option
for the land, buildings and improvements and equipment at a price that equals or
exceeds the estimated fair market value throughout the term of the lease.
F-39
<PAGE> 194
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) INVESTMENT IN A.W.G.
The investment in Associated Wholesale Grocers ("A.W.G.") consists
principally of the cooperative's six percent interest-bearing seven and
eight-year patronage certificates received in payment of certain rebates.
Following is a summary of future maturities based upon current redemption terms:
<TABLE>
<S> <C>
1995..................................................... $ --
1996..................................................... --
1997..................................................... 795,000
1998..................................................... 1,420,000
1999..................................................... 1,520,000
Later years.............................................. 2,983,000
----------
$6,718,000
==========
</TABLE>
(7) INCOME TAXES
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JUNE 27, JUNE 26, JUNE 25,
1992 1993 1994
---------- ---------- -----------
<S> <C> <C> <C>
Current:
Federal..................................... $2,507,000 $ -- $ 3,251,000
State and other............................. 934,000 82,000 712,000
---------- ---------- -----------
3,441,000 82,000 3,963,000
---------- ---------- -----------
Deferred:
Federal..................................... -- 1,345,000 (70,000)
State and other............................. -- -- (1,193,000)
---------- ---------- -----------
-- 1,345,000 (1,263,000)
---------- ---------- -----------
$3,441,000 $1,427,000 $ 2,700,000
========== ========== ===========
</TABLE>
A reconciliation of the provision (benefit) for income taxes to amounts
computed at the federal statutory rates of 34% for fiscal 1992 and 1993 and 35%
for fiscal 1994 is as follows:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JUNE 27, JUNE 26, JUNE 25,
1992 1993 1994
----------- ----------- ----------
<S> <C> <C> <C>
Federal income taxes at statutory rate on
loss before provision for income taxes and
extraordinary charges...................... $(8,689,000) $(8,818,000) $ --
State and other taxes, net of federal tax
benefit.................................... 934,000 82,000 (1,000)
Alternative minimum tax...................... 2,507,000 -- --
Effect of permanent differences resulting
primarily from amortization of goodwill.... 2,706,000 2,850,000 2,820,000
Accounting limitation (recognition) of
deferred tax benefit....................... 5,983,000 7,313,000 (119,000)
----------- ----------- ----------
$ 3,441,000 $ 1,427,000 $2,700,000
=========== =========== ==========
</TABLE>
F-40
<PAGE> 195
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision (benefit) for deferred taxes consists of the following:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JUNE 27, JUNE 26, JUNE 25,
1992 1993 1994
------------ ----------- -----------
<S> <C> <C> <C>
Depreciation....................................... $ 6,282,000 $ 7,756,000 $ 2,536,000
Difference between book and tax basis of assets
sold............................................. 2,514,000 3,198,000 (4,223,000)
Deferred revenues and allowances................... (7,028,000) 40,000 (2,349,000)
Pre-opening costs.................................. 1,072,000 (512,000) 174,000
Accounts receivable reserves....................... -- (270,000) 249,000
Unicap............................................. (124,000) (5,000) (536,000)
Capital lease obligation........................... (2,010,000) (1,385,000) 2,792,000
Self-insurance reserves............................ (13,558,000) (4,082,000) (535,000)
Inventory shrink reserve........................... (528,000) 777,000 (869,000)
LIFO............................................... 7,104,000 (554,000) (1,010,000)
Closed store reserve............................... 964,000 1,092,000 440,000
Accrued expense.................................... -- -- (582,000)
Accrued payroll and related liabilities............ (2,656,000) 193,000 1,721,000
Damaged inventory reimbursement.................... 1,195,000 -- --
Acquisition costs.................................. 4,974,000 2,626,000 1,397,000
Sales tax reserves................................. -- (715,000) (418,000)
Deferred rent subsidy.............................. -- (483,000) (624,000)
Net operating loss usage........................... -- -- 5,782,000
Tax credits benefited.............................. -- (1,392,000) (4,477,000)
Accounting limitation (recognition) of deferred tax
benefit 1,588,000 (4,591,000) (1,085,000)
Other, net......................................... 211,000 (348,000) 354,000
------------ ----------- -----------
$ -- $ 1,345,000 $(1,263,000)
============ =========== ===========
</TABLE>
F-41
<PAGE> 196
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant components of the Company's deferred tax assets
(liabilities) are as follows:
<TABLE>
<CAPTION>
JUNE 26, JUNE 25,
1993 1994
------------ ------------
<S> <C> <C>
Deferred tax assets:
Accrued payroll and related liabilities.... $ 4,064,000 $ 2,448,000
Other accrued liabilities.................. 13,488,000 13,953,000
Property and equipment..................... 9,674,000 2,997,000
Self-insurance liabilities................. 30,907,000 27,744,000
Loss carryforwards......................... 27,863,000 20,675,000
Tax credit carryforwards................... 1,392,000 5,869,000
Other...................................... 1,223,000 580,000
------------ ------------
Gross deferred tax assets............... 88,611,000 74,266,000
Valuation allowance........................ (45,008,000) (31,149,000)
------------ ------------
Net deferred tax assets................. $ 43,603,000 $ 43,117,000
------------ ------------
Deferred tax liabilities:
Inventories................................ $(20,243,000) $(16,738,000)
Property and equipment..................... (38,298,000) (30,516,000)
Obligations under capital leases........... (5,802,000) (8,733,000)
Other...................................... (1,689,000) (1,870,000)
------------ ------------
Gross deferred tax liability............ (66,032,000) (57,857,000)
------------ ------------
Net deferred tax liability.............. $(22,429,000) $(14,740,000)
============ ============
</TABLE>
The Company recorded a valuation allowance to reserve a portion of its
gross deferred tax assets at June 25, 1994 due primarily to financial and tax
losses in recent years. Under SFAS 109, this valuation allowance will be
adjusted in future periods as appropriate. However, the timing and extent of
such future adjustments to the allowance cannot be determined at this time.
At June 25, 1994, approximately $8,864,000 of the valuation allowance for
deferred tax assets will reduce goodwill when the allowance is no longer
required.
At June 25, 1994, the Company has net operating loss carryforwards for
federal income tax purposes of $59,071,000, which expire in 2007 through 2008.
The Company has federal and state Alternative Minimum Tax ("AMT") credit
carryforwards of approximately $4,090,000 which are available to reduce future
regular taxes in excess of AMT. Currently, there is no expiration date for these
credits.
FFL files a consolidated federal income tax return, under which the federal
income tax liability of FFL and its subsidiaries (which since June 23, 1989
include the Company) is determined on a consolidated basis. FFL has entered into
a federal income tax sharing agreement with the Company and certain of its
subsidiaries (the "Tax Sharing Agreement"). The Tax Sharing Agreement provides
that in any year in which the Company is included in any consolidated tax
liability of FFL and has taxable income, the Company will pay to FFL the amount
of the tax liability that the Company would have had on such due date if it had
been filing a separate return. Conversely, if the Company generates losses or
credits which actually reduce the consolidated tax liability of FFL and its
other subsidiaries, FFL will credit to the Company the amount of such reduction
in the consolidated tax liability. These credits are passed between FFL and the
Company in the form of cash payments. In the event any state and local income
taxes are determinable on a combined or consolidated basis, the Tax Sharing
Agreement provides for a similar allocation between FFL and the Company of such
state and local taxes.
F-42
<PAGE> 197
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company currently has an Internal Revenue Service examination in
process covering its 1990 and 1991 fiscal years. The Internal Revenue Service
has not yet made any additional tax assessments related to these years.
(8) RELATED PARTY TRANSACTIONS
The Company has a five-year consulting agreement with an affiliated company
effective June 17, 1991 for management, financing, acquisition and other
services. The agreement is automatically renewed on January 1 of each year for
the five-year term unless ninety (90) days' notice is given by either party. The
contract provides for annual management fees equal to $2 million plus an
additional amount based on the Company's performance and advisory fees for
acquisition and financing transactions.
Fees paid or accrued associated with management services were $2,270,000
during the 52 weeks ended June 25, 1994, $2,000,000 during the 52 weeks ended
June 26, 1993, and $2,000,000 during the 52 weeks ended June 27, 1992. Advisory
fees paid or accrued were $170,000 during the 52 weeks ended June 25, 1994,
$1,795,000 for the 52 weeks ended June 26, 1993, and $116,000 for the 52 weeks
ended June 27, 1992. Advisory fees paid or accrued for financing transactions
are capitalized and amortized over the term of the related financing. In
connection with the acquisitions of Alpha Beta, ABC and the Food Barn Stores,
the Company capitalized fees of $8,000,000, $500,000 and $92,000, respectively,
which were paid to this affiliated company for acquisition services.
(9) COMMITMENTS AND CONTINGENCIES
The Company is contingently liable to former stockholders of certain
predecessors for any prorated gains which may be realized within ten years of
the acquisition of the respective companies resulting from the sale of the
Certified stock. Such gains are only payable if Certified is purchased or
dissolved, or if the Company sells the shares to Certified within the period
noted above.
The Company is a partner in a supplier partnership, in which it is
contingently liable for the partnership's long-term debt. The Company's portion
of such debt is approximately $1,650,000.
The Company has entered into lease agreements with the developers of
several new sites in which the Company has agreed to provide construction
financing. At June 25, 1994, the Company had capitalized construction costs of
$10,435,000 on total commitments of $19,250,000.
In December 1992, three California state antitrust class action suits were
commenced in Los Angeles Superior Court against the Company and other major
supermarket chains located in Southern California, alleging that they conspired
to refrain from competing in and to fix the price of fluid milk above
competitive prices. Specifically, class actions were commenced by Diane Barela
and Neila Ross, Ron Moliare and Paul C. Pfeifle on December 7, December 14 and
December 23, 1992, respectively. To date, the Court has yet to certify any of
these classes, while a demurrer to the complaints was denied. The Company will
vigorously defend itself in these class action suits.
In addition, the Company or its subsidiaries are defendants in a number of
other cases currently in litigation or potential claims encountered in the
normal course of business which are being vigorously defended. In the opinion of
management, the resolutions of these matters will not have a material effect on
the Company's financial position or results of operations.
(10) EMPLOYEE BENEFIT PLANS
The Company implemented SOP No. 93-6, Employer Accounting for Employee
Stock Ownership Plans, effective June 26, 1994. The implementation of SOP No.
93-6 did not have a material effect on the accompanying unaudited consolidated
financial statements.
F-43
<PAGE> 198
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company and its subsidiaries sponsor several defined contribution
benefit plans. The full-time employees of Falley's who are not members of a
collective bargaining agreement are covered under a 401(k) plan under which the
Company matches certain employee contributions with cash or FFL stock (the
"Falley's ESOP"). As part of the original stock sale agreement between FFL and
the Falley's ESOP, which has been amended from time to time, an affiliate of the
Company has assumed the obligation to purchase any FFL shares as to which
terminated plan participants have exercised a put option under the terms of
Falley's ESOP. As part of that agreement, the Company may, at its sole
discretion, after providing a right of first refusal to the affiliate, purchase
FFL shares put under the provisions of the plan. During the year ended June 25,
1994, the Company elected to purchase $1.0 million of FFL shares as to which
terminated plan participants had exercised their put option. FFL shares
purchased by the Company are classified as treasury stock. As of September 17,
1994, the fair value of the shares allocated which are subject to a repurchase
obligation by an affiliate of the Company was approximately $13,286,000
(unaudited).
The Company also sponsors two ESOPs for employees of the Company who are
members of certain collective bargaining agreements (the "Union ESOPs"). The
Union ESOPs provide for annual contributions based on hours worked at a rate
specified by the terms of the collective bargaining agreements. The Company
contributions are made in the form of Holdings stock or cash for the purchase of
Holdings stock and are to be allocated to participants based on hours worked.
During the 12 weeks ended September 17, 1994, the Company recorded a charge
against operations of approximately $77,000 (unaudited) for benefits under the
Union ESOPs. There were no shares issued to the Union ESOPs at September 17,
1994.
All other full-time employees of the Company who are not members of a
collective bargaining agreement are covered under a separate 401(k) plan (the
"Management Plan"). The Management Plan provides for annual contributions which
are determined at the discretion of the Company. The Company contributions are
allocated to participants based on employee compensation and matching of certain
employee contributions. A portion of the Company contribution allocated based on
compensation is made in the form of stock or cash for the purchase of stock.
Total charges against operations related to all employee benefit plans
sponsored by the Company and its subsidiaries were $337,000, $284,000 and
$699,000 for the 52 weeks ended June 27, 1992, the 52 weeks ended June 26, 1993,
and the 52 weeks ended June 25, 1994, respectively. No contributions were made
with stock and no stock was acquired by any plans in fiscal 1992, fiscal 1993 or
fiscal 1994.
The Company contributes to multi-employer pension plans administered by
various trustees. Contributions to these plans are based upon negotiated wage
contracts. These plans may be deemed to be defined benefit plans. Information
related to accumulated plan benefits and plan net assets as they may be
allocated to the Company at June 25, 1994 is not available. The Company
contributed $78.6 million, $69.4 million and $57.2 million to these plans for
the 52 weeks ended June 27, 1992, June 26, 1993, and June 25, 1994,
respectively. Management is not aware of any plans to terminate such plans.
The United Food and Commercial Workers health and welfare plans were
overfunded and those employers who contributed to the plans are to receive a pro
rata share of the excess reserves in these plans through a reduction of current
contributions. The Company's share of the excess reserve was $24.2 million, of
which $8.1 million was recognized in the 52 weeks ended June 25, 1994, with the
remainder to be recognized in future periods as the credits are taken.
Offsetting the reduction in employer contributions was a $5.5 million union
contract ratification bonus and contractual wage increases.
(11) COMMON STOCK
On December 31, 1992, concurrent with the sale of the Preferred Stock, the
Company sold 121,118 shares of common stock to Holdings. Concurrently, the
remaining shares of common stock of the Company were exchanged for shares of
Holdings common stock on a one for one basis.
F-44
<PAGE> 199
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(12) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
(a) Cash and Cash Equivalents
The carrying amount approximates fair value as a result of the short
maturity of these instruments.
(b) Short-Term Notes and Other Receivables
The carrying amount approximates fair value as a result of the short
maturity of these instruments.
(c) Investments In and Notes Receivable From Supplier Cooperatives
The Company maintains a non-current deposit with Certified in the form of
Class B shares of Certified. Certified is not obligated in any fiscal year to
redeem more than a prescribed number of the Class B shares issued. Therefore, it
is not practicable to estimate the fair value of this investment.
The Company maintains a non-current note receivable from A.W.G. There are
no quoted market prices for this investment and a reasonable estimate could not
be made without incurring excessive costs. Additional information pertinent to
the value of this investment is provided in Note 6.
(d) Long-Term Debt
The fair value of the $175.0 million Senior Notes, the $145.0 million
Subordinated Notes and the Bank Term Loan is based on quoted market prices.
Market quotes for the fair value of the remainder of the Company's debt are not
available, and a reasonable estimate of the fair value could not be made without
incurring excessive costs. Additional information pertinent to the value of the
unquoted debt is provided in Note 4.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
JUNE 25, 1994
-------------------------
CARRYING FAIR
AMOUNT VALUE
----------- -----------
<S> <C> <C>
Cash and cash equivalents................................... $32,996,000 $32,996,000
Short-term notes and other receivables...................... 4,187,000 4,187,000
Investments in and notes receivable from supplier
cooperatives.............................................. 12,702,000 --
Long-term debt for which it is:
- Practicable to estimate fair values..................... 457,064,000 472,779,000
- Not practicable......................................... 17,194,000 --
</TABLE>
F-45
<PAGE> 200
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) OTHER INCOME, NET
The components of other income items included in SG&A are as follows:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JUNE 27, JUNE 26, JUNE 25,
1992 1993 1994
---------- ---------- ---------
<S> <C> <C> <C>
Interest income.................................... $1,266,000 $ 993,000 $ 903,000
Licensing fees..................................... 493,000 246,000 270,000
Other income (expense)............................. 769,000 3,710,000 (177,000)
---------- ---------- ---------
$2,528,000 $4,949,000 $ 996,000
========= ========= =========
</TABLE>
(14) SUBSEQUENT EVENT (UNAUDITED)
On September 14, 1994, the Company, Holdings, and FFL entered into a
definitive Agreement and Plan of Merger (the "Merger") with Ralphs Supermarkets,
Inc. ("Ralphs") and the stockholders of Ralphs. Pursuant to the terms of the
Merger Agreement, the Company will, subject to certain terms and conditions
being satisfied or waived, be merged into Ralphs and Ralphs will become a
wholly-owned subsidiary of Holdings. Conditions to the consummation of the
Merger include, among other things, receipt of regulatory approvals and other
necessary consents and the completion of financing for the transaction. The
purchase price for Ralphs is approximately $1.5 billion, including the
assumption of debt.
Upon the effectiveness of the Merger, each outstanding share of common
stock, par value $1.00 per share, of Ralphs will be converted into and become a
right to receive (a) approximately $16.61 in cash and (b) approximately $3.91
principal amount of 13% Senior Subordinated Pay-in Kind Debentures due 2006
issued by Holdings (the "Debentures"). This represents an aggregate purchase
price, payable to the stockholders of Ralphs, of $425 million in cash and $100
million initial principal amount of Debentures. In addition, the Company will
enter into an agreement with a stockholder of Ralphs pursuant to which such
stockholder will act as a consultant to the Company with respect to certain real
estate and general commercial matters for a period of five years from the
closing of the Ralphs Merger in exchange for the payment of a consulting fee.
The financing required to complete the Merger will include the issuance of
significant additional equity by FFL, the issuance of new debt securities by the
Company and Holdings and the incurrence of additional bank financing by the
Company. The equity issuance would be made to a group of investors led by Apollo
Advisors, L.P., which has committed to purchase up to $150 million in FFL stock,
and the bank financing would be made pursuant to a commitment by Bankers Trust
Company to provide up to $1,225 million in such financing. In connection with
the receipt of new financing, the Company and Holdings will also be required to
complete certain exchange offers, consent solicitations and or other
transactions with the holders of their currently outstanding debt securities.
As of July 17, 1994, Ralphs had outstanding indebtedness of approximately
$990 million. Ralphs had sales of $2,730 million, operating income of $152.1
million and earnings before income taxes of $30.3 million for its most recent
fiscal year ended January 30, 1994.
Upon consummation of the Merger, the operations and activities of the
Company will be significantly impacted due to conversions of the Company's
existing Southern California conventional stores to either Ralphs or Food 4 Less
warehouse stores as well as the consolidation of various operating functions and
departments. This consolidation may result in a restructuring charge and, in
conjunction with the Merger, the Company intends to determine if there is any
impairment of the value of the Company's existing assets and goodwill. The
amount of the restructuring charge is not presently determinable due to various
factors,
F-46
<PAGE> 201
FOOD 4 LESS SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
including uncertainties inherent in the completion of the Merger; however, the
restructuring charge may be material in relation to the stockholder's equity and
financial position of the Company at June 25, 1994.
(15) RESTATEMENT
The Company has restated the statements of operations for its fiscal years
ended June 27, 1992, June 26, 1993 and June 25, 1994 and the 12 weeks ended
September 18, 1993 to classify certain buying, occupancy and labor costs
associated with making its products available for sale as cost of sales. These
amounts were previously classified as selling, general, administrative, and
other net, and depreciation and amortization of property and equipment and
totalled $236,152,000, $224,469,000, $219,548,000 and $50,910,000 (unaudited)
for the fiscal years ended June 27, 1992, June 26, 1993 and June 25, 1994 and
the 12 weeks ended September 18, 1993, respectively. The Company has also
classified a portion of its self-insurance costs as interest expense that was
previously recorded in selling, general, administrative and other, net. These
amounts were $4,960,000, $5,865,000, $5,836,000 and $1,389,000 (unaudited) for
the fiscal years 1992, 1993 and 1994 and the 12 weeks ended September 18, 1993,
respectively. Depreciation and amortization costs not classified in cost of
sales are included in selling, general, administrative and other, net. The
change in classification did not affect the net loss, loss before provision for
income taxes and extraordinary charges or loss per common share.
F-47
<PAGE> 202
APPENDIX A
COMPARISON OF OLD F4L SENIOR NOTES AND
NEW F4L SENIOR NOTES
The following is a brief comparison of the principal features of the Old
F4L Senior Notes and the New F4L Senior Notes. The terms of the New F4L Senior
Notes differ from the current (unamended) terms of the Old F4L Senior Notes in
certain significant respects, including those described below. The summary
comparisons set forth below do not purport to be complete and are qualified in
their entirety by reference to the Old F4L Senior Note Indenture, the Old F4L
Senior Notes, the New F4L Senior Note Indenture, the New F4L Senior Notes, the
"Description of the New F4L Notes" and "The Proposed Amendments" and the related
definitions contained therein.
<TABLE>
<CAPTION>
OLD F4L SENIOR NOTES NEW F4L SENIOR NOTES
<S> <C>
- ------------------------------------------------------ ------------------------------------------------------
ISSUER ISSUER
Food 4 Less. The Company, as successor by merger to Food 4 Less.
PRINCIPAL AMOUNT OUTSTANDING PRINCIPAL AMOUNT OUTSTANDING
As of November 1, 1994, $175 million. The up to $175 million principal amount of New F4L
Senior Notes offered hereby will be part of an issue of
up to $575 million aggregate principal amount of New
F4L Senior Notes, up to $400 million principal amount
of which will be issued pursuant to the Public
Offering.
INTEREST RATE INTEREST RATE
The Old F4L Senior Notes bear interest at the rate of The New F4L Senior Notes will bear interest at a fixed
10.45% per annum. rate per annum equal to the greater of (a) 11% and (b)
the Applicable Treasury Rate (as hereinafter defined)
plus 375 basis points (3.75 percentage points);
provided, however, that in no event will the New F4L
Senior Notes bear interest at a rate per annum that is
less than the interest rate on the New F4L Senior Notes
offered pursuant to the Public Offering. The
"Applicable Treasury Rate" means the yield to maturity
at the time of computation of United States Treasury
securities with a constant maturity (as compiled by and
published in the most recent Federal Reserve
Statistical Release H.15 (519)) most nearly equal to
the average life to stated maturity of the New F4L
Senior Notes; provided, that if the average life to
stated maturity of the New F4L SeniorNotes is not equal
to the constant maturity of the United States Treasury
security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpola-
tion (calculated to the nearest one-twelfth of the
year) from the weekly average yields of the United
States Treasury securities for which such yields are
given.
INTEREST PAYMENT DATES INTEREST PAYMENT DATES
April 15 and October 15. February 1 and August 1, commencing on August 1, 1995.
FINAL MATURITY DATE FINAL MATURITY DATE
April 15, 2000. February 1, 2004.
OPTIONAL REDEMPTION OPTIONAL REDEMPTION
The Old F4L Senior Notes are redeemable, at the option The New F4L Senior Notes are redeemable, at the option
of Food 4 Less, in whole at any time or in part from of the Company, in whole at any time or in part from
time to time, on or after April 15, 1996, at the time to time, on or after February 1, 2000, at the
following redemption prices if redeemed during the following redemption prices if redeemed during the
twelve-month period commencing on April 15 of the years twelve-month period commencing on February 1 of the
set forth below: years set forth below:
1996..........................................104.48% 2000..........................................104.48%
1997..........................................102.99% 2001..........................................102.99%
1998..........................................101.49% 2002..........................................101.49%
1999 and thereafter............................100.00% 2003 and thereafter...........................100.00%
in each case plus accrued and unpaid interest to the in each case plus accrued and unpaid interest to the
date of redemption. date of redemption. In addition, on or prior to
February 1, 1998, the Company may, at its option, use
the net cash proceeds of one or more Public Equity
Offerings to redeem up to an aggregate of 35% of the
New F4L Senior Notes originally issued, at a redemption
price equal to % of the principal amount thereof,
plus accrued and unpaid interest to the redemption
date.
</TABLE>
A-1
<PAGE> 203
<TABLE>
<CAPTION>
OLD F4L SENIOR NOTES NEW F4L SENIOR NOTES
- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
MANDATORY REDEMPTION MANDATORY REDEMPTION
Food 4 Less will make a mandatory sinking fund payment The New F4L Senior Notes are not subject to a mandatory
of $87.5 million on April 15, 1999, sufficient to sinking fund requirement.
retire 50% of the Old F4L Senior Notes originally
issued, at a redemption price equal to 100% of the
principal amount thereof, plus accrued and unpaid
interest to the date of redemption. Food 4 Less may, at
its option, receive credit against such sinking fund
payment for 100% of the principal amount of any Old F4L
Senior Notes previously acquired by Food 4 Less and
surrendered to the Old F4L Senior Note Trustee for
cancellation or redeemed at the option of Food 4 Less
and which, in each case, were not previously used for
or as a credit against any other required payment
pursuant to the Old F4L Senior Note Indenture. Food 4
Less may use the same Old F4L Senior Note as a credit
only once. Food 4 Less intends to credit Old F4L Senior
Notes tendered into the Exchange Offer against its
sinking fund obligation.
RANKING RANKING
The Old F4L Senior Notes are general unsecured senior The New F4L Senior Notes will be senior unsecured
obligations of Food 4 Less and are senior to all obligations of the Company and will be senior to all
Subordinated Indebtedness of Food 4 Less, including the Subordinated Indebtedness. The New F4L Senior Notes
Old F4L Subordinated Notes. The Old F4L Senior Notes will rank pari passu in right of payment with all
rank pari passu in right of payment with all borrowings unsubordinated Indebtedness and other liabilities of
and other obligations of Food 4 Less and its the Company. Such borrowings and obligations under the
subsidiaries under the Credit Agreement. Such Credit Agreement and the related guarantees are secured
borrowings and obligations under the Credit Agreement by substantially all of the assets of the Company and
and related guarantees are secured by substantially all its subsidiaries, whereas the New F4L Senior Notes are
of the assets of Food 4 Less and its subsidiaries, senior unsecured obligations of the Company and its
whereas the Old F4L Senior Notes are senior unsecured subsidiaries.
obligations of Food 4 Less and its subsidiaries.
GUARANTEES GUARANTEES
Each Subsidiary Guarantor has unconditionally Each Subsidiary Guarantor will unconditionally
guaranteed, jointly and severally, the complete and guarantee, jointly and severally, the complete and
prompt performance of Food 4 Less' obligations under prompt performance of the Company's obligations under
the Old F4L Senior Note Indenture and the Old F4L the New F4L Senior Note Indenture and New F4L Senior
Senior Notes. See "Guarantees of Certain Indebtedness" Notes. See "Guarantees of Certain Indebtedness" below.
below.
"Subsidiary Guarantor" means (i) each of Alpha Beta "Subsidiary Guarantor" means (i) each of Alpha Beta
Company, Bell Markets, Inc., Cala Co., Cala Foods, Company, Bay Area Warehouse Stores, Inc., Bell Markets,
Inc., Falley's, Inc., Food 4 Less of California, Inc., Inc., Cala Co., Cala Foods, Inc., Falley's Inc., Food 4
Food 4 Less Merchandising, Inc., Food 4 Less GM, Inc. Less of California, Inc., Food 4 Less Merchandising,
and Food 4 Less of Southern California, Inc., (ii) each Inc., Food 4 Less GM, Inc., Food 4 Less of Southern
of Food 4 Less' subsidiaries which becomes a guarantor California, Inc., (ii) upon consummation of the Merger,
of the Old F4L Senior Notes in compliance with the Crawford Stores, Inc., (iii) each of the Company's
provisions set forth under "Guarantees of Certain subsidiaries which becomes a guarantor of the New F4L
Indebtedness," and (iii) each of Food 4 Less' Senior Notes in compliance with the provisions set
subsidiaries executing a supplemental indenture in forth under "Guarantees of Certain Indebtedness," and
which such subsidiary agrees to be bound by the terms (iv) each of the Company's subsidiaries executing a
of the Old F4L Senior Note Indenture. supplemental indenture in which such subsidiary agrees
to be bound by the terms of the New F4L Senior Notes
Indenture.
CHANGE OF CONTROL CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder The New F4L Senior Note Indenture will provide that if
will have the right to require the repurchase of such a Change of Control occurs, each holder will have the
holder's Old F4L Senior Notes at a purchase price equal right to require the Company to repurchase such
to 101% of the principal amount thereof plus accrued holder's New F4L Senior Notes pursuant to a Change of
and unpaid interest to the date of repurchase. Control Offer at 101% of the principal amount thereof
plus accrued and unpaid interest to the date of
"Change of Control" means the acquisition after the repurchase.
Issue Date, in one or more transactions, of beneficial
ownership (within the meaning of Rule 13d-3 under the "Change of Control" means (i) the acquisition after the
Exchange Act) by (i) any person or entity (other than Issue Date, in one or more transactions, of beneficial
any Permitted Holder) or (ii) any group of persons or ownership (within the meaning of Rule 13d-3 under the
entities (excluding any Permitted Holders) who Exchange Act) by (a) any person or entity (other than
constitute a group (within the meaning of Section any Permitted Holder) or (b) any group of persons or
13(d)(3) of the Exchange Act), in either case, of any entities (excluding any Permitted Holders) who
securities of FFL or of Food 4 Less such that, as a constitute a group (within the meaning of Section
result of such acquisition, such person, entity or 13(d)(3) of the Exchange Act), in either case, of any
group either (A) beneficially owns (within the meaning securities of New Holdings or the Company such that, as
of Rule 13d-3 under the Exchange Act), directly or a result of such acquisition, such person, entity or
indirectly, 51% or more of Food 4 Less' then group either beneficially owns (within the meaning of
outstanding voting securities entitled to vote on a Rule 13d-3 under the Exchange Act), directly or
regular basis for a majority of the board of directors indirectly, 40% or more of the then outstanding voting
of Food 4 Less (but only to securities entitled to vote on a regular basis for
</TABLE>
A-2
<PAGE> 204
<TABLE>
<CAPTION>
OLD F4L SENIOR NOTES NEW F4L SENIOR NOTES
- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
the extent that such beneficial ownership is not shared a majority of the board of directors of the Company
with any Permitted Holder who has the power to direct (but only to the extent that such beneficial ownership
the vote thereof) or (B) otherwise has the ability to is not shared with any Permitted Holder who has the
elect, directly or indirectly, a majority of the power to direct the vote thereof), provided, however,
members of Food 4 Less' board of directors. that no such Change of Control shall be deemed to have
occurred if (A) the Permitted Holders beneficially own,
"Permitted Holder" means (i) Food 4 Less Equity in the aggregate, at such time, a greater percentage of
Partners, L.P., The Yucaipa Companies or any entity such voting securities than such other person, entity
controlled thereby, (ii) an employee benefit plan of or group or (B) at the time of such acquisition, the
Food 4 Less, or any participant therein or any of its Permitted Holders (or any of them) possess the ability
subsidiaries, (iii) a trustee or other fiduciary (by contract or otherwise) to elect, or cause the
holding securities under an employee benefit plan of election, of a majority of the members of the Company's
Food 4 Less or any of its subsidiaries or (iv) any board of directors.
Permitted Transferee of any of the foregoing persons.
"Permitted Holder" means (i) Food 4 Less Equity
"Permitted Transferees" means, with respect to any Partners, L.P., and The Yucaipa Companies, or any
person, (i) any affiliates of such person, (ii) the entity controlled thereby or any of the partners
heirs, executors, administrators, testamentary thereof, (ii) Apollo Advisors, L.P., Lion Advisors,
trustees, legatees or beneficiaries of any such person, L.P. or any entity controlled thereby or any of the
and (iii) a trust the beneficiaries of which, or a partners thereof, (iii) an employee benefit plan of the
corporation of partnership, the stockholders or general Company, or any participant therein or any of its
or limited partners of which, include only such person subsidiaries, (iv) a trustee or other fiduciary holding
or his or her spouse or lineal descendents, in each securities under an employee benefit plan of the
case to whom such person has transferred securities of Company or any of its subsidiaries or (v) any Permitted
Food 4 Less. Transferee of any of the foregoing persons.
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD "Permitted Transferees" means, with respect to any
F4L SENIOR NOTE INDENTURE WILL BE MODIFIED TO ELIMINATE person, (i) any Affiliate of such person, (ii) the
THIS COVENANT AND CERTAIN RELATED DEFINITIONS. heirs, executors, administrators, testamentary
trustees, legatees or beneficiaries of any such person,
(iii) a trust, the beneficiaries of which, or a
corporation or partnership, the stockholders or general
or limited partners of which, include only such person
or his or her spouse or lineal descendants, in each
case to whom such person has transferred the beneficial
ownership of any securities of the Company, (iv) any
investment account whose investment managers and
investment advisors consist solely of such person
and/or Permitted Transferees of such person and (v) any
investment fund or investment entity that is a
subsidiary of such person or a Permitted Transferee of
such person.
CERTAIN COVENANTS CERTAIN COVENANTS
LIMITATION ON RESTRICTED PAYMENTS. Pursuant to the LIMITATION ON RESTRICTED PAYMENTS. Pursuant to the New
Old F4L Senior Note Indenture, Food 4 Less shall not, F4L Senior Note Indenture, the Company shall not, and
and shall cause each of its subsidiaries not to, shall cause each of its subsidiaries not to, directly
directly or indirectly, make any Restricted Payment if, or indirectly, make any Restricted Payment if, at the
at the time of such Restricted Payment, or after giving time of such proposed Restricted Payment, or after
effect thereto, (a) a Default or an Event of Default giving effect thereto, (a) a Default or an Event of
(as defined below) shall have occurred and be continu- Default shall have occurred and be continuing, (b) the
ing, (b) the net worth of Food 4 Less on the last day Company could not incur $1.00 of additional Indebted-
of the full fiscal quarter immediately preceding the ness (other than Permitted Indebtedness) pursuant to
date of such Restricted Payment (pro forma to give the covenant described below under "Limitation on
effect thereto) is not greater than $115 million, (c) Incurrences of Additional Indebtedness" or (c) the
Food 4 Less' Operating Coverage Ratio, calculated on a aggregate amount expended for all Restricted Payments,
pro forma basis as if such Restricted Payment had been including such proposed Restricted Payment (the amount
made at the beginning of the pro forma period, shall be of any Restricted Payment, if other than cash, to be
less than 2.25 to 1.0 or (d) the aggregate amount the fair market value thereof at the date of payment as
expended for all Restricted Payments, including such determined in good faith by the board of directors of
Restricted Payment (the amount of any Restricted the Company), subsequent to the Issue Date, shall
Payment, if other than cash, to be the fair market exceed the sum of (i) 50% of the aggregate Consolidated
value thereof at the date of payment as determined in Net Income (or if such aggregate Consolidated Net
good faith by the board of directors of Food 4 Less Income is a loss, minus 100% of such loss) of the
which determination shall be evidenced by a board Company earned subsequent to the Issue Date and on or
resolution), subsequent to the Issue Date, shall exceed prior to the date of the proposed Restricted Payment
the sum of (i) 25% of the aggregate Consolidated Net (the "Reference Date") plus (ii) 100% of the aggregate
Income (or if such aggregate Consolidated Net Income is net proceeds received by the Company from any person
a loss, minus 100% of such loss) of Food 4 Less earned (other than a subsidiary of the Company) from the
subsequent to the Issue Date and prior to the date the issuance and sale (including upon exchange or
Restricted Payment occurs (the "Reference Date") plus conversion for other securities of the Company)
(ii) 100% of the aggregate net proceeds received by subsequent to the Issue Date and on or prior to the
Food 4 Less from any person (other than a subsidiary) Reference Date of Qualified Capital Stock (excluding
from the issuance and sale (including upon exchange or (A) Qualified Capital Stock paid as a dividend on any
conversion for other securities of Food 4 Less) capital stock or as interest on any Indebtedness and,
subsequent to the Issue Date and on or prior to the (B) any net proceeds from issuances and sales financed
Reference Date of Qualified Capital Stock (excluding directly or indirectly using funds borrowed from the
(A) Qualified Capital Stock paid as a dividend on any Company or any subsidiary, until and to the extent such
capital stock or as interest on any Indebtedness and borrowing is repaid, plus (iii) 100% of the aggregate
(B) any net proceeds from issuances and sales financed net cash proceeds received by the Company as capital
directly or indirectly
</TABLE>
A-3
<PAGE> 205
<TABLE>
<CAPTION>
OLD F4L SENIOR NOTES NEW F4L SENIOR NOTES
- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
using funds borrowed from Food 4 Less or any contributions to the Company after the Issue Date plus
subsidiary, until and to the extent such borrowing is (iv) $25 million.
repaid).
Notwithstanding the foregoing, if no Default or Event Notwithstanding the foregoing, if no Default or Event
of Default shall have occurred and be continuing as a of Default shall have occurred and be continuing as a
consequence thereof, the provisions set forth in the consequence thereof, the provisions set forth in the
immediately preceding paragraph will not prevent (1) immediately preceding paragraph will not prevent (1)
the payment of any dividend within 60 days after the the payment of any dividend within 60 days after the
date of its declaration if the dividend would have been date of its declaration if the dividend would have been
permitted on the date of declaration, (2) the permitted on the date of declaration, (2) the
acquisition of any shares of capital stock of Food 4 acquisition of any shares of capital stock of the
Less or the repayment of any Indebtedness of Food 4 Company or the repurchase, redemption or other
Less in exchange for or solely out of the proceeds of repayment of any Subordinated Indebtedness in exchange
the substantially concurrent sale (other than to a for or solely out of the proceeds of the substantially
subsidiary) of shares of Qualified Capital Stock, (3) concurrent sale (other than to a subsidiary) of shares
the repurchase or redemption of (a) Old F4L Notes in of Qualified Capital Stock of the Company, (3) the
accordance with the provisions of (i) Section 5.04 repurchase, redemption or other repayment or redemption
("Maintenance of Net Worth"), (ii) Section 5.16 of any Subordinated Indebtedness in exchange for or
("Limitation on Change of Control") and (iii) Section solely out of the proceeds of the substantially
5.17 ("Limitation on Disposition of Assets") set forth concurrent sale (other than to a subsidiary) of
in the Old F4L Subordinated Note Indenture or (b) any Subordinated Indebtedness of the Company with an
other Indebtedness of Food 4 Less in exchange for or Average Life equal to or greater than the then
solely out of the proceeds of the substantially remaining Average Life of the Subordinated Indebtedness
concurrent sale (other than to a Subsidiary) of repurchased or redeemed, and (4) Permitted Payments;
Indebtedness which is subordinated in right of payment provided, however, that the declaration of each
to the Old F4L Senior Notes with no scheduled or dividend paid in accordance with clause (1) above, each
required maturity or scheduled or required repayment of acquisition, repurchase, redemption or other repayment
principal or sinking fund payment prior to the final made in accordance with, or of the type set forth in,
maturity of the Old F4L Senior Notes, or (4) Permitted clause (2) above, and each payment described in clause
Payments; provided that the declaration of each (iii), (iv), (v), (vi) or (vii) of the definition of
dividend paid in accordance with clause (1) above, each the term "Permitted Payments" shall each be counted for
acquisition or repayment made in accordance with, or of purposes of computing amounts expended pursuant to
the type set forth in, clause (2) above, each subclause (c) in the immediately preceding paragraph,
repurchase of Old F4L Subordinated Notes pursuant to and no amounts expended pursuant to clause (3) above or
clause (3)(a)(i) and each payment described in clause pursuant to clause (i) or (ii) of the definition of the
(iii) or (iv) of the definition of "Permitted Payments" term "Permitted Payments" shall be so counted,
shall each be counted for purposes of computing amounts provided, further that to the extent any payments made
expended pursuant to subclause (d) in the immediately pursuant to clause (vii) of the definition of the term
preceding paragraph, and no payment described in clause "Permitted Payments" are deducted for purposes of
(3) above (other than clause (3)(a)(i)) or pursuant to computing the Consolidated Net Income of the Company,
clause (i) or (ii) of the definition of "Permitted such payments shall not be counted for purposes of
Payments" shall be so counted. computing amounts expended as Restricted Payments
pursuant to subclause (c) in the immediately preceding
"Restricted Payment" means any (i) Stock Payment, paragraph.
(ii) Investment (other than a Permitted Investment) or
(iii) Restricted Debt Prepayment. "Restricted Payment" means any (i) Stock Payment, (ii)
Investment (other than a Permitted Investment) or (iii)
"Stock Payment" means, with respect to any person, Restricted Debt Prepayment.
(a) the declaration or payment by such person, either
in cash or in property, of any dividend on (except, in "Stock Payment" means, with respect to any person, (a)
the case of Food 4 Less, dividends payable solely in the declaration or payment by such person, either in
Qualified Capital Stock of Food 4 Less), or the making cash or in property, of any dividend on (except, in the
by such person or any of its subsidiaries of any other case of the Company, dividends payable solely in
distribution in respect of, such person's Qualified Qualified Capital Stock of the Company), or the making
Capital Stock or any warrants, rights or options to by such person or any of its subsidiaries of any other
purchase or acquire shares of any class of such capital distribution in respect of, such person's Qualified
stock (other than exchangeable or convertible Capital Stock or any warrants, rights or options to
Indebtedness of such person), or (b) the redemption, purchase or acquire shares of any class of such capital
repurchase, retirement or other acquisition for value stock (other than exchangeable or convertible
by such person or any of its subsidiaries, directly or Indebtedness of such person), or (b) the redemption,
indirectly, of such person's Qualified Capital Stock repurchase, retirement or other acquisition for value
(and, in the case of a subsidiary, Qualified Capital by such person or any of its subsidiaries, directly or
Stock of Food 4 Less) or any warrants, rights or indirectly, of such person's Qualified Capital Stock
options to purchase or acquire shares of any class of (and, in the case of a subsidiary, Qualified Capital
such capital stock (other than exchangeable or Stock of the Company) or any warrants, rights or
convertible Indebtedness of such person), other than, options to purchase or acquire shares of any class of
in the case of Food 4 Less, through the issuance in such capital stock (other than exchangeable or
exchange therefor solely of Qualified Capital Stock of convertible Indebtedness of such person), other than,
Food 4 Less; provided, however, that in the case of a in the case of the Company, through the issuance in
subsidiary, the term "Stock Payment" shall not include exchange therefor solely of Qualified Capital Stock of
any such payment with respect to its capital stock or the Company; provided, however, that in the case of a
warrants, rights or options to purchase or acquire subsidiary, the term "Stock Payment" shall not include
shares of any class of its capital stock that are owned any such payment with respect to its capital stock or
solely by Food 4 Less or a wholly-owned subsidiary. warrants, rights or options to purchase or acquire
shares of any class of its capital stock that are owned
"Investment" by any person in any other person means solely by the Company or a wholly-owned subsidiary.
any investment by such person in such other person,
whether by a purchase of assets, in any transaction or "Investment" by any person in any other person means
series of related transactions, individually or in the any investment by such person in such other person,
aggregate, in an amount greater than $5 million, share whether by a purchase of assets, in any transaction or
purchase, capital contribution, loan, advance (other series of related transactions, individually or in the
than reasonable loans and advances to employees for aggregate, in an amount greater than
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moving and travel expenses, as salary advances, or to $5 million, share purchase, capital contribution, loan,
permit the purchase of Qualified Capital Stock of Food advance (other than reasonable loans and advances to
4 Less and other similar customary expenses incurred, employees for moving and travel expenses, as salary
in each case in the ordinary course of business advances, or to permit the purchase of Qualified
consistent with past practice) or similar credit Capital Stock of the Company and other similar
extension constituting Indebtedness of such other customary expenses incurred, in each case in the
person, and any guarantee of Indebtedness of any other ordinary course of business consistent with past
person. practice) or similar credit extension constituting
Indebtedness of such other person, and any guarantee of
"Permitted Investment" by any person means (i) any Indebtedness of any other person.
Related Business Investment, (ii) Investments in
securities not constituting cash or cash equivalents "Permitted Investment" by any person means (i) any
and received in connection with an Asset Sale made Related Business Investment, (ii) Investments in
pursuant to the provisions of the Old F4L Senior Note securities not constituting cash or cash equivalents
Indenture summarized under "Limitation on Disposition and received in connection with an Asset Sale made
of Assets" or any other disposition of assets not pursuant to the provisions of the covenant described
constituting an Asset Sale by reason of the $250,000 under "Limitation on Asset Sales" or any other dispo-
threshold contained in the definition thereof, (iii) sition of assets not constituting an Asset Sale by
cash and cash equivalents, (iv) Investments existing on reason of the $500,000 threshold contained in the
June 17, 1991, (v) Investments specifically permitted definition thereof, (iii) cash and cash equivalents,
by and made in accordance with the provisions of the (iv) Investments existing on the Issue Date, (v)
Old F4L Senior Note Indenture summarized under Investments specifically permitted by and made in
"Limitation on Restricted Payments," "Limitation on accordance with the provisions of the covenant
Transactions with Affiliates" and "Limitation on described under "Limitation on Transactions with
Incurrences of Additional Indebtedness," and (vi) Affiliates", (vi) Investments by Subsidiary Guarantors
Investments by Subsidiary Guarantors in other in other Subsidiary Guarantors and Investments by
Subsidiary Guarantors and Investments by subsidiaries subsidiaries which are not Subsidiary Guarantors in
which are not Subsidiary Guarantors in other subsid- other subsidiaries which are not Subsidiary Guarantors,
iaries which are not Subsidiary Guarantors. and (vii) additional Investments in an aggregate amount
not exceeding $5 million.
"Restricted Debt Prepayment" means any purchase,
redemption, defeasance (including, but not limited "Restricted Debt Prepayment" means any purchase,
to, in-substance or legal defeasance) or other redemption, defeasance (including, but not limited to,
acquisition or retirement for value, directly or in substance or legal defeasance) or other acquisition
indirectly, by Food 4 Less or a subsidiary, prior to or retirement for value, directly or indirectly, by the
the scheduled maturity or prior to any scheduled Company or a subsidiary, prior to the scheduled
repayment of principal or sinking fund payment, as the maturity or prior to any scheduled repayment of
case may be, in respect of Indebtedness of Food 4 Less principal or sinking fund payment, as the case may be,
that is subordinate in right of payment to the Old F4L in respect of Subordinated Indebtedness.
Senior Subordinated Notes; provided, however, that any
such acquisition shall be deemed not to be a Restricted "Permitted Payments" means (i) any payment by the Com-
Debt Prepayment to the extent it is made (x) in pany or any subsidiary to The Yucaipa Companies or the
exchange for or with the proceeds from the principals thereof for consulting, management,
substantially concurrent issuance of Qualified Capital investment banking or similar advisory services during
Stock or (y) in exchange for or with the proceeds from such period pursuant to that certain Consulting
the substantially concurrent issuance of Indebtedness, Agreement, dated as of the Issue Date among Food 4
in a principal amount (or, if such Indebtedness Less, New Holdings and The Yucaipa Companies, (as such
provides for an amount less than the principal amount payments would be calculated under such Consulting
thereof to be due and payable upon the acceleration Agreement as in effect on the Issue Date) (ii) any
thereof, with an original issue price) not to exceed payment by the Company or any subsidiary pursuant to
the sum of (A) the lesser of (i) the principal amount the Amended and Restated Tax Sharing Agreement, dated
of Indebtedness being acquired in exchange therefor (or as of June 17, 1991, between Food 4 Less and certain
with the proceeds therefrom) and (ii) if such subsidiaries, as such Tax Sharing Agreement may be
Indebtedness being acquired was issued at an original amended from time to time, so long as the payment
issue discount, the original issue price thereof plus thereunder by the Company and its subsidiaries shall
amortization of the original issue discount at the time not exceed the amount of taxes the Company would be
of the incurrence of the Indebtedness being issued in required to pay if it were the filing person for all
exchange therefor (or the proceeds of which will applicable taxes, (iii) any payment by the Company or
finance such acquisition), and (B) the amount of any subsidiary pursuant to the Transfer and Assumption
penalties, fees and expenses actually incurred with Agreement, dated as of June 23, 1989, between Food 4
respect thereto, and provided further that (x) any such Less and Holdings, as in effect on the Issue Date, (iv)
Indebtedness shall have an average life not less than any payment by the Company or any subsidiary (a) in
the average life of the Indebtedness being acquired, connection with repurchases of outstanding shares of
and shall contain subordination and default provisions the Company's or New Holdings' common stock following
no less favorable, in any material respect, to holders the death, disability or termination of employment of
of the Old F4L Senior Subordinated Notes than those management stockholders, and (b) of amounts required to
contained in such Indebtedness being acquired (y) any be paid by New Holdings, the Company or any of its
such Indebtedness that repays the F4L Senior subsidiaries to participants in employee benefit plans
Subordinated Notes shall not have any fixed mandatory upon termination of employment by such participants, as
redemption or sinking fund requirement in an amount provided in the documents related thereto, in an
greater than or at a time prior to the amounts and aggregate amount (for both clauses (a) and (b)) not to
times specified in the F4L Senior Subordinated Notes or exceed $10 million in any yearly period (provided that
any Indebtedness refinancing the F4L Senior Subordi- any unused amounts may be carried over to any
nated Notes, as the case may be, unless any such subsequent yearly period subject to a maximum amount of
requirement applies on a date after the Maturity Date. $20 million in any yearly period), (v) from and after
June 30, 1998, payments of cash dividends to New
"Permitted Payments" means any payment by Food 4 Less Holdings in an amount sufficient to enable New Holdings
or any subsidiary (i) to The Yucaipa Companies or the to make payments of interest required to be made in
principals thereof for consulting, investment banking respect of the Holdings Discount Notes in accordance
or similar services during such period pursuant to that with the terms thereof in effect on the Issue Date,
certain Amended and Restated Consulting Agreement, (vi) from and after February , 2000, payments of cash
dated as of June 17, 1991, among Food 4 Less, Yucaipa dividends to New Holdings in an amount sufficient to
Management Company and The Yucaipa enable New Holdings to make pay-
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Companies, as such amounts would be calculated under ments of interest required to be made in respect of the
such Consulting Agreement as in effect on the Issue Seller Debentures in accordance with the terms thereof
Date, (ii) pursuant to the Amended and Restated Tax in effect on the Issue Date and (vii) dividends or
Sharing Agreement, dated as of June 17, 1991, between other payments to New Holdings sufficient to permit New
Food 4 Less and certain subsidiaries, as such Tax Holdings to perform accounting, legal, corporate and
Sharing Agreement may be amended from time to time, so administrative functions in the ordinary course of
long as the payment thereunder by Food 4 Less and its business or to pay required fees and expenses in
subsidiaries shall not exceed the amount of taxes Food connection with the Merger, the Reincorporation Merger
4 Less would be required to pay if it were the filing and the registration under applicable laws and
person for all applicable taxes, (iii) pursuant to the regulations of its debts and securities.
Transfer and Assumption Agreement, dated as of June 23,
1989, between Food 4 Less and FFL, as in effect on the "Consolidated Net Income" means, with respect to any
Issue Date, and (iv) (a) in connection with repurchases person, for any period, the aggregate of the net income
of outstanding shares of Food 4 Less' common stock (or loss) of such person and its subsidiaries for such
following the death, disability or termination of period, on a consolidated basis, determined in
employment of management stockholders, and (b) of accordance with GAAP; provided that (a) the net income
amounts required to be paid by FFL, Food 4 Less or any of any other person in which such person or any of its
of its subsidiaries to participants in employee benefit subsidiaries has an interest (which interest does not
plans upon any termination of employment by such cause the net income of such other person to be
participants, as provided in the documents related consolidated with the net income of such person and its
thereto, in an aggregate amount (for both clauses (a) subsidiaries in accordance with GAAP) shall be included
and (b)) not to exceed $5 million in any yearly period only to the extent of the amount of dividends or
(provided that any unused amounts may be carried over distributions actually paid to such person or such
to any subsequent yearly period subject to a maximum subsidiary by such other person in such period; (b) the
amount of $10 million in any yearly period). net income of any subsidiary of such person that is
subject to any Payment Restriction shall be excluded to
"Consolidated Net Income," means, with respect to any the extent such Payment Restriction actually prevented
person, for any period, the aggregate of the net income the payment of an amount that otherwise could have been
(or loss) of such person and its subsidiaries for such paid to, or received by, such person or a subsidiary of
period, on a consolidated basis, determined in such person not subject to any Payment Restriction; and
accordance with GAAP; provided that (a) the net income (c)(i) the net income (or loss) of any other person
of any other person in which such person or any of its acquired in a pooling of interests transaction for any
subsidiaries has an interest (which interest does not period prior to the date of such acquisition, (ii) all
cause the net income of such other person to be gains and losses realized on any Asset Sale, (iii) all
consolidated with the net income of such person and its gains realized upon or in connection with or as a
subsidiaries in accordance with GAAP) shall be included consequence of the issuance of the capital stock of
only to the extent of the amount of dividends or such person or any of its subsidiaries and any gains on
distributions actually paid to such person or such pension reversions received by such person or any of
subsidiary by such other person in such period; (b) the its subsidiaries, (iv) all gains and losses realized on
net income of any subsidiary of such person that is the purchase or other acquisition by such person or any
subject to any Payment Restriction shall be excluded to of its subsidiaries of any securities of such person or
the extent such Payment Restriction actually prevented any of its subsidiaries, (v) all gains and losses
the payment of an amount that otherwise could have been resulting from the cumulative effect of any accounting
paid to, or received by, such person or a subsidiary of change pursuant to the application of Accounting
such person not subject to any Payment Restriction; and Principles Board Opinion No. 20, as amended, (vi) all
(c)(i) the net income (or loss) of any other person other extraordinary gains and losses, (vii) all
acquired in a pooling of interests transaction for any non-cash charges incurred by the Company or any of its
period prior to the date of such acquisition, (ii) all subsidiaries in connection with the Merger, including,
gains and losses realized on any Asset Sale or in without limitation, the divestiture of the Excluded
connection with the closure of the Long Beach Assets, (viii) losses incurred by the Company and its
Warehouse, (iii) all gains realized upon or in subsidiaries resulting from earthquakes and (ix) with
connection with or as a consequence of the issuance of respect to the Company, all deferred financing costs
the capital stock of such person or any of its written off in connection with the early extinguishment
subsidiaries and any gains on pension reversions of any Indebtedness, shall each be excluded.
received by such person or any of its subsidiaries,
(iv) all gains and losses realized on the purchase or "Subordinated Indebtedness" means, with respect to the
other acquisition by such person or any of its Company or any Subsidiary Guarantor, Indebtedness of
subsidiaries of any securities of such person or any of such person which is subordinated in right of payment
its subsidiaries, (v) all gains and losses resulting to the New F4L Senior Notes or the guarantee of such
from the cumulative effect of any accounting change Subsidiary Guarantor, as the case may be.
pursuant to the application of Accounting Principles
Board Opinion No. 20, as amended, (vi) all other
extraordinary gains and losses, and (vii) with respect
to Food 4 Less all deferred financing costs written off
in connection with the early extinguishment of any
Indebtedness shall each be excluded.
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD
F4L SENIOR NOTE INDENTURE WILL BE MODIFIED TO ELIMINATE
THIS COVENANT AND CERTAIN RELATED DEFINITIONS.
LIMITATION ON INCURRENCES OF ADDITIONAL LIMITATION ON INCURRENCES OF ADDITIONAL
INDEBTEDNESS. Pursuant to the Old F4L Senior Note INDEBTEDNESS. Pursuant to the New F4L Senior Note
Indenture, Food 4 Less shall not, and shall not permit Indenture, the Company shall not, and shall not permit
any of its subsidiaries, directly or indirectly, to any of its subsidiaries, directly or indirectly, to
incur, assume, guarantee, become liable, contingently incur, assume, guarantee, become liable, contingently
or otherwise, with respect to, or otherwise become or otherwise, with respect to, or otherwise become
responsible for the payment of (collectively "incur") responsible for the payment of (collectively "incur")
any Indebtedness; provided, however, that (i) Food 4 any Indebtedness other than Permitted Indebtedness;
Less may incur Indebtedness if (A) no Default with provided, however, that if no Default with respect to
respect to payment of principal of, or interest on, the payment of principal of, or interest on, the New F4L
Old F4L Senior Notes or Event of Default shall have Senior Notes issued under the New F4L Senior Note
occurred and be continuing at the time or as a Indenture or Event of Default under the New F4L Senior
consequence
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of the incurrence of any such Indebtedness and (B) on Note Indenture shall have occurred and be continuing at
the date of the incurrence of such Indebtedness the the time or as a consequence of the incurrence of any
Operating Coverage Ratio of Food 4 Less would be such Indebtedness, the Company may incur Indebtedness
greater than 2.2. to 1.0 if such date is after June 15, if immediately before and immediately after giving
1994 and prior to June 15, 1996; and greater than 2.4 effect to the incurrence of such Indebtedness the
to 1.0 thereafter; and (ii) a subsidiary may incur Operating Coverage Ratio of the Company would be
Acquired Indebtedness to the extent such Indebtedness greater than 2.0 to 1.0; provided, further, that a
could have been incurred by Food 4 Less pursuant to the subsidiary may incur Acquired Indebtedness to the
preceding clause (i). extent such Indebtedness could have been incurred by
the Company pursuant to the immediately preceding
The foregoing limitation shall not apply to (a) proviso.
Indebtedness of Food 4 Less and its subsidiaries
pursuant to (i) the Term Facility under or pursuant to In addition, the New F4L Senior Note Indenture will
the Loan Documents in an aggregate principal amount at provide that neither the Company nor any Subsidiary
any time outstanding not to exceed $301.7 million, less Guarantor will, directly or indirectly, in any event
the aggregate amount of all principal repayments incur any Indebtedness that by its terms (or by the
thereunder out of the net proceeds of the offering of terms of any agreement governing such Indebtedness) is
the Old F4L Senior Notes, and less any future subordinated to any other Indebtedness of the Company
repayments subsequent to the Issue Date, (ii) the or such Subsidiary Guarantor, as the case may be,
Subsidiary Letter of Credit Obligations (and Food 4 unless such Indebtedness is also by its terms (or by
Less and each subsidiary (to the extent it is not an the terms of any agreement governing such Indebtedness)
obligor) may guarantee such Indebtedness) not to exceed made expressly subordinate to the New F4L Senior Notes
$55 million at any time outstanding and (iii) the or the guarantee of such Subsidiary Guarantor, as the
Revolving Facility under the Loan Documents (and Food 4 case may be, to the same extent and in the same manner
Less and each subsidiary (to the extent it is not an as such Indebtedness is subordinated pursuant to
obligor) may guarantee such Indebtedness) in an subordination provisions that are most favorable to the
aggregate principal amount at any time outstanding not holders of any other Indebtedness of the Company or
to exceed $70 million, less all permanent reductions of such Subsidiary Guarantor, as the case may be.
the unused portion under the Revolving Facility, (b)
the Old F4L Senior Notes; (c) certain intercompany "Indebtedness" means, with respect to any person,
Indebtedness; (d) Indebtedness incurred by Food 4 Less without duplication, (i) all liabilities, contingent or
or any subsidiary in connection with the purchase or otherwise, of such person (a) for borrowed money
improvement of property (real or personal) or equipment (whether or not the recourse of the lender is to the
or other capital expenditures in the ordinary course of whole of the assets of such person or only to a portion
business (including for the purchase of assets or stock thereof), (b) evidenced by bonds, notes, debentures,
of any retail grocery store or business) or consisting drafts accepted or similar instruments or letters of
of capitalized lease obligations, in aggregate not to credit or representing the balance deferred and unpaid
exceed $25 million in any yearly period (provided that of the purchase price of any property (other than any
any unused amounts may be carried over to the next (but such balance that represents an account payable or any
not any subsequent) yearly period); (e) Indebtedness of other monetary obligation to a trade creditor (whether
Food 4 Less under certain Foreign Exchange Agreements or not an affiliate) created, incurred, assumed or
and Interest Swap Obligations; (f) Permitted Guarantees guaranteed by such person in the ordinary course of
of Indebtedness in aggregate not to exceed $25 million business of such person in connection with obtaining
at any time outstanding in addition to those goods, materials or services and due within twelve
outstanding on the date of the Alpha Beta Acquisition; months (or such longer period for payment as is
(g) guarantees by Food 4 Less and its subsidiaries of customarily extended by such trade creditor) of the
Indebtedness incurred by a wholly-owned subsidiary incurrence thereof, which account is not overdue by
provided that the incurrence of such Indebtedness by more than 90 days, according to the original terms of
such wholly-owned subsidiary is permitted under the sale, unless such account payable is being contested in
terms of the Old F4L Senior Note Indenture; (h) good faith), or (c) for the payment of money relating
Refinancing Indebtedness; (i) Indebtedness in to a capitalized lease obligation; (ii) the maximum
connection with the acquisition of the La Habra fixed repurchase price of all Disqualified Capital
Facility and Option Stores if, after giving effect to Stock of such person; (iii) reimbursement obligations
such incurrence, the Operating Coverage Ratio of Food 4 of such person with respect to letters of credit; (iv)
Less would be greater than 2.0 to 1.0; (j) Indebtedness obligations of such person with respect to Interest
for letters of credit relating to workers' compensation Swap Obligations and Foreign Exchange Agreements; (v)
claims and self-insurance or similar requirements in all liabilities of others of the kind described in the
the ordinary course of business; (k) the Old F4L preceding clause (i), (ii), (iii) or (iv) that such
Subordinated Notes and related guarantees; and (l) person has guaranteed or that is otherwise its legal
additional Indebtedness of Food 4 Less and its liability; and (vi) all obligations of others secured
Subsidiary Guarantors in an amount not to exceed $75 by a lien to which any of the properties or assets
million at any time outstanding. (including, without limitation, leasehold interests and
any other tangible or intangible property rights) of
"Indebtedness" means with respect to any person, such person are subject, whether or not the obligations
without duplication, (i) all liabilities, contingent or secured thereby shall have been assumed by such person
otherwise, of such person (a) for borrowed money or shall otherwise be such person's legal liability
(whether or not the recourse of the lender is to the (provided that if the obligations so secured have not
whole of the assets of such person or only to a portion been assumed by such person or are not otherwise such
thereof), (b) evidenced by bonds, notes, debentures, person's legal liability, such obligations shall be
drafts accepted or similar instruments or letters of deemed to be in an amount equal to the fair market
credit or representing the balance deferred and unpaid value of such properties or assets, as determined in
of the purchase price of any property (other than any good faith by the board of directors of such person,
such balance that represents an account payable or any which determination shall be evidenced by a board
other monetary obligation to a trade creditor (whether resolution). For purposes of the preceding sentence,
or not an affiliate) created, incurred, assumed or the "maximum fixed repurchase price" of any
guaranteed by such person in the ordinary course of Disqualified Capital Stock that does not have a fixed
business of such person in connection with obtaining repurchase price shall be calculated in accordance with
goods, materials or services and due within twelve the terms of such Disqualified Capital Stock as if such
months (or such longer period for payment as is Disqualified Capital Stock were purchased on any date
customarily extended by such trade creditor) of the on which Indebtedness shall be required to be
incurrence thereof, which account is not overdue by determined pursuant to this Indenture, and if such
more than 90 days, according to the original terms of price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock (or any
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sale, unless such account payable is being contested in equity security for which it may be exchanged or
good faith), or (c) for the payment of money relating converted), such fair market value shall be determined
to a capitalized lease obligation; (ii) the maximum in good faith by the board of directors of such person,
fixed repurchase price of all Disqualified Capital which determination shall be evidenced by a board
Stock of such person; (iii) reimbursement obligations resolution. For purposes of the New F4L Senior Note
of such person with respect to letters of credit; (iv) Indenture, Indebtedness incurred by any person that is
obligations of such person with respect to Interest a general partnership (other than non-recourse
Swap Obligations and Foreign Exchange Agreements; (v) Indebtedness) shall be deemed to have been incurred by
all liabilities of others of the kind described in the the general partners of such partnership pro rata in
preceding clause (i), (ii), (iii) or (iv) that such accordance with their respective interests in the
person has guaranteed or that is otherwise its legal liabilities of such partnership unless any such general
liability; and (vi) all obligations of others secured partner shall, in the reasonable determination of the
by a lien to which any of the properties or assets board of directors of the Company, be unable to satisfy
(including, without limitation, leasehold interests and its pro rata share of the liabilities of the
any other tangible or intangible property rights) of partnership, in which case the pro rata share of any
such person are subject, whether or not the obligations Indebtedness attributable to such partner shall be
secured thereby shall have been assumed by such person deemed to be incurred at such time by the remaining
or shall otherwise be such person's legal liability general partners on a pro rata basis in accordance with
(provided that if the obligations so secured have not their interests.
been assumed by such person or are not otherwise such
person's legal liability, such obligations shall be "Permitted Indebtedness" means (a) Indebtedness of the
deemed to be in an amount equal to the fair market Company and its Subsidiaries pursuant to (i) the Term
value of such properties or assets, as determined in Loans in an aggregate principal amount at any time
good faith by the board of directors of such person, outstanding not to exceed $750 million, less the
which determination shall be evidenced by a board aggregate amount of all principal repayments thereunder
resolution). For purposes of the preceding sentence, pursuant to and in accordance with the covenant
the "maximum fixed repurchase price" of any described under "-- Certain Covenants -- Limitation on
Disqualified Capital Stock that does not have a fixed Asset Sales" above subsequent to the Issue Date, and
repurchase price shall be calculated in accordance with (ii) the revolving credit facility under the Credit
the terms of such Disqualified Capital Stock as if such Agreement (and the Company and each Subsidiary (to the
Disqualified Capital Stock were purchased on any date extent it is not an obligor) may guarantee such
on which Indebtedness shall be required to be Indebtedness) in an aggregate principal amount at any
determined pursuant to the Old F4L Senior Note time outstanding not to exceed $325 million, less all
Indenture, and if such price is based upon, or measured permanent reductions thereunder pursuant to and in
by, the fair market value of such Disqualified Capital accordance with the covenant described under
Stock (or any equity security for which it may be "-- Certain Covenants -- Limitation on Asset Sales"
exchanged or converted), such fair market value shall above, (b) Indebtedness of the Company or a Subsidiary
be determined in good faith by the board of directors Guarantor owed to and held by the Company or a
of such person, which determination shall be evidenced Subsidiary Guarantor; (c) Indebtedness incurred by the
by a board resolution. For purposes of the Old F4L Company or any Subsidiary in connection with the
Senior Note Indenture, Indebtedness incurred by any purchase or improvement of property (real or personal)
person that is a general partnership (other than or equipment or other capital expenditures in the
non-recourse Indebtedness) shall be deemed to have been ordinary course of business (including for the purchase
incurred by the general partners of such partnership of assets or stock of any retail grocery store or
pro rata in accordance with their respective interests business) or consisting of Capitalized Lease
in the liabilities of such partnership unless any such Obligations provided that (i) at the time of the
general partner shall, in the reasonable determination incurrence thereof, such indebtedness, together with
of the board of directors of Food 4 Less, be unable to any other Indebtedness incurred during the most
satisfy its pro rata share of the liabilities of the recently completed four fiscal quarter period in
partnership, in which case the pro rata share of any reliance upon this clause (c) does not exceed, in the
Indebtedness attributable to such partner shall be aggregate, 3% of net sales of the Company and its
deemed to be incurred at such time by the remaining Subsidiaries during the most recently completed four
general partners on a pro rata basis in accordance with fiscal quarter period on a consolidated basis
their interests. (calculated on a pro forma basis if the date of
incurrence is prior to the first anniversary of the
"Operating Coverage Ratio" means, with respect to any Merger) and (ii) such Indebtedness, together with all
person, the ratio of (1) EBDIT of such person for the then outstanding Indebtedness incurred in reliance upon
period (the "Pro Forma Period") consisting of the most this clause (c) does not exceed, in the aggregate, 3%
recent four full fiscal quarters for which financial of the aggregate net sales of the Company and its
information in respect thereof is available immediately Subsidiaries during the most recently completed twelve
prior to the date of the transaction giving rise to the fiscal quarter period on a consolidated basis (calcu-
need to calculate the Operating Coverage Ratio (the lated on a pro forma basis if the date of incurrence is
"Transaction Date") to (2) the aggregate Fixed Charges prior to the third anniversary of the Merger); (d)
of such person for the fiscal quarter in which the Indebtedness incurred by the Company or any subsidiary
Transaction Date occurs and the three fiscal quarters in connection with capital expenditures in an aggregate
immediately subsequent to such fiscal quarter (the principal amount not exceeding $150 million in the
"Forward Period") reasonably anticipated by the board aggregate, provided that such capital expenditures
of directors of such person to become due from time to relate solely to the integration of the operations of
time during such period. For purposes of this RSI, Food 4 Less and their respective subsidiaries, as
definition, if the Transaction Date occurs prior to the described in this Prospectus and Solicitation
first anniversary of the Alpha Beta Acquisition, Statement; (e) Indebtedness of the Company incurred
"EBDIT" for the Pro Forma Period shall be calculated, under certain Foreign Exchange Agreements and Interest
in the case of Food 4 Less, after giving effect on a Swap Obligations; (f) guarantees incurred in the
pro forma basis to the Alpha Beta Acquisition as if it ordinary course of business by the Company or a
had occurred on the first day of the Pro Forma Period. Subsidiary of Indebtedness of any other person in
In addition to, but without duplication of, the aggregate not to exceed $25.0 million at any time
foregoing, for purposes of this definition, "EBDIT" outstanding; (g) guarantees by the Company or a
shall be calculated after giving effect (without Subsidiary Guarantor of Indebtedness incurred by a
duplication), on a pro forma basis for the Pro Forma wholly-owned Subsidiary Guarantor so long as the
Period (but no longer), to (a) any Investment, during incurrence of such Indebtedness incurred by such
the period commencing on the first day of the Pro Forma wholly-owned Subsidiary Guarantor is permitted under
Period to and including the Transaction Date (the the terms of the applicable New Indenture; (h)
"Reference Period"), in any Refinancing Indebtedness; (i) Indebtedness for letters
of credit relating to workers' compensation claims and
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other person that, as a result of such Investment, self-insurance or similar requirements in the ordinary
becomes a subsidiary of such person, (b) the course of business; (j) other Indebtedness outstanding
acquisition, during the Reference Period (by merger, on the Issue Date (after giving effect to the Merger);
consolidation or purchase of stock or assets) of any (k) Indebtedness arising from guarantees of
business or assets, which acquisition is not prohib- Indebtedness of the Company or any Subsidiary or other
ited by the Old F4L Senior Note Indenture, and (c) any agreements of the Company or a Subsidiary providing for
sales or other dispositions of assets (other than sales indemnification, adjustment of purchase price or
of inventory in the ordinary course of business) similar obligations, in each case, incurred or assumed
occurring during the Reference Period, in each case as in connection with the disposition of any business,
if such incurrence, Investment, repayment, acquisition assets or Subsidiary, other than guarantees of
or asset sale had occurred on the first day of the Indebtedness incurred by any person acquiring all or
Reference Period. In addition, for purposes of this any portion of such bonuses, assets or Subsidiary for
definition, "Fixed Charges" shall be calculated the purpose of financing such acquisition, provided
after giving effect (without duplication), on a pro that the maximum aggregate liability in respect of all
forma basis for the Forward Period, to any Indebtedness such Indebtedness shall at no time exceed the gross
incurred or repaid on or after the first day of the proceeds actually received by the Company and its
Forward Period and prior to the Transaction subsidiaries in connection with such disposition; (l)
Date. obligations in respect of performance bonds and
completion guarantees provided by the Company or any
"Refinancing Indebtedness" means, with respect to any Subsidiary in the ordinary course of business; and (m)
person, Indebtedness of such person issued in exchange additional Indebtedness of the Company and the
for, or the proceeds from the issuance and sale or Subsidiary Guarantors in an amount not to exceed $200
disbursement of which are used to substantially million at any time outstanding.
concurrently repay, redeem, refund, refinance,
discharge or otherwise retire for value, in whole or in "Operating Coverage Ratio" means, with respect to any
part (collectively, "repay"), or constituting an person, the ratio of (1) EBDIT of such person for the
amendment, modification or supplement to, or a deferral period (the "Pro Forma Period") consisting of the most
or renewal of (collectively, an "amendment"), any recent four full fiscal quarters for which financial
Indebtedness of such person existing on the Issue Date information in respect thereof is available immediately
or Indebtedness (other than Permitted Indebtedness, prior to the date of the transaction giving rise to the
except Permitted Indebtedness incurred pursuant to need to calculate the Operating Coverage Ratio (the
clauses (a), (c), (d), (h), (j) and (k) of the "Transaction Date") to (2) the aggregate fixed charges
definition thereof) incurred in accordance with the of such person for the fiscal quarter in which the
applicable New Indenture (a) in a principal amount (or, Transaction Date occurs and the three fiscal quarters
if such Refinancing Indebtedness provides for an amount immediately subsequent to such fiscal quarter (the
less than the principal amount thereof to be due and "Forward Period") reasonably anticipated by the board
payable upon the acceleration thereof, with an original of directors of such person to become due from time to
issue price) not in excess of (without duplication) (i) time during such period. For purposes of this
the principal amount or the original issue price, as definition, if the Transaction Date occurs prior to the
the case may be, of the Indebtedness so refinanced (or, first anniversary of the Merger, "EBDIT" for the Pro
if such Refinancing Indebtedness refinances Forma Period shall be calculated, in the case of the
Indebtedness under a revolving credit facility or other Company, after giving effect on a pro forma basis to
agreement providing a commitment for subsequent the Merger as if it had occurred on the first day of
borrowings, with a maximum commitment not to exceed the the Pro Forma Period. In addition to, but without
maximum commitment under such revolving credit facility duplication of, the foregoing, for purposes of this
or other agreement) plus (ii) unpaid accrued interest definition, "EBDIT" shall be calculated after giving
on such Indebtedness plus (iii) premiums, penalties, effect (without duplication), on a pro forma basis for
fees and expenses actually incurred by such person in the Pro Forma Period (but no longer), to (a) any
connection with the repayment or amendment thereof and Investment, during the period commencing on the first
(b) with respect to Refinancing Indebtedness that day of the Pro Forma Period to and including the
repays or constitutes an amendment to Subordinated Transaction Date (the "Reference Period"), in any other
Indebtedness, such Refinancing Indebtedness (x) shall person that, as a result of such Investment, becomes a
not have any fixed mandatory redemption or sinking fund subsidiary of such person, (b) the acquisition, during
requirement in an amount greater than or at a time the Reference Period (by merger, consolidation or
prior to the amounts and times specified in such repaid purchase of stock or assets) of any business or assets,
or amended Subordinated Indebtedness, except to the which acquisition is not prohibited by the New F4L
extent that any such requirement applies on a date Senior Note Indenture, and (c) any sales or other
after the Maturity Date of the New F4L Senior Notes and dispositions of assets (other than sales of inventory
(y) shall contain subordination and default provisions in the ordinary course of business) occurring during
no less favorable in any material respect to holders of the Reference Period, in each case as if such
the New Senior F4L Notes than those contained in such incurrence, Investment, repayment, acquisition or asset
repaid or amended Subordinated Indebtedness. sale had occurred on the first day of the Reference
Period. In addition, for purposes of this definition,
"Loan Documents" means the Credit Agreement and all "Fixed Charges" shall be calculated after giving effect
promissory notes, guarantees, security agreements, (without duplication), on a pro forma basis for the
pledge agreements, deeds of trust, mortgages, letters Forward Period, to any Indebtedness incurred or repaid
of credit and other instruments, agreements and on or after the first day of the Forward Period and
documents executed pursuant thereto or in connection prior to the Transaction Date. If such person or any of
therewith, including all amendments, supplements, its subsidiaries directly or indirectly guarantees any
extensions, renewals, restatements, replacements or Indebtedness of a third person, the Operating Coverage
refinancings thereof, or other modifications (in whole Ratio shall give effect to the incurrence of such
or in part, and without limitation as to amount, terms, Indebtedness as if such person or subsidiary had
conditions, covenants or other provisions) thereof from directly incurred such guaranteed Indebtedness.
time to time.
"Credit Agreement" means the Credit Agreement, dated as
"Credit Agreement" means the Credit Agreement, dated of the Issue Date, by and among Food 4 Less, certain of
as of June 17, 1991, by and among Food 4 Less, certain its subsidiaries, the Lenders referred to therein,
of its subsidiaries, the Lenders and Designated Issuers Bankers Trust Company, as administrative agent, as the
of the Lenders referred to therein, Bankers Trust case may be, as amended, extended, renewed, restated,
Company, Citicorp North America, Inc., and supplemented or otherwise modified (in whole or in
Manufacturers Hanover Trust Company, as Co-Agents, and part, and without limitation as to amount, terms
Citicorp North America, Inc., as Administrative Agent, conditions, covenants and other provisions) from time
as amended, extended, renewed, restated, supplemented to time, and any agreement governing Indebtedness in-
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or otherwise modified (in whole or in part, and without curred to refund or refinance the borrowings and
limitation as to amount, terms, conditions and other commitments then outstanding or permitted to be
provisions) from time to time, and any agreement outstanding under such Credit Agreement or such
governing Indebtedness required to refund or refinance agreement.
the entirety of the borrowings and commitments then
outstanding or permitted to be outstanding under such "Acquired Indebtedness" means (i) with respect to any
Credit Agreement or such agreement. Food 4 Less shall person that becomes a subsidiary of the Company (or is
promptly notify the Old F4L Senior Note Trustee of any merged into the Company or any of its subsidiaries)
such refunding or refinancing of the Credit Agreement. after the Issue Date, Indebtedness of, such person or
any of its subsidiaries existing at the time such
"Acquired Indebtedness" means Indebtedness of a person becomes a subsidiary of the Company
person or any of its subsidiaries existing at the time (or is merged into the Company or any of its
such person becomes a subsidiary or assumed in subsidiaries) and which was not incurred in
connection with the acquisition of assets from such connection with, or in contemplation of, such person
person and not incurred by such person in connection becoming a subsidiary of the Company (or being merged
with, or in anticipation or contemplation of, such into the Company or any of its subsidiaries) and (ii)
person becoming a subsidiary or such acquisition. with respect to the Company or any of its subsidiaries,
any Indebtedness assumed by the Company or any of its
"Permitted Guarantees" means (i) guarantees in effect subsidiaries in connection with the acquisition of any
on the Issue Date and (ii) guarantees incurred in the assets from another person (other than the Company or
ordinary course of business, by Food 4 Less or a any of its subsidiaries), and which was not incurred by
subsidiary, of Indebtedness of any other person. such other person in connection with, or in contem-
plation of, such acquisition.
"Refinancing Indebtedness" means Indebtedness of Food
4 Less or a subsidiary (i) issued in exchange for, or "EBDIT" means, with respect to any person, for any
the proceeds from the issuance and sale or disbursement period, the Consolidated Net Income of such person for
of which are used to substantially concurrently repay, such period, plus, in each case to the extent deducted
redeem, refund, refinance, discharge or otherwise in computing Consolidated Net Income of such person for
retire for value, in whole or in part (collectively, such period (without duplication( (i) provisions for
"repay"), or constituting an amendment, modification or income taxes or similar charged recognized by such
supplement to, or a deferral or renewal of person and its consolidated subsidiaries accrued during
(collectively, an "amendment"), any Indebtedness of such period, (ii) depreciation and amortization expense
Food 4 Less or a subsidiary (and any penalties, fees of such person and its consolidated subsidiaries
and expenses actually incurred by Food 4 Less or such accrued during such period (but only to the extent not
subsidiary in connection with the repayment or included in fixed charges), (iii) fixed charges of such
amendment thereof) existing immediately after the person and its consolidated subsidiaries for such
original issuance of the Old F4L Senior Notes or period, (iv) LIFO charges (credits) of such person and
incurred pursuant to the Operating Coverage Ratio test its consolidated subsidiaries for such period, (v) the
set forth under "Limitation on the Incurrence of amount of any restructuring reserve or charge recorded
Additional Indebtedness," or pursuant to certain other during such period in accordance with GAAP, including
exceptions thereunder, in a principal amount (or, if any such reserve or charge related to the Merger, and
such Refinancing Indebtedness provides for an amount (vi) any other non-cash charges reducing Consolidated
less than the principal amount thereof to be due and Net Income for such period (excluding any such charge
payable upon the acceleration thereof, with an original which requires an accrual of or a cash reserve for cash
issue price) not in excess of (1) the principal amount charges for any future period), less, without
of the Indebtedness so refinanced (or, if such duplication, (i) non-cash items increasing Consolidated
Refinancing Indebtedness refinances Indebtedness under Net Income of such person for such period in each case
a revolving credit facility or other agreement determined in accordance with GAAP and (ii) the amount
providing a commitment for subsequent borrowings, with of all cash payments made by such person or its
a maximum commitment not to exceed the maximum subsidiaries during such period to the extent that such
commitment under such revolving credit facility or cash payment has been provided for in a restructuring
other agreement) plus (2) unpaid accrued interest on reserve or charge referred to in clause (v) above (and
such Indebtedness plus (3) penalties, fees and ex- were not otherwise deducted in the computation of
penses actually incurred by Food 4 Less or such Consolidated Net Income of such person for such
subsidiary, as the case may be, in connection with the period).
repayment or amendment thereof; or (ii) in an amount
permitted to be incurred at the time of such incurrence "Permitted Guarantees" means (i) guarantees in effect
by Food 4 Less or such subsidiary, as the case may be, on the Issue Date and (ii) guarantees incurred in the
under the Credit Agreement pursuant to "Limitation on ordinary course of business, by the Company or a
the Incurrence of Additional Indebtedness"; provided subsidiary, of Indebtedness of any other person.
that (for both clauses (i) and (ii) above) (A)
Refinancing Indebtedness of any subsidiary shall not be
used to repay outstanding Indebtedness of Food 4 Less,
(B) Refinancing Indebtedness of Food 4 Less that repays
or constitutes an amendment to Indebtedness of Food 4
Less (other than any of the Old F4L Senior Notes)
ranking junior in right of payment to, the Old F4L
Senior Notes shall not have an average life less than
the Indebtedness to be so refinanced at the time of
such incurrence; provided, however, Refinancing
Indebtedness of Food 4 Less that repays or constitutes
an amendment to the Old F4L Subordinated Notes or any
Indebtedness refinancing the Old F4L Subordinated Notes
shall not have any fixed mandatory redemption or
sinking fund requirement in an amount greater than or
at a time prior to the amounts and times specified in
the Old F4L Subordinated Notes or any Indebtedness
refinancing the Old F4L Subordinated Notes, as the case
may be, unless any such requirement applies on a date
after the final maturity of the Old F4L Senior Notes;
and, in any case, shall contain subordination and
default provisions no less favorable in any material
respect to holders of the
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Old F4L Senior Notes than those contained in such
repaid or amended Indebtedness, and (C) notwithstanding
the foregoing, any Refinancing Indebtedness incurred to
repay all of the Old F4L Senior Notes then outstanding
shall not be limited in principal amount or otherwise
if Food 4 Less irrevocably deposits with the Old F4L
Senior Note Trustee or Paying Agent an amount of the
proceeds of such Refinancing Indebtedness sufficient to
redeem the outstanding principal amount of the Old F4L
Senior Notes on the date fixed for the repayment
thereof.
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD
F4L SENIOR NOTE INDENTURE WILL BE MODIFIED TO
ELIMINATE THIS COVENANT AND CERTAIN RELATED
DEFINITIONS.
LIMITATION ON LIENS. Pursuant to the Old F4L Senior LIMITATION ON LIENS. Pursuant to the New F4L Senior
Note Indenture, Food 4 Less shall not and shall not Note Indenture, the Company shall not and shall not
permit any subsidiary to create, incur, assume or permit any subsidiary to create, incur, assume or
suffer to exist any liens upon any of their respective suffer to exist any liens upon any of their respective
assets unless the Old F4L Senior Notes are equally and assets unless the New F4L Senior Notes issued
ratably secured by the liens covering such assets, thereunder are equally and ratably secured by the liens
except for (i) existing and future liens securing covering such assets, except for (i) liens on assets of
Indebtedness and other obligations of Food 4 Less its the Company securing Senior Indebtedness and liens on
subsidiaries under the Loan Documents and related assets of a Subsidiary Guarantor which, at the time of
documents or any refinancing or replacement thereof in incurrence, secure Guarantor Senior Indebtedness, (ii)
whole or in part, (ii) Permitted Liens, (iii) liens existing and future liens securing Indebtedness and
securing Acquired Indebtedness; provided that such other obligations of the Company and its subsidiaries
liens (x) are not incurred in connection with, or in under the Credit Agreement and related documents or any
contemplation of the acquisition of the property or refinancing or replacement thereof in whole or in part
assets acquired and (y) do not extend to or cover any permitted under the New F4L Senior Note Indenture,
property or assets of Food 4 Less or any subsidiary (iii) Permitted Liens, (iv) liens securing Acquired
other than the property or assets so acquired, (iv) Indebtedness; provided that such liens (x) are not
liens securing Indebtedness to the extent incurred to incurred in connection with, or in contemplation of the
refinance secured Indebtedness outstanding as of the acquisition of the property or assets acquired and (y)
Issue Date; provided that such refinancing Indebtedness do not extend to or cover any property or assets of the
shall be secured solely by the assets securing such Company or any subsidiary other than the property or
currently outstanding Indebtedness, (v) liens to secure assets acquired, (v) liens to secure capitalized lease
certain Indebtedness that is otherwise permitted under obligations and certain other Indebtedness that is
the Old F4L Senior Note Indenture; provided that (A) otherwise permitted under the New F4L Senior Note
any such lien is created solely for the purpose of Indenture; provided that (A) any such lien is created
securing Indebtedness representing, or incurred to solely for the purpose of securing such other
finance, refinance or refund, the cost (including sales Indebtedness representing, or incurred to finance,
and excise taxes, installation and delivery charges and refinance or refund, the cost (including sales and
other direct costs of, and other direct expenses paid excise taxes, installation and delivery charges and
or charged in connection with, the purchase (whether other direct costs of, and other direct expenses paid
through stock or asset purchase, merger or otherwise) or charged in connection with, the purchase (whether
or construction) of the property subject thereto, (B) through stock or asset purchase, merger or otherwise)
the principal amount of the Indebtedness secured by or construction) or improvement of the property subject
such lien does not exceed 100% of such costs and (C) thereto (whether real or personal, including fixtures
such lien does not extend to or cover any other and other equipment), (B) the principal amount of the
property other than such item of property and any Indebtedness secured by such lien does not exceed 100%
improvements on such item; (vi) liens existing on the of such costs and (C) such lien does not extend to or
Issue Date; (vii) liens in favor of the Old F4L Senior cover any other property other than such item of
Note Trustee; (viii) liens securing Indebtedness property and any improvements on such item; (vi) liens
permitted by clauses (d), (h) or (k) above of existing on the Issue Date (after giving effect to the
"Limitation on Incurrences of Additional Indebtedness," Merger); (vii) liens in favor of the New F4L Senior
provided that, in the case of Indebtedness permitted by Note Trustee under the New F4L Senior Note Indenture
clause (h) above, the principal amount of the and any substantially equivalent lien granted to any
Indebtedness secured by liens does not exceed 100% of trustee or similar institution under any indenture for
the purchase price of the La Habra Facility or the Indebtedness permitted to be incurred under the New F4L
Option Stores, as the case may be; and (ix) any Senior Note Indenture; and (viii) any replacement,
replacement, extension or renewal, in whole or in part, extension or renewal, in whole or in part, of any lien
of any lien described in this or the foregoing clauses described in this or the foregoing clauses including in
including in connection with any refinancing of the connection with any refinancing of the Indebtedness, in
Indebtedness, in whole or in part, secured by any such whole or in part, secured by any such lien provided
lien provided that to the extent any such clause limits that to the extent any such clause limits the amount
the amount secured or the assets subject to such liens, secured or the assets subject to such liens, no
no extension or renewal shall increase the amount of extension or renewal shall increase the amount or the
the assets subject to such liens, except to the extent assets subject to such liens, except to the extent that
that the liens associated with such additional assets the liens associated with such additional assets are
are otherwise permitted hereunder. otherwise permitted hereunder.
"Permitted Liens" shall mean (i) liens for taxes,
assessments and governmental charges to the extent "Permitted Liens" shall mean (i) liens for taxes,
not required to be paid under the Old F4L Senior Note assessments and governmental charges or claims not yet
Indenture; (ii) statutory liens of landlords and due or which are being contested in good faith by
carriers, warehousemen, mechanics, suppliers, ma- appropriate proceedings promptly instituted and
terialmen, repairmen or other like liens arising in the diligently conducted and if a reserve or other
ordinary course of business and with respect to amounts appropriate provision, if any, as shall be required in
not yet delinquent or being contested in good faith by conformity with GAAP shall have been made therefor;
an appropriate process of law,
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and for which a reserve or other appropriate provision, (ii) statutory liens of landlords and carriers,
if any, as shall be required by GAAP shall have been warehouseman, mechanics, suppliers, materialmen,
made; (iii) pledges or deposits in the ordinary course repairmen or other like liens arising in the ordinary
of business to secure lease obligations or course of business, deposits made to obtain the release
nondelinquent obligations under workers' compensation, of such liens, and with respect to amounts not yet
unemployment insurance or similar legislation; (iv) delinquent for a period of more than 60 days or being
liens to secure the performance of public statutory contested in good faith by an appropriate process of
obligations that are not delinquent, appeal bonds, law, and for which a reserve or other appropriate
performance bonds or other obligations of a like nature provision, if any, as shall be required by GAAP shall
(other than for borrowed money); (v) easements, have been made; (iii) liens incurred or pledges or
rights-of-way, restrictions, minor defects or irreg- deposits made in the ordinary course of business to
ularities in title and other similar charges or secure obligations under workers' compensation,
encumbrances not interfering in any material respect unemployment insurance and other types of social
with the business of Food 4 Less or any of its security or similar legislation; (iv) liens incurred or
subsidiaries incurred in the ordinary course of deposits made to secure the performance of tenders,
business; (vi) purchase money liens upon or in any real bids, leases, statutory obligations, surety and appeal
or personal property (including fixtures and other bonds, government contracts, performance and return of
equipment) acquired or held by Food 4 Less or any money bonds and other obligations of a like nature
subsidiary in the ordinary course of business to secure incurred in the ordinary course of business (exclusive
the purchase price of such property or to secure of obligations for the payment of borrowed money); (v)
Indebtedness incurred solely for the purpose of easements, rights-of-way, zoning or other restrictions,
financing or refinancing the acquisition or improvement minor defects or irregularities in title and other
of such property, or liens existing on such property at similar charges or encumbrances not interfering in any
the time of its acquisition (other than any such lien material respect with the business of the Company or
created in contemplation of such acquisition) provided any of its Subsidiaries incurred in the ordinary course
that (x) no such lien shall extend to or cover any of business; (vi) liens upon specific items of
property other than the property being acquired or inventory or other goods and proceeds of any person
improved and (y) any such Indebtedness would be securing such person's obligations in respect of
permitted to be incurred pursuant to "Limitation on bankers' acceptances issued or created for the account
Incurrences of Additional Indebtedness"; (vii) liens of such person to facilitate the purchase, shipment or
upon specific items of inventory or other goods and storage of such inventory or other goods in the
proceeds of any person securing such person's ordinary course of business; (vii) liens securing
obligations in respect of bankers' acceptances issued reimbursement obligations with respect to letters of
or created for the account of such person to facilitate credit which encumber documents and other property
the purchase, shipment or storage of such inventory or relating to such letters of credit and the products and
other goods in the ordinary course of business; (viii) proceeds thereof; (viii) liens in favor of customs and
liens securing reimbursement obligations with respect revenue authorities arising as a matter of law to
to letters of credit which encumber documents and other secure payment of nondelinquent customs duties in
property relating to such letters of credit and the connection with the importation of goods; (ix) judgment
products and proceeds thereof; (ix) liens in favor of and attachment liens not giving rise to a Default or
customs and revenue authorities arising as a matter of Event of Default; (x) leases or subleases granted to
law to secure payment of nondelinquent customs duties others not interfering in any material respect with the
in connection with the importation of goods; (x) business of the Company or any Subsidiary; (xi) liens
judgment and attachment liens not giving rise to a encumbering customary initial deposits and margin
Default or Event of Default; (xi) leases or subleases deposits, and other liens incurred in the ordinary
granted to others not interfering in any material course of business that are within the general
respect with the business of Food 4 Less or any parameters customary in the industry, in each case
subsidiary; (xii) liens encumbering customary initial securing Indebtedness under interest swap obligations
deposits and margin deposits, and other liens incurred and foreign exchange agreements and forward contracts,
in the ordinary course of business that are within the option futures contracts, futures options or similar
general parameters customary in the industry, in each agreements or arrangements designed to protect the
case securing Indebtedness under Interest Swap Company or any Subsidiary from fluctuations in the
Obligations and Foreign Exchange Agreements and forward price of commodities; (xii) liens encumbering deposits
contracts, option futures contracts, futures options or made in the ordinary course of business to secure
similar agreements or arrangements designed to protect nondelinquent obligations arising from statutory,
Food 4 Less or any subsidiary from fluctuations in the regulatory, contractual or warranty requirements of the
price of commodities; (xiii) liens encumbering deposits Company or its Subsidiaries for which a reserve or
made in the ordinary course of business to secure other appropriate provision, if any, as shall be
nondelinquent obligations arising from statutory, required by GAAP shall have been made; (xiii) liens
regulatory, contractual or warranty requirements of arising out of consignment or similar arrangements for
Food 4 Less or its subsidiaries for which a reserve or the sale of goods entered into by the Company or any
other appropriate provision, if any, as shall be Subsidiary in the ordinary course of business in
required by GAAP shall have been made; (xiv) liens accordance with past practices; (xiv) any interest or
arising out of consignment or similar arrangements for title of a lessor in the property subject to any lease,
the sale of goods entered into by Food 4 Less or any whether characterized as capitalized or operating other
subsidiary in the ordinary course of business in than any such interest or title resulting from or
accordance with past practices; (xv) any interest or arising out of a default by the Company or any
title of a lessor in the property subject to any lease, Subsidiary of its obligations under such lease; and
whether characterized as capitalized or operating other (xv) liens arising from filing UCC financing statements
than any such interest or title resulting from or for precautionary purposes in connection with true
arising out of a default by Food 4 Less or any leases of personal property that are otherwise
subsidiary of its obligations under such lease; and permitted under the applicable Indenture and under
(xvi) liens arising from filing UCC financing which the Company or any Subsidiary is lessee; (xvi)
statements for precautionary purposes in connection liens on assets of the Company securing Indebtedness
with true leases of personal property that are which would constitute Senior Indebtedness but for the
otherwise permitted under the Old F4L Senior Note provisions of clause (c) in the third sentence of the
Indenture and under which Food 4 Less or any subsidiary definition of Senior Indebtedness and liens on assets
is a lessee. of a Subsidiary Guarantor securing Indebtedness which
would constitute Guarantor Senior Indebtedness but for
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD the provisions of clause (c) in the third sentence of
F4L SENIOR NOTE INDENTURES WILL BE MODIFIED TO the definition of Guarantor Senior Indebtedness; and
ELIMINATE THIS PROVISION AND CERTAIN RELATED LIENS. (xvii) additional liens securing Indebtedness at any
one time outstanding not exceeding the sum of
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(i) $25 million and (ii) 10% of the aggregate
Consolidated Net Income of the Company earned
subsequent to the Issue Date and on or prior to such
time.
LIMITATION ON DISPOSITIONS OF ASSETS. Pursuant to the LIMITATION ON ASSET SALES. Pursuant to the New F4L
Old F4L Senior Note Indenture, Food 4 Less will not, Senior Note Indenture, the Company, will not, and will
and will not permit any of its subsidiaries to make any not permit any of its subsidiaries to make any Asset
Asset Sale unless (a) Food 4 Less or its applicable Sale unless (a) the Company or the applicable
subsidiary receives consideration at the time of such subsidiary receives consideration at the time of such
Asset Sale at least equal to the fair market value of Asset Sale at least equal to the fair market value of
the assets sold or otherwise disposed of and at least the assets sold and (b) upon consummation of an Asset
75% of the consideration so received by Food 4 Less or Sale, the Company will within 365 days of the receipt
such subsidiary is in the form of cash; provided, of the proceeds therefrom either: (i) apply or cause
however, that the amount of (i) any liabilities (as its subsidiary to apply the net cash proceeds of any
shown on Food 4 Less' or such subsidiary's most recent Asset Sale to (A) a Related Business Investment, (B) an
balance sheet or in the notes thereto) of Food 4 Less investment in properties and assets that replace the
or any subsidiary that are assumed by the transferee in properties and assets that are the subject of such
any such transaction and (ii) any cash equivalents or Asset Sale or (C) an investment in properties and
notes or other obligations received by Food 4 Less or assets that will be used in the business of the Company
any subsidiary from such transferee that are and its subsidiaries existing on the Issue Date or in
immediately converted by Food 4 Less or such subsidiary businesses reasonably related thereto; (ii) apply or
into cash, shall both be deemed to be cash, solely to cause to be applied such net cash proceeds to the
the extent of the cash received in the case of this permanent repayment of Pari Passu Indebtedness; pro-
clause (ii), for the purposes of this provision; vided, however, that any repayment of any revolving
provided, further, however, that the 75% limitation loan (under the Credit Agreement or otherwise) shall
referred to above shall not apply to (A) any Asset Sale result in a permanent reduction in the commitment
in which the cash portion of the consideration received thereunder; (iii) use such net cash proceeds to secure
therefor, determined in accordance with the foregoing Letter of Credit Obligations to the extent the related
clause, is equal to or greater than what the net letters of credit have not been drawn upon or returned
after-tax proceeds would have been had such Asset Sale undrawn; or (iv) after such time as the accumulated net
complied with the aforementioned 75% limitation and (B) cash proceeds equals or exceeds $20 million, apply or
any Asset Sale in which the consideration received by cause to be applied such net cash proceeds to the
Food 4 Less or any of its subsidiaries is less than $5 purchase of New F4L Senior Notes tendered to the
million; and (b) the net cash proceeds received by Food Company for purchase at a price equal to 100% of the
4 Less or such subsidiary, as the case may be, will principal amount thereof plus accrued interest thereon
within 180 days of such Asset Sale, at the election of to the date of purchase pursuant to an offer to
Food 4 Less, either (i) invest or cause to be invested purchase made by the Company as set forth below (a "Net
in a manner that would constitute a Related Business Proceeds Offer"); provided, however, that the Company
Investment; (ii) apply or cause to be applied to the shall have the right to exclude from the foregoing
payment of Indebtedness under the Credit Agreement or provisions Asset Sales subsequent to the Issue
used to secure Letter of Credit Obligations to the substantially Date, (x) the proceeds of which are
extent the related letters of credit have not been derived from the sale and concurrent lease- back of a
drawn upon or returned undrawn; provided, however, that supermarket and/or related assets which are acquired or
any repayment of Indebtedness under the Revolving constructed by the Company or a subsidiary subsequent
Facility under the Loan Documents shall result in a to the Issue Date, provided that such sale and
permanent reduction in the commitment thereunder; or substantially concurrent lease-back occurs within 180
(iii) after such time as the accumulated net cash days following such acquisition or the completion of
proceeds equals or exceeds $2.5 million, apply or cause such construction, as the case may be, and (y) the
to be applied such net cash proceeds to the purchase of proceeds of which in the aggregate do not exceed $20
Old F4L Senior Notes tendered to Food 4 Less for million; provided, further, that pending the
purchase at a price equal to 100% of the principal utilization of any Net Cash Proceeds in the manner (and
amount thereof plus accrued interest thereon to the within the time period) described above, the Company
date of purchase pursuant to an offer to purchase made may use any such Net Cash Proceeds to repay revolving
by Food 4 Less as set forth below (a "Net Proceeds loans under the Credit Agreement without a permanent
Offer"); provided, however, that Food 4 Less shall have reduction of the commitment thereunder.
the right to exclude Asset Sales subsequent to the
Issue Date, the proceeds of which in the aggregate do Pursuant to the New F4L Senior Note Indenture, notwith-
not exceed $10 million, from the foregoing provisions. standing the foregoing, prior to the mailing of the Net
Proceeds Offer, the Company shall purchase all New F4L
Pursuant to the Old F4L Senior Note Indenture, each Senior Notes (or permitted refinancings thereof) which
Net Proceeds Offer will be mailed to the record holders it is required to purchase by reason of such Asset Sale
of the Old F4L Senior Notes as shown on the register of pursuant to the provisions of the New F4L Senior Note
holders of Old F4L Senior Notes not less than 140 nor Indenture.
more than 180 days after the relevant Asset Sale, with
a copy to the Old F4L Senior Note Trustee and the Pursuant to the New F4L Senior Note Indenture, each Net
Credit Agent. Such notice shall state, among other Proceeds Offer will be mailed to the record holders of
things, the purchase date (which shall be no earlier New F4L Senior Notes as shown on the register of
than 30 days nor later than 40 days from the date such holders of New F4L Senior Notes not less than 325 nor
notice is mailed) and shall otherwise comply with the more than 365 days after the relevant Asset Sale, with
procedures set forth in the Old F4L Senior Note a copy to the New F4L Senior Note Trustee and the
Indenture. Upon receiving notice of the Net Proceeds Credit Agent. Such notice shall state, among other
Offer, holders of the Old F4L Senior Notes may elect to things, the purchase date (which shall be no earlier
tender their Old F4L Senior Notes in whole on in part than 30 days nor later than 40 days from the date such
in integral multiples of $1,000 in exchange for cash. notice is mailed) and shall otherwise comply with the
To the extent holders properly tender Old F4L Senior procedures set forth in the New F4L Senior Note
Notes in an amount exceeding the Net Proceeds Offer, Indenture. Upon receiving notice of the Net Proceeds
Old F4L Senior Notes of tendering holders will be Offer, holders may elect to tender their New F4L Senior
repurchased on a pro rata basis (based on amounts Notes in whole or in part in integral multiples of
tendered). $1,000 in exchange for cash. To the extent holders
properly tender New F4L Senior Notes in an amount
Pursuant to the Old F4L Senior Note Indenture, Food 4 exceeding the Net Proceeds Offer, New F4L Senior Notes
Less of tendering holders will
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will comply with the requirements of Rule 14e-1 under be repurchased on a pro rata basis (based on amounts
the Exchange Act and any other securities laws and tendered).
regulations thereunder to the extent such laws and
regulations are applicable in connection with the Pursuant to the New F4L Senior Note Indenture, the Com-
repurchase of Old F4L Senior Notes pursuant to a Net pany will comply with the requirements of Rule 14e-1
Proceeds Offer. under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and
"Asset Sale" means, for any person, any sale, regulations are applicable in connection with the
transfer or other disposition or series of sales, repurchase of New F4L Senior Notes pursuant to a Net
transfers or other dispositions (including, without Proceeds Offer.
limitation, by merger or consolidation or by exchange
of assets and whether by operation of law or otherwise) "Asset Sale" means, with respect to any person, any
made by such person or any of its subsidiaries to any sale, transfer or other disposition or series of sales,
person other than such person or one of its transfers or other dispositions (including, without
wholly-owned subsidiaries (or, in the case of a sale, limitation, by merger or consolidation or by exchange
transfer or other disposition by a subsidiary, to any of assets and whether by operation of law or otherwise)
person other than Food 4 Less or a directly or made by such person or any of its subsidiaries to any
indirectly wholly-owned subsidiary) of any assets of person other than such person or one of its
such person or any of its subsidiaries including, wholly-owned subsidiaries (or, in the case of a sale,
without limitation, assets consisting of any capital transfer or other disposition by a subsidiary, to any
stock or other securities held by such person, or any person other than the Company or a directly or
of its subsidiaries, and any capital stock issued by indirectly wholly-owned subsidiary) of any assets of
any subsidiary of such person, outside of the ordinary such person or any of its subsidiaries including,
course of business, excluding, however, any sale, without limitation, assets consisting of any capital
transfer or other disposition, or series of related stock or other securities held by such person or any of
sales, transfers or other dispositions, having a its subsidiaries, and any capital stock issued by any
purchase price or transaction value, as the case may subsidiary of such person, in each case, outside of the
be, of $250,000 or less. ordinary course of business, excluding, however, any
sale, transfer or other disposition, or series of
"Related Business Investment" means (i) any related sales, transfers or other dispositions (i)
Investment by a person in any other person a majority involving only excluded assets, (ii) resulting in net
of whose revenues are derived from the operation of one proceeds to the Company and the subsidiaries of
or more retail grocery stores or supermarkets or any $500,000 or less or (iii) pursuant to any foreclosure
other line of business engaged in by Food 4 Less or any of assets or other remedy provided by applicable law to
of its subsidiaries as of the Issue Date; (ii) any a creditor of the Company with a Lien on such assets,
Investment by such person in any cooperative or other which lien is permitted under the New F4L Senior Note
supplier, including, without limitation, any joint Indenture, provided that such foreclosure or other
venture which is intended to supply any product or remedy is conducted in a commercially reasonable manner
service useful to the business of Food 4 Less and its or in accordance with any Bankruptcy Law.
subsidiaries as it is conducted as of the Issue Date
and as such business may thereafter evolve or change; "Related Business Investment" means (i) any Investment
and (iii) any capital expenditure or Investment by a person in any other person a majority of whose
(without regard to the $5 million threshold in the revenues are derived from the operation of one or more
definition thereof), in each case reasonably related to retail grocery stores or supermarkets or any other line
the business of Food 4 Less and its subsidiaries as it of business engaged in by the Company or any of its
is conducted as of the Issue Date and as such business subsidiaries as of the Issue Date; (ii) any Investment
may thereafter evolve or change. by such person in any cooperative or other supplier,
including, without limitation, any joint venture which
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD is intended to supply any product or service useful to
F4L SENIOR NOTE INDENTURE WILL BE MODIFIED TO ELIMINATE the business of the Company and its subsidiaries as it
THIS PROVISION AND CERTAIN RELATED DEFINITIONS. is conducted as of the Issue Date and as such business
may thereafter evolve or change; and (iii) any capital
expenditure or Investment (without regard to the $5
million threshold in the definition thereof), in each
case reasonably related to the business of the Company
and its subsidiaries as it is conducted as of the Issue
Date and as such business may thereafter evolve or
change.
LIMITATION ON PAYMENT RESTRICTIONS AFFECTING LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
SUBSIDIARIES. Pursuant to the Old F4L Senior Note AFFECTING SUBSIDIARIES. Pursuant to the New F4L Senior
Indenture, Food 4 Less shall not, and shall not permit Note Indenture, the Company shall not, and shall not
any subsidiary to, directly or indirectly, create or permit any subsidiary to, directly or indirectly,
suffer to exist, or allow to become effective any create or suffer to exist, or allow to become effective
consensual Payment Restriction with respect to any of any consensual Payment Restriction with respect to any
its subsidiaries, except for (a) any such restrictions of its subsidiaries, except for (a) any such
contained in (i) the Loan Documents as in effect on the restrictions contained in (i) the Credit Agreement and
Issue Date as any such payment restriction may apply to related documents as in effect on the Issue Date as any
any present or future subsidiary, (ii) Indebtedness of such payment restriction may apply to any present or
Food 4 Less and any subsidiary existing on the Issue future subsidiary, (ii) the New F4L Senior Note
Date, (iii) the Old F4L Senior Note Indenture, (iv) Indenture and any agreement in effect at or entered
Indebtedness of a person existing at the time such into on the Issue Date, (iii) Indebtedness of a person
person becomes a subsidiary (provided that (x) such existing at the time such person becomes a subsidiary
Indebtedness is not incurred in connection with, or in (provided that (x) such Indebtedness is not incurred in
contemplation of, such person becoming a subsidiary, connection with, or in contemplation of, such person
(y) such restriction is not applicable to any person, becoming a subsidiary, (y) such restriction is not
or the properties or assets of any person, other than applicable to any person, or the properties or assets
the person so acquired and (z) such Indebtedness is of any person, other than the person so acquired and
otherwise permitted to be incurred pursuant to the (z) such Indebtedness is otherwise permitted to be
provisions of "Limitation on Incurrences of Additional incurred pursuant to the provisions described above
Indebtedness"), (v) secured Indebtedness otherwise under "Limitation on Incurrences of Additional
permitted to be incurred pursuant to the provisions of Indebtedness"), (iv) secured Indebtedness otherwise
"Limitation on Incurrences of Additional Indebtedness" permitted to be incurred pursuant to the provisions
and that limits the right of the described above under "Limitation on Incurrences of
Additional
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debtor to dispose of the assets securing such Indebtedness" and "Limitation on Liens" that limit the
Indebtedness; (b) customary non-assignment provisions right of the debtor to dispose of the assets securing
restricting subletting or assignment of any lease or such Indebtedness; (b) customary non-assignment
assignment of any contract of any subsidiary; (c) provisions restricting subletting or assignment of any
customary net worth provisions contained in leases and lease or other agreement entered into by a subsidiary;
other agreements entered into by a subsidiary in the (c) customary net worth provisions contained in leases
ordinary course of business; (d) customary restrictions and other agreements entered into by a subsidiary in
with respect to a subsidiary pursuant to an agreement the ordinary course of business; (d) customary
that has been entered into for the sale or disposition restrictions with respect to a subsidiary pursuant to
of all or substantially all of the capital stock or an agreement that has been entered into for the sale or
assets of such subsidiary; (e) customary provisions in disposition of all or substantially all of the capital
instruments or agreements relating to a lien permitted stock or assets of such subsidiary; (e) customary
to be created, incurred or assumed pursuant to the provisions in joint venture agreements and other
provisions of "Limitation on Liens" and prohibiting the similar agreements; and (f) restrictions contained in
transfer of the property subject to such lien; (f) Indebtedness incurred to refinance, refund, extend or
customary provisions in joint venture agreements and renew Indebtedness referred to in clause (a) above;
other similar agreements entered into in the ordinary provided that the restrictions contained therein are
course of business which provide that distributions not materially more restrictive taken as a whole than
from such venture may only be made with the consent of those provided for in such Indebtedness being
the partners; and (g) restrictions contained in refinanced, refunded, extended or renewed and (g)
Indebtedness incurred to refinance, refund, extend or Payment Restrictions contained in any other
renew Indebtedness referred to in clause (a) above or Indebtedness permitted to be incurred subsequent to the
amendments to the Indebtedness referred to in clause Issue Date pursuant to the provisions of the covenant
(a) above; provided that the restrictions contained described under "-- Limitation on Incurrences of
therein relating to the payment of dividends by such Additional Indebtedness" above; provided that any such
subsidiaries are not materially more restrictive than Payment Restrictions are ordinary and customary with
those provided for in such Indebtedness being respect to the type of Indebtedness being incurred
refinanced, refunded, extended or renewed. (under the relevant circumstances), and, in any event,
no more restrictive than the most restrictive Payment
"Payment Restriction" means, with respect to a Restrictions in effect on the Issue Date.
subsidiary of any person, any encumbrance, restriction
or limitation, whether by operation of the terms of its "Payment Restriction" means, with respect to a
charter or by reason of any agreement, instrument, subsidiary of any person, any encumbrance, restriction
judgment, decree, order, statute, rule or governmental or limitation, whether by operation of the terms of its
regulation, on the ability of (i) such subsidiary to charter or by reason of any agreement, instrument,
(a) pay dividends or make other distributions on its judgment, decree, order, statute, rule or governmental
capital stock or make payments on any obligation, regulation, on the ability of (i) such subsidiary to
liability or Indebtedness owed to such person or any (a) pay dividends or make other distributions on its
other subsidiary of such person, (b) make loans or capital stock or make payments on any obligation,
advances to such person or any other subsidiary of such liability or Indebtedness owed to such person or any
person or (c) transfer any of its properties or assets other subsidiary of such person, (b) make loans or
to such person or any other subsidiary of such person, advances to such person or any other subsidiary of such
or (ii) such person or any other subsidiary of such person or (c) transfer any of its properties or assets
person to receive or retain any such (a) dividends, to such person or any other subsidiary of such person,
distributions or payments, (b) loans or advances or (c) or (ii) such person or any other subsidiary of such
transfer of properties or assets person to receive or retain any such (a) dividends,
distributions or payments, (b) loans or advances or (c)
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD transfer of properties or assets.
F4L SENIOR NOTE INDENTURES WILL BE MODIFIED TO
ELIMINATE THIS PROVISION, AND CERTAIN RELATED
DEFINITIONS.
GUARANTEES OF CERTAIN INDEBTEDNESS. Pursuant to the GUARANTEES OF CERTAIN INDEBTEDNESS. Pursuant to the New
Old F4L Senior Note Indenture, Food 4 Less shall not F4L Senior Note Indenture, the Company shall not permit
permit any of its subsidiaries, directly or indirectly, any of its subsidiaries to (a) incur, guarantee or
to (a) incur, guarantee or secure through the granting secure through the granting of liens the payment of any
of liens the payment of any Indebtedness under the Term Indebtedness under the term portion of the Credit
Facility under the Credit Agreement or refinancings Agreement or refinancings thereof or (b) pledge any
related thereto or (b) pledge any intercompany notes intercompany notes representing obligations of any of
representing obligations of any of its subsidiaries, to its subsidiaries, to secure the payment of any
secure the payment of any Indebtedness under the Term Indebtedness under the term portion of the Credit
Facility under the Credit Agreement or refinancings Agreement or refinancings thereof, in each case unless
related thereto, in each case unless such subsidiary, such subsidiary, the Company and the New F4L Senior
Food 4 Less and the Old F4L Senior Note Trustee execute Note Trustee execute and deliver a supplemental
and deliver a supplemental indenture evidencing such indenture evidencing such subsidiary's guarantee.
subsidiary's guarantee, such guarantee to be a senior
unsecured obligation of such subsidiary.
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD
F4L SENIOR NOTE INDENTURE WILL BE MODIFIED TO ELIMINATE
THIS PROVISION AND CERTAIN RELATED DEFINITIONS.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. Pursuant LIMITATION ON TRANSACTIONS WITH AFFILIATES. Pursuant to
to the Old F4L Senior Note Indenture, neither Food 4 the New F4L Senior Note Indenture, neither the Company
Less nor any of its subsidiaries shall (i) sell, lease, nor any of its subsidiaries shall (i) sell, lease,
transfer or otherwise dispose of any of its properties, transfer or otherwise dispose of any of its properties,
assets or securities to, (ii) purchase any property, or assets or issue securities (other than equity
assets or securities from, (iii) make any Investment securities which do not constitute Disqualified Capi-
in, or (iv) enter into or suffer to exist any contract tal Stock) to, (ii) purchase any property, assets or
or agreement with or for the benefit of, an affiliate securities (other than equity securities which do not
or Significant Stockholder (and any affiliate of such constitute Disqualified Capital Stock) from, (iii) make
Significant Stockholder) of Food 4 Less or any any Investment in, or (iv) enter into or suffer to
subsidiary (an "Affiliate Transaction"), other than exist any contract or agreement with or for the benefit
Affiliate Transactions (including lease transactions) of, an affiliate or Significant Stockholder (or any
in the ordi- affiliate
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nary course of business, that are fair to Food 4 Less of such Significant Stockholder) of the Company or any
or such subsidiary, as the case may be, and on terms at subsidiary (an "Affiliate Transaction"), other than (x)
least as favorable as might reasonably have been Affiliate Transactions permitted under the following
obtainable at such time from an unaffiliated party, paragraph and (y) Affiliate Transactions in the
unless the board of directors of Food 4 Less or such ordinary course of business, that are fair to the
subsidiary, as the case may be, pursuant to a board Company or such subsidiary, as the case may be, and on
resolution, reasonably and in good faith determines terms at least as favorable as might reasonably have
that such Affiliate Transaction is fair to Food 4 Less been obtainable at such time from an unaffiliated
or such subsidiary, as the case may be, and is on terms party; provided, that (A) with respect to Affiliate
at least as favorable as might reasonably have been Transactions involving aggregate payments in excess of
obtainable at such time from an unaffiliated party. In $1 million and less than $5 million, the Company or
addition, neither Food 4 Less nor any of its such subsidiary, as the case may be, shall have
subsidiaries shall enter into an Affiliate Transaction delivered an officers' certificate to the New F4L
or series of related Affiliate Transactions involving Senior Note Trustee certifying that such Affiliate
or having a value of more than $15 million unless Food Transactions complies with clause (y) above, (B) with
4 Less or such subsidiary, as the case may be, has respect to Affiliate Transactions involving aggregate
received an opinion from an independent financial payments in excess of $5 million and less than $15
advisor to the effect that the financial terms of such million, with respect to which the Company or such
Affiliate Transaction are fair to Food 4 Less or such subsidiary, as the case may, shall have delivered an
subsidiary from a financial point of view. officers' certificate to the New F4L Senior Note
Trustee certifying that such Affiliate Transactions
The provisions of the Old F4L Senior Note Indenture complies with clause (y) above and that such Affiliate
described in the foregoing paragraph shall not apply to Transactions has received the approval of a majority of
(i) any Permitted Payment, (ii) any Restricted Payment the disinterested members of the board of directors of
that is made in compliance with the provisions set the Company or the subsidiary, as the case may be, or,
forth in "Limitation on Restricted Payments," (iii) in the absence of any such approval by the
reasonable and customary fees and compensation paid to, disinterested members of the board of directors of the
and indemnity provided on behalf of, officers, Company or that the subsidiary, as the case may be,
directors, employees or consultants of Food 4 Less or that an independent financial advisor has reasonably
any subsidiary, as determined by the board of directors and in good faith determined that the financial terms
of Food 4 Less or any subsidiary or the senior of such Affiliate Transaction are fair to the Company
management thereof in good faith, (iv) transactions or such subsidiary, as the case may be, or that the
exclusively between or among Food 4 Less and any of its terms of such Affiliate Transaction are at least as
wholly-owned subsidiaries or exclusively between or favorable as might reasonably have been obtained at
among such subsidiaries, provided such transactions are such time from an unaffiliated party, and that such
not otherwise prohibited by the Old F4L Senior Note Independent Financial Advisor has provided written
Indenture, (v) any agreement as in effect as of the confirmation of such determination to the Board of
Issue Date or any amendment thereto or any transaction Directors and (C) with respect to Affiliate
contemplated thereby (including pursuant to any Transactions involving aggregate payments in excess of
amendment thereto) so long as any such amendment is not $15 million, with respect to which the Company or such
disadvantageous to the holders of the Old F4L Senior subsidiary, as the case may be, shall have delivered to
Notes in any material respect, (vi) the existence of, the New F4L Senior Note Trustee, a written opinion from
or the performance by Food 4 Less or any of its an independent financial advisor to the effect that the
subsidiaries of its obligations under the terms of, any financial terms of such Affiliate Transaction are fair
stockholders agreement (including any registration to the Company or such subsidiary, as the case may be,
rights agreement or purchase agreement related thereto) or that the terms of such Affiliate Transaction are at
to which it FFL is a party as of the Issue Date and any least as favorable as those that might reasonably have
similar agreements which it FFL may enter into been obtained at the time from an unaffiliated party.
thereafter; provided, however, that the existence of,
or the performance by Food 4 Less or any subsidiaries The provisions of the New F4L Senior Note Indenture de-
of obligations under any future amendment to, any such scribed in the foregoing paragraph shall not apply to
existing agreement or under any similar agreement (i) any Permitted Payment, (ii) any Restricted Payment
entered into after the Issue Date shall only be that is made in compliance with the provisions
permitted by this clause (vi) to the extent that the described herein under "Limitation on Restricted
terms of any such amendment or new agreement are not Payments," (iii) reasonable and customary fees and
otherwise disadvantageous to the holders of the Old F4L compensation paid to, and indemnity provided on behalf
Senior Notes in any material respect, (vii) of, officers, directors, employees or consultants of
transactions permitted by, and complying with, the the Company or any subsidiary, as determined by the
provisions set forth in "Limitation on Merger and board of directors of the Company or any subsidiary or
Certain Other Transactions," and (viii) transactions the senior management thereof in good faith, (iv)
with Certified Grocers of California, Inc., Affiliated transactions exclusively between or among the Company
Wholesale Grocers of Kansas City, Inc. or their and any of its wholly-owned subsidiaries or exclusively
subsidiaries or other suppliers in the ordinary course between or among such wholly-owned subsidiaries,
of business (including, without limitation, pursuant to provided such transactions are not otherwise prohibited
joint venture arrangements with such persons) and by the New F4L Senior Note Indenture, (v) any agreement
otherwise in compliance with the terms of the Old F4L as in effect as of the Issue Date or any amendment
Senior Note Indenture. thereto or any transaction contemplated thereby
(including pursuant to any amendment thereto) so long
"Significant Stockholder" means, with respect to any as any such amendment is not disadvantageous to the
person, any other person who is the beneficial owner holders of the New F4L Senior Notes in any material
(within the meaning of Rule 13d-3 under the Exchange respect, (vi) the existence of, or the performance by
Act) of more than 10% of any class of equity securities the Company or any of its subsidiaries of its
of such person that are entitled to vote on a regular obligations under the terms of, any stockholders
basis for the election of directors of such person. agreement (including any registration rights agreement
or purchase agreement related thereto) to which it (or
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD New Holdings) is a party as of the Issue Date and any
F4L SENIOR NOTE INDENTURE WILL BE MODIFIED TO ELIMINATE similar agreements which it (or New Holdings) may enter
THIS PROVISION AND CERTAIN RELATED DEFINITIONS. into thereafter; provided, however, that the existence
of, or the performance by the Company or any
subsidiaries of obligations under any future amendment
to, any such existing agreement or under any similar
agreement entered into after the Issue Date shall only
be permitted by this clause (vi) to the extent that the
terms of any
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such amendment or new agreement are not otherwise
disadvantageous to the holders of the New F4L Senior
Notes in any material respect, (vii) transactions
permitted by, and complying with, the provisions
described below under "Limitation on Mergers and
Certain Other Transactions," and (viii) purchases or
sales of goods or services or other transactions with
suppliers in each case, in the ordinary course of
business (including, without limitation, pursuant to
joint venture agreements) and otherwise in compliance
with the terms of the applicable New F4L Senior Note
Indenture which are fair to the Company, in the
reasonable determination of the board of directors, or
are on terms at least as favorable as might reasonably
have been obtained at such time from an unaffiliated
party.
"Significant Stockholder" means, with respect to any
person, any other person who is the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange
Act) of more than 10% of any class of equity securities
of such person that are entitled to vote on a regular
basis for the election of directors of such person.
LIMITATION ON CHANGE OF CONTROL. Pursuant to the Old LIMITATION ON CHANGE OF CONTROL. The New F4L Subordi-
F4L Senior Note Indenture, upon the occurrence of a nated Note Indenture will provide that if a Change of
Change of Control, each holder will have the right to Control occurs, each holder will have the right to
require the repurchase of such holder's Old F4L Senior require the Company to repurchase such holder's New F4L
Notes pursuant to the offer described below (the Senior Notes pursuant to a Change of Control Offer at
"Change of Control Offer"), at a purchase price equal 101% of the principal amount thereof plus accrued and
to 101% of the principal amount thereof plus accrued unpaid interest to the date of repurchase.
interest, if any, to the date of purchase. Within 10
days after any Change of Control Date requiring Food 4 The New F4L Senior Note Indenture will further provide
Less to make a Change of Control Offer Food 4 Less that, notwithstanding the foregoing, prior to the
shall so notify the Old F4L Senior Note Trustee and the mailing of the notice of a Change of Control Offer
Credit Agent. Food 4 Less must comply with Rule 14e-1 referred to above, the Company shall within 30 days
under the Securities Exchange Act of 1934, as amended, following any change of control either (a) repay in
and any other applicable provisions of the federal full and terminate all commitments under Indebtedness
securities laws in connection with a Change of Control under the Credit Agreement to the extent the terms
Offer. thereof require repayment upon a Change of Control (or
offer to repay in full and terminate all commitments
Pursuant to the Old F4L Senior Note Indenture, within under all Indebtedness under the Credit Agreement and
30 days following any Change of Control Date, Food 4 repay the Indebtedness owed to each lender which has
Less must send, by first class mail, a notice to each accepted such offer), or (b) obtain the requisite
holder, with copies to the Credit Agent and the Old F4L consents under the Credit Agreement, the terms of which
Senior Subordinated Note Trustee, which notice shall require repayment upon a Change of Control, to permit
govern the terms of the Change of Control Offer. Such the repurchase of the New F4L Senior Notes as provided
notice shall state, among other things, the purchase above. The Company shall first comply with the covenant
date, which must be no earlier than 30 days nor later in the immediately preceding sentence before it shall
than 40 days from the date such notice is mailed, other be required to repurchase New F4L Senior Notes pursuant
than as may be required by law (the "Change of Control to the provisions described below. The Company's
Payment Date"). Holders electing to have a Old F4L failure to comply with the covenants described in this
Senior Note purchased pursuant to a Change of Control paragraph shall constitute an Event of Default under
Offer will be required to surrender the Old F4L Senior the New F4L Senior Note Indenture.
Note, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Old F4L Senior In addition, the New F4L Senior Subordinated Note
Subordinated Note completed, to the Paying Agent at the Indenture will provide that prior to purchasing New F4L
address specified in the notice prior to the close of Senior Subordinated Notes tendered in a Change of
business on the business day prior to the Change of Control Offer, the Company shall purchase all Senior
Control Payment Date. F4L Notes (or permitted refinancings thereof) which it
is required to purchase by reason of such Change of
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD Control pursuant to the provisions of the indenture
F4L SENIOR NOTE INDENTURE WILL BE MODIFIED TO ELIMINATE under which such New Senior F4L Notes are issued, as in
THIS COVENANT AND CERTAIN RELATED DEFINITIONS. effect on the Issue Date.
LIMITATION ON MERGER AND CERTAIN OTHER LIMITATION ON MERGER AND CERTAIN OTHER
TRANSACTIONS. Pursuant to the Old F4L Senior Note TRANSACTIONS. Pursuant to the New F4L Senior Note
Indenture, Food 4 Less, in a single transaction or Indenture, the Company, in a single transaction or
through a series of related transactions, shall not (i) through a series of related transactions, shall not (i)
consolidate with or merge with or into any other consolidate with or merge with or into any other
person, or transfer (by lease, assignment, sale or person, or transfer (by lease, assignment, sale or
otherwise) all or substantially all of its properties otherwise) all or substantially all of its properties
and assets as an entirety or substantially as an and assets as an entirety or substantially as an
entirety to another person or group of affiliated entirety to another person or group of affiliated
persons or (ii) adopt a plan of liquidation, unless, in persons or (ii) adopt a plan of liquidation, unless, in
either case, (1) either Food 4 Less shall be the either case, (1) either the Company shall be the
continuing person, or the person (if other than Food 4 continuing person, or the person (if other than the
Less) formed by such consolidation or into which Food 4 Company) formed by such consolidation or into which the
Less is merged or to which all or substantially all of Company is merged or to which all or substantially all
the properties and assets of Food 4 Less as an entirety of the properties and assets of the Company as an
or substantially as an entirety are transferred (or, in entirety or substantially as an entirety are
the case of a plan of liquidation, any person to which transferred (or, in the case of a plan of liquidation,
assets are transferred) (Food 4 Less or such other any person to which assets are transferred) (the
person being hereinafter referred to as the "Surviving Company or such other person being hereinafter referred
Person") shall be a corporation organized and validly to as the "Surviving Person") shall be a corporation
existing under the laws of the United States, any state organized and validly existing under the laws of the
United
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thereof or the District of Columbia, and shall States, any state thereof or the District of Columbia,
expressly assume, by an indenture supplement, all the and shall expressly assume, by an indenture supplement,
obligations of Food 4 Less under the Old F4L Senior all the obligations of the Company under the New F4L
Notes and the Old F4L Senior Note Indenture; (2) Senior Note Indenture and the New F4L Senior Notes; (2)
immediately after and giving effect of such transaction immediately after and giving effect to such transaction
and the assumption contemplated by clause (1) above and and the assumption contemplated by clause (1) above and
the incurrence or anticipated incurrence of any In- the incurrence or anticipated incurrence of any
debtedness to be incurred in connection therewith, (A) Indebtedness to be incurred in connection therewith,
the surviving person shall have a Net Worth equal to or (A) the Surviving Person shall have a Consolidated Net
greater than the Net Worth of Food 4 Less immediately Worth equal to or greater than the Consolidated Net
preceding the transaction, (B) the surviving person Worth of the Company immediately preceding the
could incur at least $1 of Indebtedness pursuant to transaction and (B) the Surviving Person could incur at
provisions of the Old F4L Senior Note Indenture least $1.00 of additional Indebtedness (other than
described in the first paragraph under the heading Permitted Indebtedness) pursuant to the provisions
"Limitation on the Incurrence of Additional described herein under "Limitation on Incurrences of
Indebtedness" and (C) if the Operating Coverage Ratio Additional Indebtedness;" (3) immediately before and
of Food 4 Less immediately preceding the transaction is immediately after and giving effect to such transaction
within a range set forth under column X below, then the and the assumption of the obligations as set forth in
Surviving Person shall have an Operating Coverage Ratio clause (1) above and the incurrence or anticipated
at least equal to the greater of (i) the actual incurrence of any Indebtedness to be incurred in
Operating Coverage Ratio of Food 4 Less multiplied by connection therewith, no Default or Event of Default
the appropriate percentage set forth in column Y and shall have occurred and be continuing; and (iv) each
(ii) the ratio set forth in column Z below: Subsidiary Guarantor, unless it is the other party to
the transaction, shall have by supplemental indenture
X Y Z confirmed that its guarantee of the obligations of the
Company under the New F4L Senior Notes and the New F4L
1.8:1 to 2.499:1 100% 1.8:1 Senior Note Indenture shall apply, without alteration
2.5:1 to 2.999:1 90% 2.5:1 or amendment as such guarantee applies on the date it
3.0:1 or more 80% 2.7:1 was granted under the New F4L Senior Note Indenture to
the obligations of the Company under the New F4L Senior
and provided, further, that if immediately after giving Notes Indenture and the New F4L Senior Notes to the
effect of such transaction on a pro forma basis, the obligations of the Company or such person, as the case
Operating Coverage Ratio of Food 4 Less or the may be, under the New F4L Senior Note Indenture and the
surviving entity, as the case may be, is 3.2:1 or more, New F4L Senior Notes, after the consummation of such
the calculation in the preceding proviso shall be transaction. Notwithstanding the foregoing, the
inapplicable and such transaction shall be deemed to consummation of the Merger on the Issue Date need only
have complied with the requirements of such provision; comply with clauses (1) and (3) of the foregoing.
(3) immediately before and immediately after and giving
effect to such transaction and the assumption of the "Consolidated Net Worth" means, with respect to any
obligations as set forth in clause (1) above and the person, the total stockholders' equity (exclusive of
incurrence or anticipated incurrence of any any Disqualified Capital Stock) of such person and its
Indebtedness to be incurred in connection therewith, no subsidiaries determined on a consolidated basis in
Default or Event of Default shall have occurred and be accordance with GAAP.
continuing. For purposes of the foregoing, the transfer
(by lease, assignment, sale or otherwise) of all or
substantially all of the properties and assets of one
or more subsidiaries, the capital stock of which
constitutes all or substantially all of the properties
and assets of Food 4 Less shall be deemed to be the
transfer of all or substantially all of the properties
and assets of Food 4 Less. IF THE PROPOSED AMENDMENTS
BECOME OPERATIVE, THE OLD F4L SENIOR NOTE INDENTURES
WILL BE MODIFIED TO ELIMINATE THE SUBSECTIONS OF THIS
PROVISION WHICH REQUIRE THAT IMMEDIATELY AFTER GIVING
EFFECT TO SUCH TRANSACTION AND THE INCURRENCE OF ANY
INDEBTEDNESS IN CONNECTION THEREWITH, FOOD 4 LESS OR
THE SURVIVING ENTITY, AS THE CASE MAY BE, HAS A NET
WORTH OR OPERATING COVERAGE RATIO THAT MEETS THE
STANDARDS SET FORTH THEREIN.
MAINTENANCE OF NET WORTH. Pursuant to the Old F4L MAINTENANCE OF NET WORTH. THE NEW F4L SENIOR NOTE
Senior Subordinated Note Indenture, if Food 4 Less' INDENTURE WILL NOT CONTAIN A COVENANT REQUIRING THE
Net Worth at the end of each of any two consecutive MAINTENANCE OF A MINIMUM NET WORTH.
fiscal quarters (the last day of the second fiscal
quarter being referred to as the "Acceleration Date")
is equal to or less than $50 million (the "Minimum Net
Worth"), then Food 4 Less shall make an offer to all
holders (an "Offer") to purchase, on a pro rata basis,
on or before the last day of the next following fiscal
quarter or, in the event that the Acceleration Date is
the last day of Food 4 Less' fiscal year, the
forty-fifth day after the last day of the next
following fiscal quarter (the "Accelerated Payment
Date"), $17.5 million aggregate principal amount of
Old F4L Senior Subordinated Notes (an "Accelerated
Payment") at a purchase price equal to 100% of
principal amount plus accrued but unpaid interest to
the Accelerated Payment Date. Food 4 Less may credit
against the principal amount of Old F4L Senior
Subordinated Notes to be acquired in any Accelerated
Payment 100% of the principal amount of Old F4L Senior
Subordinated Notes acquired by Food 4 Less through
purchase, optional redemption, exchange or otherwise
during the 180-day period ending on the Acceleration
Date and surrendered for cancellation. Food 4 Less,
however,
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may not credit Old F4L Senior Subordinated Notes
against an Accelerated Payment if such Old F4L Senior
Subordinated Notes were previously used as a credit
against any other required payment under the Old F4L
Senior Subordinated Note Indenture. In no event shall
the failure of Food 4 Less' Net Worth to equal or
exceed $50 million at the end of any fiscal quarter be
counted toward the making of more than one Offer.
"Net Worth" as of any date means, with respect to any
person, the amount of the equity of the holders of
capital stock of such person that would appear on the
balance sheet of such person as of such date,
determined in accordance with GAAP, adjusted to exclude
(to the extent included in such equity), (i) the amount
of equity attributable to Disqualified Capital Stock
and (ii) with respect to Food 4 Less, the effect of (a)
all non-cash charges reducing such equity amount and
attributable to the early extinguishment of, or
acceleration of costs of, the financing of the Alpha
Beta Acquisition (other than amortization of original
issue discount), (b) prepayment penalties or other
charges incurred in connection with the retirement of
certain Indebtedness of a subsidiary of Food 4 Less
existing immediately prior to the Alpha Beta
Acquisition and (c) the recognition of deferred losses,
in an amount not to exceed $3 million, on the Long
Beach Warehouse.
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD
F4L SENIOR NOTE INDENTURE WILL BE MODIFIED TO ELIMINATE
THIS COVENANT AND CERTAIN RELATED DEFINITIONS.
LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. The LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. Pursuant
Old F4L Senior Note Indenture does not have a to the New Senior Note Indenture, the Company will not
covenant providing for the limitation on the issuance permit any of its Subsidiaries to issue any Preferred
of preferred stock of subsidiaries. Stock (other than to the Company or to a wholly-owned
Subsidiary) or permit any person (other than the
Company or a wholly-owned subsidiary) to own any
Preferred Stock of any subsidiary.
EVENTS OF DEFAULT EVENTS OF DEFAULT
Under the terms of the Old F4L Senior Note Indenture Under the terms of the New F4L Senior Note Indenture,
the following events constitute "Events of Default:" the following events constitute "Events of Default":
(i) failure to make any interest payment on the Old F4L (i) failure to make any interest payment on the New F4L
Senior Notes when due and the continuance of such Senior Notes when due and the continuance of such
default for a period of 30 days; (ii) failure to pay default for a period of 30 days; (ii) failure to pay
principal of the Old F4L Senior Notes when due, whether principal of, or premium, if any, on the New F4L Senior
at maturity, upon acceleration, redemption or Notes when due, whether at maturity, upon accelera-
otherwise; (iii) failure to comply with any other tion, redemption, required repurchase or otherwise;
agreement contained in the Old F4L Senior Notes or the (iii) failure to comply with any other agreement
Old F4L Senior Note Indenture, if such failure contained in the New F4L Senior Notes or the New F4L
continues unremedied for 30 days after written notice Senior Note Indenture, if such failure continues
given by the Old F4L Senior Note Trustee or the holders unremedied for 30 days after written notice given by
of at least 25% in principal amount of the Old F4L the New F4L Senior Note Trustee or the holders of at
Senior Notes then outstanding (except in the case of a least 25% in principal amount of the New F4L Senior
default with respect to the covenants set forth in the Notes then outstanding (except in the case of a default
Old F4L Senior Note Indenture, and described herein with respect to the covenants set forth in the New F4L
under the headings "Limitation on Restricted Payments," Senior Note Indenture, and described herein under the
"Maintenance of Net Worth," "Limitations on headings "Limitation on Restricted Payments,"
Dispositions of Assets," "Change of Control," and "Limitations on Asset Sales," "Change of Control," and
"Limitations on Merger and Certain Other Transactions," "Limitations on Merger and Certain Other Transactions,"
which shall constitute Events of Default with notice which shall constitute Events of Default with notice
but without passage of time); (iv) a default under any but without passage of time); (iv) a default under any
Indebtedness of Food 4 Less or its subsidiaries, Indebtedness of the Company or its subsidiaries,
whether such Indebtedness now exists or shall whether such Indebtedness now exists or shall
hereinafter be created, if both (A) such default either hereinafter be created, if both (A) such default either
(1) results from the failure to pay any such (1) results from the failure to pay any such
Indebtedness at its stated final maturity or (2) Indebtedness at its stated final maturity or (2)
relates to an obligation other than the obligation to relates to an obligation other than the obligation to
pay any principal of such Indebtedness at its stated pay such Indebtedness at its stated final maturity and
maturity and results in the holder or holders of such results in the holder or holders of such Indebtedness
Indebtedness causing such Indebtedness to become due causing such Indebtedness to become due prior to its
prior to its stated maturity and (B) the principal stated maturity and (B) the principal amount of such
amount of such Indebtedness, together with the Indebtedness, together with the principal amount of any
principal amount of any other such Indebtedness in other such Indebtedness in default for failure to pay
default for failure to pay principal at maturity or the principal at stated final maturity or the maturity of
maturity of which has been so accelerated, aggregate which has been so accelerated, aggregate $20 million or
$20 million or more at any one time outstanding; (v) more at any one time outstanding; (v) any final
any final judgment or order for payment of money in judgment or order for payment of money in excess of $20
excess of $20 million shall be entered against Food 4 million
Less or any Significant Subsidiary and
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shall not be discharged for a period of 60 days after shall be entered against the Company or any Significant
such judgment becomes final and nonappealable; (vi) Subsidiary and shall not be discharged for a period of
either Food 4 Less or any Significant Subsidiary 60 days after such judgment becomes final and
pursuant to or within the meaning of any Bankruptcy nonappealable; (vi) either the Company or any
Law: (a) commences a voluntary case or proceeding; (b) Significant Subsidiary pursuant to or within the
consents to the entry of an order for relief against it meaning of any Bankruptcy Law: (a) commences a
in an involuntary case or proceeding; (c) consents to voluntary case or proceeding; (b) consents to the entry
the appointment of a custodian of it or for all or of an order for relief against it in an involuntary
substantially all of its property; or (d) makes a case or proceeding; (c) consents to the appointment of
general assignment for the benefit of its creditors; a custodian of it or for all or substantially all
(vii) a court of competent jurisdiction enters an order of its property; or (d) makes a general assignment for
or decree in an involuntary case or proceeding under the benefit of its creditors; (vii) a court of
any Bankruptcy Law that: (a) is for relief against Food competent jurisdiction enters an order or decree under
4 Less or any Significant Subsidiary; (b) appoints a any Bankruptcy Law that: (a) is for relief against the
custodian of Food 4 Less or any Significant Subsidiary, Company or any Significant Subsidiary, in an invol-
or for all or any substantial part of their respective untary case or proceeding; (b) appoints a custodian of
properties; or (c) orders the liquidation of Food 4 the Company or any Significant Subsidiary, or for all
Less or any Significant Subsidiary, and in each case or any substantial part of their respective properties;
the order or decree remains unstayed and in effect for or (c) orders the liquidation of the Company or any
60 days; and (viii) the lenders under the Loan Significant Subsidiary, and in each case the order or
Documents shall commence judicial proceedings to decree remains unstayed and in effect for 60 days;
foreclose upon any material portion of the assets of (viii) the lenders under the Credit Agreement shall
Food 4 Less and its subsidiaries. In the event of a commence judicial proceedings to foreclose upon any
declaration or acceleration because an Event of Default material portion of the assets of the Company and its
set forth in clause (iv) above has occurred and is subsidiaries; or (ix) any of the guarantees shall be
continuing, such declaration of acceleration shall be declared or adjudged invalid in a final judgment or
automatically rescinded and annulled if either (i) the order issued by any court of governmental authority. In
holders of the Indebtedness which is the subject of the event of a declaration of acceleration because an
such Event of Default have waived such failure to pay Event of Default set forth in clause (iv) above has
at maturity or have rescinded the acceleration in occurred and is continuing, such declaration of
respect of such Indebtedness within 90 days of such acceleration shall be automatically rescinded and
maturity or declaration of acceleration, as the case annulled if either (i) the holders of the Indebtedness
may be, and no other Event of Default has occurred which is the subject of such Event of Default have
during such 90-day period which has not been cured or waived such failure to pay at maturity or have
waived, or (ii) such Indebtedness shall have been rescinded the acceleration in respect of such
discharged or the maturity thereof shall have been Indebtedness within 90 days of such maturity or
extended such that it is not then due and payable, or declaration of acceleration, as the case may be, and no
the underlying default has been cured, within 90 days other Event of Default has occurred during such 90-day
of such maturity or declaration of acceleration, as the period which has not been cured or waived, or (ii) such
case may be. Indebtedness shall have been discharged or the maturity
thereof shall have been extended such that it is not
Pursuant to the Old F4L Senior Note Indenture, if an then due and payable, or the underlying default has
Event of Default (other than an Event of Default been cured, within 90 days of such maturity or
resulting from bankruptcy, insolvency, receivership or declaration of acceleration, as the case may be.
reorganization of Food 4 Less) occurs and is
continuing, the Old F4L Senior Note Trustee or the Pursuant to the New F4L Senior Note Indenture, if an
holders of at least 25% in principal amount of the Old Event of Default (other than an Event of Default
F4L Senior Notes then outstanding may declare resulting from bankruptcy, insolvency, receivership or
immediately due and payable all unpaid principal plus reorganization of the Company or a Subsidiary
accrued and unpaid interest on the Old F4L Senior Notes Guarantor) occurs and is continuing, the New F4L Senior
then outstanding. If an Event of Default resulting from Note Trustee or the holders of at least 25% in
certain events of bankruptcy, insolvency, receivership principal amount of the then outstanding New F4L Senior
or reorganization of Food 4 Less shall occur, all Notes may declare due and payable all unpaid principal
unpaid principal and accrued interest shall be and interest accrued and unpaid on the then outstanding
immediately due and payable without any declaration or New F4L Senior Notes issued under such New F4L Senior
other act on the part of the Old F4L Senior Note Note Indenture by notice in writing to the Company and
Trustee or any of the holders. Subject to certain the applicable New F4L Senior Note Trustee specifying
conditions, the holders of a majority in principal the respective Event of Default and that it is a
amount of the Old F4L Senior Notes then outstanding, by "notice of acceleration" (the "Acceleration Notice"),
notice to the Old F4L Senior Note Trustee, may rescind and the same (i) shall become immediately due and
such declaration if all existing Events of Default are payable or (ii) if there are any amounts outstanding
remedied. In certain cases the holders of a majority in under the Credit Agreement, shall become due and
principal amount of outstanding Old F4L Senior Notes payable upon the first to occur of an acceleration
may waive any past default and its consequences, except under the Credit Agreement, or five business days after
a default in the payment of principal of or interest on receipt by the Company and the administrative agent
any of the Old F4L Senior Notes. under the Credit Agreement of such Acceleration Notice.
If an Event of Default resulting from certain events of
The Old F4L Senior Note Indenture provides that if a bankruptcy, insolvency, receivership or reorganization
Default or Event of Default occurs and is continuing of the Company or a Subsidiary Guarantor shall occur,
and if it is known to the Old F4L Senior Note Trustee, all unpaid principal of and accrued interest on all
the Old F4L Senior Note Trustee shall mail to each then outstanding New F4L Senior Notes shall be
holder notice of the uncured Default or Event of immediately due and payable without any declaration or
Default within 90 days after such Default or Event of other act on the part of the New F4L Senior Note
Default occurs; provided, however, that, except in the Trustee or any of the holders. After a declaration of
case of a Default or Event of Default in the payment of acceleration, subject to certain conditions, the
the principal of or interest on any of the Old F4L holders of a majority in principal amount of the then
Senior Notes, including the failure to make payment on outstanding New F4L Senior Notes, by notice to the New
the Change of Control Payment Date pursuant to a Change F4L Senior Note Trustee, may rescind such declaration
of Control Offer, payment when due pursuant to a Net if all existing Events of Default are
Proceeds Offer or payment when due pursuant
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to an Offer described above under "Maintenance of Net remedied. In certain cases the holders of a majority in
Worth," the Old F4L Senior Note Trustee may withhold principal amount of outstanding New F4L Senior Notes
such notice if it in good faith determines that may waive a past default under the New F4L Senior Note
withholding such notice is in the interest of the Indenture and its consequences, except a default in the
holders. payment of or interest on any of the New F4L Senior
The Old F4L Senior Note Indenture provides that no Notes.
holder may pursue any remedy thereunder unless the Old
F4L Senior Note Trustee (i) shall have failed to act The New F4L Senior Note Indenture provides that if a
for a period of 60 days after receiving written notice Default or Event of Default occurs and is continuing
of a continuing Event of Default by such holder and a and if it is known to the New F4L Senior Note Trustee,
request to act by holders of at least 25% in principal the New F4L Senior Note Trustee shall mail to each
amount of Old F4L Senior Notes and (ii) has received holder of New F4L Senior Notes notice of the Default or
indemnification satisfactory to it; provided, however, Event of Default within 90 days after such Default or
that such provision does not affect the right of any Event of Default occurs; provided, however, that,
holder to sue for enforcement of any overdue payment of except in the case of a Default or Event of Default in
Old F4L Senior Notes. the payment of the principal of or interest on any New
Under the Old F4L Senior Note Indenture, two officers F4L Senior Notes, including the failure to make payment
of Food 4 Less are required to certify to the Old F4L on a Change of Control Payment Date pursuant to a
Senior Note Trustee within 120 days after the end of Change of Control Offer or payment when due pursuant to
each fiscal year of Food 4 Less whether or not they a Net Proceeds Offer the New F4L Senior Note Trustee
know of any Default that occurred during such fiscal may withhold such notice if it in good faith determines
year and if applicable, describe such Default and the that withholding such notice is in the interest of the
status thereof. holders.
The New F4L Senior Note Indenture provides that no
holder of New F4L Senior Notes may pursue any remedy
thereunder unless the New F4L Senior Note Trustee (i)
shall have failed to act for a period of 60 days after
receiving written notice of a continuing Event of
Default by such holder and a request to act by holders
of at least 25% in principal amount of New F4L Senior
Notes and (ii) has received indemnification
satisfactory to it; provided, however, that such
provision does not affect the right of any holder to
sue for enforcement of any overdue payment of New F4L
Senior Notes.
Under the New F4L Senior Note Indenture, two officers
of the Company are required to certify to the New F4L
Senior Note Trustee within 120 days after the end of
each fiscal year of New F4L Senior Note whether or not
they know of any Default that occurred during such
fiscal year and, if applicable, describe such Default
and the status thereof.
MODIFICATION OF THE OLD F4L SENIOR NOTE INDENTURE MODIFICATION OF THE NEW F4L SENIOR NOTE INDENTURE
Pursuant to the terms of the Old F4L Senior Note Pursuant to the terms of the New F4L Senior Note
Indenture, the Old F4L Senior Note Indenture and the Indenture, the New F4L Senior Note Indenture and the
Old F4L Senior Notes may be amended or supplemented New F4L Senior Notes may be amended or supplemented
(and compliance with any provision thereof may be (and compliance with any provision thereof may be
waived) by Food 4 Less, the Old F4L Senior Note Trustee waived) by the Company, the Subsidiary Guarantors, the
and the holders of not less than a majority in New F4L Senior Note Trustee and the holders of not less
aggregate principal amount of the Old F4L Senior Notes than a majority in aggregate principal amount of New
then outstanding, except that without the consent of F4L Senior Notes then outstanding, except that without
each holder affected, no such amendment, supplement or the consent of each holder of New F4L Senior Notes
waiver may (1) change the principal amount of Old F4L affected, no such amendment, supplement or waiver may
Senior Notes whose holders must consent to an (1) change the principal amount of the New F4L Senior
amendment, supplement or waiver of any provision of the Notes the holders of which must consent to an
Old F4L Senior Note Indenture or the Old F4L Senior amendment, supplement or waiver of any provision of the
Notes; (2) reduce the rate or extend the time for New F4L Senior Note Indenture, the New F4L Senior Notes
payment of interest on any Old F4L Senior Note; (3) or the guarantees, (2) reduce the rate or extend the
reduce the principal amount of any Old F4L Senior Note; time for payment of interest on any New F4L Senior
(4) change the date of maturity of any Old F4L Senior Notes, (3) reduce the principal amount of any New F4L
Note or alter the redemption provisions in a manner Senior Notes, (4) change the date of maturity of any
adverse to any holder; (5) make any changes in the New F4L Senior Notes or the Change of Control Date or
provisions concerning waivers of Defaults or Events of alter the redemption provisions in the New F4L Senior
Default by holders or the rights of holders to recover Note Indenture or the New F4L Senior Notes or the
the principal of, interest on or redemption payment purchase price in connection with any repurchase of New
with respect to any Old F4L Senior Note; and (6) make F4L Senior Notes pursuant to the covenant described
the principal of, or interest on, any Old F4L Senior under change of control above in a manner adverse to
Note payable with anything or in any manner other than any holder, (5) make any changes in the provisions
as provided for in the Old F4L Senior Note Indenture concerning waivers of Defaults or Events of Default by
and the Old F4L Senior Notes. holders or the rights of holders to recover the
principal of, interest on or redemption payment with
In addition, pursuant to the Old F4L Senior Note respect to any New F4L Senior Notes, (6) make the
Indenture, Food 4 Less and the Old F4L Senior Note principal of, or interest on, any New F4L Senior
Trustee may amend the Old F4L Senior Note Indenture and Notes payable with anything or in any manner other than
the Old F4L Senior Notes (a) to cure any ambiguity, as provided for in the New F4L Senior Note Indenture,
defect or inconsistency therein; the New
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<TABLE>
<CAPTION>
OLD F4L SENIOR NOTES NEW F4L SENIOR NOTES
- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
provided that such amendment or supplement does not F4L Senior Notes and the guarantees, (7) waive any
adversely affect the rights of any holder or (b) to Default or Event of Default resulting from a failure to
make any other change that does not adversely affect comply with the covenant described above under
the rights of any holder. "Limitation on Change of Control" or (8) without the
Consent of holders of not less than two-thirds in
aggregate principal amount of such New F4L Senior Notes
then outstanding, no such amendment, supplement or
waiver may release any Subsidiary Guarantor from any of
its Obligations under its guarantee or the New F4L
Senior Note Indenture other than in accordance with the
terms of such guarantee and the New F4L Senior Note
Indenture.
In addition, pursuant to the New F4L Senior Note
Indenture, the New F4L Senior Notes, the New F4L Senior
Notes and the related guarantees may be amended by the
Company, the Subsidiary Guarantors and the New F4L
Senior Note Trustee (a) to cure any ambiguity, defect
or inconsistency therein; provided that such amendment
or supplement does not adversely affect the rights of
any holder thereof or (b) to make any other change that
does not adversely affect the rights of any holder
thereunder in any material respect.
</TABLE>
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APPENDIX B
COMPARISON OF OLD F4L SENIOR SUBORDINATED NOTES AND
NEW F4L SENIOR SUBORDINATED NOTES
The following is a brief comparison of the principal features of the Old
F4L Senior Subordinated Notes to the New F4L Senior Subordinated Notes. The
terms of the New F4L Senior Subordinated Notes differ from the current
(unamended) terms of the Old F4L Senior Subordinated Notes in certain
significant respects, including those discussed below. The summary comparisons
set forth below do not purport to be complete and are qualified in their
entirety by reference to the Old F4L Senior Subordinated Note Indenture, the Old
F4L Senior Subordinated Notes, the New F4L Senior Subordinated Note Indenture,
the New F4L Senior Subordinated Notes, the "Description of the New F4L Notes"
and "The Proposed Amendments" and the related definitions contained therein.
<TABLE>
<CAPTION>
OLD F4L SENIOR SUBORDINATED NOTES NEW F4L SENIOR SUBORDINATED NOTES
<S> <C>
- ------------------------------------------------------ ------------------------------------------------------
ISSUER ISSUER.
Food 4 Less. The Company, as successor by merger to Food 4 Less.
PRINCIPAL AMOUNT OUTSTANDING PRINCIPAL AMOUNT OUTSTANDING
Up to $145 million.
As of November 1, 1994, $145 million.
INTEREST RATE INTEREST RATE
The Old F4L Senior Subordinated Notes bear interest at The New F4L Senior Subordinated Notes will bear
the rate of 13 3/4% per annum. interest at the rate of 13.75% per annum.
INTEREST PAYMENT DATES INTEREST PAYMENT DATES
June 15 and December 15. February 1 and August 1, commencing on August 1, 1995.
FINAL MATURITY DATE FINAL MATURITY DATE
June 15, 2001. February 1, 2005.
OPTIONAL REDEMPTION OPTIONAL REDEMPTION
The Old F4L Senior Subordinated Notes are redeemable, The New F4L Senior Subordinated Notes are redeemable,
at the option of Food 4 Less, in whole at any time or at the option of the Company in whole at any time or in
in part from time to time, on or after June 15, 1996, part from time to time, on or after June 15, 1996, at
at the following redemption prices if redeemed during the following redemption prices if redeemed during the
the twelve-month period commencing on June 15 of the twelve-month period commencing on June 15 of the years
years set forth below: set forth below:
1996..........................................106.111% 1996..........................................106.111%
1997..........................................104.583% 1997..........................................104.583%
1998..........................................103.056% 1998..........................................103.056%
1999..........................................101.528% 1999..........................................101.528%
2000 and thereafter............................100.000% 2000 and thereafter............................100.000%
in each case plus accrued and unpaid interest to the in each case plus accrued and unpaid interest to the
date of redemption. date of redemption.
In the event of a Change of Control, the Old F4L Senior
Subordinated Notes may be redeemed on or after June 15,
1994 and prior to June 15, 1996, at the option of Food
4 Less, at a redemption price equal to the applicable
percentage of the principal amount thereof set forth
below, together with accrued and unpaid interest to the
date of redemption, if redeemed during the 12 months
commencing on June 15 in the years set forth below:
YEAR PERCENTAGE
1994..........................................109.167%
1995..........................................107.639%
MANDATORY REDEMPTION MANDATORY REDEMPTION
Food 4 Less will make a mandatory sinking fund payment The New F4L Senior Subordinated Notes are not subject
on June 15, 2000, sufficient to retire 50% of the Old to a mandatory sinking fund requirement.
F4L Senior Subordinated Notes originally issued, at a
redemption price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest to the date
of redemption. Food 4 Less may, at its option, receive
credit against such sinking fund payment for 100% of
the principal amount of any Old F4L Senior Subordinated
Notes previously acquired by Food 4 Less in the open
market and surrendered to the Old F4L Senior
Subordinated Note Trustee for cancellation or redeemed
at the option of Food 4 Less and which, in each case,
were not previously used for or as a credit against any
other required payment pursuant to the Old F4L
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<TABLE>
<CAPTION>
OLD F4L SENIOR SUBORDINATED NOTES NEW F4L SENIOR SUBORDINATED NOTES
- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
Senior Subordinated Note Indenture. Food 4 Less may use
the same Old F4L Senior Subordinated Note as a credit
only once. Food 4 Less intends to credit Old F4L Senior
Subordinated Notes tendered into the Exchange Offer
against its sinking fund obligation.
RANKING RANKING
The Old F4L Senior Subordinated Notes are unsecured The New F4L Senior Subordinated Notes will be unsecured
general obligations of Food 4 Less and are general obligations of the Company and will be
subordinated to all Senior Indebtedness of Food 4 Less, subordinated to all Senior Indebtedness of the Company,
including the Old F4L Senior Notes and the borrowings including the Company's obligations under the Credit
and other obligations under the Credit Agreement. As of Agreement and the indebtedness under the New F4L Senior
September 17, 1994, the Senior Indebtedness of Food 4 Notes and the Old F4L Senior Notes, if any. The New F4L
Less was approximately $1,244.0 million. Senior Subordinated Notes will rank senior to, or pari
passu with, all subordinated indebtedness of the
Company.
"Senior Indebtedness" means the principal of, premium,
if any, and interest on any Indebtedness of the
Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the
case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which
the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to
the New F4L Senior Subordinated Notes. Without limiting
the generality of the foregoing, "Senior Indebtedness"
shall include (x) the principal of, premium, if any,
and interest on all obligations of every nature of the
Company from time to time owed to the lenders under the
Credit Agreement, including, without limitation, the
Letter of Credit Obligations and principal of and
interest on, and all fees and expenses payable under
the Credit Agreement and the Letter of Credit
Obligations, and (y) interest accruing thereon
subsequent to the occurrence of any Event of Default
specified in clause (vi) or (vii) under "-- Events of
Default" relating to the Company, whether or not the
claim for such interest is allowed under any applicable
Bankruptcy Code. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (a) Indebtedness
evidenced by the New F4L Senior Subordinated Notes, (b)
Indebtedness that is expressly subordinate or junior in
right of payment to any Indebtedness of the Company,
(c) Indebtedness which, when incurred and without
respect to any election under Section 1111(b) of Title
11, United States Code, is without recourse to the
Company, (d) Indebtedness which is represented by
Disqualified Capital Stock, (e) Obligations for goods,
materials or services purchased in the ordinary course
of business or Indebtedness consisting of trade
payables, (f) Indebtedness of or amounts owed by the
Company for compensation to employees or for services
rendered to the Company, (g) any liability for federal,
state, local or other taxes owed or owing by the
Company, (h) Indebtedness of the Company to a
Subsidiary of the Company, and (i) that portion of any
Indebtedness which is incurred by the Company in
violation of the New F4L Senior Subordinated Note
Indenture.
GUARANTEES GUARANTEES
Each Subsidiary Guarantor has unconditionally Each Subsidiary Guarantor will unconditionally
guaranteed, jointly and severally, the full and guarantee, jointly and severally, the full and prompt
prompt performance of Food 4 Less' obligations under performance of the Company's obligations under the New
the Old F4L Senior Subordinated Note Indenture and the F4L Senior Subordinated Note Indenture and the New F4L
Old F4L Subordinated Notes. Senior Subordinated Notes.
"Subsidiary Guarantor" means (i) Cala Co., Cala "Subsidiary Guarantor" means (i) each of Alpha Beta
Foods, Inc., Bell Markets, Inc., Food 4 Less of Company, Bay Area Warehouse Stores, Inc., Bell Markets,
Southern California, Inc., Alpha Beta Company, Food 4 Inc., Cala Co., Cala Foods, Inc., Falley's Inc., Food 4
Less of California, Inc., Falley's, Inc., and Food 4 Less of California, Inc., Food 4 Less Merchandising,
Less Merchandising, Inc., (ii) each of the Food 4 Less' Inc., Food 4 Less GM, Inc., Food 4 Less of Southern
subsidiaries that becomes a guarantor of the Old F4L California, Inc. (ii) upon consummation of the Mergers,
Senior Subordinated Notes pursuant to the provisions of Crawford Stores, Inc., (iii) each of the Company's
the Old F4L Senior Subordinated Note Indenture subsidiaries which becomes a guarantor of the New F4L
summarized under "Guarantees of Certain Indebtedness" Senior Subordinated Notes in compliance with the
and (iii) each of Food 4 Less's subsidiaries executing provisions set forth under "Guarantees of Certain
a supplemental indenture in which such subsidiary Indebtedness," and (iv) each of the Company's
agrees to be bound by the provisions of the Old F4L subsidiaries executing a supplemental indenture in
Senior Subordinated Note Indenture. See "Guarantees which such subsidiary agrees to be bound by
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<TABLE>
<CAPTION>
OLD F4L SENIOR SUBORDINATED NOTES NEW F4L SENIOR SUBORDINATED NOTES
- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
of Certain Indebtedness" below. the terms of the New F4L Senior Subordinated Indenture.
See "Guarantees of Certain Indebtedness" below.
CHANGE OF CONTROL CHANGE OF CONTROL
Under the occurrence of a Change of Control, each Under the occurrence of a Change of Control, each
holder will have the right to require the repurchase holder will have the right to require the repurchase of
of such holder's Old F4L Senior Subordinated Notes at a such holder's New F4L Senior Subordinated Notes at a
purchase price equal to 101% of the principal amount purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest to the date of thereof plus accrued and unpaid interest to the date of
repurchase. See "Limitation on Change of Control" repurchase. See "Limitation on Change of Control"
below. below.
"Change of Control" means the acquisition, in one or "Change of Control" means (i) the acquisition after the
more transactions, of beneficial ownership (within the Issue Date, in one or more transactions, of beneficial
meaning of Rule 13d-3 under the Exchange Act) by (i) ownership (within the meaning of Rule 13d-3 under the
any person or entity other than any Permitted Holder Exchange Act) by (a) any person or entity (other than
(as defined below) or (ii) any group of persons or any Permitted Holder) or (b) any group of persons or
entities (excluding any Permitted Holders) who entities (excluding any Permitted Holders) who
constitute a group (within the meaning of section constitute a group (within the meaning of Section
13(d)(3) of the Exchange Act), in either case, of any 13(d)(3) of the Exchange Act), in either case, of any
securities of FFL or Food 4 Less such that, as a result securities of New Holdings or the Company such that, as
of such acquisition, such person, entity or group a result of such acquisition, such person, entity or
either (A) beneficially owns (within the meaning of group either beneficially owns (within the meaning of
Rule 13d-3 under the Exchange Act) 51% or more of Food Rule 13d-3 under the Exchange Act), directly or
4 Less's then outstanding voting securities entitled to indirectly, 40% or more of the then outstanding voting
vote on a regular basis for a majority of the board of securities entitled to vote on a regular basis for a
directors of Food 4 Less (to the extend such beneficial majority of the board of directors of the Company (but
ownership is not shared with any Permitted Holder who only to the extent that such beneficial ownership is
has the power to direct the vote thereof), or (B) not shared with any Permitted Holder who has the power
otherwise has the ability to elect a majority of the to direct the vote thereof), provided, however, that no
members of Food 4 Less's board of directors. such Change of Control shall be deemed to have occurred
if (A) the Permitted Holders beneficially own, in the
"Permitted Holder" means (i) Food 4 Less Equity aggregate, at such time, a greater percentage of such
Partners, L.P., The Yucaipa Companies or any entity voting securities than such other person, entity or
controlled thereby, (ii) an employee benefit plan of group or (B) at the time of such acquisition, the
Food 4 Less, or any participant therein or any of its Permitted Holders (or any of them) possess the ability
subsidiaries, (iii) a trustee or other fiduciary (by contract or otherwise) to elect, or cause the
holding securities under an employee benefit plan of election, of a majority of the members of the Company's
Food 4 Less or any of its subsidiaries or (iv) any board of directors.
Permitted Transferee of any of the foregoing persons.
"Permitted Holder" means (i) Food 4 Less Equity
"Permitted Transferee" means, with respect to any Partners, L.P., and The Yucaipa Companies or any entity
person, (i) any affiliate of such person, (ii) the controlled thereby or any of the partners thereof, (ii)
heirs, executors, administrators, testamentary Apollo Advisors, L.P., Lion Advisors, L.P. or any
trustees, legatees or beneficiaries of any such person, entity controlled thereby or any of the partners
and (iii) a trust, the beneficiaries of which, or a thereof, (iii) an employee benefit plan of the Company,
corporation or partnership, the stockholders or general or any participant therein or any of its subsidiaries,
or limited partners of which, include only such person (iv) a trustee or other fiduciary holding securities
or his or her spouse or lineal descendants, in each under an employee benefit plan of the Company or any of
case to whom such person has transferred securities of its subsidiaries or (v) any Permitted Transferee of any
Food 4 Less. of the foregoing persons.
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD "Permitted Transferees" means, with respect to any
F4L SENIOR SUBORDINATED NOTE INDENTURE WILL BE MODIFIED person, (i) any Affiliate of such person, (ii) the
TO ELIMINATE THIS COVENANT AND CERTAIN RELATED heirs, executors, administrators, testamentary
DEFINITIONS. trustees, legatees or beneficiaries of any such person,
(iii) a trust, the beneficiaries of which, or a
corporation or partnership, the stockholders or general
or limited partners of which, include only such person
or his or her spouse or lineal descendants, in each
case to whom such person has transferred the beneficial
ownership of any securities of the Company, (iv) any
investment account whose investment managers and
investment advisors consist solely of such person
and/or Permitted Transferees of such person and (v) any
investment fund or investment entity that is a
subsidiary of such person or a Permitted Transferee of
such person.
CERTAIN COVENANTS CERTAIN COVENANTS
LIMITATION ON RESTRICTED PAYMENTS. Pursuant to the LIMITATION ON RESTRICTED PAYMENTS. Pursuant to the New
Old F4L Senior Subordinated Note Indenture, Food 4 F4L Senior Subordinated Note Indenture, the Company
Less shall not, and shall cause each of its shall not, and shall cause each of its subsidiaries not
subsidiaries not to, directly or indirectly, make any to, directly or indirectly, make any Restricted Payment
Restricted Payment if, at the time of such Restricted if, at the time of such proposed Restricted Payment, or
Payment, or after giving effect thereto, (a) a Default after giving effect thereto, (a) a Default or an Event
or an Event of Default shall have occurred and be of Default shall have occurred and be continuing, (b)
continuing, (b) the Net Worth of Food 4 Less on the the Company could not incur $1.00 of additional
last day of the full fiscal quarter immediately Indebtedness (other than Permitted Indebtedness)
preceding the date of such Restricted Payment (pro pursuant to the covenant described under "-- Limitation
forma to give effect thereto) is not greater than $115 on Incurrences of Additional Indebtedness" below or (c)
million, (c) Food 4 Less's Operating Coverage Ratio, the aggregate amount
calculated on a pro
</TABLE>
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<TABLE>
<CAPTION>
OLD F4L SENIOR SUBORDINATED NOTES NEW F4L SENIOR SUBORDINATED NOTES
- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
forma basis as if such Restricted Payment had been made expended for all Restricted Payments, including such
at the beginning of the Pro Forma Period, shall be less proposed Restricted Payment (the amount of any
than 2.25 to 1.0 or (d) the aggregate amount expended Restricted Payment, if other than cash, to be the fair
for all Restricted Payments, including such Restricted market value thereof at the date of payment as
Payment (the amount of any Restricted Payment, if other determined in good faith by the board of directors of
than cash, to be the fair market value thereof at the the Company), subsequent to the Issue Date, shall
date of payment as determined in good faith by the exceed the sum of (i) 50% of the aggregate Consolidated
board of directors of Food 4 Less), subsequent to June Net Income (or if such aggregate Consolidated Net
17, 1991, shall exceed the sum of (i) 25% of the Income is a loss, minus 100% of such loss) of the
aggregate Consolidated Net Income (or if such Company earned subsequent to the Issue Date and on or
Consolidated Net Income is a loss, minus 100% of such prior to the date of the proposed Restricted Payment
loss) of Food 4 Less earned subsequent to June 17, 1991 (the "Reference Date") plus (ii) 100% of the aggregate
and on or prior to the date the Restricted Payment net proceeds received by the Company from any person
occurs (the "Reference Date") plus (ii) 100% of the (other than a subsidiary of the Company) from the
aggregate net proceeds received by Food 4 Less from any issuance and sale (including upon exchange or
person (other than a subsidiary) from the issuance and conversion for other securities of the Company)
sale subsequent to June 17, 1991 and on or prior to the subsequent to the Issue Date and on or prior to the
Reference Date of Qualified Capital Stock (excluding Reference Date of Qualified Capital Stock (excluding
(A) Qualified Capital Stock paid as a dividend on any (A) Qualified Capital Stock paid as a dividend on any
capital stock or as interest on any Indebtedness and capital stock or as interest on any Indebtedness, and
(B) any net proceeds from issuances and sales financed (B) any net proceeds from issuances and sales financed
directly or indirectly using funds borrowed from Food 4 directly or indirectly using funds borrowed from the
Less or any subsidiary, until and to the extent such Company or any subsidiary, until and to the extent such
borrowing is repaid). borrowing is repaid plus (iii) 100% of the aggregate
net cash proceeds received by the Company as capital
Notwithstanding the foregoing, if no Default or Event contributions to the Company after the Issue Date plus
of Default shall have occurred and be continuing as a (iv) $25 million.
consequence thereof, the provisions set forth in the
immediately preceding paragraph will not prevent (1) Notwithstanding the foregoing, if no Default or Event
the payment of any dividend within 60 days after the of Default shall have occurred and be continuing as a
date of its declaration if the dividend would have been consequence thereof, the provisions set forth in the
permitted on the date of declaration, (2) the immediately preceding paragraph will not prevent (1)
acquisition of any shares of capital stock of Food 4 the payment of any dividend within 60 days after the
Less or the repayment of any Indebtedness of Food 4 date of its declaration if the dividend would have been
Less in exchange for or solely out of the proceeds of permitted on the date of declaration, (2) the
the substantially concurrent sale (other than to a acquisition of any shares of capital stock of the
subsidiary) of shares of Qualified Capital Stock or the Company or the repurchase, redemption or other
repayment of any Indebtedness of Food 4 Less in ex- repayment of any Subordinated Indebtedness in exchange
change for or solely out of the proceeds of the for or solely out of the proceeds of the substantially
substantially concurrent sale (other than to a concurrent sale (other than to a subsidiary) of shares
subsidiary) of Indebtedness subordinated in right of of Qualified Capital Stock of the Company, (3) the
payment to the Old F4L Senior Subordinated Notes with repurchase, redemption or other repayment of any
no scheduled or required maturity or scheduled or Subordinated Indebtedness in exchange for or solely out
required repayment of principal or sinking fund payment of the proceeds of the substantially concurrent sale
prior to the date of maturity, (3) Permitted Payments; (other than to a subsidiary) of Subordinated
provided, however, that the declaration of each Indebtedness of the Company with an Average Life equal
dividend paid in accordance with clause (1) above, and to or greater than the then remaining Average Life of
each acquisition made in accordance with clause (2) the Subordinated Indebtedness repurchased or redeemed,
above, and each payment described in clause (ii), (iii) and (4) Permitted Payments; provided, however, that the
or (iv) of the definition of "Permitted Payments" shall declaration of each dividend paid in accordance with
each be counted for purposes of computing amounts clause (1) above, each acquisition or repayment made in
expended pursuant to subclause (d) in the immediately accordance with, or of the type set forth in, clause
preceding paragraph, and no amounts expended pursuant (2) above, and each payment described in clause (iii),
to clause (i) or (v) of the definition of "Permitted (iv), (v), (vi) or (vii) of the definition of the term
Payments" shall be so counted. "Permitted Payments" shall each be counted for purposes
of computing amounts expended pursuant to subclause (c)
"Restricted Payment" means any (i) Stock Payment, in the immediately preceding paragraph, and no amounts
(ii) Investment (other than a Permitted Investment) or expended pursuant to clause (3) above or pursuant to
(iii) Restricted Debt Prepayment (each as defined clause (i) or (ii) of the definition of the term
below). "Permitted Payments" shall be so counted; provided,
further that to the extent any payments made pursuant
"Stock Payment" means, with respect to any person, to clause (vii) of the definition of the term
(a) the declaration or payment by such person, either "Permitted Payments" are deducted for purposes of
in cash or in property, of any dividend on (except, in computing the Consolidated Net Income of the Company,
the case of Food 4 Less, dividends payable solely in such payments shall not be counted for purposes of
Qualified Capital Stock of Food 4 Less), or the making computing amounts expended as Restricted Payments
by such person or any of its subsidiaries of any other pursuant to subclause (c) in the immediately preceding
distribution in respect of, such person's Qualified paragraph.
Capital Stock or any warrants, rights or options to
purchase or acquire shares of any class of such capital "Restricted Payment" means any (i) Stock Payment, (ii)
stock (other than exchangeable or convertible Investment (other than a Permitted Investment) or (iii)
Indebtedness of such person), or (b) the redemption, Restricted Debt Prepayment (each as defined below).
repurchase, retirement or other acquisition for value
by such person or any of its subsidiaries, directly or "Stock Payment" means, with respect to any person, (a)
indirectly, of such person's Qualified Capital Stock the declaration or payment by such person, either in
(and, in the case of a subsidiary, Qualified Capital cash or in property, of any dividend on (except, in the
Stock of Food 4 Less) or any warrants, rights or case of the Company, dividends payable solely in
options to purchase or acquire shares of any class of Qualified Capital Stock of the Company), or the making
such capital stock (other than exchangeable or by such person or any of its subsidiaries of any other
convertible Indebtedness of such person), other than, distribution in respect of, such person's Qualified
in the case of Food 4 Less, through the issuance in
exchange therefor solely of Qualified Capital Stock of
Food 4 Less; provided, however,
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<TABLE>
<CAPTION>
OLD F4L SENIOR SUBORDINATED NOTES NEW F4L SENIOR SUBORDINATED NOTES
- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
that in the case of a subsidiary, the term "Stock Capital Stock or any warrants, rights or options to
Payment" shall not include any such payment with purchase or acquire shares of any class of such capital
respect to its capital stock or warrants, rights or stock (other than exchangeable or convertible
options to purchase or acquire shares of any class of Indebtedness of such person), or (b) the redemption,
its capital stock that are owned solely by Food 4 Less repurchase, retirement or other acquisition for value
or a wholly-owned subsidiary. by such person or any of its subsidiaries, directly or
indirectly, of such person's Qualified Capital Stock
"Investment" by any person in any other person means (and, in the case of a subsidiary, Qualified Capital
any investment by such person in such other person, Stock of the Company) or any warrants, rights or
whether by a purchase of assets, in any transaction or options to purchase or acquire shares of any class of
series of related transactions, individually or in the such capital stock (other than exchangeable or
aggregate, in an amount greater than $5 million, share convertible Indebtedness of such person), other than,
purchase, capital contribution, loan, advance (other in the case of the Company, through the issuance in
than reasonable loans and advances to employees for exchange therefor solely of Qualified Capital Stock of
moving and travel expenses, as salary advances, or to the Company; provided, however, that in the case of a
permit the purchase of Qualified Capital Stock of Food subsidiary, the term "Stock Payment" shall not include
4 Less and other similar customary expenses incurred, any such payment with respect to its capital stock or
in each case in the ordinary course of business warrants, rights or options to purchase or acquire
consistent with past practice) or similar credit shares of any class of its capital stock that are owned
extension constituting Indebtedness of such other solely by the Company or a wholly-owned subsidiary.
person, and any guarantee of Indebtedness of any other
person.
"Investment" by any person in any other person means
"Permitted Investment" by any person means (i) any any investment by such person in such other person, whether
Related Business Investment, (ii) Investments in by a purchase of assets, in any transaction or series
securities not constituting cash or cash equivalents of related transactions, individually or in the
and received in connection with an Asset Sale made aggregate, in an amount greater than $5 million, share
pursuant to the provisions of the Old F4L Senior purchase, capital contribution, loan, advance (other
Subordinated Note Indenture summarized under "Limi- than reasonable loans and advances to employees for
tation on Disposition of Assets" or any other moving and travel expenses, as salary advances, or to
disposition of assets not constituting an Asset Sale by permit the purchase of Qualified Capital Stock of the
reason of the $250,000 threshold contained in the Company and other similar customary expenses incurred,
definition thereof, (iii) cash and cash equivalents, in each case in the ordinary course of business
(iv) Investments existing on June 17, 1991, (v) consistent with past practice) or similar credit
Investments specifically permitted by and made in extension constituting Indebtedness of such other
accordance with the provisions of the Old F4L Senior person, and any guarantee of Indebtedness of any other
Subordinated Note Indenture summarized under person.
"Limitation on Restricted Payments," "Limitation on
Transactions with Affiliates" and "Limitation on "Permitted Investment" by any person means (i) any
Incurrences of Additional Indebtedness," and (vi) Related Business Investment, (ii) Investments in
Investments by Subsidiary Guarantors in other securities not constituting cash or cash equivalents
Subsidiary Guarantors and Investments by subsidiaries and received in connection with an Asset Sale made
which are not Subsidiary Guarantors in other pursuant to the provisions of the covenant described
subsidiaries which are not Subsidiary Guarantors. under "Limitation on Asset Sales" or any other dispo-
sition of assets not constituting an Asset Sale by
"Restricted Debt Prepayment" means any purchase, reason of the $500,000 threshold contained in the
redemption, defeasance (including, but not limited to, definition thereof, (iii) cash and cash equivalents,
in-substance or legal defeasance) or other acquisition (iv) Investments existing on the Issue Date, (v)
or retirement for value, directly or indirectly, by Investments specifically permitted by and made in
Food 4 Less or a subsidiary, prior to the scheduled accordance with the provisions of the covenant
maturity or prior to any scheduled repayment of described under "Limitation on Transactions with
principal or sinking fund payment, as the case may be, Affiliates", (vi) Investments by Subsidiary Guarantors
in respect of Indebtedness of Food 4 Less that is in other Subsidiary Guarantors and Investments by
subordinate in right of payment to the Old F4L Senior subsidiaries which are not Subsidiary Guarantors in
Subordinated Notes; provided, however, that any such other subsidiaries which are not Subsidiary Guarantors
acquisition shall be deemed not to be a Restricted Debt and (vii) additional investments in an aggregate amount
Prepayment to the extent it is made (x) in exchange for not exceeding $5 million.
or with the proceeds from the substantially concurrent
issuance of Qualified Capital Stock or (y) in exchange "Restricted Debt Prepayment" means any purchase,
for or with the proceeds from the substantially redemption, defeasance (including, but not limited to,
concurrent issuance of Indebtedness, in a principal in substance or legal defeasance) or other acquisition
amount (or, if such Indebtedness provides for an amount or retirement for value, directly or indirectly, by the
less than the principal amount thereof to be due and Company or a subsidiary, prior to the scheduled
payable upon the acceleration thereof, with an original maturity or prior to any scheduled repayment of
issue price) not to exceed the sum of (A) the lesser of principal or sinking fund payment, as the case may be,
(i) the principal amount of Indebtedness being acquired in respect of Subordinated Indebtedness.
in exchange therefor (or with the proceeds therefrom)
and (ii) if such Indebtedness being acquired was issued "Permitted Payments" means (i) any payment by the Com-
at an original issue discount, the original issue price pany or any subsidiary to The Yucaipa Companies or the
thereof plus amortization of the original issue principals thereof for consulting, management,
discount at the time of the incurrence of the investment banking or similar advisory services during
Indebtedness being issued in exchange therefor (or the such period pursuant to that certain Consulting
proceeds of which will finance such acquisition), and Agreement, dated as of the Issue Date, among Food 4
(B) the amount of penalties, fees and expenses actually Less, New Holdings and The Yucaipa Companies, (as such
incurred with respect thereto, and provided further amounts would be calculated under such Consulting
that any such Indebtedness shall have an average life Agreement as in effect on the Issue Date), (ii) any
not less than the average life of the Indebtedness payment by the Company or any subsidiary pursuant to
being acquired, and shall contain subordination and the Amended and Restated Tax Sharing Agreement, dated
default provisions no less favorable, in any material as of June 17, 1991, between Food 4 Less and certain
respect, to holders of the Old F4L Senior Subordinated subsidiaries, as such Tax Sharing Agreement may be
Notes than those contained in such Indebtedness being amended from time to time, so long as the payment
acquired. thereunder by the Company and its subsidiaries shall
not exceed the amount of taxes the Company would be
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"Permitted Payments" means any payment by Food 4 Less required to pay if it were the filing person for all
or any subsidiary (i) to The Yucaipa Companies or the applicable taxes, (iii) any payment by the Company or
principals thereof for consulting, investment banking any subsidiary pursuant to the Transfer and Assumption
or similar services during such period pursuant to that Agreement, dated as of June 23, 1989, between Food 4
certain Amended and Restated Consulting Agreement, Less and Holdings, as in effect on the Issue Date, (iv)
dated as of June 17, 1991, among Food 4 Less, Yucaipa any payment by the Company or any subsidiary (a) in
Management Company and The Yucaipa Companies, as such connection with repurchases of outstanding shares of
amounts would be calculated under such Consulting the Company's or New Holdings' common stock following
Agreement as in effect on the date of the Old F4L the death, disability or termination of employment of
Senior Subordinated Note Indenture, (ii) pursuant to management stockholders, and (b) of amounts required to
the Amended and Restated Tax Sharing Agreement, dated be paid by New Holdings, the Company or any of its
as of June 17, 1991, between Food 4 Less and certain subsidiaries to participants in employee benefit plans
subsidiaries, as such Tax Sharing Agreement may be upon termination of employment by such participants, as
amended from time to time, so long as the payment provided in the documents related thereto, in an
thereunder by Food 4 Less and its subsidiaries shall aggregate amount (for both clauses (a) and (b)) not to
not exceed the amount of taxes Food 4 Less would be exceed $10 million in any yearly period (provided that
required to pay if it were the filing person for all any unused amounts may be carried over to any
applicable taxes, (iii) pursuant to the Transfer and subsequent yearly period subject to a maximum amount of
Assumption Agreement, dated as of June 23, 1989, $20 million in any yearly period), (v) from and after
between Food 4 Less and FFL, as in effect on June 17, June 30, 1998, payments of cash dividends to New
1991, and (iv) (a) in connection with repurchases of Holdings in an amount sufficient to enable New Holdings
outstanding shares of Food 4 Less's common stock to make payments of interest required to be made in
following the death, disability or termination of respect of the Holdings Discount Notes in accordance
employment of management stockholders, and (b) of with the terms thereof in effect on the Issue Date,
amounts required to be paid by FFL, Food 4 Less or any (vi) from and after February , 2000, payments of cash
of its subsidiaries to participants in employee benefit dividends to New Holdings in an amount sufficient to
plans upon any termination of employment by such enable New Holdings to make payments of interest
participants, as provided in the documents related required to be made in respect of the Seller Debentures
thereto, in an aggregate amount (for both clauses (a) in accordance with the terms thereof in effect on the
and (b)) not to exceed $5 million in any yearly period Issue Date and (vii) dividends or other payments to New
(provided that any unused amounts may be carried over Holdings sufficient to permit New Holdings to perform
to any subsequent yearly period subject to a maximum accounting, legal, corporate, and administrative
amount of $10 million in any yearly period). functions in the ordinary course of business or to pay
required fees and expenses in connection with the
In addition to the foregoing, the maximum annual fee Merger, the Reincorporation Merger and the registration
payable to Yucaipa for management and consulting under applicable laws and regulations of its debt or
services pursuant to the Amended and Restated equity securities.
Consulting Agreement (and thereby allowable as a
Permitted Payment under the Old F4L Senior Subordinated "Consolidated Net Income," means, with respect to any
Note Indenture) is either (a) one-tenth of one percent person, for any period, the aggregate of the net income
of annual revenues or (b) a fixed annual fee of $2 (or loss) of such person and its subsidiaries for such
million plus 2.5 percent of the excess of (i) earnings period, on a consolidated basis, determined in
before interest, taxes, depreciation and amortization accordance with GAAP; provided that (a) the net income
("EBITDA") over (ii) a minimum EBITDA threshold of $110 of any other person in which such person or any of its
million. Yucaipa may elect either method for subsidiaries has an interest (which interest does not
determining its consulting fee at the beginning of each cause the net income of such other person to be
fiscal year during the term of the agreement. However, consolidated with the net income of such person and its
pursuant to the terms of the 1991 Stockholders Agree- subsidiaries in accordance with GAAP) shall be included
ment, Yucaipa's consulting fee is currently limited to only to the extent of the amount of dividends or
an amount not greater than that specified in clause (b) distributions actually paid to such person or such
above. The maximum fee payable to Yucaipa for subsidiary by such other person in such period; (b) the
transactional consulting services pursuant to the net income of any subsidiary of such person that is
Amended and Restated Consulting Agreement (and thereby subject to any Payment Restriction shall be excluded to
allowable as a Permitted Payment under the Old F4L the extent such Payment Restriction actually prevented
Senior Subordinated Note Indenture) is one percent of the payment of an amount that otherwise could have been
the cash and noncash consideration paid or received paid to, or received by, such person or a subsidiary of
(including assumed indebtedness) by Food 4 Less in any such person not subject to any Payment Restriction; and
acquisition or disposition transaction, and, without (c)(i) the net income (or loss) of any other person
duplication of the foregoing, one percent of the acquired in a pooling of interests transaction for any
maximum principal amount or proceeds of any debt, period prior to the date of such acquisition, (ii) all
equity or lease financing by Food 4 Less. gains and losses realized on any Asset Sale, (iii) all
gains realized upon or in connection with or as a
"Consolidated Net Income," with respect to any consequence of the issuance of the capital stock of
person, for any period, means the aggregate of the net such person or any of its subsidiaries and any gains on
income (or loss) of such person and its subsidiaries pension reversions received by such person or any of
for such period, on a consolidated basis, determined in its subsidiaries, (iv) all gains and losses realized on
accordance with GAAP; provided that (a) the net income the purchase or other acquisition by such person or any
of any other person in which such person or any of its of its subsidiaries of any securities of such person or
subsidiaries has an interest (which interest does not any of its subsidiaries, (v) all gains and losses
cause the net income of such other person to be resulting from the cumulative effect of any accounting
consolidated with the net income of such person and its change pursuant to the application of Accounting
subsidiaries in accordance with GAAP) shall be included Principles Board Opinion No. 20, as amended, (vi) all
only to the extent of the amount of dividends or other extraordinary gains and losses, (vii) all
distributions actually paid to such person or such non-cash charges incurred by the Company or any of its
subsidiary by such other person in such period; (b) the subsidiaries in connection with the Merger, including
net income of any subsidiary of such person that is without limitation the divestiture of the excluded
subject to any Payment Restriction shall be excluded to assets, (viii) losses incurred by the Company and its
the extent such Payment Restriction actually prevented subsidiaries resulting from earthquakes, and (ix) with
the payment of an amount that otherwise could have been respect to the Company, all deferred financing costs
paid to, or received written off in connection with the early extinguishment
of any Indebtedness, shall
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by, such person or a subsidiary of such person not each be excluded.
subject to any Payment Restriction; and (c)(i) the net
income (or loss) of any other person acquired in a "Subordinated Indebtedness" means, with respect to the
pooling of interests transaction for any period prior Company or any Subsidiary Guarantor, Indebtedness of
to the date of such acquisition, (ii) all gains and such person which is subordinated in right of payment
losses-realized on any Asset Sale or in connection with to the New F4L Senior Subordinated Notes or the senior
the closure of the Long Beach Warehouse, (iii) all subordinated note guarantee of such Subsidiary
gains realized upon or in connection with or as a Guarantor, as the case may be.
consequence of the issuance of the capital stock of
such person or any of its subsidiaries and any gains on
pension reversions received by such person or any of
its subsidiaries, (iv) all gains and losses realized on
the purchase or other acquisition by such person or any
of its subsidiaries of any securities of such person or
any of its subsidiaries, (v) all gains and losses
resulting from the cumulative effect of any accounting
change pursuant to the application of Accounting
Principles Board Opinion No. 20, as amended, (vi) all
other extraordinary gains and losses, and (vii) with
respect to Food 4 Less, all deferred financing costs
written off in connection with the early extinguishment
of any Indebtedness, shall each be excluded.
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD
F4L SENIOR SUBORDINATED NOTE INDENTURE WILL BE MODIFIED
TO ELIMINATE THIS COVENANT AND CERTAIN RELATED
DEFINITIONS.
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LIMITATION ON INCURRENCES OF ADDITIONAL LIMITATION ON INCURRENCES OF ADDITIONAL
INDEBTEDNESS. Pursuant to the Old F4L Senior INDEBTEDNESS. Pursuant to the New F4L Senior
Subordinated Note Indenture, Food 4 Less shall not, and Subordinated Note Indenture, the Company shall not, and
shall not permit any of its subsidiaries, after the shall not permit any of its subsidiaries, directly or
original issuance of the Old F4L Senior Subordinated indirectly, to incur, assume, guarantee, become liable,
Notes, directly or indirectly, to incur, assume, contingently or otherwise, with respect to, or
guarantee, become liable, contingently or otherwise, otherwise become responsible for the payment of
with respect to, or otherwise become responsible for (collectively "incur") any Indebtedness other than
the payment of (collectively "incur") any Indebt- Permitted Indebtedness; provided, however, that if no
edness; provided, however, that if no Default with Default with respect to payment of principal of, or
respect to payment of principal of, or interest on, the interest on, the New F4L Senior Subordinated Notes
Old F4L Senior Subordinated Notes or Event of Default issued under the New F4L Senior Subordinated Note
shall have occurred and be continuing at the time or as Indenture or Event of Default under the New F4L Senior
a consequence of the incurrence of any such Subordinated Note Indenture shall have occurred and be
Indebtedness, Food 4 Less (and, in certain circum- continuing at the time or as a consequence of the
stances subsidiaries) may incur Indebtedness if on the incurrence of any such Indebtedness, the Company may
date of the incurrence of such Indebtedness the incur Indebtedness if immediately before and
Operating Coverage Ratio of Food 4 Less would be immediately after giving effect to the incurrence of
greater than 2.0 to 1.0 if such date is after June 15, such Indebtedness the Operating Coverage Ratio of
1992 and prior to June 15, 1994; greater than 2.2 to Ralphs Grocery would be greater than 2.0 to 1.0;
1.0 if such date is on or after June 15, 1994 and prior provided, further, a subsidiary may incur Acquired
to June 15, 1996; and greater than 2.4 to 1.0 Indebtedness to the extent such Indebtedness could have
thereafter. been incurred by the Company pursuant to the
immediately preceding proviso.
The foregoing limitation shall not apply to (a)
certain Indebtedness of Food 4 Less and its "Indebtedness" means with respect to any person,
subsidiaries pursuant to (i) the Term Facility under without duplication, (i) all liabilities, contingent or
the Loan Documents, (ii) the Subsidiary Letter of otherwise, of such person (a) for borrowed money
Credit Obligations, and (iii) the Revolving Facility (whether or not the recourse of the lender is to the
under the Loan Documents (and Food 4 Less and each whole of the assets of such person or only to a portion
subsidiary (to the extent it is not an obligor) may thereof), (b) evidenced by bonds, notes, debentures,
guarantee such Indebtedness, subject to certain drafts accepted or similar instruments or letters of
limitations) (b) the Old F4L Senior Subordinated Notes; credit or representing the balance deferred and unpaid
(c) certain intercompany Indebtedness; (d) Indebtedness of the purchase price of any property (other than any
incurred by Food 4 Less or any subsidiary in connection such balance that represents an account payable or any
with the purchase or improvement of property (real or other monetary obligation to a trade creditor (whether
personal) or equipment or other capital expenditures in or not an affiliate) created, incurred, assumed or
the ordinary course of business (including for the guaranteed by such person in the ordinary course of
purchase of assets or stock of any retail grocery store business of such person in connection with obtaining
or business) or consisting of capitalized lease goods, materials or services and due within twelve
obligations, in aggregate not to exceed $25 million in months (or such longer period for payment as is
any yearly period (provided, that any unused amounts customarily extended by such trade creditor) of the
may be carried over to the next (but not any subse- incurrence thereof, which account is not overdue by
quent) yearly period); (e) Indebtedness of Food 4 Less more than 90 days, according to the original terms of
under certain Foreign Exchange Agreements and Interest sale, unless such account payable is being contested in
Swap Obligations; (f) certain Permitted Guarantees of good faith), or (c) for the payment of money relating
Indebtedness, in aggregate not to exceed $25 million at to a capitalized lease obligation; (ii) the maximum
any time outstanding, in addition to Permitted fixed repurchase price of all Disqualified Capital
Guarantees outstanding on June 17, 1991; (g) guarantees Stock of such person; (iii) reimbursement obligations
by Food 4 Less and its subsidiaries of Indebtedness of such person with respect to letters of credit; (iv)
incurred by a wholly-owned subsidiary so long as the obligations of such person with respect to Interest
incurrence of such Indebtedness by such wholly-owned Swap Obligations and Foreign Exchange Agreements; (v)
subsidiary is permitted under the terms of the Old F4L all liabilities of others of the kind described in the
Senior Subordinated Note Indenture; (h) Refinancing preceding clause (i), (ii), (iii) or (iv) that such
Indebtedness; (i) Indebtedness in connection with the person has guaranteed or that is otherwise its legal
acquisition of the La Habra Facility and Option Stores liability, and (vi) all obligations of others secured
if, after giving effect to such incurrence, the by a lien to which any of the properties or assets
Operating Coverage Ratio of Food 4 Less would be (including, without limitation, leasehold interests and
greater than 2.0 to 1.0; (j) Indebtedness for letters any other tangible or intangible property rights) of
of credit relating to workers compensation claims and such person are subject, whether or not the obligations
self-insurance and (k) additional Indebtedness of Food secured thereby shall have been assumed by such person
4 Less and Subsidiary Guarantors not to exceed $75 or shall otherwise be such person's legal liability
million at any time outstanding. (provided, that if the obligations so secured have not
been assumed by such person or are not otherwise such
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD person's legal liability, such obligations shall be
F4L SENIOR SUBORDINATED NOTE INDENTURE WILL BE MODIFIED deemed to be in an amount equal to the fair market
TO ELIMINATE THIS PROVISION AND CERTAIN RELATED value of such properties or assets, as determined in
DEFINITIONS. good faith by the board of directors of such person,
which determination shall be evidenced by a board
"Indebtedness" means with respect to any person, resolution). For purposes of the preceding sentence,
without duplication, (i) all liabilities, contingent or the "maximum fixed repurchase price" of any
otherwise, of such person (a) for borrowed money Disqualified Capital Stock that does not have a fixed
(whether or not the recourse of the lender is to the repurchase price shall be calculated in accordance with
whole of the assets of such person or only to a portion the terms of such Disqualified Capital Stock as if such
thereof), (b) evidenced by bonds, notes, debentures, Disqualified Capital Stock were purchased on any date
drafts accepted or similar instruments or letters of on which Indebtedness shall be required to be
credit or representing the balance deferred and unpaid determined under the New F4L Senior Subordinated Note
of the purchase price of any property (other than any Indenture, and if such price is based upon, or measured
such balance that represents an account payable or any by, the fair market value of such Disqualified Capital
other monetary obligation to a trade creditor (whether Stock (or any equity security for which it may be
or not an affiliate) created, incurred, assumed or exchanged or converted), such fair market value shall
guaranteed by such person in the ordinary course of be determined in good faith by the board of directors
business of such person in connection with obtaining of such person,
goods,
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materials or services and due within twelve months (or which determination shall be evidenced by a board
such longer period for payment as is customarily resolution. For purposes of the New F4L Senior
extended by such trade creditor) of the incurrence Subordinated Indenture, Indebtedness incurred by any
thereof, which account is not overdue by more than 90 person that is a general partnership (other than
days, according to the original terms of sale, unless non-recourse Indebtedness) shall be deemed to have been
such account payable is being contested in good faith), incurred by the general partners of such partnership
or (c) for the payment of money relating to a pro rata in accordance with their respective interests
capitalized lease obligation; (ii) the maximum fixed in the liabilities of such partnership unless any such
repurchase price of all Disqualified Capital Stock of general partner shall, in the reasonable determination
such person; (iii) reimbursement obligations of such of the board of directors of the Company, be unable to
person with respect to letters of credit; (iv) satisfy its pro rata share of the liabilities of the
obligations of such person with respect to Interest partnership, in which case the pro rata share of any
Swap Obligations and Foreign Exchange Agreements; (v) Indebtedness attributable to such partner shall be
all liabilities of others of the kind described in the deemed to be incurred at such time by the remaining
preceding clause (i), (ii), (iii) or (iv) that such general partners on a pro rata basis in accordance with
person has guaranteed or that is otherwise its legal their interests.
liability, and (vi) all obligations of others secured
by a lien to which any of the properties or assets "Permitted Indebtedness" means (a) Indebtedness of the
(including, without limitation, leasehold interests and Company and its subsidiaries pursuant to (i) the Term
any other tangible or intangible property rights) of Loans in an aggregate principal amount at any time
such person are subject, whether or not the obligations outstanding not to exceed $750 million, less the
secured thereby shall have been assumed by such person aggregate amount of all principal repayments thereunder
or shall otherwise be such person's legal liability pursuant to and in accordance with the covenant
(provided, that if the obligations so secured have not described under "-- Limitation on Asset Sales" herein
been assumed by such person or are not otherwise such subsequent to the Issue Date, and (ii) the revolving
person's legal liability, such obligations shall be credit facility under the Credit Agreement (and the
deemed to be in an amount equal to the fair market Company and each subsidiary (to the extent it is not an
value of such properties or assets, as determined in obligor) may guarantee such Indebtedness) in an
good faith by the board of directors of such person, aggregate principal amount at any time outstanding not
which determination shall be evidenced by a board to exceed $325 million, less all permanent reductions
resolution). For purposes of the preceding sentence, thereunder pursuant to and in accordance with the
the "maximum fixed repurchase price" of any covenant described under "-- Limitation on Asset Sales"
Disqualified Capital Stock that does not have a fixed herein, (b) Indebtedness of the Company or a Subsidiary
repurchase price shall be calculated in accordance with Guarantor owed to and held by the Company or a
the terms of such Disqualified Capital Stock as if such Subsidiary Guarantor; (c) Indebtedness incurred by the
Disqualified Capital Stock were purchased on any date Company or any subsidiary in connection with the
on which Indebtedness would be required to be purchase or improvement of property (real or personal)
determined under the Old F4L Senior Subordinated Note or equipment or other capital expenditures in the
Indenture, and if such price is based upon, or measured ordinary course of business (including for the purchase
by, the fair market value of such Disqualified Capital of assets or stock of any retail grocery store or
Stock (or any equity security for which it may be business) or consisting of Capitalized Lease
exchanged or converted), such fair market value shall Obligations provided that (i) at the time of the
be determined in good faith by the board of directors incurrence thereof, such indebtedness, together with
of such person, which determination shall be evidenced any other Indebtedness incurred during the most
by a board resolution. recently completed four fiscal quarter period in
reliance upon this clause (c) does not exceed, in the
"Operating Coverage Ratio" means, with respect to any aggregate, 3% of net sales of the Company and its
person, the ratio of (1) EBDIT of such person for the subsidiaries during the most recently completed four
period (the "Pro Forma Period") consisting of the most fiscal quarter period on a consolidated basis
recent four full fiscal quarters for which financial (calculated on a pro forma basis if the date of
information in respect thereof is available immediately incurrence is prior to the first anniversary of the
prior to the date of the transaction giving rise to the Merger) and (ii) such Indebtedness, together with all
need to calculate the Operating Coverage Ratio (the then outstanding Indebtedness incurred in reliance upon
"Transaction Date") to (2) the aggregate Fixed Charges this clause (c) does not exceed, in the aggregate, 3%
of such person for the fiscal quarter in which the of the aggregate net sales of the Company and its
Transaction Date occurs and the three fiscal quarters Subsidiaries during the most recently completed twelve
immediately subsequent to such fiscal quarter (the fiscal quarter period on a consolidated basis
"Forward Period") reasonably anticipated by the board (calculated on a pro forma basis if the date of
of directors of such person to become due from time to incurrence is prior to the third anniversary of the
time during such period. For purposes of this Merger); (d) Indebtedness incurred by the Company or
definition, if the Transaction Date occurs prior to the any subsidiary in connection with capital expenditures
first anniversary of June 17, 1991, "EBDIT" for the Pro in an aggregate principal amount not exceeding $150.0
Forma Period shall be calculated, in the case of Food 4 million in the aggregate, provided that such capital
Less, after giving effect on a pro forma basis to the expenditures relate solely to the integration of the
Alpha Beta Acquisition as if it had occurred on the operations of RSI, Food 4 Less and their respective
first day of the Pro Forma Period. In addition to, but subsidiaries, as described in this Prospectus and
without duplication of, the foregoing, for purposes of Solicitation Statement; (e) Indebtedness of the Company
this definition, "EBDIT" shall be calculated after incurred under certain Foreign Exchange Agreements and
giving effect (without duplication), on a pro forma Interest Swap Obligations; (f) guarantees incurred in
basis for the Pro Forma Period (but no longer), to (a) the ordinary course of business by the Company or a
any Investment, during the period commencing on the Subsidiary of Indebtedness of any other person in
first day of the Pro Forma Period to and including the aggregate not to exceed $25 million at any time
Transaction Date (the "Reference Period"), in any other outstanding; (g) guarantees by the Company or a
person that, as a result of such Investment, becomes a Subsidiary Guarantor of Indebtedness incurred by a
subsidiary of such person, (b) the acquisition, during wholly-owned Subsidiary Guarantor so long as the
the Reference Period (by merger, consolidation or incurrence of such Indebtedness incurred by such
purchase of stock or assets) of any business or assets, wholly-owned Subsidiary Guarantor is permitted under
which acquisition is not prohibited by the Old F4L the terms of the applicable New Indenture; (h)
Senior Subordinated Note Indenture, and (c) any sales Refinancing Indebtedness; (i) Indebtedness for letters
or other dispositions of assets (other than sales of of credit relating to workers' compensation claims and
inventory in the ordinary course of business) occurring self-insurance or similar requirements in the ordinary
during the Reference Period, in each case as if such course of business; (j) other Indebtedness outstanding
incurrence, Investment, repayment, acquisition or asset on the Issue Date (after giving effect to the Merger);
sale had
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occurred on the first day of the Reference Period. In (k) Indebtedness arising from guarantees of
addition, for purposes of this definition, "Fixed Indebtedness of the Company or any subsidiary or other
Charges" shall be calculated after giving effect agreements of the Company or a subsidiary providing for
(without duplication), on a pro forma basis for the indemnification, adjustment of purchase price or
Forward Period, to any Indebtedness incurred or repaid similar obligations, in each case, incurred or assumed
on or after the first day of the Forward Period and in connection with the disposition of any business,
prior to the Transaction Date. assets or subsidiary, other than guarantees of
Indebtedness incurred by any person acquiring all or
"Loan Documents" means the Credit Agreement and all any portion of such bonuses, assets or subsidiary for
promissory notes, guarantees, security agreements, the purpose of financing such acquisition, provided
pledge agreements, deeds of trust, mortgages, letters that the maximum aggregate liability in respect of all
of credit and other instruments, agreements and such Indebtedness shall at no time exceed the gross
documents executed pursuant thereto or in connection proceeds actually received by the Company and its
therewith, including all amendments, supplements, subsidiaries in connection with such disposition; (l)
extensions, renewals, restatements, replacements or obligations in respect of performance bonds and
refinancings thereof, or other modifications (in whole completion guarantees provided by the Company or any
or in part, and without limitation as to amount, terms, subsidiary in the ordinary course of business; and (m)
conditions, covenants or other provisions) thereof from additional Indebtedness of the Company and the
time to time. Subsidiary Guarantors in an amount not to exceed $200
million at any time outstanding.
"Credit Agreement" means the Credit Agreement, dated
as of June 17, 1991, by and among Food 4 Less, certain "Operating Coverage Ratio" means, with respect to any
of its subsidiaries, the Lenders and Designated Issuers person, the ratio of (1) EBDIT of such person for the
of the Lenders referred to therein, Bankers Trust period (the "Pro Forma Period") consisting of the most
Company, Citicorp North America, Inc., and recent four full fiscal quarters for which financial
Manufacturers Hanover Trust Company, as Co-Agents, and information in respect thereof is available immediately
Citicorp North America, Inc., as Administrative Agent, prior to the date of the transaction giving rise to the
as the same may be amended, extended, renewed, re- need to calculate the Operating Coverage Ratio (the
stated, supplemented or otherwise modified (in whole or "Transaction Date") to (2) the aggregate Fixed Charges
in part, and without limitation as to amount, terms, of such person for the fiscal quarter in which the
conditions, covenants and other provisions) from time Transaction Date occurs and the three fiscal quarters
to time, and any agreement governing Indebtedness immediately subsequent to such fiscal quarter (the
incurred to refund or refinance the entirety of the "Forward Period") reasonably anticipated by the board
borrowings and commitments then outstanding or of directors of such person to become due from time to
permitted to be outstanding under such Credit Agreement time during such period. For purposes of this
or such agreement; provided that such refunding or definition, if the Transaction Date occurs prior to the
refinancing by its terms states that it is intended to first anniversary of the Merger, "EBDIT" for the Pro
be senior in right of payment to the Old F4L Senior Forma Period shall be calculated, in the case of the
Subordinated Notes. Food 4 Less shall promptly notify Company, after giving effect on a pro forma basis to
the Trustee of any such refunding or refinancing of the the Merger as if it had occurred on the first day of
Credit Agreement. the Pro Forma Period. In addition to, but without
duplication of, the foregoing, for purposes of this
"Acquired Indebtedness" means Indebtedness of a definition, "EBDIT" shall be calculated after giving
person or any of its subsidiaries existing at the time effect (without duplication), on a pro forma basis for
such person becomes a subsidiary of Food 4 Less or the Pro Forma Period (but no longer), to (a) any
assumed in connection with the acquisition of assets Investment, during the period commencing on the first
from such person and not incurred by such person in day of the Pro Forma Period to and including the
connection with, or in anticipation or contemplation Transaction Date (the "Reference Period"), in any other
of, such person becoming a subsidiary or such person that, as a result of such Investment, becomes a
acquisition. subsidiary of such person, (b) the acquisition, during
the Reference Period (by merger, consolidation or
"Permitted Guarantees" means (i) guarantees in effect purchase of stock or assets) of any business or assets,
on June 17, 1991 and (ii) guarantees incurred in the which acquisition is not prohibited by the New F4L
ordinary course of business, by Food 4 Less or a Senior Subordinated Indenture, and (c) any sales or
subsidiary, of Indebtedness of any other person. other dispositions of assets (other than sales of
inventory in the ordinary course of business) occurring
"Refinancing Indebtedness" means Indebtedness of Food during the Reference Period, in each case as if such
4 Less or a subsidiary (i) issued in exchange for, or incurrence, Investment, repayment, acquisition or asset
the proceeds from the issuance and sales or sale had occurred on the first day of the Reference
disbursement of which are used to substantially Period. In addition, for purposes of this definition,
concurrently repay, redeem, refund, refinance, dis- "Fixed Charges" shall be calculated after giving effect
charge or otherwise retire for value, in whole or in (without duplication), on a pro forma basis for the
part (collectively, "repay"), or constituting an Forward Period, to any Indebtedness incurred or repaid
amendment, modification or supplement to, or a deferral on or after the first day of the Forward Period and
or renewal of (collectively, an "amendment"), any prior to the Transaction Date. If such person or any of
Indebtedness of Food 4 Less or a subsidiary (and any its subsidiaries directly or indirectly guarantees any
penalties, fees and expenses actually incurred by Food Indebtedness of a third person, the Operating Coverage
4 Less or such subsidiary in connection with the Ratio shall give effect to the incurrence of such
repayment or amendment thereof) existing immediately Indebtedness as if such person or subsidiary had
after the original issuance of the Old F4L Senior directly incurred such guaranteed Indebtedness.
Subordinated Notes or incurred pursuant to paragraphs
(b), (c), (d), (f), (g), (h), (i), (j), (k), (l), (m) "EBDIT" means, with respect to any person, for any
or (n) of Section 5.13 in a principal amount (or, if period, the Consolidated Net Income of such person for
such Refinancing Indebtedness provides for an amount such period, plus, in each case to the extent deducted
less than the principal amount thereof to be due and in computing Consolidated Net Income of such person for
payable upon the acceleration thereof, with an original such period (without duplication)(i) provisions for
issue price) not in excess of (l) the principal amount income taxes or similar charges recognized by such
of the Indebtedness so refinanced (or, if such person and its consolidated subsidiaries accrued during
Refinancing Indebtedness refinances Indebtedness under such period, (ii) depreciation and amortization expense
a revolving facility or other agreement providing a of such person and its consolidated subsidiaries
commitment for subsequent borrowings, with a maximum accrued during such period (but only to the extent not
commitment not to exceed the maximum commitment under included in fixed
such revolving credit
</TABLE>
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facility or other agreement) plus (2) unpaid accrued charges), (iii) fixed charges of such person and its
interest on such Indebtedness plus (3) penalties, fees consolidated subsidiaries for such period, (iv) LIFO
and expenses actually incurred by Food 4 Less or such charges (credits) of such person and its consolidated
subsidiary, as the case may be, in connection with the subsidiaries for such period, (v) the amount of any
repayment or amendment thereof; or (ii) in an amount restructuring reserve or charge recorded during such
permitted to be incurred at the time of such incurrence period in accordance with GAAP, including any such
by Food 4 Less or such subsidiary, as the case may be, reserve or charge related to the Merger, and (vi) any
under the Credit Agreement pursuant to limitations on other non-cash charges reducing Consolidated Net Income
Incurrences of Additional Indebtedness; provided that for such period (excluding any such charge which
(for both clauses (i) and (ii) above) (A) Refinancing requires an accrual of or a cash reserve for cash
Indebtedness of any subsidiary shall not be used to charges for any future period), less, without
repay outstanding Indebtedness of Food 4 Less and (B) duplication, (i) non-cash items increasing Consolidated
Refinancing Indebtedness of Food 4 Less that repays or Net Income of such person for such period in each case
constitutes an amendment to Indebtedness of Food 4 Less determined in accordance with GAAP and (ii) the amount
(other than any of the Securities) ranking pari passu of all cash payments made by such person or its
with, or junior in right of payment to, the Old F4L subsidiaries during such period to the extent that such
Senior Subordinated Notes shall not have an Average cash payment has been provided for in a restructuring
Life less than the Indebtedness to be so refinanced at reserve or charge referred to in clause (v) above (and
the time of such incurrence and shall not rank senior were not otherwise deducted in the computation of
in right of payment in any respect to such repaid or Consolidated Net Income of such person for such
amended Indebtedness, and (C) notwithstanding the period).
foregoing, any Refinancing Indebtedness incurred to
repay all of Old F4L Senior Subordinated Notes then "Credit Agreement" means the Credit Agreement, dated as
outstanding shall not be limited in principal amount or of the Issue Date, by and among Food 4 Less, certain of
otherwise if Food 4 Less irrevocably deposits with the its subsidiaries, the Lenders referred to therein,
Old F4L Senior Subordinated Notes Trustee or Paying Bankers Trust Company, as administrative agent, as the
Agent an amount of the proceeds of such Refinancing case may be, as amended, extended, renewed, restated,
Indebtedness sufficient to redeem the outstanding supplemented or otherwise modified (in whole or in
principal amount of the Old F4L Senior Subordinated part, and without limitation as to amount, terms,
Notes on the date fixed for the repayment thereof. conditions, covenants and other provisions) from time
to time, and any agreement governing Indebtedness in-
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD curred to refund or refinance the borrowings and
F4L SENIOR SUBORDINATED NOTE INDENTURE WILL BE MODIFIED commitments then outstanding or permitted to be
TO ELIMINATE THIS COVENANT AND CERTAIN RELATED outstanding under such Credit Agreement or such
DEFINITIONS. agreement.
"Acquired Indebtedness" means (i) with respect to any
person that becomes a subsidiary of the Company (or is
merged into the Company or any of its subsidiaries)
after the Issue Date, Indebtedness of, such person or
any of its subsidiaries existing at the time such
person becomes a subsidiary of the Company (or is
merged into the Company or any of its subsidiaries) and
which was not incurred in connection with, or in
contemplation of, such person becoming a subsidiary of
the Company (or being merged into the Company or any of
its subsidiaries) and (ii) with respect to the Company
or any of its subsidiaries, any Indebtedness assumed by
the Company or any of its subsidiaries in connection
with the acquisition of any assets from another person
(other than the Company or any of its subsidiaries),
and which was not incurred by such other person in
connection with, or in contemplation of, such
acquisition.
"Permitted Guarantees" means (i) guarantees in effect
on the Issue Date and (ii) guarantees incurred in the
ordinary course of business, by the Company or a
subsidiary, of Indebtedness of any other person.
"Refinancing Indebtedness" means, with respect to any
person, Indebtedness of such person issued in exchange
for, or the proceeds from the issuance and sale or
disbursement of which are used to substantially
concurrently repay, redeem, refund, refinance,
discharge or otherwise retire for value, in whole or in
part (collectively, "repay"), or constituting an
amendment, modification or supplement to, or a deferral
or renewal of (collectively, an "amendment"), any
Indebtedness of such person existing on the Issue Date
or Indebtedness (other than Permitted Indebtedness,
except Permitted Indebtedness incurred pursuant to
clauses (a), (c), (d), (h) and (j) of the definition
thereof) incurred in accordance with the applicable New
Indenture (a) in a principal amount (or, if such
Refinancing Indebtedness provides for an amount less
than the principal amount thereof to be due and payable
upon the acceleration thereof, with an original issue
price) not in excess of (without duplication) (i) the
principal amount or the original issue price, as the
case may be, of the Indebtedness so refinanced (or, if
such Refinancing Indebtedness refinances Indebtedness
under a revolving credit facility or other
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- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
agreement providing a commitment for subsequent
borrowings, with a maximum commitment not to exceed the
maximum commitment under such revolving credit facility
or other agreement) plus (ii) unpaid accrued interest
on such Indebtedness plus (iii) premiums, penalties,
fees and expenses actually incurred by such person in
connection with the repayment or amendment thereof and
(b) with respect to Refinancing Indebtedness that
repays or constitutes an amendment to Subordinated
Indebtedness, such Refinancing Indebtedness (x) shall
not have any fixed mandatory redemption or sinking fund
requirement in an amount greater than or at a time
prior to the amounts and times specified in such repaid
or amended Subordinated Indebtedness, except to the
extent that any such requirement applies on a date
after the Maturity Date of the New F4L Senior Subordi-
nated Notes and (y) shall contain subordination and
default provisions no less favorable in any material
respect to holders of the New Senior Subordinated F4L
Notes than those contained in such repaid or amended
Subordinated Indebtedness.
LIMITATION ON LIENS. Pursuant to the Old F4L Senior LIMITATION ON LIENS. Pursuant to the New F4L Senior
Subordinated Note Indenture, Food 4 Less shall not Subordinated Note Indenture, the Company shall not and
and shall not permit any subsidiary to create, incur, shall not permit any subsidiary to create, incur,
assume or suffer to exist any liens upon any of their assume or suffer to exist any liens upon any of their
respective assets, except for (i) existing and future respective assets unless the New F4L Senior
liens securing Senior Indebtedness and Guarantor Senior Subordinated Notes are issued thereunder equally and
Indebtedness of each Subsidiary Guarantor, (ii) ratably secured by the liens covering such assets,
Permitted Liens, (iii) liens securing certain Acquired except for (i) liens on assets of the Company securing
Indebtedness, (iv) liens existing on June 17, 1991, (v) Senior Indebtedness and liens on assets of a Subsidiary
liens securing certain Refinancing Indebtedness, and Guarantor which, at the time of incurrence, secure
(vi) liens to secure certain Indebtedness that is Guarantor Senior Indebtedness, (ii) existing and future
otherwise permitted under the Old F4L Senior liens securing Indebtedness and other obligations of
Subordinated Note Indenture and that is incurred to the Company and its subsidiaries under the Credit
finance the costs of the property subject thereto, Agreement and related documents or any refinancing or
(vii) liens in favor of the Old F4L Senior Subordinated replacement thereof in whole or in part permitted under
Note Trustee; and (viii) any replacement, extension or the New F4L Senior Subordinated Indenture, (iii)
renewal, in whole or in part, of any lien described in Permitted Liens, (iv) liens securing Acquired
the foregoing clauses (i) through (vii) provided that Indebtedness; provided that such liens (x) are not
if any such clause limits the amount secured or the incurred in connection with, or in contemplation of the
assets subject to such liens, no extension or renewal acquisition of the property or assets acquired and (y)
shall increase the amount of the assets subject to such do not extend to or cover any property or assets of the
liens. Company or any subsidiary other than the property or
assets so acquired, (v) liens to secure capitalized
"Permitted Liens" shall mean (i) liens for taxes, lease obligation and certain other Indebtedness that is
assessments, and governmental charges to the extent not otherwise permitted under the New F4L Senior
required to be paid under the provisions of the Old F4L Subordinated Indenture; provided that (A) any such lien
Senior Subordinated Note Indenture concerning payment is created solely for the purpose of securing such
of taxes and other claims; (ii) statutory liens of other Indebtedness representing, or incurred to
landlords and carriers, warehousemen, mechanics, finance, refinance or refund, the cost (including sales
suppliers, materialmen, repairmen, or other like liens and excise taxes, installation and delivery charges and
arising in the ordinary course of business and with other direct costs of, and other direct expenses paid
respect to amounts not yet delinquent or being or charged in connection with, the purchase (whether
contested in good faith by appropriate process of law, through stock or asset purchase, merger or otherwise)
and for which a reserve or other appropriate or construction) or improvement of the property subject
provision, if any, as shall be required by GAAP thereto (whether real or personal, including fixtures
shall have been made; (iii) pledges or deposits in and other equipment), (B) the principal amount of the
the ordinary course of business to secure lease Indebtedness secured by such lien does not exceed 100%
obligations or nondelinquent obligations under workers' of such costs and (C) such lien does not extend to or
compensation, unemployment insurance or similar cover any other property other than such item of
legislation; (iv) liens to secure the performance of property and any improvements on such item; (vi) liens
public statutory obligations that are not delinquent, existing on the Issue Date (after giving effect to the
appeal bonds, performance bonds or other obligations of Merger); (vii) liens in favor of the New F4L Senior
a like nature (other than for borrowed money); (v) Subordinated Note Trustee under the New F4L Senior
easements, rights-of-way, other similar charges or Subordinated Indenture; and any substantially
encumbrances not interfering in any material respect equivalent Lien granted to any trustee or similar
with the business of Food 4 Less or any of its institution and or any indenture for indebtedness
subsidiaries incurred in the ordinary course of permitted to be incurred under the New Indentures; and
business; (vi) purchase money liens upon or in any real (viii) any replacement, extension or renewal, in whole
or personal property (including fixtures and other or in part, of any lien described in this or the
equipment) acquired or held by Food 4 Less or any foregoing clauses including in connection with any
subsidiary in the ordinary course of business to secure refinancing of the Indebtedness, in whole or in part,
the purchase price of such property or to secure secured by any such lien provided that to the extent
Indebtedness incurred solely for the purpose of any such clause limits the amount secured or the assets
financing or refinancing the acquisition or improvement subject to such liens, no extension or renewal shall
of such property, or liens existing on such property at increase the amount or the assets subject to such
the time of its acquisition (other than any such lien liens, except to the extent that the liens associated
created in contemplation of such acquisition); provided with such additional assets are otherwise permitted
that (x) no such lien shall extend to or cover any hereunder.
property other than the property being acquired or
improved and (y) any such Indebtedness would be "Permitted Liens" shall mean (i) liens for taxes,
permitted to be incurred pursuant to the assessments and governmental charges or claims not yet
</TABLE> due or which are
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- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
provisions of the Old F4L Senior Subordinated Note being contested in good faith by appropriate
Indenture summarized under "Limitation on Incurrences proceedings promptly instituted and diligently
of Additional Indebtedness"; (vii) liens upon specific conducted and if a reserve or other appropriate
items of inventory or other goods and proceeds of any provision, if any, as shall be required in conformity
person securing such person's obligations in respect of with GAAP shall have been made therefor; (ii) statutory
bankers' acceptances issued or created for the account liens of landlords and carriers, warehouseman,
of such person to facilitate the purchase, shipment or mechanics, suppliers, materialmen, repairmen or other
storage of such inventory or other goods in the like liens arising in the ordinary course of business,
ordinary course of business; (viii) liens securing deposits made to obtain the release of such liens, and
reimbursement obligations with respect to letters of with respect to amounts not yet delinquent for a period
credit which encumber documents and other property of more than 60 days or being contested in good faith
relating to such letters of credit and the products and by an appropriate process of law, and for which a
proceeds thereof; (ix) liens in favor of customs and reserve or other appropriate provision, if any, as
revenue authorities arising as a matter of law to shall be required by GAAP shall have been made; (iii)
secure payment of nondelinquent customs duties in liens incurred or pledges or deposits made in the
connection with the importation of goods; (x) judgement ordinary course of business to secure obligations under
and attachments liens not giving rise to a Default of workers' compensation, unemployment insurance and other
Event of Default; (xi) leases or subleases granted to types of social security or similar legislation; (iv)
others not interfering in any material respect with the liens incurred or deposits made to secure the
business of Food 4 Less or any of its subsidiaries; performance of tenders, bids, leases, statutory
(xii) liens encumbering customary initial deposits and obligations, surety and appeal bonds, government
margin deposits, and other liens incurred in the contracts, performance and return of money bonds and
ordinary course of business that are within the general other obligations of a like nature incurred in the
parameters customary in the industry, in each case ordinary course of business (exclusive of obligations
securing Indebtedness under Interest Swap Obligations for the payment of borrowed money); (v) easements,
and Foreign Exchange Agreements and forward contracts, rights-of-way, zoning or other restrictions, minor
option futures contracts, futures options or similar defects or irregularities in title and other similar
agreements or arrangements designed to protect Food 4 charges or encumbrances not interfering in any material
Less or any of its subsidiaries from fluctuations in respect with the business of the Company or any of its
the price of commodities; (xiii) liens encumbering subsidiaries incurred in the ordinary course of
deposits made in the ordinary course of business to business; (vi) liens upon specific items of inventory
secure nondelinquent obligations arising from statu- or other goods and proceeds of any person securing such
tory, regulatory, contractual or warranty requirements person's obligations in respect of bankers' acceptances
of Food 4 Less or its subsidiaries for which a reserve issued or created for the account of such person to
or other appropriate provision, if any, as shall be facilitate the purchase, shipment or storage of such
required by GAAP shall have been made; (xiv) liens inventory or other goods in the ordinary course of
arising out of consignment or similar arrangements for business; (vii) liens securing reimbursement
the sale of goods entered into by Food 4 Less or any of obligations with respect to letters of credit which
its subsidiaries in the ordinary course of business in encumber documents and other property relating to such
accordance with past practices; (xv) any interest or letters of credit and the products and proceeds
title of a lessor in the property subject to any lease, thereof; (viii) liens in favor of customs and revenue
whether characterized as capitalized or operating, authorities arising as a matter of law to secure
other than any such interest or title resulting from or payment of nondelinquent customs duties in connection
arising out of a default by Food 4 Less or any of its with the importation of goods; (ix) judgment and
subsidiaries of its obligations under such lease; and attachment liens not giving rise to a Default or Event
(xvi) liens arising from filing UCC financing of Default; (x) leases or subleases granted to others
statements for precautionary purposes in connection not interfering in any material respect with the
with true leases of personal property that are business of the Company or any subsidiary; (xi) liens
otherwise permitted under the Old F4L Senior encumbering customary initial deposits and margin
Subordinated Note Indenture and under which Food 4 Less deposits, and other liens incurred in the ordinary
or any of its subsidiaries is a lessee. course of business that are within the general
parameters customary in the industry, in each case
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD securing Indebtedness under interest swap obligations
F4L SENIOR SUBORDINATED NOTE INDENTURE WILL BE MODIFIED and foreign exchange agreements and forward contracts,
TO ELIMINATE THIS PROVISION AND CERAIN RELATED LIENS. option futures contracts, futures options or similar
agreements or arrangements designed to protect the
Company or any subsidiary from fluctuations in the
price of commodities; (xii) liens encumbering deposits
made in the ordinary course of business to secure
nondelinquent obligations arising from statutory,
regulatory, contractual or warranty requirements of the
Company or its subsidiaries for which a reserve or
other appropriate provision, if any, as shall be
required by GAAP shall have been made; (xiii) liens
arising out of consignment or similar arrangements for
the sale of goods entered into by the Company or any
subsidiary in the ordinary course of business in
accordance with past practices; (xiv) any interest or
title of a lessor in the property subject to any lease,
whether characterized as capitalized or operating other
than any such interest or title resulting from or
arising out of a default by the Company or any
subsidiary of its obligations under such lease; and
(xv) liens arising from filing UCC financing statements
for precautionary purposes in connection with true
leases of personal property that are otherwise
permitted under the applicable Indenture and under
which the Company or any subsidiary is lessee; (xvi)
liens on assets of the Company securing Indebtedness
which would constitute Senior Indebtedness but for the
provisions of clause (c) in the third sentence of the
definition of Senior Indebtedness and liens on assets
of a Subsidiary Guarantor securing Indebtedness which
would constitute Guarantor Senior Indebtedness but for
the provisions of
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<S> <C>
clause (c) in the third sentence of the definition of
Guarantor Senior Indebtedness and; (xvii) additional
liens securing Indebtedness at any one time outstanding
not exceeding the sum of (i) $25 million and (ii) 10%
of the aggregate Consolidated Net Income of the Company
earned subsequent to the Issue Date on or prior to such
time.
LIMITATION ON ASSET SALES. Pursuant to the Old F4L LIMITATION ON ASSET SALES. Pursuant to the New F4L
Senior Subordinated Note Indenture, Food 4 Less will Senior Subordinated Note Indenture, the Company will
not, and will not permit any of its subsidiaries to, not, and will not permit any of its subsidiaries to,
make any Asset Sale unless (a) Food 4 Less or the make any Asset Sale unless (a) the Company or the
applicable subsidiary receives consideration at the applicable subsidiary receives consideration at the
time of such Asset Sale at least equal to the fair time of such Asset Sale at least equal to the fair
market value of the assets sold or otherwise disposed market value of the assets sold and (b) upon
of (as determined in good faith by the board of consummation of an Asset Sale, the Company will within
directors of Food 4 Less or, if the aggregate 365 days of the receipt of the proceeds therefrom,
fair-market value of all non-cash consideration either: (i) apply or cause its subsidiary to apply the
received by the Food 4 Less or such subsidiary, as the net cash proceeds of any Asset Sale to (A) a Related
case may be, from any such Asset Sale shall exceed $15 Business Investment, (B) an investment in properties
million, as determined by an independent financial and assets that replace the properties and assets that
advisor, provided that no such determination by the are the subject of such Asset Sale or (C) an investment
board of directors of Food 4 Less shall be required if in properties and assets that will be used in the
the fair market value of the assets sold or otherwise business of the Company and its subsidiaries existing
disposed of does not exceed $5 million) and (b) an on the Issue Date or in businesses reasonably related
amount equal to the aggregate cash, net of expenses, thereto; (ii) apply or cause to be applied such net
taxes, commissions and the like incurred in connection cash proceeds to the permanent repayment of Pari Passu
with such Asset Sale and the amount of cash required to Indebtedness or in the case of the New Senior
repay any Indebtedness secured by the asset involved in Subordinated Note Indenture, Senior Indebtedness;
such Asset Sale, received by Food 4 Less or such provided, however, that the repayment of any revolving
subsidiary, as the case may be, from such Asset Sale loan (under the Credit Agreement or otherwise) shall
(the "Applied Amount") is applied in accordance with result in a permanent reduction in the commitment
this covenant and (c) the Applied Amount is within 180 thereunder; (iii) use such net cash proceeds to secure
days of such Asset Sale, at the election of Food 4 Less Letter of Credit Obligations to the extent the related
(i) either applied or caused to be applied to the letters of credit have not been drawn upon or returned
payment of any Senior Indebtedness or used to secure undrawn; or (vi) after such time as the accumulated net
Letter of Credit Obligations to the extent the related cash proceeds equals or exceeds $20 million, apply or
letters of credit have not been drawn upon or have not cause to be applied such net cash proceeds to the
been returned undrawn and all other Senior Indebtedness purchase of New F4L Senior Subordinated Notes issued
has been paid in full; provided, however, that, subject under such New F4L Senior Subordinated Indenture
to clause (ii) below, any repayment of Indebtedness tendered to the Company for purchase at a price equal
under the Revolving Facility under the Loan Documents to 100% of the principal amount thereof plus accrued
or other revolving line of credit shall result in a interest to the date of purchase pursuant to an offer
permanent reduction of the Revolving Commitment or such to purchase made by the Company as set forth below (a
other line of credit in a like amount; (ii) invested or "Net Proceeds Offer"); provided, however, that the
caused to be invested in a manner that would constitute Company shall have the right to exclude from the
a Related Business Investment hereunder; provided, foregoing provisions Asset Sales subsequent to the
however, that pending such Related Business Investment, Issue Date, (x) the proceeds of which are derived from
nothing contained herein shall prohibit Food 4 Less the sale and substantially concurrent lease-back of a
from applying or causing to be applied all or any supermarket and/or related assets which have acquired
portion of the Applied Amount to the repayment of or constructed by the Company or a Subsidiary
Indebtedness under the Revolving Facility under the subsequent to the Issue Date, provided that such sale
Loan Documents or other revolving line of credit and substantially concurrent lease-back occurs within
without a permanent reduction of the Revolving 180 days following such acquisition or the completion
Commitment or such other line of credit in a like of such construction, as the case may be, (y) the
amount; or (iii) applied or caused to be applied to the proceeds of which in the aggregate do not exceed $20
purchase of Old F4L Senior Notes pursuant to a Net million; provided, further that pending utilization of
Proceeds Offer as set forth in the Old F4L Senior Note any net cash proceeds in the manner (and within the
Indenture provided, however, that Food 4 Less shall not time period) described above, the Company may use any
be required to satisfy the condition specified in such net cash proceeds to repay revolving loans under
clause (a) above if such Asset Sale is pursuant to a the Credit Agreement without a permanent reduction of
foreclosure by the Lenders under the Credit Agreement the commitment thereunder.
and the other Loan Documents or their Representatives
on collateral securing Indebtedness under the Loan The New Senior Subordinated Note Indenture will further
Documents; provided, further, that if at any time any provide that, notwithstanding the foregoing, prior to
non-cash consideration received by Food 4 Less or any the mailing of the Net Proceeds Offer described below,
subsidiary in connection with any Asset Sale is the Company shall purchase all New F4L Senior Notes (or
converted into or sold or otherwise disposed of for permitted refinancings thereof) which it is required to
cash, then such cash shall constitute Applied Amounts purchase by reason of such Asset Sale pursuant to the
for purposes of this covenant and shall be applied in provisions of the New Senior Note Indenture.
accordance with clause (c) above within 180 days of the
receipt of such cash; provided, further, Food 4 Less Each Net Proceeds Offer will be mailed to the record
shall have the right to exclude up to $10 million of holders of New F4L Senior Subordinated Notes, as shown
proceeds in the aggregate received from Asset Sales on the register of holders of New F4L Senior
subsequent to the Issue Date from the provisions of Subordinated Notes not less than 325 nor more than 365
this covenant. To the extent that the Applied Amount is days after the relevant Asset Sale, with a copy to the
not actually applied in accordance with clauses (c)(i) New F4L Senior Subordinated Note Trustee, shall specify
or (ii) above, or after such application there remains the purchase date (which shall be no earlier than 30
a portion of the Applied Amount which, when added to days nor later than 40 days from the date such notice
any other Applied Amounts remaining after such is mailed) and shall otherwise comply with the
application, accumulates at least $2,500,000 subsequent procedures set forth in the New
to the previous time Food 4 Less shall have accumulated
at least such an amount and
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used it in accordance with this covenant, or if no such F4L Senior Subordinated Note Indenture. Upon receiving
accumulation shall previously have occurred, subsequent notice of the Net Proceeds Offer, New F4L Senior
to the date of the Old F4L Senior Note Indenture, Food Subordinated Notes, may elect to tender their New F4L
4 Less shall make an offer as described in the Old F4L Senior Subordinated Notes in whole or in part in
Senior Note Indenture (the "Net Proceeds Offer") to integral multiples of $1,000 in exchange for cash. To
purchase at a price equal to 100% of the aggregate the extent holders properly tender New F4L Senior
principal amount thereof, plus accrued interest to the Subordinated Notes, in an amount exceeding the Net
date of purchase, such aggregate principal amount of Proceeds Offer, New F4L Senior Subordinated Notes of
Old F4L Senior Notes which, when added to the accrued tendering holders will be repurchased on a pro rata
interest thereon, shall be equal to the Net Proceeds basis (based on amounts tendered).
required by this covenant to be used to purchase
securities in a Net Proceeds Offer; provided, however, The Company will comply with the requirements of Rule
that Food 4 Less may credit against the principal 14e-1 under the Exchange Act and any other securities
amount of Old F4L Senior Notes to be acquired pursuant laws and regulations thereunder to the extent such laws
to this covenant the principal amount of Old F4L Senior and regulations are applicable in connection with the
Notes acquired by Food 4 Less through purchase, repurchase of New F4L Senior Subordinated Notes
optional redemption, exchange or otherwise following pursuant to a Net Proceeds Offer.
consummation of the Asset Sale and surrendered for
cancellation and not previously used as a credit "Asset Sale" means, with respect to any person, any
against any other required payment pursuant to the Old sale, transfer or other disposition or series of sales,
F4L Senior Note Indenture. The Net Proceeds Offer shall transfers or other dispositions (including, without
remain open from the time of mailing until 5 days (or limitation, by merger or consolidation or by exchange
such shorter period as may be required under applicable of assets and whether by operation of law or otherwise)
law) before the Proceeds Purchase Date. made by such person or any of its subsidiaries to any
person other than such person or one of its
"Asset Sale" means, for any person, any sale, wholly-owned subsidiaries (or, in the case of a sale,
transfer or other disposition or series of sales, transfer or other disposition by a subsidiary, to any
transfers or other dispositions (including, without person other than the Company or a directly or
limitation, by merger or consolidation or by exchange indirectly wholly-owned subsidiary) of any assets of
of assets and whether by operation of law or otherwise) such person or any of its subsidiaries including,
made by such person or any of its subsidiaries to any without limitation, assets consisting of any capital
person other than such person or one of its stock or other securities held by such person or any of
wholly-owned subsidiaries (or, in the case of a sale, its subsidiaries, and any capital stock issued by any
transfer or other disposition by a subsidiary, to any subsidiary of such person, in each case, outside of the
person other than Food 4 Less or a directly or ordinary course of business, excluding, however, any
indirectly wholly-owned subsidiary) of any assets of sale, transfer or other disposition, or series of
such person or any of its subsidiaries including, related sales, transfers or other dispositions (i)
without limitation, assets consisting of any capital involving only excluded assets (ii) resulting in Net
stock or other securities held by such person, or any Proceeds to the Company and the subsidiaries of
of its subsidiaries, and any capital stock issued by $500,000 or less or (iii) pursuant to any foreclosure
any subsidiary of such person, outside of the ordinary of assets or other remedy provided by applicable law to
course of business, excluding, however, any sale, a creditor of the Company with a lien on such assets,
transfer or other disposition, or series of related which lien is permitted under the New F4L Senior
sales, transfers or other dispositions, having a Subordinated Note Indentures, provided that such
purchase price or transaction value, as the case may foreclosure or other remedy is conducted in a
be, of $250,000 or less. commerically responsible manner or in accordance with
any Bankruptcy Law.
"Related Business Investment" means (i) any
Investment by a person in any other person a majority "Related Business Investment" means (i) any Investment
of whose revenues are derived from the operation of one by a person in any other person a majority of whose
or more retail grocery stores or supermarkets or any revenues are derived from the operation of one or more
other line of business engaged in by Food 4 Less or any retail grocery stores or supermarkets or any other line
of its subsidiaries as of the Issue Date; (ii) any of business engaged in by the Company or any of its
Investment by such person in any cooperative or other subsidiaries as of the Issue Date; (ii) any Investment
supplier, including, without limitation, any joint by such person in any cooperative or other supplier,
venture which is intended to supply any product or including, without limitation, any joint venture which
service useful to the business of Food 4 Less and its is intended to supply any product or service useful to
subsidiaries as it is conducted as of the Issue Date the business of the Company and its subsidiaries as it
and as such business may thereafter evolve or change; is conducted as of the Issue Date and as such business
and (iii) any capital expenditure or Investment may thereafter evolve or change; and (iii) any capital
(without regard to the $5 million threshold in the expenditure or Investment (without regard to the $5
definition thereof), in each case reasonably related to million threshold in the definition thereof), in each
the business of Food 4 Less and its subsidiaries as it case reasonably related to the business of the Company
is conducted as of the Issue Date and as such business and its subsidiaries as it is conducted as of the Issue
may thereafter evolve or change. Date and as such business may thereafter evolve or
change.
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD
F4L SENIOR SUBORDINATED NOTE INDENTURE WILL BE MODIFIED
TO ELIMINATE THIS PROVISION.
LIMITATION ON PAYMENT RESTRICTIONS AFFECTING LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
SUBSIDIARIES. Pursuant to the Old F4L Senior AFFECTING SUBSIDIARIES. Pursuant to the New F4L Senior
Subordinated Note Indenture, Food 4 Less shall not, and Subordinated Note Indenture, the Company shall not, and
shall not permit any subsidiary to, directly or shall not permit any subsidiary to, directly or
indirectly, create or suffer to exist, or allow to indirectly, create or suffer to exist, or allow to
become effective any consensual Payment Restriction become effective any consensual Payment Restriction
with respect to any of its subsidiaries, except for (a) with respect to any of its subsidiaries, except for (a)
any such restrictions contained in (i) the Loan any such restrictions contained in (i) the Credit
Documents and related documents as in effect on June Agreement and related documents as in effect on the
17, 1991 as any such payment restriction may apply to Issue Date as any such payment restriction may apply to
any present or future subsidiary, (ii) Indebtedness of any present or future subsidiary, (ii) the New F4L
a subsidiary existing on June 17, 1991, (iii) the Old Senior Subordinated Note Indenture and any agreement in
F4L Senior Subordinated Note Indenture, (iv) effect at or entered into on the Issue Date,
Indebtedness of a person existing at the
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time such person becomes a subsidiary (provided, that (iii) Indebtedness of a person existing at the time
(x) such Indebtedness is not incurred in connection such person becomes a subsidiary (provided that (x)
with, or in contemplation of, such person becoming a such Indebtedness is not incurred in connection with,
subsidiary, (y) such restriction is not applicable to or in contemplation of, such person becoming a
any person, or the properties or assets of any person, subsidiary, (y) such restriction is not applicable to
other than the person so acquired and (z) such any person, or the properties or assets of any person,
Indebtedness is otherwise permitted to be incurred other than the person so acquired and (z) such
pursuant to the provisions of the Old F4L Senior Indebtedness is otherwise permitted to be incurred
Subordinated Note Indenture summarized under pursuant to the provisions described under "Limitation
"Limitation on Incurrences of Additional on Incurrences of Additional Indebtedness" above), and
Indebtedness"), (v) secured Indebtedness otherwise (iv) secured Indebtedness otherwise permitted to be
permitted under the provisions of the Old F4L Senior incurred pursuant to the provisions described under
Subordinated Note Indenture summarized under "Limitation on Incurrences of Additional Indebtedness"
"Limitation on Incurrences of Additional Indebtedness" and "Limitation on Liens" above that limit the right of
and that limits the right of the debtor to dispose of the debtor to dispose of the assets securing such
the assets securing such Indebtedness; (b) customary Indebtedness; (b) customary non-assignment provisions
non-assignment provisions restricting subletting or restricting subletting or assignment of any lease or
assignment of any lease or assignment of any contract other agreement entered into by a subsidiary; (c)
of any subsidiary, (c) customary net worth provisions customary net worth provisions contained in leases and
contained in leases and other agreements entered into other agreements entered into by a subsidiary in the
by a subsidiary in the ordinary course of business; (d) ordinary course of business; (d) customary restrictions
customary restrictions with respect to a subsidiary with respect to a subsidiary pursuant to an agreement
pursuant to an agreement that has been entered into for that has been entered into for the sale or disposition
the sale or disposition of all or substantially all of of all or substantially all of the capital stock or
the capital stock or assets of such subsidiary; (e) assets of such subsidiary; (e) customary provisions in
customary provisions in instruments or agreements joint venture agreements and other similar agreements;
relating to a lien created, incurred or assumed in and (f) restrictions contained in Indebtedness incurred
accordance with the provisions of the Old F4L Senior to refinance, refund, extend or renew Indebtedness
Subordinated Note Indenture summarized under referred to in clause (a) above; provided that the
"Limitation on Liens" and prohibiting the transfer of restrictions contained therein are not materially more
the property subject to such lien; and (f) restrictions restrictive taken as a whole than those provided for in
contained in Indebtedness incurred to refinance, such Indebtedness being refinanced, refunded, extended
refund, extend or renew Indebtedness referred to in or renewed and (g) Payment Restriction contained in any
clause (a) above; provided, that the restrictions other Indebtedness permitted to be incurred subsequent
contained therein relating to the payment of dividends to the Issue Date pursuant to the provisions of the
by such subsidiaries are not materially more covenant described under "-- Limitation on Incurrences
restrictive than those provided for in such of Additional Indebtedness" above; provided that any
Indebtedness being refinanced, refunded, extended, such Payment Restriction is ordinary and customary with
renewed or amended. respect to the type of Indebtedness being incurred
(under the relevant circumstances), and, in any event,
"Payment Restriction" means, with respect to a no more restrictive than the most restrictive Payment
subsidiary of any person, any encumbrance, restriction Restrictions in effect on the Issue Date.
or limitation, whether by operation of the terms of its
charter or by reason of any agreement, instrument, "Payment Restriction" means, with respect to a
judgment, decree, order, statute, rule or governmental subsidiary of any person, any encumbrance, restriction
regulation, on the ability of (i) such subsidiary to or limitation, whether by operation of the terms of its
(a) pay dividends or make other distributions on its charter or by reason of any agreement, instrument,
capital stock or make payments on any obligation, judgment, decree, order, statute, rule or governmental
liability or Indebtedness owed to such person or any regulation, on the ability of (i) such subsidiary to
other subsidiary of such person, (b) make loans or (a) pay dividends or make other distributions on its
advances to such person or any other subsidiary of such capital stock or make payments on any obligation,
person, or (c) transfer any of its properties or assets liability or Indebtedness owed to such person or any
to such person or any other subsidiary of such person, other subsidiary of such person, (b) make loans or
or (ii) such person or any other subsidiary of such advances to such person or any other subsidiary of such
person to receive or retain any such (a) dividends, person, or (c) transfer any of its properties or assets
distributions or payments, (b) loans or advances, or to such person or any other subsidiary of such person,
(c) transfer of properties or assets. or (ii) such person or any other subsidiary of such
person to receive or retain any such (a) dividends,
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD distributions or payments, (b) loans or advances, or
F4L SENIOR SUBORDINATED NOTE INDENTURE WILL BE MODIFIED (c) transfer of properties or assets.
TO ELIMINATE THIS COVENANT AND CERTAIN RELATED
DEFINITIONS.
GUARANTEES OF CERTAIN INDEBTEDNESS. Pursuant to the GUARANTEES OF CERTAIN INDEBTEDNESS. Pursuant to the New
Old F4L Senior Subordinated Note Indenture, Food 4 F4L Senior Subordinated Note Indenture, the Company
Less shall not permit any of its subsidiaries to (a) shall not permit any of its subsidiaries to (a) incur,
incur, guarantee or secure through the granting of guarantee or secure through the granting of liens the
liens the payment of any Indebtedness under the Term payment of any Indebtedness under the term portion of
Facility under the Credit Agreement or any Refinancing the Credit Agreement or refinancings thereof or (b)
Indebtedness related thereto or (b) pledge any pledge any intercompany notes representing obligations
intercompany notes representing obligations of any of of any of its subsidiaries, to secure the payment of
its subsidiaries, to secure the payment of any any Indebtedness under the term portion of the Credit
Indebtedness under the Term Facility under the Credit Agreement or refinancings thereof, in each case unless
Agreement or any Refinancing Indebtedness related such subsidiary, the Company and the New F4L Senior
thereto, in each case unless such subsidiary, Food 4 Subordinated Note Trustee execute and deliver a
Less and the Old F4L Senior Subordinated Note Trustee supplemental indenture evidencing such subsidiary's
execute and deliver a supplemental indenture evidencing guarantee.
such subsidiary's guarantee, such guarantee to be
subordinated to Guarantor Senior Indebtedness in
accordance with the Old F4L Senior Subordinated Note
Indenture.
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD
F4L SENIOR SUBORDINATED NOTE INDENTURE WILL BE MODIFIED
TO ELIMINATE THIS COVENANT.
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LIMITATION ON TRANSACTIONS WITH AFFILIATES. Pursuant LIMITATION ON TRANSACTIONS WITH AFFILIATES. Pursuant to
to the Old F4L Senior Subordinated Note Indentures, the New F4L Senior Subordinated Note Indenture, neither
neither Food 4 Less nor any of its subsidiaries shall the Company nor any of its Subsidiaries shall (i) sell,
(i) sell, lease, transfer or otherwise dispose of any lease, transfer or otherwise dispose of any of its
of its properties, assets or issue debt securities to, properties or assets or issue securities (other than
(ii) purchase any property, assets or securities from, equity securities which do not constitute Disqualified
(iii) make any Investment in, or (iv) enter into or Capital Stock) to, (ii) purchase any property, assets
suffer to exist any contract or agreement with or for or securities from, (iii) make any Investment in, or
the benefit of, an affiliate or Significant Stockholder (iv) enter into or suffer to exist any contract or
(and any affiliate of such Significant Stockholder) of agreement with or for the benefit of, an affiliate or
Food 4 Less or any subsidiary (an "Affiliate Significant Stockholder (or any affiliate of such
Transaction"), other than Affiliate Transactions Significant Stockholder) of the Company or any subsidi-
(including lease transactions) in the ordinary course ary (an "Affiliate Transaction"), other than (x)
of business, that are fair to Food 4 Less or such Affiliate Transactions permitted under the following
subsidiary, as the case may be, and on terms at least paragraph and (y) Affiliate Transactions in the
as favorable as might reasonably have been obtainable ordinary course of business, that are fair to the
at such time from an unaffiliated party, unless the Company or such subsidiary, as the case may be, and on
board of directors of Food 4 Less or such subsidiary, terms at least as favorable as might reasonably have
as the case may be, pursuant to a board resolution, been obtainable at such time from an unaffiliated
reasonably and in good faith determines that such party; provided that (A) with respect to Affiliate
Affiliate Transaction is fair to Food 4 Less or such Transactions involving aggregate payments in excess of
subsidiary, as the case may be, and is on terms at $1 million and less than $5 million, the Company or
least as favorable as might reasonably have been such subsidiary, as the case may be, shall have
obtainable at such time from an unaffiliated party. In delivered an officers' certificate to the New F4L
addition, neither Food 4 Less nor any of its Senior Subordinated Note Trustee certifying that such
subsidiaries shall enter into an Affiliate Transaction Affiliate Transaction complies with clause (y) above,
or series of related Affiliate Transactions involving (B) with respect to Affiliate Transactions involving
or having a value of more than $15 million unless Food aggregate payments in excess of $5 million and less
4 Less or such subsidiary, as the case may be, has than $15 million, with respect to which the Company or
received an opinion from an independent financial such subsidiary, as the case may be, shall have
advisor to the effect that the financial terms of such delivered an officers' certificate to the New F4L
Affiliate Transaction are fair to Food 4 Less or such Senior Subordinated Note Trustee certifying that such
subsidiary from a financial point of view. Affiliate Transaction complies with clause (y) above
and that such Affiliate Transaction has received the
The provisions of the foregoing paragraph shall not approval of a majority of the disinterested members of
apply to (i) any Permitted Payment, (ii) any Restricted the board of directors of the Company or the
Payment that is made in compliance with the provisions subsidiary, as the case may be, or, in the absence of
of the Old F4L Senior Subordinated Note Indenture any such approval by the disinterested members of the
summarized above under "Limitation on Restricted board of directors of the Company or that the
Payments," (iii) reasonable and customary fees and subsidiary, as the case may be, that an independent
compensation paid to, and indemnity provided on behalf financial advisor has reasonably and in good faith
of, officers, directors, employees or consultants of determined that the financial terms of such Affiliate
Food 4 Less or any subsidiary, as determined by the Transaction are fair to the Company or such subsidiary,
board of directors of Food 4 Less or any subsidiary or as the case may be, or that the terms of such Affiliate
the senior management thereof in good faith, (iv) Transaction are at least as favorable as might
transactions exclusively between or among Food 4 Less reasonably have been obtained at such time from an
and any of its wholly owned subsidiaries or exclu- unaffiliated party, and that such independent financial
sively between or among such subsidiaries, provided advisor has provided written confirmation of such
such transactions are not otherwise prohibited by the determination to the board of directors and (C) with
Old F4L Senior Subordinated Note Indenture, (v) any respect to Affiliate Transactions involving aggregate
agreement as in effect as of June 17, 1991 or any payments in excess of $15 million, with respect to
amendment thereto or any transaction contemplated which the Company or such subsidiary, as the case may
thereby (including pursuant to any amendment thereto) be, shall have delivered to the New F4L Senior Subordi-
so long as any such amendment is not disadvantageous to nated Note Trustee, a written opinion from an
the holders in any material respect, (vi) the existence independent financial advisor to the effect that the
of, or the performance by Food 4 Less or any of its financial terms of such
subsidiaries of its obligations under the terms of, any
stockholders agreement (including any registration Affiliate Transaction are fair to the Company or such
rights agreement or purchase agreement related thereto) subsidiary, as the case may be, or that the terms of
to which it (or FFL) is a party as of June 17, 1991 and such Affiliate Transaction are at least as favorable as
any similar agreements which it (or FFL) may enter into those that might reasonably have been obtained at the
thereafter, provided, however, that the existence of, time from an unaffiliated party.
or the performance by Food 4 Less or any subsidiaries
of obligations under any future amendment to, any such The provisions of the foregoing paragraph shall not
existing agreement or under any similar agreement apply to (i) any Permitted Payment, (ii) any Restricted
entered into after June 17, 1991 shall only be Payment that is made in compliance with the provisions
permitted by this clause (vi) to the extent that the of the covenant described under "-- Limitation on
terms of any such amendment or new agreement are not Restricted Payments" above, (iii) reasonable and
otherwise disadvantageous to the holders in any customary fees and compensation paid to, and indemnity
material respect, (vii) transactions permitted by, and provided on behalf of, officers, directors, employees
complying with, the provisions of the Old F4L Senior or consultants of the Company or any Subsidiary, as
Subordinated Note Indenture summarized below under determined by the board of directors of the Company or
"Limitations on Merger and Certain Other Transactions," any Subsidiary or the senior management thereof in good
(viii) transactions with Certified Grocers of faith, (iv) transactions exclusively between or among
California, Inc., Affiliated Wholesale Grocers of the Company and any of its wholly-owned subsidiaries or
Kansas City, Inc. or other suppliers in the ordinary exclusively between or among such wholly-owned
course of business and otherwise in compliance with the Subsidiaries, provided such transactions are not
terms of the Old F4L Senior Subordinated Note otherwise prohibited by the New F4L Senior Subordinated
Indenture. Note Indenture, (v) any agreement as in effect as of
the Issue Date or any amendment thereto or any
"Significant Stockholder" means, with respect to any transaction contemplated thereby (including pursuant to
person, any other person who is the beneficial owner any amendment thereto) so long as any such amendment is
(within the meaning not disadvantageous to the holders of the New F4L
Senior Subordinated Notes, in any material respect,
(vi) the existence of, or the performance by
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of Rule 13d-3 under the Exchange Act) of more than 10% the Company or any of its subsidiaries of its
of any class of equity securities of such person that obligations under the terms of, any stockholders
are entitled to vote on a regular basis for the agreement (including any registration rights agreement
election of directors of such person. or purchase agreement related thereto) to which it (or
New Holdings) is a party as of the Issue Date and any
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD similar agreements which it (or New Holdings) may enter
F4L SENIOR SUBORDINATED NOTE INDENTURE WILL BE MODIFIED into thereafter; provided, however, that the existence
TO ELIMINATE THIS COVENANT AND CERTAIN RELATED of, or the performance by the Company or any
DEFINITIONS. subsidiaries of obligations under any future amendment
to, any such existing agreement or under any similar
agreement entered into after the Issue Date shall only
be permitted by this clause (vi) to the extent that the
terms of any such amendment or new agreement are not
otherwise disadvantageous to the holders of the New F4L
Senior Subordinated Notes, in any material respect,
(vii) transactions permitted by, and complying with,
the provisions of the covenant described under
"-- Limitation on Mergers and Certain Other
Transactions" below and (viii) purchases or sales of
goods or services or other transactions with suppliers,
in each case, in the ordinary course of business
(including, without limitation, pursuant to joint
venture agreements) and otherwise in compliance with
the terms of the New New F4L Senior Subordinated Note
Indenture which, are fair to the Company in the
reasonable determination of the board of directors, or
are on terms at least as favorable as might reasonably
have been obtained at such time from an unaffiliated
party.
"Significant Stockholder" means, with respect to any
person, any other person who is the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange
Act) of more than 10% of any class of equity securities
of such person that are entitled to vote on a regular
basis for the election of directors of such person.
LIMITATION ON CHANGE OF CONTROL. Pursuant to the Old LIMITATION ON CHANGE OF CONTROL. The New F4L Senior
F4L Senior Subordinated Note Indenture, upon the Subordinated Note Indenture will provide that if a
occurrence of a Change of Control, each holder will Change of Control occurs, each holder will have the
have the right to require the repurchase of such right to require the Company to repurchase such
holder's Old F4L Senior Subordinated Notes pursuant to holder's New F4L Senior Subordinated Notes pursuant to
the offer described below (the "Change of Control a Change of Control Offer at 101% of the principal
Offer"), at a purchase price equal to 101% of the amount thereof plus accrued and unpaid interest to the
principal amount thereof plus accrued interest, if any, date of repurchase.
to the date of purchase. Prior to the mailing of the
notice to holders described below, but in any event The New F4L Senior Subordinated Note Indenture will
within 30 days following the date upon which the Change further provide that, notwithstanding the foregoing,
of Control occurred (the "Change of Control Date"), prior to the mailing of the notice of a Change of
Food 4 Less will (i) repay in full all Indebtedness of Control Offer referred to above, within 30 days
Food 4 Less and its subsidiaries under the loan following a Change of Control the Company shall either
documents and related documents or offer to repay in (a) repay in full and terminate all commitments under
full all such Indebtedness and repay the Indebtedness Indebtedness under the Credit Agreement to the extent
of each lender who has accepted such offer or (ii) the terms thereof require repayment upon a Change of
obtain the requisite consent under the Credit Agreement Control (or offer to repay in full and terminate all
and related documents to permit the repurchase of commitments under all such Indebtedness under the
the Old F4L Senior Subordinated Notes. Food 4 Less must each lender which has accepted such offer), or (b)
first comply with the covenant in the preceding obtain the requisite consents under the Credit
sentence before it will be required to repurchase Old Agreement, the terms of which require repayment upon a
F4L Senior Subordinated Notes pursuant to a Change of Change of Control, to permit the repurchase of the New
Control Offer. Food 4 Less must comply with Rule 14e-1 F4L Senior Subordinated Notes as provided above. The
under the Securities Exchange Act of 1934, as amended, Company shall first comply with the covenant in the
and any other applicable provisions of the federal immediately preceding sentence before it shall be
securities laws in connection with a Change of Control required to repurchase New F4L Senior Subordinated
Offer. Notes pursuant to the provisions described below. The
Company's failure to comply with the covenants
Pursuant to the Old F4L Senior Subordinated Note described in this paragraph shall constitute an Event
Indenture, within 30 days following any Change of of Default under the New F4L Senior Subordinated Note
Control Date, Food 4 Less must send, by first class Indenture.
mail, a notice to each holder, with copies to the
Credit Agent and the Old F4L Senior Subordinated Note In addition, the New F4L Senior Subordinated Note
Trustee, which notice shall govern the terms of the Indenture will provide that prior to purchasing New F4L
Change of Control Offer. Such notice shall state, among Senior Subordinated Notes tendered in a Change of
other things, the purchase date, which must be no Control Offer, the Company shall purchase all Senior
earlier than 30 days nor later than 40 days from the F4L Notes (or permitted refinancings thereof) which it
date such notice is mailed, other than as may be is required to purchase by reason of such Change of
required by law (the "Change of Control Payment Date"). Control pursuant to the provisions of the indenture
Holders electing to have a Old F4L Senior Subordinated under which such New Senior F4L Notes are issued, as in
Notes purchased pursuant to a Change of Control Offer effect on the Issue Date.
will be required to surrender the Old F4L Senior
Subordinated Note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Old F4L
Senior Subordinated Note completed, to the Paying Agent
at the address
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specified in the notice prior to the close of business
on the business day prior to the Change of Control
Payment Date.
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD
F4L SENIOR SUBORDINATED NOTE INDENTURE WILL BE MODIFIED
TO ELIMINATE THIS COVENANT AND CERTAIN RELATED
DEFINITIONS.
LIMITATIONS ON MERGERS AND CERTAIN OTHER LIMITATIONS ON MERGERS AND CERTAIN OTHER TRANSACTIONS.
TRANSACTIONS. Pursuant to the Old F4L Senior Pursuant to the New F4L Senior Subordinated Note
Subordinated Note Indenture, Food 4 Less shall not, in Indenture, the Company, in a single transaction or
a single transaction or through a series of related through a series of related transactions, shall not (i)
transactions, (i) consolidate with or merge with or consolidate with or merge with or into any other
into any other person, or transfer (by lease, person, or transfer (by lease, assignment, sale or
assignment, sale or otherwise) all or substantially all otherwise) all or substantially all of its properties
of its properties and assets as an entirety or and assets as an entirety or substantially as an
substantially as an entirety to another person or group entirety to another person or group of affiliated
of affiliated persons or (ii) adopt a plan of persons or (ii) adopt a plan of liquidation, unless, in
liquidation, unless, in either case, (1) either Food 4 either case, (1) either the Company shall be the
Less shall be the continuing person, or the person (if continuing person, or the person (if other than the
other than Food 4 Less) formed by such consolidation or Company) formed by such consolidation or into which the
into which Food 4 Less is merged or to which all or Company is merged or to which all or substantially all
substantially all of the properties and assets of Food of the properties and assets of the Company as an
4 Less as an entirety or substantially as an entirety entirety are transferred (or, in the case of a plan of
are transferred (or, in the case of a plan of liquidation, any person to which assets are
liquidation, any person to which assets are transferred) (the Company or such other person being
transferred) (Food 4 Less or such other person being hereinafter referred to as the "Surviving Person")
hereinafter referred to as the "Surviving Person") shall be a corporation organized and validly existing
shall be a corporation organized and validly existing under the laws of the United States, any state thereof
under the laws of the United States, any state thereof or the District of Columbia, and shall expressly
or the District of Columbia, and shall expressly assume, by an indenture supplement, all the obligations
assume, by an indenture supplement executed and of the Company under the New F4L Senior Subordinated
delivered to the Old F4L Senior Subordinated Note Note Indenture and the New F4L Senior Subordinated
Trustee in form satisfactory to the Old F4L Senior Notes thereunder; (2) immediately after and giving
Subordinated Note Trustee, all the obligations of Food effect of such transaction and the assumption
4 Less under the Old F4L Senior Subordinated Notes and contemplated by clause (1) above and the incurrence or
the Old F4L Senior Subordinated Note Indenture; (2) anticipated incurrence of any Indebtedness to be
immediately after and giving effect to such transaction incurred in connection therewith, (A) the Surviving
and the assumption contemplated by clause (1) above and Person shall have a Consolidated Net Worth equal to or
the incurrence or anticipated incurrence of any greater than the Consolidated Net Worth of the Company
Indebtedness to be incurred in connection therewith, immediately preceding the transaction and (B) the
(A) the Surviving Person shall have a net worth equal Surviving Person could incur at least $1.00 of
to or greater than the net worth of Food 4 Less additional Indebtedness (other than Permitted Indebt-
immediately preceding the transaction, (B) the edness) pursuant to the provisions described above
Surviving Person could incur at least $1 of Indebt- under "Limitation on Incurrences of Additional
edness pursuant to provisions of the Old F4L Senior Indebtedness"; (3) immediately before and immediately
Subordinated Note Indenture summarized above in the after and giving effect to such transaction and the
first paragraph under the heading "Limitation on assumption of the obligations as set forth in clause
Incurrences of Additional Indebtedness," and (C) if the (1) above and the incurrence or anticipated incurrence
Operating Coverage Ratio of Food 4 Less immediately of any Indebtedness to be incurred in connection
preceding the transaction is within a range set forth therewith, no Default or Event of Default shall have
under column X below, then the Surviving Person shall occurred and be continuing; and (iv) each Subsidiary
have an Operating Coverage Ratio at least equal to the Guarantor, unless it is the other party to the
greater of (i) the actual Operating Coverage Ratio of transaction, shall have by supplemental indenture
Food 4 Less multiplied by the appropriate percentage confirmed that its guarantee of the obligations of the
set forth in column Y below and (ii) the ratio set Company under the New F4L Senior Subordinated Notes and
forth in column Z below: the New F4L Senior Subordinated Note Indenture shall
apply, without alteration or amendment as such
X Y Z guarantee applies on the date it was granted under the
----- ---- --- New F4L Senior Subordinated Note Indenture to the
1.8:1 to 2.499:1 100% 1.8:1 obligations of the Company under the New F4L Senior
2.5:1 to 2.999:1 90% 2.5:1 Subordinated Note Indenture and the New F4L Senior
3.0:1 or more 80% 2.7:1 Subordinated Notes to the obligations of the Company or
such person, as the case may be, under the New F4L
and, provided further, that if immediately after giving Senior Subordinated Note Indenture and the New F4L
effect to such transaction on a pro forma basis, the Senior Subordinated Notes, after the consummation of
Operating Coverage Ratio of Food 4 Less or the such transaction.
surviving entity, as the case may be, is 3.2:1 or more,
the calculation in the preceding proviso shall be Notwithstanding the foregoing, the consummation of the
inapplicable and such transaction shall be deemed to Merger on the Issue Date need only comply with clauses
have complied with the requirements of such provision; (1) and (3) of the foregoing paragraph.
(3) immediately before and immediately after and giving
effect to such transaction and the assumption of the The New F4L Senior Subordinated Note Indenture will
obligations as set forth in clause (1) above and the provide that upon any consolidation or merger or any
incurrence or anticipated incurrence of any transfer of all or substantially all of the assets of
Indebtedness to be incurred in connection therewith, no the Company or any adoption of a plan of liquidation by
Default or Event of Default shall have occurred and be the Company in accordance with the foregoing, the
continuing. For purposes of the foregoing, the transfer surviving person formed by such consolidation or into
(by lease, assignment, sale or otherwise) of all or which the Company is merged or to which such transfer
substantially all of the properties and assets of one is made (or, in the case of a plan of liquidation, to
or more subsidiaries, the capital stock of which which assets are transferred) shall succeed to, and be
constitutes all or substantially all of the properties substituted for, and may exercise every right and power
and assets of Food 4 Less shall be deemed to be the of, the Company under the New F4L Senior Subordinated
transfer of all or substantially all of the properties Note Indenture with the same effect as
and assets of Food 4 Less.
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- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
if such surviving person had been named as the Company
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD herein; provided, however, that solely for purposes of
F4L SENIOR SUBORDINATED NOTE INDENTURE WILL BE MODIFIED computing amounts described in subclause (c) of the
TO ELIMINATE THE SUBSECTIONS OF THIS PROVISION WHICH first paragraph of the covenant described above under
REQUIRE THAT IMMEDIATELY AFTER GIVING EFFECT TO SUCH "Limitation on Restricted Payments", any such surviving
TRANSACTION AND THE INCURRENCE OF ANY INDEBTEDNESS IN person shall only be deemed to have succeeded to and be
CONNECTION THEREWITH, FOOD 4 LESS OR THE SURVIVING substituted for the Company with respect to periods
ENTITY, AS THE CASE MAY BE, HAS A NET WORTH OR subsequent to the effective time of such merger,
OPERATING COVERAGE RATIO THAT MEETS THE STANDARDS SET consolidation or transfer of assets.
FORTH THEREIN.
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise) of all or substantially
all of the properties and assets of one or more
subsidiaries, the capital stock of which constitutes
all or substantially all of the properties and assets
of the Company shall be deemed to be the transfer of
all or substantially all of the properties and assets
of the Company.
"Consolidated Net Worth" means, with respect to any
person, the total stockholders' equity (exclusive of
any Disqualified Capital Stock) of such person and its
subsidiaries determined on a consolidated basis in
accordance with GAAP.
MAINTENANCE OF NET WORTH. Pursuant to the Old F4L MAINTENANCE OF NET WORTH. The New F4L Senior Subordi-
Senior Subordinated Note Indenture, if Food 4 Less' nated Note Indenture will not contain a covenant
Net Worth at the end of each of any two consecutive requiring the maintenance of a minimum net worth.
fiscal quarters (the last day of the second fiscal
quarter being referred to as the "Acceleration Date")
is equal to or less than $50 million (the "Minimum Net
Worth"), then Food 4 Less shall make an offer to all
holders (an "Offer") to purchase, on a pro rata basis,
on or before the last day of the next following fiscal
quarter or, in the event that the Acceleration Date is
the last day of Food 4 Less' fiscal year, the
forty-fifth day after the last day of the next
following fiscal quarter (the "Accelerated Payment
Date"), $14.5 million aggregate principal amount of Old
F4L Senior Subordinated Notes (an "Accelerated
Payment") at a purchase price equal to 100% of
principal amount plus accrued but unpaid interest to
the Accelerated Payment Date. Food 4 Less may credit
against the forty-fifth day after the last day of the
next following fiscal quarter (the "Accelerated Payment
Date"), $14.5 million aggregate principal amount of Old
F4L Senior Subordinated Notes (an "Accelerated
Payment") at a purchase price equal to 100% of
principal amount plus accrued but unpaid interest to
the Accelerated Payment Date. Food 4 Less may credit
against the principal amount of Old F4L Senior
Subordinated Notes to be acquired in any Accelerated
Payment 100% of the principal amount of Old F4L Senior
Subordinated Notes acquired by Food 4 Less through
purchase, optional redemption, exchange or otherwise
during the 180-day period ending on the Acceleration
Date and surrendered for cancellation. Food 4 Less,
however, may not credit Old F4L Senior Subordinated
Notes against an Accelerated Payment if such Old F4L
Senior Subordinated Notes were previously used as a
credit against any other required payment under the Old
F4L Senior Subordinated Note Indenture. In no event
shall the failure of Food 4 Less' Net Worth to equal or
exceed $50 million at the end of any fiscal quarter be
counted toward the making of more than one Offer.
"Net Worth" as of any date means, with respect to any
person, the amount of the equity of the holders of
capital stock of such person that would appear on the
balance sheet of such person as of such date,
determined in accordance with GAAP, adjusted to exclude
(to the extent included in such equity), (i) the amount
of equity attributable to Disqualified Capital Stock
and (ii) with respect to Food 4 Less, the effect of (a)
all non-cash charges reducing such equity amount and
attributable to the early extinguishment of, or
acceleration of costs of, the financing of the Alpha
Beta Acquisition (other than amortization of original
issue discount), (b) prepayment penalties or other
charges incurred in connection with the retirement of
certain Indebtedness of a subsidiary of Food 4 Less
existing immediately prior to June 17, 1991 and (c) the
recognition of deferred losses, in an amount not
</TABLE>
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<S> <C>
to exceed $3 million, on the Long Beach Warehouse.
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE OLD
F4L SENIOR SUBORDINATED NOTE INDENTURE WILL BE MODIFIED
TO ELIMINATE THIS COVENANT AND CERTAIN RELATED
DEFINITIONS.
LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. The Old LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. Pursuant
F4L Senior Subordinated Note Indenture does not have to the New Senior Subordinated Note Indenture, the
a covenant providing for the limitation on the issuance Company will not permit any of its Subsidiaries to
of preferred stock of subsidiaries. issue any Preferred Stock (other than to the Company or
to a wholly-owned Subsidiary) or permit any person
(other than the Company or a wholly-owned subsidiary)
to own any Preferred Stock of any subsidiary.
EVENTS OF DEFAULT EVENTS OF DEFAULT
Pursuant to the Old F4L Senior Subordinated Note Pursuant to the New F4L Senior Subordinated Note
Indenture, the following events constitute "Events of Indenture the following events constitute "Events of
Default": (i) failure to make any interest payment on Default": (i) failure to make any interest payment on
the Old F4L Senior Subordinated Notes when due, and the the New F4L Senior Subordinated Notes when due and the
continuance of such default for a period of 30 days continuance of such default for a period of 30 days;
(whether or not such payment would be prohibited by the (ii) failure to pay principal of, or premium, if any,
provisions of the Old F4L Senior Subordinated Note on the New F4L Senior Subordinated Notes when due,
Indenture concerning the subordination of the Old F4L whether at maturity, upon acceleration, redemption,
Senior Subordinated Notes); (ii) failure to pay required repurchase or otherwise; (iii) failure to
principal of the Old F4L Senior Subordinated Notes when comply with any other agreement contained in the New
due, whether at maturity, upon acceleration, redemption F4L Senior Subordinated Notes or the New F4L Senior
or otherwise (including the failure to make an Subordinated Note Indenture, if such failure continues
Accelerated Payment and whether or not such payment unremedied for 30 days after written notice given by
would be prohibited by the provisions of the Old F4L the New F4L Senior Subordinated Note Trustee or the
Senior Subordinated Note Indenture concerning the holders of at least 25% in principal amount of the New
subordination of the New F4L Senior Subordinated F4L Senior Subordinated Notes then outstanding (except
Notes); (iii) failure to comply with any other in the case of a default with respect to the covenants
agreement contained in the New F4L Senior Subordinated described under "Limitation on Restricted Payments,"
Notes or the Old F4L Senior Subordinated Note "Limitations on Disposition of Assets," "Change of
Indenture, if such failure continues unremedied for 30 Control," and "Limitations on Merger and Certain Other
days after written notice given by the Old F4L Senior Transactions," which shall constitute Events of Default
Subordinated Note Trustee or the holders of at least with notice but without passage of time); (iv) a
33 1/3% in principal amount of the Old F4L Senior default under any Indebtedness of the Company or its
Subordinated Notes then outstanding (except in the case subsidiaries, whether such Indebtedness now exists or
of a default with respect to the covenants set forth in shall hereinafter be created, if both (A) such default
the Old F4L Senior Subordinated Note Indenture under either (1) results from the failure to pay any such
the headings "Limitation on Restricted Payments," Indebtedness at its stated final maturity or (2)
"Maintenance of Net Worth," "Limitation on Disposition relates to an obligation other than the obligation to
of Assets," "Limitation on Change of Control," and pay such Indebtedness at its stated final maturity and
"Limitations on Merger and Certain Other Transactions," results in the holder or holders of such Indebtedness
which shall constitute Events of Default with notice causing such Indebtedness to become due prior to its
but without passage of time specified); (iv) a default stated maturity and (B) the principal amount of such
under any Indebtedness, whether such Indebtedness now Indebtedness, together with the principal amount of any
exists or shall hereinafter be created, if both (A) other such Indebtedness in default for failure to pay
such default either (1) results from the failure to pay principal at stated final maturity or the maturity of
any such Indebtedness at its stated final maturity or which has been so accelerated, aggregate $20 million or
(2) relates to an obligation other than the obligation more at any one time outstanding; (v) any final
to pay such Indebtedness at its stated maturity and judgment or order for payment of money in excess of $20
results in the holder or holders of such Indebtedness million shall be entered against the Company or any
causing such Indebtedness to become due prior to its Significant Subsidiary and shall not be discharged for
stated maturity and (B) the principal amount of such a period of 60 days after such judgment becomes final
Indebtedness, together with the principal amount of any and nonappealable; (vi) either the Company or any
other such Indebtedness in default for failure to pay Significant Subsidiary pursuant to or within the
principal at maturity or the maturity of which has been meaning of any Bankruptcy Law: (a) commences a
so accelerated, aggregates $20 million or more at any voluntary case or proceeding; (b) consents to the entry
one time outstanding, (v) either Food 4 Less or any of an order for relief against it in an involuntary
Significant Subsidiary (a) admits in writing its case or proceeding; (c) consents to the appointment of
inability to pay its debts generally as they become a custodian of it or for all or substantially all of
due, (b) commences a voluntary case or proceding under its property; or (d) makes a general assignment for the
any Bankruptcy Law; (c) consents to the entry of a benefit of its creditors; (vii) a court of competent
judgment, decree or order for relief against it in an jurisdiction enters an order or decree under any
involuntary case or proceeding under any Bankruptcy Bankruptcy Law that: (a) is for relief against the
Law; (d) consents to the appointment of a Custodian of Company or any significant subsidiary, in an
it or for all or substantially all of its property, (e) involuntary case or proceeding; (b) appoints a
consents to or acquieces in the institution of a custodian of the Company or any significant subsidiary,
bankruptcy or an insolvency proceeding against it, (f) or for all or any substantial part of their respective
makes a general assignment for the benefit of its properties; or (c) orders the liquidation of the Com-
creditors, or (g) takes any corporate action to pany or any significant subsidiary, and in each case
authorize or effect any of the foregoing; (vi) a court the order or decree remains unstayed and in effect for
of competent jurisdiction enters a judgment, decree or 60 days; (viii) the lenders under the Credit Agreement
order for relief in respect of Food 4 Less or any shall commence judicial proceedings to foreclose upon
Significant Subsidiary in an involuntary case or any material portion of the assets of the Company and
proceeding under any Bankruptcy Law which shall: (a) its subsidiaries; or (ix) any of the guarantees issued
approve as properly filed a petition seeking under the New F4L Senior Subordinated Indenture
</TABLE>
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- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
reorganization, arrangement, adjustment or composition shall be declared or adjudged unenforceable or invalid
in respect of Food 4 Less or any Significant in a final judgment or order issued by any court of
Subsidiary, (b) appoint a Custodian of Food 4 Less or governmental authority. In the event of a declaration
any Significant Subsidiary, or for substantially all of of acceleration because an Event of Default set forth
their respective properties; or (c) order the winding in clause (iv) above has occurred and is continuing,
up liquidation of its affairs, and in each case the such declaration of acceleration shall be automati-
order or decree remains unstayed and in effect for 60 cally rescinded and annulled if either (i) the holders
days; (vii) any Warrant of attachment is issued against of the Indebtedness which is the subject of such Event
any portion of the property of Food 4 Less or any of Default have waived such failure to pay at maturity
Significant Subsidiary having a value of at least $20 or have rescinded the acceleration in respect of such
million, which Warrant is not released within 60 days Indebtedness within 90 days of such maturity or
after service of process with respect thereto, or final declaration of acceleration, as the case may be, and no
judgment not covered by insurance which in the other Event of Default has occurred during such 90-day
aggregate at any one time exceeds $20 million shall be period which has not been cured or waived, or (ii) such
entered against Food 4 Less or any Significant Indebtedness shall have been discharged or the maturity
Subsidiary and shall not be discharged for a period of thereof shall have been extended such that it is not
60 days after such judgment becomes final and then due and payable, or the underlying default has
nonappealable; and (viii) the lenders under the Loan been cured, within 90 days of such maturity or
Documents or any refinancing indebtedness related declaration of acceleration, as the case may be.
thereto shall foreclose or take any action to foreclose
upon any material portion of the collateral securing Under the terms of the New F4L Senior Subordinated Note
such indebtedness. In the event of a declaration of Indenture, if an Event of Default (other than an Event
acceleration because an Event of Default set forth in of Default resulting from bankruptcy, insolvency,
clause (iv) above has occurred and is continuing, such receivership or reorganization of the Company or a
declaration of acceleration shall be automatically Subsidiary Guarantor) occurs and is continuing, the New
rescinded and annulled if either (i) the holders of the F4L Senior Subordinated Note Trustee or the holders of
Indebtedness which is the subject of such Event of at least 25% in principal amount of the then
Default have waived such failure to pay at maturity or outstanding New F4L Senior Subordinated Notes issued
have rescinded the acceleration in respect of such under the New Indenture may declare immediately due and
Indebtedness within 90 days of such maturity or payable all unpaid principal and interest accrued and
declaration of acceleration, as the case may be, and no unpaid on the then outstanding New F4L Senior
other Event of Default has occurred during such 90-day Subordinated Notes by notice in writing to the Company
period which has not been cured or waived, or (ii) such and the New F4L Senior Subordinated Note Trustee
Indebtedness shall have been discharged or the maturity specifying the respective Event of Default and that it
thereof shall have been extended such that it is not is a "notice of acceleration" (the "Acceleration
then due and payable, or the underlying default has Notice"), and the same (i) shall become immediately due
been cured, within 90 days of such maturity or and payable or (ii) if there are any amounts
declaration of acceleration, as the case may be. outstanding under the Credit Agreement, shall become
due and payable upon the first to occur of an
Under the terms of the Old F4L Senior Subordinated acceleration under the Credit Agreement, or five
Note Indenture, if an Event of Default (other than an business days after receipt by the Company and the
Event of Default resulting from bankruptcy, insolvency, administrative agent under the Credit Agreement of such
receivership or reorganization of Food 4 Less) occurs Acceleration Notice. If an Event of Default resulting
and is continuing, the Old F4L Senior Subordinated Note from certain events of bankruptcy, insolvency,
Trustee or the holders of at least 33 1/3% in principal receivership or reorganization of the Company or a
amount of the Old F4L Senior Subordinated Notes then Subsidiary Guarantor shall occur, all unpaid principal
outstanding may declare immediately due and payable all of and accrued interest on all then outstanding New F4L
unpaid principal and interest accrued and unpaid on the Senior Subordinated Notes shall be immediately due and
Old F4L Senior Subordinated Notes then outstanding; payable without any declaration or other act on the
provided, however, that if any Senior Indebtedness is part of the New F4L Senior Subordinated Note Trustee or
outstanding under the Credit Agreement or the Credit any of the holders. After a declaration of
Agreement is otherwise in effect, upon any such acceleration, subject to certain conditions, the
declaration, all unpaid principal and interest accrued holders of a majority in principal amount of the then
and unpaid on the Old F4L Senior Subordinated Notes outstanding New F4L Senior Subordinated Notes, by
then outstanding shall become due and payable upon the notice to the New F4L Senior Subordinated Note Trustee,
first to occur of (i) five business days after notice may rescind such declaration if all existing Events of
is received by Food 4 Less and the Credit Agent; and Default are remedied. In certain cases the holders of a
(ii) an acceleration under the Credit Agreement. If an majority in principal amount of outstanding New F4L
Event of Default resulting from certain events of Senior Subordinated Notes may waive a past default
bankruptcy, insolvency, receivership or reorganization under the New F4L Senior Subordinated Note Indenture
shall occur, all unpaid principal and accrued interest and its consequences, except a default in the payment
shall be immediately due and payable without any of or interest on any of the New F4L Senior
declaration or other act on the part of the Old Subordinated Notes.
F4L Senior Subordinated Note Trustee or any of the
holders. Subject to certain conditions, the holders of The New F4L Senior Subordinated Note Indenture provides
a majority in principal amount of the Old F4L Senior that if a Default or Event of Default occurs and is
Subordinated Notes then outstanding, by notice to the continuing and if it is known to the New F4L Senior
Old F4L Senior Subordinated Note Trustee, may rescind Subordinated Note Trustee, the New F4L Senior
such declaration if all existing Events of Default are Subordinated Note Trustee shall mail to each holder of
remedied. In certain cases the holders of a majority in New F4L Senior Subordinated Notes notice of the Default
principal amount of outstanding Old F4L Senior or Event of Default within 90 days after such Default
Subordinated Notes may waive any past default and its or Event of Default occurs; provided, however, that,
consequences, except a default in the payment of except in the case of a Default or Event of Default in
principal of or interest on any of the Old F4L Senior the payment of the principal of or interest on any New
Subordinated Notes. F4L Senior Subordinated Note, including the failure to
make payment on a Change of Control Payment Date
The Old F4L Senior Subordinated Note Indenture pursuant to a Change of Control Offer or payment when
provides that if a Default or Event of Default occurs due pursuant to a Proceeds Offer the New F4L Senior
and is continuing and if it is known to the Old F4L Subordinated Note Trustee may withhold such notice if
Senior Subordinated Note Trustee, the Old F4L Senior it in good faith determines that withholding such
Subordinated Note Trustee shall mail to each holder notice is in the interest of the holders.
notice of the uncured Default or Event of Default
within 90 days after such Default or Event of Default
occurs;
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<S> <C>
provided, however, that, except in the case of a The New F4L Senior Subordinated Note Indenture provides
Default or Event of Default in the payment of the that no holder of New F4L Senior Subordinated Notes may
principal of or interest on any of the Old F4L Senior pursue any remedy thereunder unless the New F4L Senior
Subordinated Notes, including an Accelerated Payment Subordinated Note Trustee (i) shall have failed to act
and the failure to make payment on the Change of for a period of 60 days after receiving written notice
Control Payment Date pursuant to a Change of Control of a continuing Event of Default by such holder and a
Offer, the Old F4L Senior Subordinated Note Trustee may request to act by holders of at least 25% in principal
withhold such notice if it in good faith determines amount of New F4L Senior Subordinated Notes and (ii)
that withholding such notice is in the interest of the has received indemnification satisfactory to it;
holders. provided, however, that such provision does not affect
the right of any holder to sue for enforcement of any
The Old F4L Senior Subordinated Note Indenture overdue payment of New F4L Senior Subordinated Notes.
provides that no holder may pursue any remedy
thereunder unless the Old F4L Senior Subordinated Note Under the New F4L Senior Subordinated Note Indenture,
Trustee (i) shall have failed to act for a period of 60 two officers of the Company are required to certify to
days after receiving written notice of a continuing the New F4L Senior Subordinated Note Trustee within 120
Event of Default by such holder and a request to act by days after the end of each fiscal year of the Company
holders of at least 33 1/3% in principal amount of Old whether or not they know of any Default that occurred
F4L Senior Subordinated Notes and (ii) has received during such fiscal year and, if applicable, describe
indemnification satisfactory to it; provided, however, such Default and the status thereof.
that such provision does not affect the right of any
holder to sue for enforcement of any overdue payment on
Old F4L Senior Subordinated Notes.
Under the Old F4L Senior Subordinated Note Indenture,
two officers of Food 4 Less are required to certify to
the Trustee within 120 days after the end of each
fiscal year of Food 4 Less whether or not they know of
any Default that occurred during such fiscal year and,
if applicable, describe such Default and the status
thereof.
MODIFICATION OF THE OLD F4L SENIOR MODIFICATION OF THE NEW F4L SENIOR
SUBORDINATED NOTE INDENTURE SUBORDINATED NOTE INDENTURE
Pursuant to the terms of the Old F4L Senior Pursuant to the terms of the New F4L Senior
Subordinated Note Indenture, the Old F4L Senior Subordinated Note Indenture, the New F4L Senior
Subordinated Note Indenture and the Old F4L Senior Subordinated Note Indenture and the New F4L Senior
Subordinated Notes may be amended or supplemented (and Subordinated Notes may be amended or supplemented (and
compliance with any provision thereof may be waived) by compliance with any provision thereof may be waived) by
Food 4 Less, the Old F4L Senior Subordinated Note the Company, the Subsidiary Guarantors, the New F4L
Trustee and the holders of not less than a majority in Senior Subordinated Note Trustee and the holders of not
aggregate principal amount of the Old F4L Senior less than a majority in aggregate principal amount of
Subordinated Notes then outstanding, except that (A) New F4L Senior Subordinated Notes then outstanding,
without the consent of each holder affected, no such except that (i) without the consent of each holder of
amendment supplement or waiver may (1) change the New F4L Senior Subordinated Notes affected, no such
principal amount of Old F4L Senior Subordinated Notes amendment, supplement or waiver may (1) change the
whose holders must consent to an amendment, supplement principal amount of the New F4L Senior Subordinated
or waiver of any provision of the Old F4L Senior Notes the holders of which must consent to an
Subordinated Note Indenture or the Old F4L Senior amendment, supplement or waiver of any provision of the
Subordinated Notes; (2) reduce the rate or extend the New F4L Senior Subordinated Note Indenture, the New F4L
time for payment of interest on any Old F4L Senior Senior Subordinated Notes or the senior subordinated
Subordinated Note; (3) reduce the principal amount of guarantee, (2) reduce the rate or extend the time for
any Old F4L Senior Subordinated Note; (4) change the payment of interest on the New F4L Senior Subordinated
date of maturity of any Old F4L Senior Subordinated Notes, (3) reduce the principal amount of any New F4L
Note, or alter the redemption provisions in a manner Senior Subordinated Notes, (4) change the Maturity Date
adverse to any holder; (5) make any changes in the of the New F4L Senior Subordinated Notes or the Change
provisions concerning waivers of Defaults or Events of of Control Payment Date or alter the redemption
Default by holders or the rights of holders to recover provisions in the New F4L Senior Subordinated Note
the principal of, interest on, or redemption payment Indenture, the New F4L Senior Subordinated Notes or the
with respect to, any Old F4L Senior Subordinated Note; purchase price in connection with any repurchase of New
or (6) make the principal of, or the interest on, any F4L Senior Subordinated Notes pursuant to the covenant
Old F4L Senior Subordinated Note payable with anything described under " -- Limitation on Change of Control"
or in any manner other than as provided for in the Old above in a manner adverse to any holder of the New F4L
F4L Senior Subordinated Note Indenture and the Old F4L Senior Subordinated Notes, (5) make any changes in the
Senior Subordinated Notes; and (B) no provision in any provisions concerning waivers of Defaults or Events of
supplemental indenture that affects the subordination Default by holders or the rights of holders to recover
of the Old F4L Senior Subordinated Notes and the the principal of, interest on or redemption payment
Guarantee Obligations or other provisions relating with respect to New F4L Senior Subordinated Notes, (6)
thereto shall be effective against the holders of the make the principal of, or interest on, any New F4L
Senior Indebtedness or Senior Guarantor Indebtedness Senior Subordinated Notes payable with anything or in
who have not consented thereto. any manner other than as provided for in the New F4L
Senior Subordinated Note Indenture, the New F4L Senior
According to the terms of the Old F4L Senior Subordinated Notes and the Senior Subordinated Note
Subordinated Note Indenture, Food 4 Less and the Guarantee, (7) waive any Default or Event of Default
Trustee may amend the Old F4L Senior Subordinated Note resulting from a failure to comply with the covenant
Indenture and the Old F4L Senior Subordinated Notes (a) described under "Limitation on Change of Control" above
to cure any ambiguity, defect or inconsistency therein; and (ii) without the consent of holders of not less
provided, that such amendment or supplement does not than two thirds in aggregate principal amount of New
adversely affect the rights of any holder or (b) to F4L Senior Subordinated Notes then outstanding, no such
make any other change that does not adversely affect amendment, supplement or waiver may release any
the rights of any holder. Guarantor from any of its
</TABLE>
<TABLE>
<CAPTION>
OLD F4L SENIOR SUBORDINATED NOTES NEW F4L SENIOR SUBORDINATED NOTES
- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
obligations under its guarantee or the New F4L Senior
Subordinated Note Indenture other than in accordance
with the terms of the senior subordinated guarantee and
the New F4L Senior Subordinated Note Indenture.
In addition, the New F4L Senior Subordinated Note
Indentures and the guarantees may be amended by the
Company, the Subsidiary Guarantors and the New F4L
Senior Subordinated Note Trustee (a) to cure any
ambiguity, defect or ambiguity therein; provided that
such amendment or supplement does not adversely affect
the rights of any holder thereof or (b) to make any
other change that does not adversely affect the rights
of any holder thereunder in any material respect.
</TABLE>
B-23
<PAGE> 247
Facsimile copies of the Letters of Transmittal, properly completed and duly
executed, will be accepted, Letters of Transmittal, certificates for the Old F4L
Notes and any other required documents should be sent by each holder or its
broker, dealer, commercial bank, trust company or other nominee to the Exchange
Agent at one of its addresses set forth below.
The Exchange Agent is:
BANKERS TRUST COMPANY
Facsimile Transmission Number:
(212) 250-6275
(212) 250-3290
<TABLE>
<S> <C> <C>
By Mail: (For Eligible Institutions Only) By Hand/Overnight Delivery:
Bankers Trust Company Bankers Trust Company
Corporate Trust and Agency Group Confirm by Telephone: Corporate Trust and Agency Group
Reorganization Dept. (212) 250-6270 Receipt & Delivery Window
P.O. Box 1458 123 Washington Street, 1st Floor
Church Street Station New York, New York 10006
New York, New York 10008-1458
</TABLE>
Any questions or requests for assistance or additional copies of this
Prospectus and Solicitation Statement, the Letters of Transmittal and the
Notices of Guaranteed Delivery may be directed to the Information Agent or one
of the Dealer Managers at their respective telephone numbers and locations set
forth below. You may also contact your broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Exchange Offers and the
Solicitation.
The Information Agent is:
D.F. KING & CO., INC.
Call Toll Free: (800) 669-5550
77 Water Street
New York, NY 10005
(212) 269-5550 (collect)
The Dealer Managers are:
<TABLE>
<S> <C> <C>
BT SECURITIES CS FIRST BOSTON DONALDSON, LUFKIN
CORPORATION 55 East 52nd Street & JENRETTE
One Bankers Trust Plaza New York, New York 10055 SECURITIES CORPORATION
130 Liberty Street (212) 909-2873 140 Broadway
New York, New York 10006 New York, New York 10005
(212) 775-4300 (212) 504-4753
</TABLE>
<PAGE> 248
EDGAR APPENDIX
This EDGAR Appendix is filed in compliance with Item 304 of Regulation S-T
regarding graphic and image information. It describes material appearing on
pages 7 and 8 of the Prospectus and Solicitation Statement.
PAGE 7
The chart consists of two columns which graphically illustrate the
respective corporate structures of Food 4 Less and Ralphs before the Merger.
Food 4 Less' corporate structure illustrates that Food 4 Less, Inc. ("FFL") owns
Food 4 Less Holdings, Inc. ("Holdings"), which, in turn, owns Food 4 Less
Supermarkets, Inc. ("Food 4 Less") which, in turn, owns several other Food 4
Less subsidiaries. The Ralphs' corporate structure illustrates that Ralphs
Supermarkets, Inc. ("RSI"), owns Ralphs Grocery Company ("RGC") which, in turn,
owns Crawford Stores, Inc. A dotted arrow has been drawn from the box
representing Food 4 Less to the box representing RSI to simulate the RSI Merger.
A dotted arrow has been drawn from the box representing RGC to the box
representing RSI to simulate the RGC Merger. A dotted arrow has been drawn to
the box representing Holdings from the box representing FFL to simulate the FFL
Merger.
PAGE 8
The chart illustrates the corporate structure of the Company after the
Merger and the FFL Merger. The corporate structure illustrates that New Holdings
owns the Company which, in turn, is the parent of all other subsidiaries of the
Company. The anticipated debt obligations of New Holdings are placed in order of
ranking next to the box representing New Holdings and the anticipated debt
obligations of the Company are placed in order of ranking next to the box
representing the Company.
<PAGE> 249
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Food 4 Less and its subsidiaries Cala Foods, Inc. and Food 4 Less of
Southern California, Inc., are Delaware corporations and their Certificates of
Incorporation and Bylaws provide for indemnification of their officers and
directors to the fullest extent permitted by law. Section 102(b)(7) of the
Delaware General Corporation Law (the "DGCL") eliminates the liability of a
corporation's directors to a corporation or its stockholders, except for
liabilities related to breach of duty of loyalty, actions not in good faith, and
certain other liabilities.
Section 145 of the DGCL provides for the indemnification by a Delaware
corporation of its directors, officers, employees and agents in connection with
actions, suits or proceedings brought against them by a third party or in the
right of the corporation, by reason of the fact that they were or are such
directors, officers, employees or agents, against liabilities and expenses
incurred in any such action, suit or proceeding.
Alpha Beta Company, Bay Area Warehouse Stores, Inc., Bell Markets, Inc.,
Cala Co., Food 4 Less of California, Inc., Food 4 Less GM, Inc. and Food 4 Less
Merchandising, Inc. are California corporations and their Certificates of
Incorporation and Bylaws provide for indemnification of their officers and
directors to the fullest extent permitted by law. Section 204(10) of the
California General Corporation Law (the "CGCL") eliminates the liability of a
corporation's directors for monetary damages to the fullest extent permissible
under California law. Pursuant to Section 204(11) of the CGCL, a California
corporation may indemnify Agents (as defined in Section 317 of the CGCL),
subject only to the applicable limits set forth in Section 204 of the CGCL with
respect to actions for breach of duty to the corporation and its shareholders.
As permitted by Section 317 of the CGCL, indemnification may be provided by
a California corporation of its Agents (as defined in Section 317 of the CGCL),
to the maximum extent permitted by the CGCL, in connection with any proceeding
arising by reason of the fact that such person is or was such a director or
officer, against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in any such proceeding.
Falley's, Inc. is a Kansas corporation and its Bylaws provide for
indemnification of its officers and directors to the fullest extent permitted by
law. Section 17-6305(a) of the Kansas General Corporation Code (the "KGCC")
provides for the indemnification by a Kansas corporation of its directors,
officers, employees and agents in connection with actions, suits or proceedings
brought against them by a third party or in the right of the corporation, by
reason of the fact that they were or are such directors, officers, employees or
agents, against liabilities and expenses incurred in any such action, suit or
proceeding.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
A list of exhibits filed with this Registration Statement on Form S-4 is
set forth in the Index to Exhibits on page E-1, and is incorporated herein by
reference.
(b) Financial Statement Schedules
(i) Ralphs
<TABLE>
<S> <C>
Schedule V -- Property, Plant and Equipment
Schedule VI -- Accumulated Depreciation and Amortization of Property, Plant
and Equipment
Schedule VIII -- Valuation and Qualifying Accounts
Schedule IX -- Short-Term Borrowings
</TABLE>
II-1
<PAGE> 250
(ii) Food 4 Less
<TABLE>
<S> <C>
Schedule II -- Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees other than Related Parties
Schedule V -- Property and Equipment
Schedule VI -- Accumulated Depreciation and Amortization of Property and
Equipment
Schedule VIII -- Valuation and Qualifying Accounts
</TABLE>
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions, or otherwise, the
registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrants of expenses
incurred or paid by a director, officer or controlling person of the registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-2
<PAGE> 251
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on January 6, 1995.
FOOD 4 LESS SUPERMARKETS, INC.
By: /s/ MARK A. RESNIK
------------------------------------
Mark A. Resnik
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chief Executive Officer and January 6, 1995
- --------------------------------------------- Director (Principal
Ronald W. Burkle Executive Officer)
* Executive Vice President -- January 6, 1995
- --------------------------------------------- Finance/Administration and
Greg Mays Chief Financial Officer
(Principal Financial and
Accounting Officer)
* Director January 6, 1995
- ---------------------------------------------
Joe S. Burkle
/s/ MARK A. RESNIK Director January 6, 1995
- ---------------------------------------------
Mark A. Resnik
* Director January 6, 1995
- ---------------------------------------------
George G. Golleher
* Power of Attorney by
/s/ MARK A. RESNIK
-------------------------------------------
Mark A. Resnik
Vice President and Secretary
</TABLE>
II-3
<PAGE> 252
SIGNATURES
(continued)
Pursuant to the requirements of the Securities Act of 1933, the registrants
have duly caused this Amendment No. 1 to the Registration Statement to be signed
on their behalf by the undersigned, thereunto duly authorized, in the City of
Los Angeles, State of California, on January 6, 1995.
BAY AREA WAREHOUSE STORES, INC.
BELL MARKETS, INC.
CALA CO.
CALA FOODS, INC.
FOOD 4 LESS OF CALIFORNIA, INC.
FOOD 4 LESS GM, INC.
FOOD 4 LESS MERCHANDISING, INC.
FOOD 4 LESS OF SOUTHERN CALIFORNIA,
INC.
By: /s/ MARK A. RESNIK
----------------------------------
Mark A. Resnik
Vice President and Assistant
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director and Chairman of the January 6, 1995
- -------------------------------------- Board of each Registrant
Ronald W. Burkle
* Chief Executive Officer and January 6, 1995
- -------------------------------------- Director (Principal
George G. Golleher Executive Officer) of each
Registrant
* Executive Vice President -- January 6, 1995
- -------------------------------------- Finance/Administration and
Greg Mays Chief Financial Officer
(Principal Financial and
Accounting Officer) of each
Registrant
* Power of Attorney by
/s/ MARK A. RESNIK
- --------------------------------------
Mark A. Resnik
Vice President and Assistant Secretary
</TABLE>
II-4
<PAGE> 253
SIGNATURES
(continued)
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on January 6, 1995.
ALPHA BETA COMPANY
BY: /S/ MARK A. RESNIK
----------------------------------
Mark A. Resnik
Vice President and Assistant
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director and Chief Executive January 6, 1995
- -------------------------------------- Officer (Principal
Ronald W. Burkle Executive Officer)
* Director January 6, 1995
- --------------------------------------
George G. Golleher
* Executive Vice President -- January 6, 1995
- -------------------------------------- Finance/Administration and
Greg Mays Chief Financial Officer
(Principal Financial and
Accounting Officer)
* Power of Attorney by
/s/ MARK A. RESNIK
- --------------------------------------
Mark A. Resnik
Vice President and Assistant Secretary
</TABLE>
II-5
<PAGE> 254
SIGNATURES
(continued)
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on January 6, 1995.
FALLEY'S, INC.
By: /s/ MARK A. RESNIK
----------------------------------
Mark A. Resnik
Vice President and Assistant
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director January 6, 1995
- --------------------------------------
Ronald W. Burkle
* Director January 6, 1995
- --------------------------------------
George G. Golleher
* Chief Executive Officer January 6, 1995
- -------------------------------------- (Principal Executive
Joe S. Burkle Officer)
* Director January 6, 1995
- --------------------------------------
Michael Saltman
* Executive Vice President -- January 6, 1995
- -------------------------------------- Finance/Administration
Greg Mays and Chief Financial
Officer (Principal
Financial and Accounting
Officer)
* Power of Attorney by
/s/ MARK A. RESNIK
- ---------------------------------------------
Mark A. Resnik
Vice President and Assistant Secretary
</TABLE>
II-6
<PAGE> 255
ACCOUNTANTS' CONSENT AND REPORT ON SCHEDULES
Board of Directors and Stockholders
Ralphs Supermarkets, Inc.:
The audits referred to in our report dated April 8, 1994 (except as to note 16,
which is as of September 14, 1994), included the related financial statement
schedules as of January 30, 1994 and January 31, 1993, and for each of the
fiscal years in the three-year period ended January 30, 1994, included in the
registration statement. These financial statement schedules are the
responsibility of Ralphs management. Our responsibility is to express an opinion
on these financial statement schedules based on our audits. In our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
We consent to the use of our reports included herein and to the reference to our
firm under the headings "Summary Historical Financial Data of Ralphs," "Selected
Historical Financial Data of Ralphs" and "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Los Angeles, California
January 4, 1995
S-1
<PAGE> 256
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
52 WEEKS ENDED JANUARY 30, 1994, 52 WEEKS ENDED JANUARY 31, 1993
AND 52 WEEKS ENDED FEBRUARY 2, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE OTHER BALANCE
BEGINNING CHANGES -- AT END
OF PERIOD ADDITIONS RETIREMENTS ADD (DEDUCT) OF PERIOD
---------- --------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
52 WEEKS ENDED JANUARY 30, 1994:
Land.................................... $156,487 $ 4,206 $ -- $ (789) $159,904
Buildings & improvements................ 180,639 16,730 (6,290) 100 191,179
Leasehold improvements.................. 149,273 8,670 (159) 3,557 161,341
Fixtures & equipment.................... 349,697 33,361 (30,299) 1,867 354,626
Capitalized leases...................... 69,058 15,395 (358) 2,869 86,964
-------- ------- -------- ------ --------
Total......................... $905,154 $78,362 $(37,106) $7,604 $954,014
======== ======= ======== ====== ========
52 WEEKS ENDED JANUARY 31, 1993:
Land.................................... $145,344 $11,143 $ -- $ -- $156,487
Buildings & improvements................ 151,896 28,657 (31) 117 180,639
Leasehold improvements.................. 140,989 8,843 (442) (117) 149,273
Fixtures & equipment.................... 317,832 48,336 (16,471) -- 349,697
Capitalized leases...................... 70,151 -- (668) (425) 69,058
-------- ------- -------- ------ --------
Total......................... $826,212 $96,979 $(17,612) $ (425) $905,154
======== ======= ======== ======= ========
52 WEEKS ENDED FEBRUARY 2, 1992:
Land.................................... $143,410 $ 1,864 $ -- $ 70 (a) $145,344
Buildings & improvements................ 136,205 16,558 (15) (852)(a) 151,896
Leasehold improvements.................. 144,385 (11) (3,497) 112 140,989
Fixtures & equipment.................... 301,482 31,944 (16,264) 670 317,832
Capitalized leases...................... 69,228 3,847 (2,924) -- 70,151
-------- ------- -------- ------ --------
Total......................... $794,710 $54,202 $(22,700) $ -- $826,212
======== ======= ======== ====== ========
</TABLE>
- ---------------
(a) Reclassification to/from other accounts.
S-2
<PAGE> 257
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
SCHEDULE VI -- ACCUMULATED DEPRECIATION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
52 WEEKS ENDED JANUARY 30, 1994, 52 WEEKS ENDED JANUARY 31, 1993
AND 52 WEEKS ENDED FEBRUARY 2, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE OTHER BALANCE
BEGINNING CHANGES-- AT END
OF PERIOD ADDITIONS RETIREMENTS ADD (DEDUCT) OF PERIOD
--------- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
52 WEEKS ENDED JANUARY 30, 1994:
Buildings & improvements......... $ 33,598 $10,117 $ (2,640) $ (630) $ 40,445
Leasehold improvements........... 49,549 6,691 (86) 9,082 65,236
Fixtures & equipment............. 182,980 40,301 (14,392) (1,824) 207,065
Capitalized leases............... 28,362 8,434 (294) 2,869 39,371
-------- ------- -------- ------- --------
Total.................. $294,489 $65,543 $(17,412) $ 9,497 $352,117
======== ======= ======== ======= ========
52 WEEKS ENDED JANUARY 31, 1993:
Buildings & improvements......... $ 24,514 $ 9,092 $ (8) $ -- $ 33,598
Leasehold improvements........... 38,138 11,775 (364) -- 49,549
Fixtures & equipment............. 148,407 43,256 (8,683) -- 182,980
Capitalized leases............... 21,271 7,759 (668) -- 28,362
-------- ------- -------- ------- --------
Total.................. $232,330 $71,882 $ (9,723) $ -- $294,489
======== ======= ======== ======= ========
52 WEEKS ENDED FEBRUARY 2, 1992:
Buildings & improvements......... $ 17,161 $ 7,366 $ (11) $ (2) $ 24,514
Leasehold improvements........... 26,483 11,678 (23) -- 38,138
Fixtures & equipment............. 113,431 40,003 (5,029) 2 148,407
Capitalized leases............... 13,009 8,271 (9) -- 21,271
-------- ------- -------- ------- --------
Total.................. $170,084 $67,318 $ (5,072) $ -- $232,330
======== ======= ======== ======= ========
</TABLE>
S-3
<PAGE> 258
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
52 WEEKS ENDED JANUARY 30, 1994, 52 WEEKS ENDED JANUARY 31, 1993
AND 52 WEEKS ENDED FEBRUARY 2, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER ACCOUNTS-- DEDUCTIONS AT END
OF PERIOD EXPENSES DESCRIBE(B) (PAYMENTS) OF PERIOD
--------- ---------- ---------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
JANUARY 30, 1994:
Self-Insurance Reserves(a)............. $72,979 $30,323 $ 5,953 $(29,245) $80,010
Store Closure Reserves................. $10,277 $ -- $ -- $ (763) $ 9,514
JANUARY 31, 1993:
Self-Insurance Reserves(a)............. $64,523 $25,950 $10,902 $(28,396) $72,979
Store Closure Reserves................. $14,244 $ 1,838 $ -- $ (5,805) $10,277
FEBRUARY 2, 1992:
Self-Insurance Reserves(a)............. $57,948 $25,549 $ 5,620 $(24,594) $64,523
Store Closure Reserves................. $ 2,000 $12,244 $ -- $ -- $14,244
</TABLE>
- ---------------
(a) Includes short-term portion.
(b) Amortization of discount on self-insurance reserves to interest expense.
S-4
<PAGE> 259
RALPHS SUPERMARKETS, INC.
(AS SUCCESSOR TO RALPHS GROCERY COMPANY)
SCHEDULE IX -- SHORT-TERM BORROWINGS
52 WEEKS ENDED JANUARY 30, 1994, 52 WEEKS ENDED JANUARY 31, 1993
AND 52 WEEKS ENDED FEBRUARY 2, 1992
(IN THOUSANDS, EXCEPT INTEREST RATE DATA)
<TABLE>
<CAPTION>
MAXIMUM WEIGHTED
WEIGHTED AMOUNT AVERAGE AVERAGE
BALANCE AVERAGE OUTSTANDING AMOUNT INTEREST
AT END INTEREST DURING OUTSTANDING DURING
OF PERIOD RATE PERIOD RATE(a) THE PERIOD
--------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
JANUARY 30, 1994:
Working capital credit line........ $ -- --% $51,900 $ 8,006 7.75%
JANUARY 31, 1993:
Working capital credit line........ $31,100 7.75% $41,800 $13,851 7.82%
FEBRUARY 2, 1992:
Working capital credit line........ $16,500 7.75% $34,900 $ 6,706 9.56%
</TABLE>
- ---------------
(a) Average interest rate for the year is computed by dividing the actual
short-term expense by the average short-term debt outstanding.
S-5
<PAGE> 260
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholder of Food 4 Less Supermarkets, Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated balance sheets of Food 4 Less Supermarkets, Inc. and
subsidiaries as of June 26, 1993 and June 25, 1994, and the related consolidated
statements of operations, stockholder's equity and cash flows for the 52 weeks
ended June 27, 1992, the 52 weeks ended June 26, 1993, and the 52 weeks ended
June 25, 1994 and have issued our report thereon dated July 29, 1994 (except
with respect to the matter discussed in Note 14, as to which the date is
September 14, 1994, and with respect to the matter discussed in Note 15, as to
which the date is October 14, 1994). Our audits were made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
financial statement schedules on pages S-7 through S-10 are the responsibility
of the Company's management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
consolidated financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
July 29, 1994 (except with
respect to the matter discussed in
Note 14, as to which the date is
September 14, 1994, and with respect
to the matter discussed in
Note 15, as to which the date is
October 14, 1994)
S-6
<PAGE> 261
FOOD 4 LESS SUPERMARKETS, INC.
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED
PARTIES AND UNDERWRITERS, PROMOTERS, AND
EMPLOYEES OTHER THAN RELATED PARTIES
52 WEEKS ENDED JUNE 25, 1994, 52 WEEKS ENDED JUNE 26, 1993,
AND 52 WEEKS ENDED JUNE 27, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT END OF
BALANCE AT PERIOD
BEGINNING AMOUNTS OTHER ---------------------
OF PERIOD ADDITIONS COLLECTED CHANGES CURRENT NONCURRENT
---------- --------- --------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
52 WEEKS ENDED JUNE 25, 1994:
None................................... $ -- $ -- $ -- $ -- $ -- $ --
---- ---- ---- ---- ---- ----
$ -- $ -- $ -- $ -- $ -- $ --
==== ==== ==== ==== ==== ====
52 WEEKS ENDED JUNE 26, 1993:
Spencer Deese.......................... $100 $ -- $100 $ -- $ -- $ --
---- ---- ---- ---- ---- ----
$100 $ -- $100 $ -- $ -- $ --
==== ==== ==== ==== ==== ====
52 WEEKS ENDED JUNE 27, 1992:
Spencer Deese.......................... $105 $ -- $ 5 $ -- $ -- $100
---- ---- ---- ---- ---- ----
$105 $ -- $ 5 $ -- $ -- $100
==== ==== ==== ==== ==== ====
</TABLE>
S-7
<PAGE> 262
FOOD 4 LESS SUPERMARKETS, INC.
SCHEDULE V -- PROPERTY AND EQUIPMENT
52 WEEKS ENDED JUNE 25, 1994, 52 WEEKS ENDED JUNE 26, 1993
AND 52 WEEKS ENDED JUNE 27, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF OTHER BALANCE AT END
PERIOD ADDITIONS RETIREMENTS CHANGES(A) OF PERIOD
------------ --------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
52 WEEKS ENDED JUNE 25, 1994:
Land..................................... $ 23,912 $ -- $ 424 $ -- $ 23,488
Buildings................................ 12,827 -- -- -- 12,827
Leasehold improvements................... 81,049 17,292 668 -- 97,673
Store equipment & fixtures............... 129,178 27,324 11,643 3,390 148,249
Transportation equipment................. 31,758 971 470 -- 32,259
Construction in progress................. 757 11,884 -- -- 12,641
Leased property under capital leases..... 77,553 2,575 1,906 -- 78,222
Leasehold interests...................... 93,863 -- 399 -- 93,464
-------- ------- ------- -------- --------
$450,897 $60,046 $15,510 $ 3,390 $498,823
======== ======= ======= ======== ========
52 WEEKS ENDED JUNE 26, 1993:
Land..................................... $ 26,952 $ 652 $ 3,692 $ -- $ 23,912
Buildings................................ 12,568 207 126 178 12,827
Leasehold improvements................... 58,846 20,853 1,912 3,262 81,049
Store equipment & fixtures............... 104,473 24,956 2,328 2,077 129,178
Transportation equipment................. 29,415 2,531 188 -- 31,758
Construction in progress................. 8,679 1,601 2,513 (7,010) 757
Leased property under capital leases..... 80,369 115 2,931 -- 77,553
Leasehold interests...................... 92,193 2,552 882 -- 93,863
-------- ------- ------- -------- --------
$413,495 $53,467 $14,572 $ (1,493) $450,897
======== ======= ======= ======== ========
52 WEEKS ENDED JUNE 27, 1992:
Land..................................... $ 26,952 $ -- $ -- $ -- $ 26,952
Buildings................................ 12,568 -- -- -- 12,568
Leasehold improvements................... 41,730 19,592 2,476 -- 58,846
Store equipment & fixtures............... 130,497 27,819 21,072 (32,771) 104,473
Transportation equipment................. 28,937 651 173 -- 29,415
Construction in progress................. 1,947 12,201 5,469 -- 8,679
Leased property under capital leases..... 80,399 -- 30 -- 80,369
Leasehold interests...................... 100,710 -- 357 (8,160) 92,193
-------- ------- ------- -------- --------
$423,740 $60,263 $29,577 $(40,931) $413,495
======== ======= ======= ======== ========
</TABLE>
- ---------------
(a) Consists of (1) the acquisition of Food Barn in March 1994, (2) final Alpha
Beta purchase price allocation adjustments, and (3) gains and losses on
involuntary conversion of assets.
S-8
<PAGE> 263
FOOD 4 LESS SUPERMARKETS, INC.
SCHEDULE VI -- ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
52 WEEKS ENDED JUNE 25, 1994, 52 WEEKS ENDED JUNE 26, 1993,
AND 52 WEEKS ENDED JUNE 27, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING OTHER AT END
OF PERIOD ADDITIONS RETIREMENTS CHANGES(A) OF PERIOD
---------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
52 WEEKS ENDED JUNE 25, 1994:
Buildings................................... $ 2,515 $ 441 $ -- $ -- $ 2,956
Leasehold improvements...................... 25,050 7,097 185 -- 31,962
Store equipment & fixtures.................. 36,506 20,789 1,762 -- 55,533
Transportation equipment.................... 7,036 2,461 337 -- 9,160
Leased property under capital leases........ 20,356 5,591 1,906 -- 24,041
Leasehold interests......................... 5,485 5,001 49 -- 10,437
-------- ------- ------- ----- --------
$96,948 $41,380 $ 4,239 $ -- $134,089
======= ======= ======= ===== ========
52 WEEKS ENDED JUNE 26, 1993:
Buildings................................... $ 1,861 $ 682 $ 24 $ (4) $ 2,515
Leasehold improvements...................... 15,534 9,692 15 (161) 25,050
Store equipment & fixtures.................. 19,818 18,051 673 (690) 36,506
Transportation equipment.................... 5,040 2,180 184 -- 7,036
Leased property under capital leases........ 16,655 5,342 1,641 -- 20,356
Leasehold interests......................... 4,051 1,479 45 -- 5,485
-------- ------- ------- ----- --------
$62,959 $37,426 $ 2,582 $(855) $ 96,948
======= ======= ======= ===== ========
52 WEEKS ENDED JUNE 27, 1992:
Buildings................................... $ 1,252 $ 688 $ 79 $ -- $ 1,861
Leasehold improvements...................... 7,800 8,649 915 -- 15,534
Store equipment & fixtures.................. 12,275 19,224 11,681 -- 19,818
Transportation equipment.................... 3,323 1,751 34 -- 5,040
Leased property under capital leases........ 10,306 6,379 30 -- 16,655
Leasehold interests......................... 2,888 1,207 44 -- 4,051
------- ------- ------- ----- --------
$37,844 $37,898 $12,783 $ -- $ 62,959
======= ======= ======= ===== ========
</TABLE>
- ---------------
(a) Consists of gains and losses on involuntary conversion of assets.
S-9
<PAGE> 264
FOOD 4 LESS SUPERMARKETS, INC.
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
52 WEEKS ENDED JUNE 25, 1994, 52 WEEKS ENDED JUNE 26, 1993,
AND 52 WEEKS ENDED JUNE 27, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT PROVISIONS CHARGED TO BALANCE AT
BEGINNING CHARGED TO INTEREST OTHER END OF
OF PERIOD EXPENSE EXPENSE(B) PAYMENTS CHANGES PERIOD
---------- ---------- ---------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
SELF-INSURANCE LIABILITIES:
52 weeks ended June 25, 1994...... $85,494 $19,880 $5,836 $29,506 $ -- $81,704
======= ======= ====== ======= ====== =======
52 weeks ended June 26, 1993...... $82,559 $38,040 $5,865 $40,970 $ -- $85,494
======= ======= ====== ======= ====== =======
52 weeks ended June 27, 1992...... $59,525 $46,140 $4,960 $36,066 $8,000(a) $82,559
======= ======= ====== ======= ====== =======
</TABLE>
- ---------------
(a) Reflects self-insurance reserve related to Alpha Beta resulting from the
acquisition of Alpha Beta.
(b) Amortization of discount on self-insurance reserves charged to interest
expense.
S-10
<PAGE> 265
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ---------------------------------------------------------------------- ----
<S> <C> <C>
1.1 Form of Dealer Manager Agreement among Food 4 Less, Food 4 Less
Holdings, Inc., the subsidiary guarantors named therein, BT Securities
Corporation, CS First Boston Corporation and Donaldson, Lufkin &
Jenrette Securities Corporation dated as of , 1995*....
2.1 Agreement and Plan of Merger by and among Food 4 Less, Inc., Food 4
Less Holdings, Inc., Food 4 Less, Ralphs Supermarkets, Inc. and the
Stockholders of Ralphs Supermarkets, Inc. (incorporated herein by
reference to Exhibit 99 to Food 4 Less' Form 8-K dated September 14,
1994).................................................................
2.1.1 Form of Amendment No. 1 dated as of , to Agreement and
Plan of Merger by and among Food 4 Less, Inc., Food 4 Less Holdings,
Inc., Food 4 Less Holdings, Inc. (a Delaware corporation), Food 4
Less, Ralphs Supermarkets, Inc. and the stockholders of Ralphs
Supermarkets, Inc.*...................................................
3.1 Certificate of Incorporation of Food 4 Less, as amended (incorporated
herein by reference to Exhibit 3.1 to Food 4 Less' Annual Report on
Form 10-K for the fiscal year ended June 25, 1994)....................
3.2 Bylaws of Food 4 Less, as amended (incorporated herein by reference to
Exhibit 3.2 to Food 4 Less's Registration Statement on Form S-1, No.
33-31152).............................................................
4.1 Form of Senior Note Indenture dated as of , 1995 by and
among Ralphs Grocery Company (as successor by merger to Food 4 Less),
the subsidiary guarantors identified therein and Norwest Bank
Minnesota, N.A., as trustee, with respect to its % Senior Notes
due 2004..............................................................
4.2 Form of Senior Subordinated Note Indenture dated as of
, 1995 by and among Ralphs Grocery Company (as
successor by merger to Food 4 Less), the subsidiary guarantors
identified therein and United States Trust Company of New York, as
trustee, with respect to its 13.75% Senior Subordinated Notes due
2005..................................................................
4.3 Form of Senior Subordinated Note Indenture dated as of
, 1995 by and among Ralphs Grocery Company (as
successor by merger to Food 4 Less), the subsidiary guarantors
identified therein and United States Trust Company of New York, as
trustee, with respect to its % Senior Subordinated Notes due 2005
(incorporated herein by reference to Exhibit 4.3 to Amendment No. 1 to
Food 4 Less' Registration Statement on Form S-4, No. 33-56445)........
4.4.1 Form of First Supplemental Indenture dated as of , 1995
by and between Ralphs Grocery Company and United States Trust Company
of New York, as trustee, with respect to its 10 1/4% Senior
Subordinated Notes due 2002 (incorporated herein by reference to
Exhibit 4.4.1 to Amendment No. 1 to Food 4 Less' Registration
Statement on Form S-4, No. 33-56445)..................................
4.4.2 Form of Second Supplemental Indenture dated as of ,
1995 by and between Ralphs Grocery Company (as successor by merger to
Food 4 Less) and United States Trust Company of New York, as trustee,
with respect to its 10 1/4% Senior Subordinated Notes due 2002
(incorporated herein by reference to Exhibit 4.4.2 to Amendment No. 1
to Food 4 Less' Registration Statement on Form S-4, No. 33-56445).....
4.5.1 Form of Second Supplemental Indenture dated as of
, 1995 by and between Ralphs Grocery Company and
United States Trust Company of New York, as trustee, with respect to
its 9% Senior Subordinated Notes due 2003 (incorporated herein by
reference to Exhibit 4.5.1 to Amendment No. 1 to Food 4 Less'
Registration Statement on Form S-4, No. 33-56445).....................
4.5.2 Form of Third Supplemental Indenture dated as of , 1995
by and between Ralphs Grocery Company (as successor by merger to Food
4 Less) and United States Trust Company of New York, as trustee, with
respect to its 9% Senior Subordinated Notes due 2003 (incorporated
herein by reference to Exhibit 4.5.2 to Amendment No. 1 to Food 4
Less' Registration Statement on Form S-4, No. 33-56445)...............
</TABLE>
E-1
<PAGE> 266
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ---------------------------------------------------------------------- ----
<S> <C> <C>
4.6 Senior Note Indenture dated as of April 15, 1992 by and among Food 4
Less, the subsidiary guarantors identified therein and Norwest Bank
Minnesota, N.A., as trustee (incorporated herein by reference to
Exhibit 4.1 to Food 4 Less' Registration Statement on Form S-1, No.
33-46750).............................................................
4.6.1 First Supplemental Indenture dated as of July 24, 1992 by and among
Food 4 Less, Bay Area Warehouse Stores, Inc., and Norwest Bank
Minnesota, N.A., as trustee (incorporated herein by reference to
Exhibit 4.1.1 to Food 4 Less' Annual Report on Form 10-K for the
fiscal year ended June 27, 1992)......................................
4.6.2 Form of Second Supplemental Indenture dated as of , 1995 by
and among Food 4 Less, the subsidiary guarantors identified therein
and Norwest Bank Minnesota, N.A., as trustee, with respect to its
10.45% Senior Notes due 2000..........................................
4.6.3 Form of Third Supplemental Indenture dated as of , 1995
by and among Ralphs Grocery Company (as successor by merger to Food 4
Less), the subsidiary guarantors identified therein and Norwest Bank
Minnesota, N.A., as trustee, with respect to its 10.45% Senior Notes
due 2000..............................................................
4.7 Senior Subordinated Note Indenture dated as of June 15, 1991 by and
among Food 4 Less, the subsidiary guarantors identified therein and
United States Trust Company of New York, as trustee (incorporated
herein by reference to Exhibit 4.1 to Food 4 Less's Annual Report on
Form 10-K for the fiscal year ended June 29, 1991)....................
4.7.1 First Supplemental Indenture dated as of April 8, 1992 by and among
Food 4 Less, Food 4 Less GM, Inc. and United States Trust Company of
New York, as trustee (incorporated herein by reference to Exhibit
4.2.1 to Food 4 Less' Annual Report on Form 10-K for the fiscal year
ended June 27, 1992)..................................................
4.7.2 Second Supplemental Indenture dated as of May 18, 1992 by and among
Food 4 Less, the Subsidiary Guarantors and United States Trust Company
of New York, as trustee (incorporated herein by reference to Exhibit
4.2.2 to Food 4 Less' Annual Report on Form 10-K for the fiscal year
ended June 27, 1992)..................................................
4.7.3 Third Supplemental Indenture dated as of July 24, 1992 by and among
Food 4 Less, Bay Area Warehouse Stores, Inc. and United States Trust
Company of New York, as trustee (incorporated herein by reference to
Exhibit 4.2.3 to Food 4 Less' Annual Report on Form 10-K for the
fiscal year ended June 27, 1992)......................................
4.7.4 Form of Fourth Supplemental Indenture dated as of ,
1995, by and among Food 4 Less, the subsidiary guarantors identified
therein and United States Trust Company of New York, as trustee, with
respect to its 13 3/4% Senior Subordinated Notes due 2001.............
4.7.5 Form of Fifth Supplemental Indenture dated as of , 1995 by
and among Ralphs Grocery Company (as successor by merger to Food 4
Less), the subsidiary guarantors identified therein and the United
States Trust Company of New York, as trustee, with respect to its
13 3/4% Senior Subordinated Notes due 2001............................
4.8 Bank commitment letter by and among Food 4 Less, the guarantors named
therein and Bankers Trust Company, as agent, and the financial
institutions identified therein*......................................
5.1 Form of Opinion of Latham & Watkins regarding the legality of the
% Senior Notes due 2004, the 13.75% Senior Subordinated Notes due
2005, the 10.45% Senior Notes due 2000, as amended, and the 13.75%
Senior Subordinated Notes due 2001, as amended, including consent*....
8.1 Form of Opinion of Latham & Watkins regarding certain tax matters with
respect to the % Senior Notes due 2004, the 13.75% Senior
Subordinated Notes due 2005, the 10.45% Senior Notes due 2000, as
amended, and the 13.75% Senior Subordinated Notes due 2001, as
amended, including consent............................................
10.1 Lease dated as of June 17, 1991 by and between Food 4 Less and
American Food and Drug, Inc. relating to La Habra, California property
(incorporated herein by reference to Exhibit 10.4 to Food 4 Less'
Annual Report on Form 10-K for the fiscal year ended June 29, 1991)...
</TABLE>
E-2
<PAGE> 267
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ---------------------------------------------------------------------- ----
<S> <C> <C>
10.2 Stockholders Agreement dated as of June 23, 1989 by and among Food 4
Less, Food 4 Less, Inc. and Peter J. Sodini (incorporated herein by
reference to Exhibit 10.16 to Food 4 Less' Registration Statement on
Form S-1, No. 33-31152)...............................................
10.2.1 Amendment dated as of May 4, 1990 to Stockholders Agreement by and
among Food 4 Less, Food 4 Less, Inc. and Peter J. Sodini (incorporated
herein by reference to Exhibit 10.58 to Food 4 Less' Registration
Statement on Form S-1, No. 33-31152)..................................
10.2.2 Letter Agreement dated as of June 27, 1990 by and among Peter J.
Sodini, The Boys Markets, Inc., and certain affiliates, officers,
directors and employees of Food 4 Less (incorporated herein by
reference to Exhibit 10.39.1 to Food 4 Less' Annual Report on Form
10-K for the fiscal year ended June 30, 1990).........................
10.2.3 Assignment and Assumption Agreement dated as of August 22, 1990 by and
between Peter J. Sodini and Ronald W. Burkle with respect to
Stockholders Agreement by and among Food 4 Less, Food 4 Less, Inc. and
Peter J. Sodini (incorporated herein by reference to Exhibit 10.16.2
to Food 4 Less' Annual Report on Form 10-K for the fiscal year ended
June 30, 1990)........................................................
10.2.4 Amendment dated as of December 31, 1992 by and among Food 4 Less,
Inc., Food 4 Less Holdings, Inc., Food 4 Less and Ronald W. Burkle to
Stockholders Agreement by and among Food 4 Less, Food 4 Less, Inc. and
Peter J. Sodini (incorporated herein by reference to Exhibit 10.6.2 to
Food 4 Less Holdings, Inc.'s Registration Statement on Form S-4, No.
33-59214).............................................................
10.3 Stockholders Agreement dated as of June 23, 1989 by and among Food 4
Less, Food 4 Less, Inc. and George G. Golleher (incorporated herein by
reference to Exhibit 10.17 to Food 4 Less' Registration Statement on
Form S-1, No. 33-31152)...............................................
10.3.1 Amendment dated as of May 4, 1990 to Stockholders Agreement by and
among Food 4 Less, Food 4 Less, Inc. and George G. Golleher
(incorporated herein by reference to Exhibit 10.59 to Food 4 Less'
Registration Statement on Form S-1, No. 33-31152).....................
10.3.2 Amendment dated as of December 31, 1992 by and among Food 4 Less
Holdings, Inc., Food 4 Less, Food 4 Less, Inc. and George G. Golleher
to Stockholders Agreement by and among Food 4 Less, Food 4 Less, Inc.
and George G. Golleher (incorporated herein by reference to Exhibit
10.8.2 to Food 4 Less Holdings, Inc.'s Registration Statement on Form
S-4, No. 33-59214)....................................................
10.4 Letter Agreement dated as of September 14, 1994 by and among FFL
Partners, Food 4 Less, Inc., Food 4 Less Holdings, Inc., Food 4 Less
and Falley's Inc. relating to certain obligations arising under the
Falley's, Inc. Stock Ownership Plan and Trust, as amended
(incorporated herein by reference to Exhibit 10.4 to Food 4 Less'
Annual Report on Form 10-K for the fiscal year ended June 25, 1994)...
10.5 Form of Consulting Agreement dated as of , 1995 by and
between The Yucaipa Companies and Food 4 Less*........................
10.6 Consulting Agreement dated as of June 27, 1988 by and between
Falley's, Inc. and Joe S. Burkle (incorporated herein by reference to
Exhibit 10.38 to Food 4 Less' Registration Statement on Form S-1, No.
33-31152).............................................................
10.6.1 Letter Agreement dated as of December 10, 1990 amending Consulting
Agreement by and between Falley's, Inc. and Joe S. Burkle
(incorporated herein by reference to Exhibit 10.17.1 to Food 4 Less'
Annual Report on Form 10-K for the fiscal year ended June 29, 1991)...
10.7 Form of Employment Agreement dated as of , 1995 by and
between the Company and Byron E. Allumbaugh*..........................
10.8 Form of Amended and Restated Employment Agreement dated as of
, 1995 by and between the Company and George G.
Golleher*.............................................................
10.9 Employment Agreement dated as of July 1, 1994 between Food 4 Less and
Harley DeLano (incorporated herein by reference to Exhibit 10.9 to
Food 4 Less' Annual Report on Form 10-K dated June 25, 1994)..........
</TABLE>
E-3
<PAGE> 268
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ---------------------------------------------------------------------- ----
<S> <C> <C>
10.10 Employment Agreement dated as of July 1, 1994 between Food 4 Less and
Greg Mays (incorporated herein by reference to Exhibit 10.10 to Food 4
Less' Annual Report on Form 10-K dated June 25, 1994).................
10.11 Form of Employment Agreement dated as of , 1995 by and
between the Company and Alfred A. Marasca*............................
10.12 Form of Stock Purchase Agreement dated as of , 1995, among
Food 4 Less, Inc., Food 4 Less Holdings, Inc., Food 4 Less and the
Purchasers named therein*.............................................
10.13 Amended and Restated Tax Sharing Agreement dated as of June 17, 1991
by and among Food 4 Less, Inc., Food 4 Less and the subsidiaries of
Food 4 Less (incorporated herein by reference to Exhibit 10.20 to Food
4 Less' Annual Report on Form 10-K for the fiscal year ended June 29,
1991).................................................................
12.1 Statements regarding computations of ratios of earnings to fixed
charges+..............................................................
21.1 Subsidiaries of Food 4 Less (incorporated herein by reference to
Exhibit 22.1 to Food 4 Less' Annual Report on Form 10-K dated June 25,
1994).................................................................
23.1 Consent of KPMG Peat Marwick LLP, independent certified public
accountants...........................................................
23.2 Consent of Arthur Andersen LLP, independent public accountants........
23.3 Consent of Latham & Watkins (included in the opinions filed as Exhibit
5 to the Registration Statement)*.....................................
23.4 Consent of Director Nominee Byron E. Allumbaugh+......................
23.5 Consent of Director Nominee Alfred A. Marasca+........................
23.6 Consent of Director Nominee Patrick L. Graham+........................
24 Power of Attorney of directors and officers of Food 4 Less (included
in the signature pages in Part II of the Registration Statement)+.....
25.1 Statement of Eligibility and Qualification on Form T-1 of Norwest Bank
Minnesota, N.A., as trustee, under the Indenture for the % Senior
Notes due 2004........................................................
25.2 Statement of Eligibility and Qualification on Form T-1 of United
States Trust Company of New York, as trustee, under the Indenture for
the 13.75% Senior Subordinated Notes due 2005.........................
25.3 Statement of Eligibility and Qualification on Form T-1 of United
States Trust Company of New York, as trustee, under the Indenture for
the % Senior Subordinated Notes due 2005 (incorporated herein by
reference to Exhibit 25.1 to Amendment No. 1 to Food 4 Less'
Registration Statement on Form S-4, No. 33-56445).....................
99.1 Form of Letter of Transmittal and Consent with respect to the Exchange
Offers and the Solicitation...........................................
99.2 Form of Notice of Guaranteed Delivery with respect to the Exchange
Offers and the Solicitation...........................................
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees with respect to the Exchange Offers and the
Solicitation..........................................................
99.4 Form of Letter to Clients with respect to the Exchange Offers and the
Solicitation..........................................................
99.5 Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9...................................................
99.6 Form of Letter to Noteholders from Officer of Food 4 Less with respect
to the Exchange Offers and the Solicitation...........................
</TABLE>
- ---------------
* To be filed by amendment.
+ Previously filed.
E-4
<PAGE> 1
EXHIBIT 4.1
____________________________________________________________________________
FOOD 4 LESS SUPERMARKETS, INC.
TO BE MERGED WITH AND INTO RALPH'S GROCERY COMPANY
AND
SUBSIDIARY GUARANTORS
AND
UNITED STATES TRUST COMPANY OF NEW YORK
TRUSTEE
_________________
INDENTURE
Dated as of , 1995
________________
$575,000,000
____% Senior Notes
due 2004
______________________________________________________________________________
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- -------
<S> <C>
310(a)(1).................................. 8.10
(a)(2).................................. 8.10
(a)(3).................................. N.A.
(a)(4).................................. N.A
(a)(5).................................. 8.10; 8.11
(b)..................................... 8.08; 8.10;
13.02
(c)..................................... N.A.
311(a)..................................... 8.11
(b)..................................... 8.11
(c)..................................... N.A.
312(a)..................................... 2.05
(b)..................................... 13.03
(c)..................................... 13.03
313(a)..................................... 8.06
(b)(1).................................. N.A
(b)(2).................................. 8.06
(c)..................................... 8.06; 13.02
(d)..................................... 8.06
314(a)..................................... 5.07; 5.09;
13.02
(b)..................................... N.A.
(c)(1).................................. 8.02; 13.04
(c)(2).................................. 8.02; 13.04
(c)(3).................................. N.A.
(d)..................................... N.A.
(e)..................................... 13.05
(f)..................................... N.A
315(a)..................................... 8.01(b)
(b)..................................... 8.05; 13.02
(c)..................................... 8.01(a)
(d)..................................... 8.01(c)
(e)..................................... 7.11
316(a)(last sentence)...................... 2.09
(a)(1)(A)............................... 7.05
(a)(1)(B)............................... 7.04
(a)(2).................................. N.A.
(b)..................................... 7.07
317(a)(1).................................. 7.08
(a)(2).................................. 7.09
(b)..................................... 2.04
318(a)..................................... 13.01
(c)..................................... 13.01
- ----------------------
</TABLE>
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of the Indenture.
-i-
<PAGE> 3
TABLE OF CONTENTS
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1.01 Definitions.................................
Section 1.02 Incorporation by Reference of TIA...........
Section 1.03 Rules of Construction.......................
ARTICLE TWO
THE SECURITIES
Section 2.01 Form and Dating.............................
Section 2.02 Execution and Authentication................
Section 2.03 Registrar and Paying Agent..................
Section 2.04 Paying Agent to Hold Assets in
Trust.....................................
Section 2.05 Securityholder Lists........................
Section 2.06 Transfer and Exchange.......................
Section 2.07 Replacement Securities......................
Section 2.08 Outstanding Securities......................
Section 2.09 Treasury Securities.........................
Section 2.10 Temporary Securities........................
Section 2.11 Cancellation................................
Section 2.12 Defaulted Interest..........................
Section 2.13 CUSIP Number................................
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee..........................
Section 3.02 Selection of Securities to Be
Redeemed..................................
Section 3.03 Notice of Redemption........................
Section 3.04 Effect of Notice of Redemption..............
Section 3.05 Deposit of Redemption Price.................
Section 3.06 Securities Redeemed in Part.................
</TABLE>
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ARTICLE FOUR
COVENANTS
Section 4.01 Payment of Securities.....................
Section 4.02 Maintenance of Office or Agency...........
Section 4.03 Limitation on Restricted Payments.........
Section 4.04 Corporate Existence.......................
Section 4.05 Payment of Taxes and Other Claims.........
Section 4.06 Maintenance of Properties and
Insurance...............................
Section 4.07 Compliance Certificate; Notice of
Default.................................
Section 4.08 Compliance with Laws......................
Section 4.09 SEC Reports...............................
Section 4.10 Waiver of Stay, Extension or Usury
Laws....................................
Section 4.11 Limitation on Transactions with
Affiliates..............................
Section 4.12 Limitation on Incurrences of Addi
tional Indebtedness.....................
Section 4.13 Limitation on Dividends and Other
Payment Restrictions Affecting
Subsidiaries............................
Section 4.14 Limitation on Liens.......................
Section 4.15 Limitation on Change of Control...........
Section 4.16 Limitation on Asset Sales.................
Section 4.17 Guarantees of Certain Indebtedness........
Section 4.18 Limitation on Preferred Stock of
Subsidiaries............................
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Limitation on Mergers and Certain
Other Transactions......................
Section 5.02 Successor Corporation Substituted.........
</TABLE>
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ARTICLE SIX
DEFAULT AND REMEDIES
Section 6.01 Events of Default.........................
Section 6.02 Acceleration..............................
Section 6.03 Other Remedies............................
Section 6.04 Waiver of Past Defaults...................
Section 6.05 Control by Majority.......................
Section 6.06 Limitation on Suits.......................
Section 6.07 Rights of Holders to Receive
Payment.................................
Section 6.08 Collection Suit by Trustee................
Section 6.09 Trustee May File Proofs of Claim..........
Section 6.10 Priorities................................
Section 6.11 Right and Remedies Cumulative.............
Section 6.12 Delay or Omission Not Waiver..............
Section 6.13 Undertaking for Costs.....................
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee.........................
Section 7.02 Rights of Trustee.........................
Section 7.03 Individual Rights of Trustee..............
Section 7.04 Trustee's Disclaimer......................
Section 7.05 Notice of Default.........................
Section 7.06 Reports by Trustee to Holders.............
Section 7.07 Compensation and Indemnity................
Section 7.08 Replacement of Trustee....................
Section 7.09 Successor Trustee by Merger, Etc..........
Section 7.10 Eligibility; Disqualification.............
Section 7.11 Preferential Collection of Claim
Against Company.........................
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
Section 8.01 Termination of the Company's
Obligations.............................
Section 8.02 Legal Defeasance and Covenant
Defeasance..............................
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Section 8.03 Application of Trust Money.................
Section 8.04 Repayment to the Company or Sub-
sidiary Guarantors.......................
Section 8.05 Reinstatement..............................
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01 Without Consent of Holders.................
Section 9.02 With Consent of Holders....................
Section 9.03 Compliance with TIA........................
Section 9.04 Revocation and Effect of Consents..........
Section 9.05 Notation on or Exchange of
Securities...............................
Section 9.06 Trustee to Sign Amendments, Etc............
ARTICLE TEN
GUARANTEE
Section 10.01 Unconditional Guarantee....................
Section 10.02 Severability...............................
Section 10.03 Release of a Subsidiary Guarantor..........
Section 10.04 Limitation of Subsidiary Guaran-
tor's Liability..........................
Section 10.05 Subsidiary Guarantors May Consoli-
date, etc., on Certain Terms.............
Section 10.06 Contribution...............................
Section 10.07 Waiver of Subrogation......................
Section 10.08 Execution of Guarantee.....................
Section 10.09 Waiver of Stay, Extension or Usury
Laws.....................................
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01 TIA Controls...............................
Section 11.02 Notices....................................
Section 11.03 Communications by Holders with
Other Holders............................
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Section 11.04 Certificate and Opinion as to Con-
ditions Precedent.......................
Section 11.05 Statements Required in Certificate
or Opinion..............................
Section 11.06 Rules by Trustee, Paying Agent,
Registrar...............................
Section 11.07 Legal Holidays............................
Section 11.08 Governing Law.............................
Section 11.09 No Adverse Interpretation of Other
Agreements..............................
Section 11.10 No Recourse Against Others................
Section 11.11 Successors................................
Section 11.12 Duplicate Originals.......................
Section 11.13 Severability..............................
Section 11.14 No Violation..............................
Signatures...............................................
Exhibit A - Form of Note
Exhibit B - Form of Guarantee
</TABLE>
Note: This Table of Contents shall not, for any purpose, be
deemed to be part of the Indenture.
-vi-
<PAGE> 8
-1-
INDENTURE dated as of __, 1995, among FOOD 4
LESS SUPERMARKETS, INC., a Delaware corporation (the "Com-
pany"), the SUBSIDIARY GUARANTORS, and UNITED STATES TRUST COM-
PANY OF NEW YORK, a New York corporation, as Trustee.
Each party hereto agrees as follows for the benefit
of each other party and for the equal and ratable benefit of
the Holders of the Company's _____% Senior Notes due 2004:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means (i) with respect to any
person that becomes a Subsidiary of the Company (or is merged
into the Company or any of its Subsidiaries) after the Issue
Date, Indebtedness of such person or any of its Subsidiaries
existing at the time such person becomes a Subsidiary of the
Company (or is merged into the Company or any of its Subsidiar-
ies) and which was not incurred in connection with, or in con-
templation of, such person becoming a Subsidiary of the Company
(or being merged into the Company or any of its Subsidiaries)
and (ii) with respect to the Company or any of its Subsidiar-
ies, any Indebtedness assumed by the Company or any of its Sub-
sidiaries in connection with the acquisition of any assets from
another person (other than the Company or any of its Subsidiar-
ies), and which was not incurred by such other person in con-
nection with, or in contemplation of, such acquisition.
"Adjusted Net Assets" shall have the meaning provided
in Section 10.06.
"Affiliate" means, with respect to any person, any
other person directly or indirectly controlling or controlled
by or under direct or indirect common control with such speci-
fied person. For the purposes of this definition, "control"
when used with respect to any person means the power to direct
the management and policies of such person, directly or indi-
rectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "affiliated," "control-
ling" and "controlled" have meanings correlative to the fore-
going. For purposes of Section 4.11, the term "Affiliate"
shall include any person who, as a result of any transaction
described in Section 4.11, would become an Affiliate.
<PAGE> 9
-2-
Notwithstanding the foregoing, the term "Affiliate," with
respect to the Company and its Subsidiaries, shall not include
BT Securities Corporation or any of its Affiliates.
"Affiliate Transaction" shall have the meaning pro-
vided in Section 4.11.
"Agent" means any Registrar, Paying Agent or
co-Registrar.
"Asset Sale" means, with respect to any person, any
sale, transfer or other disposition or series of sales, trans-
fers or other dispositions (including, without limitation, by
merger or consolidation or by exchange of assets and whether by
operation of law or otherwise) made by such person or any of
its subsidiaries to any person other than such person or one of
its wholly owned subsidiaries (or, in the case of a sale,
transfer or other disposition by a Subsidiary, to any person
other than the Company or a directly or indirectly wholly owned
Subsidiary) of any assets of such person or any of its subsid-
iaries including, without limitation, assets consisting of any
Capital Stock or other securities held by such person or any of
its subsidiaries, and any Capital Stock issued by any subsid-
iary of such person, in each case, outside of the ordinary
course of business, excluding, however, any sale, transfer or
other disposition, or series of related sales, transfers or
other dispositions (i) involving any Excluded Assets, (ii)
resulting in Net Proceeds to the Company and the Subsidiaries
of $500,000 or less or (iii) pursuant to any foreclosure of
assets or other remedy provided by applicable law to a creditor
of the Company with a Lien on such assets, which Lien is per-
mitted under this Indenture, provided that such foreclosure or
other remedy is conducted in a commercially reasonable manner
or in accordance with any Bankruptcy Law.
"Average Life" means, as of the date of determina-
tion, with respect to any debt security, the quotient obtained
by dividing (i) the sum of the products of the number of years
from the date of determination to the dates of each successive
scheduled principal payments of such debt security multiplied
by the amount of such principal payment by (ii) the sum of all
such principal payments.
"Bankruptcy Law" means Title 11, U.S. Code or any
similar Federal, state or foreign law for the relief of
debtors.
<PAGE> 10
-3-
"Board of Directors" means, with respect to any per-
son, the Board of Directors of such person or any committee of
the Board of Directors of such person duly authorized, with
respect to any particular matter, to exercise the power of the
Board of Directors of such person.
"Board Resolution" means, with respect to any person,
a duly adopted resolution of the Board of Directors of such
person.
"Business Day" means a day that is not a Legal
Holiday.
"Capital Stock" means, with respect to any person,
any and all shares, interests, participations or other equiva-
lents (however designated) of corporate stock, including each
class of common stock and preferred stock of such person.
"Capitalized Lease Obligation" means obligations
under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligations shall be the capi-
talized amount of such obligations determined in accordance
with GAAP.
"Cash Equivalents" means (i) obligations issued or
unconditionally guaranteed by the United States of America or
any agency thereof, or obligations issued by any agency or
instrumentality thereof and backed by the full faith and credit
of the United States of America, (ii) commercial paper rated
the highest grade by Moody's Investors Service, Inc. and Stan-
dard & Poor's Ratings Group and maturing not more than one year
from the date of creation thereof, (iii) time deposits with,
and certificates of deposit and banker's acceptances issued by,
any bank having capital surplus and undivided profits aggre-
gating at least $500 million and maturing not more than one
year from the date of creation thereof, (iv) repurchase agree-
ments that are secured by a perfected security interest in an
obligation described in clause (i) and are with any bank
described in clause (iii) and (v) readily marketable direct
obligations issued by any state of the United States of America
or any political subdivision thereof having one of the two
highest rating categories obtainable from either Moody's Inves-
tors Service, Inc. or Standard & Poor's Ratings Group.
"Change of Control" means the acquisition after the
Issue Date, in one or more transactions, of beneficial
<PAGE> 11
-4-
ownership (within the meaning of Rule 13d-3 under the Exchange
Act) by (i) any person or entity (other than any Permitted
Holder) or (ii) any group of persons or entities (excluding any
Permitted Holders) who constitute a group (within the meaning
of Section 13(d)(3) of the Exchange Act), in either case, of
any securities of New Holdings or the Company such that, as a
result of such acquisition, such person, entity or group
beneficially owns (within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, 40% or more of the then
outstanding voting securities entitled to vote on a regular
basis for a majority of the Board of Directors of the Company
(but only to the extent that such beneficial ownership is not
shared with any Permitted Holder who has the power to direct
the vote thereof); provided, however, that no such Change of
Control shall be deemed to have occurred if (A) the Permitted
Holders beneficially own, in the aggregate, at such time, a
greater percentage of such voting securities than such other
person, entity or group or (B) at the time of such acquisition,
the Permitted Holders (or any of them) possess the ability (by
contract or otherwise) to elect, or cause the election, of a
majority of the members of the Company's Board of Directors.
"Change of Control Date" shall have the meaning pro-
vided in Section 4.15.
"Change of Control Offer" shall have the meaning pro-
vided in Section 4.15.
"Change of Control Payment Date" shall have the mean-
ing provided in Section 4.15.
"Commission" means the Securities and Exchange
Commission.
"Common Stock" means, with respect to any person, any
and all shares, interests or other participations in, and other
equivalents (however designated and whether voting or nonvot-
ing) of, such person's common stock, whether outstanding at the
Issue Date or issued after the Issue Date, and includes, with-
out Limitation, all series and classes of such common stock.
"Company" means the party named as such in this
Indenture until a successor replaces it pursuant to this Inden-
ture and thereafter means such successor.
"Consolidated Net Income," means, with respect to any
person, for any period, the aggregate of the net income (or
<PAGE> 12
-5-
loss) of such person and its subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP; pro-
vided that (a) the net income of any other person in which such
person or any of its subsidiaries has an interest (which inter-
est does not cause the net income of such other person to be
consolidated with the net income of such person and its subsid-
iaries in accordance with GAAP) shall be included only to the
extent of the amount of dividends or distributions actually
paid to such person or such subsidiary by such other person in
such period; (b) the net income of any subsidiary of such per-
son that is subject to any Payment Restriction shall be
excluded to the extent such Payment Restriction actually pre-
vented the payment of an amount that otherwise could have been
paid to, or received by, such person or a subsidiary of such
person not subject to any Payment Restriction; and (c)(i) the
net income (or loss) of any other person acquired in a pooling
of interests transaction for any period prior to the date of
such acquisition, (ii) all gains and losses realized on any
Asset Sale, (iii) all gains realized upon or in connection with
or as a consequence of the issuance of the Capital Stock of
such person or any of its subsidiaries and any gains on pension
reversions received by such person or any of its subsidiaries,
(iv) all gains and losses realized on the purchase or other
acquisition by such person or any of its subsidiaries of any
securities of such person or any of its subsidiaries, (v) all
gains and losses resulting from the cumulative effect of any
accounting change pursuant to the application of Accounting
Principles Board Opinion No. 20, as amended, (vi) all other
extraordinary gains and losses, (vii) (A) all non-cash charges,
(B) up to $10 million of severance costs and (C) any other
restructuring reserves or charges (provided, however, that any
cash payments actually made with respect to the liabilities for
which such restructuring reserves or charges were created shall
be deducted from Consolidated Net Income in the period when
made), in each case, incurred by the Company or any of its Sub-
sidiaries in connection with the Merger, including, without
limitation, the divestiture of the Excluded Assets, (viii)
losses incurred by the Company and its Subsidiaries resulting
from earthquakes and (ix) with respect to the Company, all
deferred financing costs written off in connection with the
early extinguishment of any Indebtedness, shall each be
excluded.
"Consolidated Net Worth" means, with respect to any
person, the total stockholders' equity (exclusive of any Dis-
qualified Capital Stock) of such person and its subsidiaries
determined on a consolidated basis in accordance with GAAP.
<PAGE> 13
-6-
"Credit Agent" means, at any time, the then-acting
Administrative Agent as defined in and under the Credit Agree-
ment, which initially shall be Bankers Trust Company. The Com-
pany shall promptly notify the Trustee of any change in the
Credit Agent.
"Credit Agreement" means the Credit Agreement, dated
as of the Issue Date, by and among the Company, certain of its
subsidiaries, the Lenders referred to therein and Bankers Trust
Company, as administrative agent, as the same may be amended,
extended, renewed, restated, supplemented or otherwise modified
(in whole or in part, and without limitation as to amount,
terms, conditions, covenants and other provisions) from time to
time, and any agreement governing Indebtedness incurred to
refund or refinance the borrowings and commitments then out-
standing or permitted to be outstanding under such Credit
Agreement or such agreement. The Company shall promptly notify
the Trustee of any such refunding or refinancing of the Credit
Agreement.
"Custodian" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bank-
ruptcy Law.
"Default" means any event which is, or after notice
or passage of time or both would be, an Event of Default.
"Disqualified Capital Stock" means, with respect to
any Capital Stock of such person or its subsidiaries that, by
its terms, by the terms of any agreement related thereto or by
the terms of any security into which it is convertible,
puttable or exchangeable, is, or upon the happening of an event
or the passage of time would be, required to be redeemed or
repurchased by such person or its subsidiaries, including at
the option of the holder thereof, in whole or in part, or has,
or upon the happening of an event or passage of time would
have, a redemption or similar payment due, on or prior to the
Maturity Date of the Securities or any other Capital Stock of
such person or its subsidiaries designated as Disqualified Cap-
ital Stock by such person at the time of issuance; provided,
however, that if such Capital Stock is either (i) redeemable or
repurchasable solely at the option of such person or
(ii) issued to employees of the Company or its Subsidiaries or
to any plan for the benefit of such employees, such Capital
Stock shall not constitute Disqualified Capital Stock unless so
designated.
<PAGE> 14
-7-
"EBDIT" means, with respect to any person, for any
period, the Consolidated Net Income of such person for such
period, plus, in each case to the extent deducted in computing
Consolidated Net Income of such person for such period (without
duplication) (i) provisions for income taxes or similar charges
recognized by such persons and its consolidated subsidiaries
accrued during such period, (ii) depreciation and amortization
expense of such person and its consolidated subsidiaries
accrued during such period (but only to the extent not included
in Fixed Charges), (iii) Fixed Charges of such person and its
consolidated subsidiaries for such period, (iv) LIFO charges
(credit) of such person and its consolidated subsidiaries for
such period, (v) the amount of any restructuring reserve or
charge recorded during such period in accordance with GAAP,
including any such reserve or charge related to the Merger, and
(vi) any other non-cash charges reducing Consolidated Net
Income for such period (excluding any such charge which
requires an accrual of or a cash reserve for cash charges for
any future period), less, without duplication, (i) non-cash
items increasing Consolidated Net Income of such person for
such period in each case determined in accordance with GAAP and
(ii) the amount of all cash payments made by such person or its
subsidiaries during such period to the extent that such cash
payment has been provided for in a restructuring reserve or
charge referred to in clause (v) above (and was not otherwise
deducted in the computation of Consolidated Net Income of such
person for such period).
"Event of Default" shall have the meaning provided in
Section 6.01.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated by
the Commission thereunder.
"Excluded Assets" means assets of the Company
required to be disposed of by applicable regulatory authorities
in connection with the Merger.
"Fixed Charges" means, with respect to any person,
for any period, the aggregate amount of (i) interest, whether
expensed or capitalized, paid, accrued or scheduled to be paid
or accrued during such period (except to the extent accrued in
a prior period) in respect of all Indebtedness of such person
and its consolidated subsidiaries (including (a) original issue
discount on any Indebtedness (including, (without duplication)
in the case of the Company, any original issue discount on the
<PAGE> 15
-8-
Securities but excluding amortization of debt issuance costs)
and (b) the interest portion of all deferred payment obliga-
tions, calculated in accordance with the effective interest
method, in each case to the extent attributable to such period
but excluding the amortization of debt issuance costs) and
(ii) dividend requirements on Capital Stock of such person and
its consolidated subsidiaries (whether in cash or otherwise
(except dividends payable in shares of Qualified Capital
Stock)) paid, accrued or scheduled to be paid or accrued during
such period (except to the extent accrued in a prior period)
and excluding items eliminated in consolidation. For purposes
of this definition, (a) interest on a Capitalized Lease Obliga-
tion shall be deemed to accrue at an interest rate reasonably
determined by the Board of Directors of such person (as evi-
denced by a Board Resolution) to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance
with GAAP, (b) interest on Indebtedness that is determined on a
fluctuating basis shall be deemed to have accrued at a fixed
rate per annum equal to the rate of interest of such Indebted-
ness in effect on the date Fixed Charges are being calculated,
(c) interest on Indebtedness that may optionally be determined
at an interest rate based upon a factor of a prime or similar
rate, a eurocurrency interbank offered rate, or other rate,
shall be deemed to have been based upon the rate actually cho-
sen, or, if none, then based upon such optional rate chosen as
the Company may designate, and (d) Fixed Charges shall be
increased or reduced by the net cost (including amortization of
discount) or benefit associated with Interest Swap Obligations
attributable to such period. For purposes of clause (ii)
above, dividend requirements shall be increased to an amount
representing the pretax earnings that would be required to
cover such dividend requirements; accordingly, the increased
amount shall be equal to a fraction, the numerator of which is
such dividend requirements and the denominator of which is one
(1) minus the applicable actual combined federal, state, local
and foreign income tax rate of such person and its subsidiaries
(expressed as a decimal), on a consolidated basis, for the fis-
cal year immediately preceding the date of the transaction giv-
ing rise to the need to calculate Fixed Charges.
"FFL" means Food 4 Less, Inc., a Delaware corpora-
tion, and its successors including, without limitation, Hold-
ings following the FFL Merger and New Holdings following the
Reincorporation Merger.
"FFL Merger" means the merger, prior to the Merger,
<PAGE> 16
-9-
"Food 4 Less" means Food 4 Less Supermarkets, Inc., a
Delaware corporation, and its successors, including, without
limitation, Ralphs Supermarkets, Inc. (to be renamed Ralph's
Grocery Company following the Merger).
"Foreign Exchange Agreement" means any foreign
exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect against fluctua-
tions in currency values.
"Forward Period" shall have the meaning provided in
the definition of "Operating Coverage Ratio" contained in this
Section 1.01.
"GAAP" means generally accepted accounting principles
as in effect in the United States of America as of the date of
this Indenture.
"Guarantee" means the guarantee of each Subsidiary
Guarantor set forth in Article Ten and any additional guarantee
of the Securities executed by any Subsidiary of the Company.
"Holder" or "Securityholder" means the person in
whose name a Security is registered on the Registrar's books.
"Holdings" means Food 4 Less Holdings, Inc., a Cali-
fornia corporation, and its successors including, without limi-
tation, New Holdings following the Reincorporation Merger.
"Holdings Discount Notes" means the 15.25% Senior
Discount Notes due 2004 of Holdings, as the same may be modi-
fied or amended from time to time and refinancings thereof.
"Indebtedness" means with respect to any person,
without duplication, (i) all liabilities, contingent or other-
wise, of such person (a) for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such
person or only to a portion thereof), (b) evidenced by bonds,
notes, debentures, drafts accepted or similar instruments or
letters of credit or representing the balance deferred and
unpaid of the purchase price of any property (other than any
such balance that represents an account payable or any other
monetary obligation to a trade creditor (whether or not an
Affiliate) created, incurred, assumed or guaranteed by such
person in the ordinary course of business of such person in
connection with obtaining goods, materials or services and due
within twelve months (or such longer period for payment as is
<PAGE> 17
-10-
customarily exended by such trade creditor) of the incurrence
thereof, which account is not overdue by more than 90 days,
according to the original terms of sale, unless such account
payable is being contested in good faith), or (c) for the pay-
ment of money relating to a Capitalized Lease Obligation;
(ii) the maximum fixed repurchase price of all Disqualified
Capital Stock of such person; (iii) reimbursement obligations
of such person with respect to letters of credit; (iv) obliga-
tions of such person with respect to Interest Swap Obligations
and Foreign Exchange Agreements; (v) all liabilities of others
of the kind described in the preceding clause (i), (ii), (iii)
or (iv) that such person has guaranteed or that is otherwise
its legal liability; and (vi) all obligations of others secured
by a Lien to which any of the properties or assets (including,
without limitation, leasehold interests and any other tangible
or intangible property rights) of such person are subject,
whether or not the obligations secured thereby shall have been
assumed by such person or shall otherwise be such person's
legal liability (provided that if the obligations so secured
have not been assumed by such person or are not otherwise such
person's legal liability, such obligations shall be deemed to
be in an amount equal to the fair market value of such proper-
ties or assets, as determined in good faith by the Board of
Directors of such person, which determination shall be evi-
denced by a Board Resolution). For purposes of the preceding
sentence, the "maximum fixed repurchase price" of any Disquali-
fied Capital Stock that does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Dis-
qualified Capital Stock as if such Disqualified Capital Stock
were purchased on any date on which Indebtedness shall be
required to be determined pursuant to this Indenture, and if
such price is based upon, or measured by, the fair market value
of such Disqualified Capital Stock (or any equity security for
which it may be exchanged or converted), such fair market value
shall be determined in good faith by the Board of Directors of
such person, which determination shall be evidenced by a Board
Resolution. For purposes of this Indenture, Indebtedness
incurred by any person that is a general partnership (other
than non-recourse Indebtedness) shall be deemed to have been
incurred by the general partners of such partnership pro rata
in accordance with their respective interests in the liabili-
ties of such partnership unless any such general partner shall,
in the reasonable determination of the Board of Directors of
the Company, be unable to satisfy its pro rata share of the
liabilities of the partnership, in which case the pro rata
share of any Indebtedness attributable to such partner shall be
deemed to be incurred at such time by the remaining general
<PAGE> 18
-11-
partners on a pro rata basis in accordance with their
interests.
"Indenture" means this Indenture, as amended or sup-
plemented from time to time in accordance with the terms
hereof.
"Independent Financial Advisor" means a reputable
accounting, appraisal or nationally recognized investment bank-
ing firm that is, in the reasonable judgment of the Board of
Directors of the Company, qualified to perform the task for
which such firm has been engaged hereunder and disinterested
and independent with respect to the Company and its Affiliates.
"Interest Payment Date" means the stated maturity of
an installment of interest on the Securities.
"Interest Swap Obligation" means any obligation of
any person pursuant to any arrangement with any other person
whereby, directly or indirectly, such person is entitled to
receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a
stated notional amount in exchange for periodic payments made
by such person calculated by applying a fixed or floating rate
of interest on the same notional amount; provided that the term
"Interest Swap Obligation" shall also include interest rate
exchange, collar, cap, swap option or similar agreements pro-
viding interest rate protection.
"Investment" by any person in any other person means
any investment by such person in such other person, whether by
a purchase of assets, in any transaction or series of related
transactions, individually or in the aggregate, in an amount
greater than $5 million, share purchase, capital contribution,
loan, advance (other than reasonable loans and advances to
employees for moving and travel expenses, as salary advances,
or to permit the purchase of Qualified Capital Stock of the
Company and other similar customary expenses incurred, in each
case in the ordinary course of business consistent with past
practice) or similar credit extension constituting Indebtedness
of such other person, and any guarantee of Indebtedness of any
other person.
"Issue Date" means the date of original issuance of
the Securities under this Indenture.
<PAGE> 19
-12-
"Legal Holiday" shall have the meaning provided in
Section 11.07.
"Letter of Credit Obligations" means Indebtedness of
the Company or any of its Subsidiaries with respect to letters
of credit issued pursuant to the Credit Agreement, and for pur-
poses of the definition of the term "Permitted Indebtedness,"
the aggregate principal amount of Indebtedness outstanding at
any time with respect thereto shall be deemed to consist of (a)
the aggregate maximum amount then available to be drawn under
all such letters of credit (the determination of such maximum
amount to assume compliance with all conditions for drawing),
and (b) the aggregate amount that has been paid by, and not
reimbursed to, the issuers under such letters of credit.
"Lien" means any mortgage, pledge, lien, encumbrance,
charge or adverse claim affecting title or resulting in an
encumbrance against real or personal property, or a security
interest of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, any
option or other agreement to sell which is intended to consti-
tute or create a security interest, mortgage, pledge or lien,
and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of
any jurisdiction); provided that in no event shall an operating
lease be deemed to constitute a Lien under this Indenture.
"Maturity Date" means February 1, 2004.
"Merger" means (i) the merger of the Company into
Ralphs Supermarkets, Inc. (with Ralphs Supermarkets, Inc. sur-
viving such merger) pursuant to the Merger Agreement and (ii)
immediately following the merger described in clause (i) of
this definition, the merger of Ralphs Grocery Company into
Ralphs Supermarkets, Inc. (with Ralphs Supermarkets, Inc. sur-
viving such merger and changing its name to "Ralphs Grocery
Company" in connection with such merger).
"Merger Agreement" means the Agreement and Plan of
Merger, dated September 14, 1994, by and among Holdings, FFL,
Food 4 Less, Ralphs Supermarkets, Inc. and the stockholders of
Ralphs Supermarkets, Inc., as such agreement is amended and is
in effect on the Issue Date.
"Net Cash Proceeds" means the Net Proceeds of any
Asset Sale received in the form of cash or Cash Equivalents.
<PAGE> 20
-13-
"Net Proceeds" means (a) in the case of any Asset
Sale or any issuance and sale by any person of Qualified Capi-
tal Stock, the aggregate net proceeds received by such person
after payment of expenses, taxes, commissions and the like
incurred in connection therewith (and, in the case of any Asset
Sale, net of the amount of cash applied to repay Indebtedness
secured by the asset involved in such Asset Sale), whether such
proceeds are in cash or in property (valued at the fair market
value thereof at the time of receipt, as determined with
respect to any Asset Sale resulting in Net Proceeds in excess
of $5 million in good faith by the Board of Directors of such
person, which determination shall be evidenced by a Board Reso-
lution) and (b) in the case of any conversion or exchange of
any outstanding Indebtedness or Disqualified Capital Stock of
such person for or into shares of Qualified Capital Stock of
the Company, the sum of (i) the fair market value of the pro-
ceeds received by the Company in connection with the issuance
of such Indebtedness or Disqualified Capital Stock on the date
of such issuance and (ii) any additional amount paid by the
holder to the Company upon such conversion or exchange.
"New Holdings" means Food 4 Less Holdings, Inc., a
Delaware corporation, and its successors.
"Obligations" means any principal, interest, penal-
ties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any
Indebtedness.
"Officer" means, with respect to any person, the
Chairman of the Board, the President, any Vice President, the
Chief Financial Officer, the Controller, or the Secretary of
such person.
"Officers' Certificate" means, with respect to any
person, a certificate signed by two Officers or by an Officer
and either an Assistant Treasurer or an Assistant Secretary of
such person and otherwise complying with the requirements of
Sections 11.04 and 11.05.
"Operating Coverage Ratio" means, with respect to any
person, the ratio of (1) EBDIT of such person for the period
(the "Pro Forma Period") consisting of the most recent four
full fiscal quarters for which financial information in respect
thereof is available immediately prior to the date of the
transaction giving rise to the need to calculate the Operating
Coverage Ratio (the "Transaction Date") to (2) the aggregate
<PAGE> 21
-14-
Fixed Charges of such person for the fiscal quarter in which
the Transaction Date occurs and the three fiscal quarters imme-
diately subsequent to such fiscal quarter (the "Forward
Period") reasonably anticipated by the Board of Directors of
such person to become due from time to time during such period.
For purposes of this definition, if the Transaction Date occurs
prior to the first anniversary of the Merger, "EBDIT" for the
Pro Forma Period shall be calculated, in the case of the Com-
pany, after giving effect on a pro forma basis to the Merger as
if it had occurred on the first day of the Pro Forma Period.
In addition to, but without duplication of, the foregoing, for
purposes of this definition, "EBDIT" shall be calculated after
giving effect (without duplication), on a pro forma basis for
the Pro Forma Period (but no longer), to (a) any Investment,
during the period commencing on the first day of the Pro Forma
Period to and including the Transaction Date (the "Reference
Period"), in any other person that, as a result of such Invest-
ment, becomes a subsidiary of such person, (b) the acquisition,
during the Reference Period (by merger, consolidation or pur-
chase of stock or assets) of any business or assets, which
acquisition is not prohibited by this Indenture, and (c) any
sales or other dispositions of assets (other than sales of
inventory in the ordinary course of business) occurring during
the Reference Period, in each case as if such incurrence,
Investment, repayment, acquisition or asset sale had occurred
on the first day of the Reference Period. In addition, for
purposes of this definition, "Fixed Charges" shall be calcu-
lated after giving effect (without duplication), on a pro forma
basis for the Forward Period, to any Indebtedness incurred or
repaid on or after the first day of the Forward Period and
prior to the Transaction Date. If such person or any of its
subsidiaries directly or indirectly guarantees any Indebtedness
of a third person, the Operating Coverage Ratio shall give
effect to the incurrence of such Indebtedness as if such person
or subsidiary had directly incurred such guaranteed
Indebtedness.
"operating lease" means any lease the obligations
under which do not constitute Capitalized Lease Obligations.
"Opinion of Counsel" means a written opinion from
legal counsel who is reasonably acceptable to the Trustee com-
plying with the requirements of Sections 11.04 and 11.05.
Unless otherwise required by the Trustee, the legal counsel may
be an employee of or counsel to the Company or the Trustee.
<PAGE> 22
-15-
"Pari Passu Indebtedness" means, with respect to the
Company or any Subsidiary Guarantor, Indebtedness of such per-
son which ranks pari passu in right of payment to the Securi-
ties or the Guarantee of such Subsidiary Guarantor, as the case
may be.
"Paying Agent" shall have the meaning provided in
Section 2.03, except that, for the purposes of Articles Two and
Eight and Sections 4.15 and 4.16, the Paying Agent shall not be
the Company or an Affiliate of the Company.
"Payment Restriction" means, with respect to a sub-
sidiary of any person, any encumbrance, restriction or limita-
tion, whether by operation of the terms of its charter or by
reason of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation, on the ability of
(i) such subsidiary to (a) pay dividends or make other distri-
butions on its Capital Stock or make payments on any obliga-
tion, liability or Indebtedness owed to such person or any
other subsidiary of such person, (b) make loans or advances to
such person or any other subsidiary of such person, or
(c) transfer any of its properties or assets to such person or
any other subsidiary of such person, or (ii) such person or any
other subsidiary of such person to receive or retain any such
(a) dividends, distributions or payments, (b) loans or
advances, or (c) transfer of properties or assets.
"Permitted Holder" means (i) Food 4 Less Equity Part-
ners, L.P., The Yucaipa Companies or any entity controlled
thereby or any of the partners thereof, (ii) Apollo Advisors,
L.P., Lion Advisors, L.P. or any entity controlled thereby or
any of the partners thereof, (iii) an employee benefit plan of
the Company, or any participant therein or any of its subsid-
iaries, (iv) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
subsidiaries or (v) any Permitted Transferee of any of the
foregoing persons.
"Permitted Indebtedness" means (a) Indebtedness of
the Company and its Subsidiaries pursuant to (i) the Term Loans
in an aggregate principal amount at any time outstanding not to
exceed $750 million, less the aggregate amount of all principal
repayments thereunder pursuant to and in accordance with the
requirements of Section 4.16 subsequent to the Issue Date, and
(ii) the revolving credit facility under the Credit Agreement
(and the Company and each Subsidiary (to the extent it is not
<PAGE> 23
-16-
an obligor) may guarantee such Indebtedness) in an aggregate
principal amount at any time outstanding not to exceed $325
million, less all permanent reductions thereunder pursuant to
and in accordance with the requirements of Section 4.16,
(b) Indebtedness of the Company or a Subsidiary Guarantor owed
to and held by the Company or a Subsidiary Guarantor,
(c) Indebtedness incurred by the Company or any Subsidiary in
connection with the purchase or improvement of property (real
or personal) or equipment or other capital expenditures in the
ordinary course of business (including for the purchase of
assets or stock of any retail grocery store or business) or
consisting of Capitalized Lease Obligations, provided that
(i) at the time of the incurrence thereof, such Indebtedness,
together with any other Indebtedness incurred during the most
recently completed four fiscal quarter period in reliance upon
this clause (c) does not exceed, in the aggregate, 3% of net
sales of the Company and its Subsidiaries during the most
recently completed four fiscal quarter period on a consolidated
basis (calculated on a pro forma basis if the date of incur-
rence is prior to the first anniversary of the Merger) and
(ii) such Indebtedness, together with all then outstanding
Indebtedness incurred in reliance upon this clause (c) does not
exceed, in the aggregate, 3% of the aggregate net sales of the
Company and its Subsidiaries during the most recently completed
twelve fiscal quarter period on a consolidated basis (calcu-
lated on a pro forma basis if the date of incurrence is prior
to the third anniversary of the Merger); (d) Indebtedness
incurred by the Company or any Subsidiary in connection with
capital expenditures in an aggregate principal amount not
exceeding $150 million, provided that such capital expenditures
relate solely to the integration of the operations of RSI, the
Company and their respective subsidiaries as described in the
Prospectus; (e) Indebtedness of the Company incurred under For-
eign Exchange Agreements and Interest Swap Obligations entered
into with respect to Indebtedness in a notional amount not
exceeding the aggregate principal amount of Indebtedness out-
standing or committed under the Credit Agreement at the date of
such incurrence and otherwise permitted to be outstanding pur-
suant to Section 4.12; (f) guarantees incurred in the ordinary
course of business, by the Company or a Subsidiary, of Indebt-
edness of any other person in the aggregate not to exceed $25
million at any time outstanding; (g) guarantees by the Company
or a Subsidiary Guarantor of Indebtedness incurred by a wholly-
owned Subsidiary Guarantor so long as the incurrence of such
Indebtedness incurred by such wholly-owned Subsidiary Guarantor
is permitted under the terms of this Indenture; (h) Refinancing
Indebtedness; (i) Indebtedness for letters of credit relating
<PAGE> 24
-17-
to workers' compensation claims and self-insurance or similar
requirements in the ordinary course of business; (j) other
Indebtedness outstanding on the Issue Date (after giving effect
to the Merger); (k) Indebtedness arising from guarantees of
Indebtedness of the Company or any Subsidiary or other agree-
ments of the Company or a Subsidiary providing for indemnifica-
tion, adjustment of purchase price or similar obligations, in
each case, incurred or assumed in connection with the disposi-
tion of any business, assets or Subsidiary, other than guaran-
tees of Indebtedness incurred by any person acquiring all or
any portion of such business, assets or Subsidiary for the pur-
pose of financing such acquisition; provided that the maximum
assumable liability in respect of all such Indebtedness shall
at no time exceed the gross proceeds actually received by the
Company and its Subsidiaries in connection with such disposi-
tion; (l) obligations in respect of performance bonds and com-
pletion guarantees provided by the Company or any Subsidiary in
the ordinary course of business; and (m) additional Indebted-
ness of the Company and the Subsidiary Guarantors in an amount
not to exceed $200 million at any time outstanding.
"Permitted Investment" by any person means (i) any
Related Business Investment, (ii) Investments in securities not
constituting cash or Cash Equivalents and received in connec-
tion with an Asset Sale made pursuant to Section 4.16 or any
other disposition of assets not constituting an Asset Sale by
reason of the $500,000 threshold contained in the definition
thereof, (iii) cash and Cash Equivalents, (iv) Investments
existing on the Issue Date, (v) Investments specifically per-
mitted by and made in accordance with Section 4.11,
(vi) Investments by Subsidiary Guarantors in other Subsidiary
Guarantors and Investments by Subsidiaries which are not Sub-
sidiary Guarantors in other Subsidiaries which are not Subsid-
iary Guarantors and (vii) additional Investments in an aggre-
gate amount not exceeding $5 million.
"Permitted Liens" shall mean (i) Liens for taxes,
assessments, and governmental charges or claims not yet due or
which are being contested in good faith by appropriate proceed-
ings promptly instituted and diligently conducted and if a
reserve or other appropriate provision, if any, as shall be
required in conformity wity GAAP shall have been made thereof;
(ii) statutory Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen, or other like
Liens arising in the ordinary course of business, deposits made
to obtain the release of such Liens, and with respect to
amounts not yet delinquent for a period of more than 60 days or
<PAGE> 25
-18-
being contested in good faith by appropriate process of law,
and for which a reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been made; (iii) Liens
incurred or pledges or deposits made in the ordinary course of
business to secure obligations under workers' compensation,
unemployment insurance and other types of social security or
similar legislation; (iv) Liens incurred or deposits made to
secure the performance of tenders, bids, leases, statutory
obligations, surety and appeal bonds, government contracts,
performance and return of money bonds and other obligations of
a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money);
(v) easements, rights-of-way, zoning or other restrictions,
minor defects or irregularities in title and other similar
charges or encumbrances not interfering in any material respect
with the business of the Company or any of its Subsidiaries
incurred in the ordinary course of business; (vi) Liens upon
specific items of inventory or other goods and proceeds of any
person securing such person's obligations in respect of bank-
ers' acceptances issued or created for the account of such per-
son to facilitate the purchase, shipment or storage of such
inventory or other goods in the ordinary course of business;
(vii) Liens securing reimbursement obligations with respect to
letters of credit which encumber documents and other property
relating to such letters of credit and the products and pro-
ceeds thereof; (viii) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of
nondelinquent customs duties in connection with the importation
of goods; (ix) judgment and attachment Liens not giving rise to
a Default or Event of Default; (x) leases or subleases granted
to others not interfering in any material respect with the
business of the Company or any Subsidiary; (xi) Liens encumber-
ing customary initial deposits and margin deposits, and other
Liens incurred in the ordinary course of business that are
within the general parameters customary in the industry, in
each case securing Indebtedness under Interest Swap Obligations
and Foreign Exchange Agreements and forward contracts, option
futures contracts, futures options or similar agreements or
arrangements designed to protect the Company or any Subsidiary
from fluctuations in the price of commodities; (xii) Liens
encumbering deposits made in the ordinary course of business to
secure nondelinquent obligations arising from statutory, regu-
latory, contractual or warranty requirements of the Company or
its Subsidiaries for which a reserve or other appropriate pro-
vision, if any, as shall be required by GAAP shall have been
made; (xiii) Liens arising out of consignment or similar
arrangements for the sale of goods entered into by the Company
<PAGE> 26
-19-
or any Subsidiary in the ordinary course of business in accor-
dance with past practices; (xiv) any interest or title of a
lessor in the property subject to any lease, whether character-
ized as capitalized or operating other than any such interest
or title resulting from or arising out of a default by the Com-
pany or any Subsidiary of its obligations under such lease;
(xv) Liens arising from filing UCC financing statements for
precautionary purposes in connection with true leases of per-
sonal property that are otherwise permitted under this Inden-
ture and under which the Company or any Subsidiary is lessee;
and (xvi) additional Liens securing Indebtedness in an aggre-
gate principal amount at any one time outstanding not exceeding
the sum of (i) $25 million and (ii) 10% of the aggregate Con-
solidated Net Income of the Company earned subsequent to the
Issue Date and on or prior to such time.
"Permitted Payments" means (i) any payment by the
Company or any Subsidiary to The Yucaipa Companies or the prin-
cipals or any Affiliates thereof for consulting, management,
investment banking or similar advisory services pursuant to
that certain Consulting Agreement, dated as of the Issue Date,
between the Company, New Holdings and The Yucaipa Companies,
(as such Consulting Agreement may be amended or replaced, so
long as any amounts paid under any amended or replacement
agreement do not exceed the amounts payable under such Consult-
ing Agreement as in effect on the Issue Date), (ii) any payment
by the Company or any Subsidiary pursuant to the Amended and
Restated Tax Sharing Agreement, dated as of June 17, 1991,
between the Company and certain Subsidiaries, as such Tax Shar-
ing Agreement may be amended from time to time, so long as the
payment thereunder by the Company and its Subsidiaries shall
not exceed the amount of taxes the Company would be required to
pay if it were the filing person for all applicable taxes,
(iii) any payment by the Company or any Subsidiary pursuant to
the Transfer and Assumption Agreement, dated as of June 23,
1989, between the Company and Holdings, as in effect on the
Issue Date, (iv) any payment by the Company or any Subsidiary
(a) in connection with repurchases of outstanding shares of the
Company's or New Holding's Common Stock following the death,
disability or termination of employment of management stock-
holders, and (b) of amounts required to be paid by New Hold-
ings, the Company or any of its Subsidiaries to participants in
employee benefit plans upon termination of employment by such
participants, as provided in the documents related thereto, in
an aggregate amount (for both clauses (a) and (b)) not to
exceed $10 million in any Yearly Period (provided that any
unused amounts may be carried over to any subsequent Yearly
<PAGE> 27
-20-
Period subject to a maximum amount of $20 million in any Yearly
Period), (v) from and after June 30, 1998, payments of cash
dividends to New Holdings in an amount sufficient to enable New
Holdings to make payments of interest required to be made in
respect of the Holdings Discount Notes in accordance with the
terms thereof in effect on the Issue Date, (vi) from and after
February , 2000, payments of cash dividends to New Holdings
in an amount sufficient to enable New Holdings to make payments
of interest required to be made in respect of the Seller Deben-
tures in accordance with the terms thereof in effect on the
Issue Date and (vii) dividends or other payments to New Hold-
ings sufficient to enable New Holdings to perform accounting,
legal, corporate reporting and administrative functions in the
ordinary course of business or to pay required fees and
expenses in connection with the Merger, the FFL Merger, the
Reincorporation Merger and the registration under applicable
laws and regulations of its debt or equity securities.
"Permitted Transferees" means, with respect to any
person, (i) any Affiliate of such person, (ii) the heirs, exec-
utors, administrators, testamentary trustees, legatees or bene-
ficiaries of any such person, (iii) a trust, the beneficiaries
of which, or a corporation or partnership, the stockholders or
general or limited partners of which, include only such person
or his or her spouse or lineal descendants, in each case to
whom such person has transferred the beneficial ownership of
any securities of the Company, (iv) any investment account
whose investment managers and investment advisors consist
solely of such person and/or Permitted Transferees of such per-
son and (v) any investment fund and investment entity that is a
subsidiary of such person or a Permitted Transferee of such
person.
"person" means any individual, corporation, partner-
ship, joint venture, association, joint-stock company, trust,
unincorporated organization or government or other agency or
political subdivision thereof.
"Plan of Liquidation" means, with respect to any per-
son, a plan that provides for, contemplates or the effectuation
of which is preceded or accompanied by (whether or not substan-
tially contemporaneously, in phases or otherwise) (i) the sale,
lease, conveyance or other disposition of all or substantially
all of the assets of such person otherwise than as an entirety
or substantially as an entirety and (ii) the distribution of
all or substantially all of the proceeds of such sale, lease,
conveyance or other disposition and all or substantially all of
<PAGE> 28
-21-
the remaining assets of such person to holders of Capital Stock
of such person.
"Preferred Stock" means, with respect to any person,
Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends or distribu-
tions, or as to the distribution of assets upon any voluntary
or involuntary liquidation or dissolution of such person, over
shares of Capital Stock of any other class of such person.
"principal" of any Indebtedness (including the Secu-
rities) means the principal of such Indebtedness plus the pre-
mium, if any, on such Indebtedness.
"pro forma" means, with respect to any calculation
made or required to be made pursuant to the terms of this
Indenture, a calculation in accordance with Article 11 of Regu-
lation S-X under the Securities Act of 1933, as amended, as
interpreted by the Company's chief financial officer or Board
of Directors in consultation with its independent certified
public accountants.
"Public Equity Offering" means an undewritten public
offering of Common Stock of the Company or New Holdings pursu-
ant to a registration statement filed with the Commission in
accordance with the Securities Act which public equity offering
results in gross proceeds to the Company or New Holdings, as
the case may be, of not less than $20,000,000; provided, how-
ever, that in the case of a Public Equity Offering by New Hold-
ings, New Holdings contributes to the capital of the Company
net cash proceeds in an amount sufficient to redeem the Securi-
ties called for redemption in accordance with the terms
thereof.
"Qualified Capital Stock" means, with respect to any
person, any Capital Stock of such person that is not Disquali-
fied Capital Stock.
"Record Date" means the Record Dates specified in the
Securities; provided that if any such date is a Legal Holiday,
the Record Date shall be the first day immediately preceding
such specified day that is not a Legal Holiday.
"Redemption Date," when used with respect to any
Security to be redeemed, means the date fixed for such redemp-
tion pursuant to this Indenture and Paragraph 5 of the Securi-
ties annexed hereto as Exhibit A.
<PAGE> 29
-22-
"Redemption Price," when used with respect to any
Security to be redeemed, means the price fixed for such redemp-
tion pursuant to this Indenture and Paragraph 5 of the Securi-
ties annexed hereto as Exhibit A.
"Reference Date" shall have the meaning provided in
Section 4.03.
"Reference Period" shall have the meaning provided in
the definition of "Operating Coverage Ratio" contained in this
Section 1.01.
"Refinancing Indebtedness" means, with respect to any
person, Indebtedness of such person issued in exchange for, or
the proceeds from the issuance and sale or disbursement of
which are used to substantially concurrently repay, redeem,
refund, refinance, discharge or otherwise retire for value, in
whole or in part (collectively, "repay"), or constituting an
amendment, modification or supplement to, or a deferral or
renewal of (collectively, an "amendment"), any Indebtedness of
such person existing on the Issue Date or Indebtedness (other
than Permitted Indebtedness, except Permitted Indebtedness
incurred pursuant to clauses (a), (c), (d), (h) and (j) of the
definition thereof) incurred in accordance with this Indenture
(a) in a principal amount (or, if such Refinancing Indebtedness
provides for an amount less than the principal amount thereof
to be due and payable upon the acceleration thereof, with an
original issue price) not in excess of (without duplication)
(i) the principal amount or the original issue price, as the
case may be, of the Indebtedness so refinanced (or, if such
Refinancing Indebtedness refinances Indebtedness under a
revolving credit facility or other agreement providing a com-
mitment for subsequent borrowings, with a maximum commitment
not to exceed the maximum commitment under such revolving
credit facility or other agreement) plus (ii) unpaid accrued
interest on such Indebtedness plus (iii) premiums, penalties,
fees and expenses actually incurred by such person in connec-
tion with the repayment or amendment thereof and (b) with
respect to Refinancing Indebtedness that repays or constitutes
an amendment to Subordinated Indebtedness, such Refinancing
Indebtedness (x) shall not have any fixed mandatory redemption
or sinking fund requirement in an amount greater than or at a
time prior to the amounts and times specified in such repaid or
amended Subordinated Indebtedness, except to the extent that
any such requirement applies on a date after the Maturity Date
and (y) shall contain subordination and default provisions no
<PAGE> 30
-23-
less favorable in any material respect to Holders than those
contained in such repaid or amended Subordinated Indebtedness.
"Registrar" shall have the meaning provided in
Section 2.03.
"Reincorporation Merger" means the merger, prior to
the Merger of Holdings with and into New Holdings.
"Related Business Investment" means (i) any Invest-
ment by a person in any other person a majority of whose reve-
nues are derived from the operation of one or more retail gro-
cery stores or supermarkets or any other line of business
engaged in by the Company or any of its Subsidiaries as of the
Issue Date; (ii) any Investment by such person in any coopera-
tive or other supplier, including, without limitation, any
joint venture which is intended to supply any product or ser-
vice useful to the business of the Company and its Subsidiaries
as it is conducted as of the Issue Date and as such business
may thereafter evolve or change; and (iii) any capital expendi-
ture or Investment (without regard to the $5 million threshold
in the definition thereof), in each case reasonably related to
the business of the Company and its Subsidiaries as it is con-
ducted as of the Issue Date and as such business may thereafter
evolve or change.
"Representative" means the indenture trustee or other
trustee, agent or representative for any Senior Indebtedness;
provided that in no event shall United States Trust Company of
New York, in its capacities as Trustee, Registrar, co-Registrar
or Paying Agent, serve as Representative.
"Restricted Debt Prepayment" means any purchase,
redemption, defeasance (including, but not limited to, in-sub-
stance or legal defeasance) or other acquisition or retirement
for value, directly or indirectly, by the Company or a Subsid-
iary, prior to the scheduled maturity or prior to any scheduled
repayment of principal or sinking fund payment, as the case may
be, in respect of Subordinated Indebtedness.
"Restricted Payment" means any (i) Stock Payment,
(ii) Investment (other than a Permitted Investment) or
(iii) Restricted Debt Prepayment.
"RSI" means Ralphs Supermarkets Inc., a Delaware
corporation.
<PAGE> 31
-24-
"Securities" means the Company's _____% Senior Notes
due 2004, as amended or supplemented from time to time in
accordance with the terms hereof, that are issued pursuant to
this Indenture.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission pro-
mulgated thereunder.
"Seller Debentures" means the 13% Senior Subordinated
Pay-in-Kind Debentures of New Holdings, as the same may be mod-
ified or amended from time to time and future refinancings
thereof.
"Senior Subordinated Note Indentures" means,
together, (i) the indenture dated as of __________ 1995 between
the Company, the Subsidiary Guarantors and the United States
Trust Company of New York, as trustee, pursuant to which the
Company issued $450,000,000 of ____% Senior Subordinated notes
due 2005, and (ii) the indenture dated as of __________ 1995
between the Company, the Subsidiary Guarantors and the United
States Trust Company of New York, as trustee, pursuant to which
the Company issued $145,000,000 of ____% Senior Subordinated
notes due 2005.
"Significant Stockholder" means, with respect to any
person, any other person who is the beneficial owner (within
the meaning of Rule 13d-3 under the Exchange Act) of more than
10% of any class of equity securities of such person that are
entitled to vote on a regular basis for the election of direc-
tors of such person.
"Significant Subsidiary" means each subsidiary of the
Company that is either (a) a "significant subsidiary" as
defined in Rule 1-02(v) of Regulation S-X under the Securities
Act and the Exchange Act (as such regulation is in effect on
the date hereof) or (b) material to the financial condition or
results of operations of the Company and its Subsidiaries taken
as a whole.
"Stock Payment" means, with respect to any person,
(a) the declaration or payment by such person, either in cash
or in property, of any dividend on (except, in the case of the
Company, dividends payable solely in Qualified Capital Stock of
the Company), or the making by such person or any of its sub-
sidiaries of any other distribution in respect of, such per-
son's Qualified Capital Stock or any warrants, rights or
<PAGE> 32
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options to purchase or acquire shares of any class of such Cap-
ital Stock (other than exchangeable or convertible Indebtedness
of such person), or (b) the redemption, repurchase, retirement
or other acquisition for value by such person or any of its
subsidiaries, directly or indirectly, of such person's Quali-
fied Capital Stock (and, in the case of a Subsidiary, Qualified
Capital Stock of the Company) or any warrants, rights or
options to purchase or acquire shares of any class of such Cap-
ital Stock (other than exchangeable or convertible Indebtedness
of such person), other than, in the case of the Company,
through the issuance in exchange therefor solely of Qualified
Capital Stock of the Company; provided, however, that in the
case of a Subsidiary, the term "Stock Payment" shall not
include any such payment with respect to its Capital Stock or
warrants, rights or options to purchase or acquire shares of
any class of its Capital Stock that are owned solely by the
Company or a wholly owned Subsidiary.
"Subordinated Indebtedness" means, with respect to
the Company or any Subsidiary Guarantor, Indebtedness of such
person which is subordinated in right of payment to the Securi-
ties or the Guarantee of such Subsidiary Guarantor, as the case
may be.
"subsidiary" of any person means (i) a corporation a
majority of whose Capital Stock with voting power, under ordi-
nary circumstances, to elect directors is, at the date of
determination, directly or indirectly, owned by such person, by
one or more subsidiaries of such person or by such person and
one or more subsidiaries of such person or (ii) a partnership
in which such person or a subsidiary of such person is, at the
date of determination, a general partner of such partnership,
but only if such person or its subsidiary is entitled to
receive more than fifty percent of the assets of such partner-
ship upon its dissolution, or (iii) any other person (other
than a corporation or a partnership) in which such person, a
subsidiary of such person or such person and one or more sub-
sidiaries of such person, directly or indirectly, at the date
of determination, has (x) at least a majority ownership inter-
est or (y) the power to elect or direct the election of a
majority of the directors or other governing body of such
person.
"Subsidiary" means any subsidiary of the Company.
"Subsidiary Guarantor" means (i) each of Alpha Beta
Company, Bay Area Warehouse Stores, Inc., Bell Markets, Inc.,
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Cala Co., Cala Foods, Inc., Falley's Inc., Food 4 Less of Cali-
fornia, Inc., Food 4 Less Merchandising, Inc., Food 4 Less GM,
Inc. and Food 4 Less of Southern California, Inc., (ii) upon
consummation of the Merger, Crawford Stores, Inc., (iii) each
of the Company's Subsidiaries which becomes a guarantor of the
Securities in compliance with the provisions set forth in Section
4.17, and (iv) each of the Company's Subsidiaries execut
ing a supplemental indenture in which such Subsidiary agrees to
be bound by the terms of this Indenture.
"Term Loans" means the term loan facility under the
Credit Agreement.
"The Yucaipa Companies" means The Yucaipa Companies,
a California general partnership.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.
Code Secs. 77aaa-77bbbb), as amended, as in effect on the date of
the execution of this Indenture until such time as this Inden-
ture is qualified under the TIA, and thereafter as in effect on
the date on which this Indenture is qualified under the TIA,
except as otherwise provided in Section 9.03.
"Transaction Date" shall have the meaning provided in
the definition of "Operating Coverage Ratio" contained in this
Section 1.01.
"Trustee" means the party named as such in this
Indenture until a successor replaces it in accordance with the
provisions of this Indenture and thereafter means such
successor.
"Trust Officer" means any officer of the Trustee
assigned by the Trustee to administer its corporate trust
matters.
"U.S. Government Obligations" shall have the meaning
provided in Section 8.02.
"U.S. Legal Tender" means such coin or currency of
the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts.
"Yearly Period" means each fiscal year of the Com-
pany; provided that the first Yearly Period shall begin on the
Issue Date and shall end on January 28, 1996.
<PAGE> 34
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SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the
TIA, such provision is incorporated by reference in, and made a
part of, this Indenture. The following TIA terms used in this
Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or a
Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the indenture securities means the Com-
pany, any Subsidiary Guarantor, or any other obligor on the
Securities or the Guarantees.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute
or defined by SEC rule and not otherwise defined herein have
the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and
words in the plural include the singular;
(5) provisions apply to successive events and trans-
actions; and
<PAGE> 35
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(6) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Securities, the notation thereon relating to the
Guarantee and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A. The Securities may
have notations, legends or endorsements required by law, stock
exchange rule or usage. The Company and the Trustee shall
approve the form of the Securities and any notation, legend or
endorsement on them. Each Security shall be dated the date of
its authentication.
The terms and provisions contained in the Securities
and the Guarantee shall constitute, and are hereby expressly
made, a part of this Indenture and, to the extent applicable,
the Company and the Trustee, by their execution and delivery of
this Indenture, expressly agree to such terms and provisions
and to be bound thereby.
SECTION 2.02. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secre-
tary, shall sign, or one Officer shall sign and one Officer or
an Assistant Secretary (each of whom shall, in each case, have
been duly authorized by all requisite corporate actions) shall
attest to, the Securities for the Company by manual or fac-
simile signature. Each Subsidiary Guarantor shall execute the
Guarantee in the manner set forth in Section 10.08.
If an Officer whose signature is on a Security was an
Officer at the time of such execution but no longer holds that
office at the time the Trustee authenticates the Security, the
Security shall be valid nevertheless.
A Security shall not be valid until an authorized
signatory of the Trustee manually signs the certificate of
authentication on the Security. The signature shall be
<PAGE> 36
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conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate Securities for origi-
nal issue in the aggregate principal amount of up to
$575,000,000 upon a written order of the Company in the form of
an Officers' Certificate. The Officers' Certificate shall
specify the amount of Securities to be authenticated and the
date on which the Securities are to be authenticated. The
aggregate principal amount of Securities outstanding at any
time may not exceed $575,000,000, except as provided in Section
2.07. Upon the written order of the Company in the form of an
Officers' Certificate, the Trustee shall authenticate Securi-
ties in substitution of Securities originally issued to reflect
any name change of the Company.
The Trustee may appoint an authenticating agent rea-
sonably acceptable to the Company to authenticate Securities.
Unless otherwise provided in the appointment, an authenticating
agent may authenticate Securities whenever the Trustee may do
so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticat-
ing agent has the same rights as an Agent to deal with the Com-
pany and Affiliates of the Company.
The Securities shall be issuable only in registered
form without coupons in denominations of $1,000 and integral
multiples thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency in the
Borough of Manhattan, The City of New York, where (a) Secu-
rities may be presented or surrendered for registration of
transfer or for exchange ("Registrar"), (b) Securities may be
presented or surrendered for payment ("Paying Agent") and
(c) notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served. The Company
may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surren-
dered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such des-
ignation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Bor-
ough of Manhattan, The City of New York, for such purposes.
The Company may act as its own Registrar or Paying Agent except
that for the purposes of Articles Three and Eight and Sections
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4.15 and 4.16, neither the Company nor any Affiliate of the
Company shall act as Paying Agent. The Registrar shall keep a
register of the Securities and of their transfer and exchange.
The Company, upon notice to the Trustee, may have one or more
co-Registrars and one or more additional paying agents reason-
ably acceptable to the Trustee. The term "Paying Agent"
includes any additional paying agent. The Company initially
appoints the Trustee as Registrar and Paying Agent until such
time as the Trustee has resigned or a successor has been
appointed.
The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which
agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee, in
advance, of the name and address of any such Agent. If the
Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such.
SECTION 2.04. Paying Agent to Hold Assets in Trust.
The Company shall require each Paying Agent other
than the Trustee to agree in writing that each Paying Agent
shall hold in trust for the benefit of Holders or the Trustee
all assets held by the Paying Agent for the payment of princi-
pal of, or interest on, the Securities (whether such assets
have been distributed to it by the Company or any other obligor
on the Securities), and shall notify the Trustee of any Default
by the Company (or any other obligor on the Securities) in mak
ing any such payment. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate such assets and hold them as a
separate trust fund. The Company at any time may require a
Paying Agent to distribute all assets held by it to the Trustee
and account for any assets disbursed and the Trustee may at any
time during the continuance of any payment Default, upon writ-
ten request to a Paying Agent, require such Paying Agent to
distribute all assets held by it to the Trustee and to account
for any assets distributed. Upon distribution to the Trustee
of all assets that shall have been delivered by the Company to
the Paying Agent, the Paying Agent shall have no further lia-
bility for such assets.
SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of Holders. If the Trustee is not the
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Registrar, the Company shall furnish to the Trustee on or
before each Interest Payment Date and at such other times as
the Trustee may request in writing a list in such form and as
of such date as the Trustee may reasonably require of the names
and addresses of Holders, which list may be conclusively relied
upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
When Securities are presented to the Registrar or a
co-Registrar with a request to register the transfer of such
Securities or to exchange such Securities for an equal princi-
pal amount of Securities of other authorized denominations, the
Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transac-
tion are met; provided, however, that the Securities surren-
dered for transfer or exchange shall be duly endorsed or accom-
panied by a written instrument of transfer in form satisfactory
to the Company and the Registrar or co-Registrar, duly executed
by the Holder thereof or his attorney duly authorized in writ-
ing. To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Secu-
rities at the Registrar's or co-Registrar's request. No ser-
vice charge shall be made for any registration of transfer or
exchange, but the Company may require payment of a sum suffi-
cient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer
taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Sections 2.02, 2.07, 2.10, 3.06, 4.15,
4.16 or 9.05). The Registrar or co-Registrar shall not be
required to register the transfer of or exchange of any Secu-
rity (i) during a period beginning at the opening of business
15 days before the mailing of a notice of redemption of Securi-
ties and ending at the close of business on the day of such
mailing and (ii) selected for redemption in whole or in part
pursuant to Article Three, except the unredeemed portion of any
Security being redeemed in part.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee
or if the Holder of a Security claims that the Security has
been lost, destroyed or wrongfully taken, the Company shall
issue and the Trustee shall authenticate a replacement Security
if the Trustee's requirements are met. If required by the
Trustee or the Company, such Holder must provide an indemnity
bond or other indemnity, sufficient in the judgment of both the
<PAGE> 39
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Company and the Trustee, to protect the Company, the Trustee or
any Agent from any loss which any of them may suffer if a Secu-
rity is replaced. The Company may charge such Holder for its
reasonable, out-of-pocket expenses in replacing a Security,
including reasonable fees and expenses of counsel.
Every replacement Security is an additional obliga-
tion of the Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Secu-
rities that have been authenticated by the Trustee except those
cancelled by it, those delivered to it for cancellation and
those described in this Section as not outstanding. A Security
does not cease to be outstanding because the Company, the Sub-
sidiary Guarantors or any of their respective Affiliates holds
the Security.
If a Security is replaced pursuant to Section 2.07
(other than a mutilated Security surrendered for replacement),
it ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced Security is held by a bona
fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursu-
ant to Section 2.07.
If on a Redemption Date or the Maturity Date the Pay-
ing Agent (other than the Company or a Subsidiary) holds U.S.
Legal Tender or U.S. Government Obligations sufficient to pay
all of the principal and interest due on the Securities payable
on that date, then on and after that date such Securities cease
to be outstanding and interest on them ceases to accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required
principal amount of Securities have concurred in any direction,
waiver or consent, Securities owned by the Company, the Subsid-
iary Guarantors or any of their respective Affiliates shall be
disregarded, except that, for the purposes of determining
whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities that the Trustee
knows or has reason to know are so owned shall be disregarded.
<PAGE> 40
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SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery,
the Company may prepare and the Trustee shall authenticate tem-
porary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations
that the Company considers appropriate for temporary Securi-
ties. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Securities in
exchange for temporary Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the
Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them
for transfer, exchange or payment. The Trustee, or at the
direction of the Trustee, the Registrar or the Paying Agent
(other than the Company or a Subsidiary), and no one else,
shall cancel and, at the written direction of the Company,
shall dispose of all Securities surrendered for transfer,
exchange, payment or cancellation. Subject to Section 2.07,
the Company may not issue new Securities to replace Securities
that it has paid or delivered to the Trustee for cancellation.
If the Company or any Subsidiary Guarantor shall acquire any of
the Securities, such acquisition shall not operate as a redemp-
tion or satisfaction of the Indebtedness represented by such
Securities unless and until the same are surrendered to the
Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on
the Securities, it shall, unless the Trustee fixes another
record date pursuant to Section 6.10, pay the defaulted inter-
est, plus (to the extent lawful) any interest payable on the
defaulted interest, to the persons who are Holders on a subse-
quent special record date, which date shall be the fifteenth
day next preceding the date fixed by the Company for the pay-
ment of defaulted interest or the next succeeding Business Day
if such date is not a Business Day. At least 15 days before
the subsequent special record date, the Company shall mail to
each Holder, with a copy to the Trustee, a notice that states
the subsequent special record date, the payment date and the
amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid.
<PAGE> 41
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SECTION 2.13. CUSIP Number.
The Company in issuing the Securities may use a
"CUSIP" number, and if so, the Trustee shall use the CUSIP num-
ber in notices of redemption or exchange as a convenience to
Holders; provided that any such notice may state that no repre-
sentation is made as to the correctness or accuracy of the
CUSIP number printed in the notice or on the Securities, and
that reliance may be placed only on the other identification
numbers printed on the Securities.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant
to Paragraph 5 of the Securities, it shall notify the Trustee,
with a copy to the Credit Agent, of the Redemption Date and the
principal amount of Securities to be redeemed and whether it
wants the Trustee to give notice of redemption to the Holders
at least 30 days (unless a shorter notice shall be satisfactory
to the Trustee) but not more than 60 days before the Redemption
Date. In order to effect a redemption pursuant to Paragraph 5
of the Securities with the proceeds of a Public Equity Offer-
ing, the Company shall send the redemption notice not later
than 60 days after the consummation of such Public Equity
Offering. Any such notice may be cancelled at any time prior
to notice of such redemption being mailed to any Holder and
shall thereby be void and of no effect.
SECTION 3.02. Selection of Securities to Be Redeemed.
If fewer than all of the Securities are to be
redeemed, the Trustee shall select the Securities to be
redeemed pro rata by lot or by any other method that the Trus-
tee considers fair and appropriate and, if such Securities are
listed on any securities exchange, by a method that complies
with the requirements of such exchange; provided, however, that
any redemption pursuant to Paragraph 5 of the Securities with
the proceeds of a Public Equity Offering shall be made on a pro
rata basis.
<PAGE> 42
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The Trustee shall make the selection from the Securi-
ties outstanding and not previously called for redemption and
shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Security
selected for partial redemption, the principal amount thereof
to be redeemed. Securities in denominations of $1,000 may be
redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or integral multiples thereof) of the
principal amount of Securities that have denominations larger
than $1,000. Provisions of this Indenture that apply to Secu-
rities called for redemption also apply to portions of Securi-
ties called for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a
Redemption Date, the Company shall mail a notice of redemption
by first class mail to each Holder whose Securities are to be
redeemed at such Holder's registered address, with a copy to
the Credit Agent. In order to effect a redemption pursuant to
Paragraph 5 of the Securities with the proceeds of a Public
Equity Offering, the Company shall send the redemption notice
not later than 60 days after the consummation of such Public
Equity Offering. At the Company's request, the Trustee shall
give the notice of redemption in the Company's name and at the
Company's expense. Each notice for redemption shall identify
the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption
Price;
(5) that, unless the Company defaults in making the
redemption payment interest on Securities called for
redemption ceases to accrue on and after the Redemption
Date, and the only remaining right of the Holders of such
Securities is to receive payment of the Redemption Price
upon surrender to the Paying Agent of the Securities
redeemed;
<PAGE> 43
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(6) if any Security is being redeemed in part, the
portion of the principal amount of such Security to be
redeemed and that, after the Redemption Date, and upon
surrender of such Security, a new Security or Securities
in aggregate principal amount equal to the unredeemed por-
tion thereof will be issued; and
(7) if fewer than all the Securities are to be
redeemed, the identification of the particular Securities
(or portion thereof) to be redeemed, as well as the aggre-
gate principal amount of Securities to be redeemed and the
aggregate principal amount of Securities to be outstanding
after such partial redemption.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance
with Section 3.03, Securities called for redemption become due
and payable on the Redemption Date and at the Redemption Price.
Upon surrender to the Trustee or Paying Agent, such Securities
called for redemption shall be paid at the Redemption Price.
Securities that are redeemed by the Company or that are pur-
chased by the Company pursuant to a Net Proceeds Offer as
described in Section 4.16 or pursuant to a Change of Control
Offer as described in Section 4.15 or that are otherwise
acquired by the Company will be surrendered to the Trustee for
cancellation.
SECTION 3.05. Deposit of Redemption Price.
On or before the Redemption Date, the Company shall
deposit with the Paying Agent U.S. Legal Tender sufficient to
pay the Redemption Price of all Securities to be redeemed on
that date (other than Securities or portions thereof called for
redemption on that date which have been delivered by the Com-
pany to the Trustee for cancellation). The Paying Agent shall
promptly return to the Company any U.S. Legal Tender so depos-
ited which is not required for that purpose upon the written
request of the Company, except with respect to monies owed as
obligations to the Trustee pursuant to Article Seven hereof.
If the Company complies with the preceding paragraph
then, unless the Company defaults in the payment of such
Redemption Price, interest on the Securities to be redeemed
will cease to accrue on and after the applicable Redemption
Date, whether or not such Securities are presented for payment.
<PAGE> 44
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SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed
in part, the Trustee shall authenticate for the Holder a new
Security or Securities equal in principal amount to the
unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest
on the Securities on the dates and in the manner provided in
the Securities. An installment of principal of or interest on
the Securities shall be considered paid on the date it is due
if the Trustee or Paying Agent (other than the Company or a
Subsidiary) holds on that date U.S. Legal Tender designated for
and sufficient to pay the installment.
The Company shall pay interest on overdue principal
at the rate borne by the Securities and it shall pay interest
on overdue installments of interest at the same rate, to the
extent lawful.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhat-
tan, The City of New York, the office or agency required under
Section 2.03 hereof. The Company shall give prior notice to
the Trustee of the location, and any change in the location, of
such office or agency. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presenta-
tions, surrenders, notices and demands may be made or served at
the address of the Trustee set forth in Section 11.02.
SECTION 4.03. Limitation on Restricted Payments.
The Company shall not, and shall cause each of its
Subsidiaries not to, directly or indirectly, make any
Restricted Payment if, at the time of such proposed Restricted
Payment, or after giving effect thereto, (a) a Default or an
Event of Default shall have occurred and be continuing, (b) the
<PAGE> 45
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Company could not incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to Section 4.12 or
(c) the aggregate amount expended for all Restricted Payments,
including such proposed Restricted Payment (the amount of any
Restricted Payment, if other than cash, to be the fair market
value thereof at the date of payment, as determined in good
faith by the Board of Directors of the Company), subsequent to
the Issue Date, shall exceed the sum of (i) 50% of the aggre-
gate Consolidated Net Income (or if such Consolidated Net
Income is a loss, minus 100% of such loss) of the Company
earned subsequent to the Issue Date and on or prior to the date
of the proposed Restricted Payment (the "Reference Date"), plus
(ii) 100% of the aggregate Net Proceeds received by the Company
from any person (other than a Subsidiary of the Company) from
the issuance and sale (including upon exchange or conversion
for other securities of the Company) subsequent to the Issue
Date and on or prior to the Reference Date of Qualified Capital
Stock (excluding (A) Qualified Capital Stock paid as a dividend
on any Capital Stock or as interest on any Indebtedness and
(B) any Net Proceeds from issuances and sales financed directly
or indirectly using funds borrowed from the Company or any Sub-
sidiary, until and to the extent such borrowing is repaid),
plus (iii) 100% of the aggregate net cash proceeds received by
the Company as capital contributions to the Company after the
Issue Date, plus (iv) $25 million.
Notwithstanding the foregoing, if no Default or Event
of Default shall have occurred and be continuing as a conse-
quence thereof, the provisions set forth in the immediately
preceding paragraph will not prevent (1) the payment of any
dividend within 60 days after the date of its declaration if
the dividend would have been permitted on the date of declara-
tion, (2) the acquisition of any shares of Capital Stock of the
Company or the repurchase, redemption or other repayment of any
Subordinated Indebtedness in exchange for or solely out of the
proceeds of the substantially concurrent sale (other than to a
Subsidiary) of shares of Qualified Capital Stock of the Com-
pany, (3) the repurchase, redemption or other repayment of any
Subordinated Indebtedness in exchange for or solely out of the
proceeds of the substantially concurrent sale (other than to a
Subsidiary) of Subordinated Indebtedness of the Company with an
Average Life equal to or greater than the then remaining Aver-
age Life of the Subordinated Indebtedness repurchased, redeemed
or repaid, and (4) Permitted Payments; provided, however, that
the declaration of each dividend paid in accordance with clause
(1) above, each acquisition, repurchase, redemption or other
repayment made in accordance with, or of the type set forth in,
<PAGE> 46
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clause (2) above, and each payment described in clause (iii),
(iv), (v), (vi) or (vii) of the definition of the term "Permit-
ted Payments" shall each be counted for purposes of computing
amounts expended pursuant to subclause (c) in the immediately
preceding paragraph, and no amounts expended pursuant to clause
(3) above or pursuant to clauses (i) or (ii) of the definition
of the term "Permitted Payments" shall be so counted; provided
further that to the extent any payments made pursuant to clause
(vii) of the definition of the term "Permitted Payments" are
deducted for purposes of computing the Consolidated Net Income
of the Company, such payments shall not be counted for purposes
of computing amounts expended as Restricted Payments pursuant
to subclause (c) in the immediately preceding paragraph.
Prior to making any Restricted Payment under the
first paragraph of this Section 4.03, the Company shall deliver
to the Trustee an Officers' Certificate setting forth the com-
putation by which the amount available for Restricted Payments
pursuant to such paragraph was determined. The Trustee shall
have no duty or responsibility to determine the accuracy or
correctness of this computation and shall be fully protected in
relying on such Officers' Certificate.
SECTION 4.04. Corporate Existence.
Except as otherwise permitted by Article Five, the
Company shall do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate exis-
tence and the corporate or other existence of each of its Sig-
nificant Subsidiaries in accordance with the respective organi-
zational documents of each such Significant Subsidiary and the
rights (charter and statutory) and franchises of the Company
and each such Significant Subsidiary; provided, however, that
the Company shall not be required to preserve, with respect to
itself, any right or franchise, and with respect to any of its
Significant Subsidiaries, any such existence, right or fran-
chise, if the Board of Directors of the Company or such Sig-
nificant Subsidiary, as the case may be, shall determine that
the preservation thereof is no longer desirable in the conduct
of the business of the Company or any such Significant
Subsidiary.
SECTION 4.05. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be
paid or discharged, before the same shall become delinquent,
(i) all taxes, assessments and governmental charges (including
<PAGE> 47
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withholding taxes and any penalties, interest and additions to
taxes) levied or imposed upon it or any of its Subsidiaries or
properties of it or any of its Subsidiaries and (ii) all lawful
claims for labor, materials and supplies that, if unpaid, might
by law become a Lien upon the property of it or any of its Sub-
sidiaries; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged
any such tax, assessment, charge or claim if either (a) the
amount, applicability or validity thereof is being contested in
good faith by appropriate proceedings and an adequate reserve
has been established therefor to the extent required by GAAP or
(b) the failure to make such payment or effect such discharge
(together with all other such failures) would not have a mate-
rial adverse effect on the financial condition or results or
operations of the Company and its Subsidiaries taken as a
whole.
SECTION 4.06. Maintenance of Properties and Insurance.
(a) The Company shall cause all properties used or
useful to the conduct of its business or the business of any of
its Subsidiaries to be maintained and kept in good condition,
repair and working order and supplied with all necessary equip-
ment and shall cause to be made all necessary repairs, renew-
als, replacements, betterments and improvements thereof, all as
in its judgment may be necessary, so that the business carried
on in connection therewith may be properly and advantageously
conducted at all times unless the failure to so maintain such
properties (together with all other such failures) would not
have a material adverse effect on the financial condition or
results of operations of the Company and its Subsidiaries taken
as a whole; provided, however, that nothing in this
Section 4.06 shall prevent the Company or any Subsidiary from
discontinuing the operation or maintenance of any of such prop-
erties, or disposing of any of them, if such discontinuance or
disposal is either (i) in the ordinary course of business,
(ii) in the good faith judgment of the Board of Directors of
the Company or the Subsidiary concerned, or of the senior
officers of the Company or such Subsidiary, as the case may be,
desirable in the conduct of the business of the Company or such
Subsidiary, as the case may be, or (iii) is otherwise permitted
by this Indenture.
(b) The Company shall provide or cause to be pro-
vided, for itself and each of its Subsidiaries, insurance
(including appropriate self-insurance) against loss or damage
of the kinds that, in the reasonable, good faith opinion of the
<PAGE> 48
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Company are adequate and appropriate for the conduct of the
business of the Company and such Subsidiaries in a prudent man-
ner, with reputable insurers or with the government of the
United States of America or an agency or instrumentality
thereof, in such amounts, with such deductibles, and by such
methods as shall be either (i) consistent with past practices
of the Company or the applicable Subsidiary or (ii) customary,
in the reasonable, good faith opinion of the Company, for cor-
porations similarly situated in the industry, unless the fail-
ure to provide such insurance (together with all other such
failures) would not have a material adverse effect on the
financial condition or results of operations of the Company and
its Subsidiaries, taken as a whole.
SECTION 4.07. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee within
120 days after the end of the Company's fiscal year an Offic-
ers' Certificate stating that a review of its activities and
the activities of its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Offic-
ers with a view to determining whether it has kept, observed,
performed and fulfilled its obligations under this Indenture
and further stating, as to each such Officer signing such cer-
tificate, that to the best of his knowledge the Company during
such preceding fiscal year has kept, observed, performed and
fulfilled each and every such covenant and no event of default
in respect of any payment obligation under the Credit Agree-
ment, Default or Event of Default occurred during such year or,
if such signers do know of such an event of default, Default or
Event of Default, the certificate shall describe the event of
default, Default or Event of Default and its status with par-
ticularity. The Officers' Certificate shall also notify the
Trustee should the Company elect to change the manner in which
it fixes its fiscal year end.
(b) So long as not contrary to the then current rec-
ommendations of the American Institute of Certified Public
Accountants, the Company shall deliver to the Trustee within
120 days after the end of each fiscal year a written statement
by the Company's independent certified public accountants stat-
ing (A) that their audit examination has included a review of
the terms of this Indenture and the Securities as they relate
to accounting matters, and (B) whether, in connection with
their audit examination, any Default has come to their atten-
tion and if such a Default has come to their attention, speci-
fying the nature and period of existence thereof.
<PAGE> 49
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(c) The Company shall deliver to the Trustee, forth-
with upon becoming aware, and in any event within 5 days after
the occurrence, of (i) any Default or Event of Default in the
performance of any covenant, agreement or condition contained
in this Indenture; (ii) any event of default in respect of any
payment obligation under the Credit Agreement or any event of
default under any other bond, debenture, note, or other evi-
dence of Indebtedness of the Company or any of its Subsidiar-
ies, or under any mortgage, indenture or other instrument if
such event of default related to Indebtedness at any time in an
aggregate principal amount exceeding $20 million, an Officers'
Certificate specifying with particularity such event.
SECTION 4.08. Compliance with Laws.
The Company shall comply, and shall cause each of its
Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders and restrictions of the United States of
America, all states and municipalities thereof, and of any gov-
ernmental department, commission, board, regulatory authority,
bureau, agency and instrumentality of the foregoing, in respect
of the conduct of their respective businesses and the ownership
of their respective properties, except such as are being con-
tested in good faith and by appropriate proceedings and except
for such noncompliances as would not in the aggregate have a
material adverse effect on the financial condition or results
of operations of the Company and its Subsidiaries taken as a
whole.
SECTION 4.09. SEC Reports.
The Company will deliver to the Trustee within 15
days after the filing of the same with the Commission, copies
of the quarterly and annual report and of the information docu-
ments and other reports, if any, which the Company is required
to file with the Commission pursuant to Section 13 or 15(d) of
the Securities Exchange Act. Notwithstanding that the Company
may not be subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act, the Company will file with the
Commission, to the extent permitted, and provide the Trustee
and Holders of Securities with such annual reports and such
information, documents and other reports specified in Section
13 and 15(d) of the Exchange Act. The Company will also comply
with the other provisions of TIA Section 314(a).
<PAGE> 50
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SECTION 4.10. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may law-
fully do so) that it will not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advan-
tage of, any stay or extension law or any usury law or other
law that would prohibit or forgive the Company from paying all
or any portion of the principal of or interest on the Securi-
ties as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or
the performance of this Indenture; and (to the extent that it
may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been
enacted.
SECTION 4.11. Limitation on Transactions with Affiliates.
(a) Neither the Company nor any of its Subsidiaries
shall (i) sell, lease, transfer or otherwise dispose of any of
its properties or assets, or issue securities (other than
equity securities which do not constitute Disqualified Capital
Stock) to, (ii) purchase any property, assets or securities
from, (iii) make any Investment in, or (iv) enter into or suf-
fer to exist any contract or agreement with or for the benefit
of, an Affiliate or Significant Stockholder (or any Affiliate
of such Significant Stockholder) of the Company or any Subsid-
iary (an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under Section 4.11(b) and (y) Affiliate
Transactions in the ordinary course of business that are fair
to the Company or such Subsidiary, as the case may be, and on
terms at least as favorable as might reasonably have been
obtainable at such time from an unaffiliated party; provided
that (A) with respect to Affiliate Transactions involving
aggregate payments in excess of $1 million and less than $5
million, the Company or such Subsidiary, as the case may be,
shall have delivered an Officers' Certificate to the Trustee
certifying that such transaction or series of transactions com-
plies with clause (y) above, (B) with respect to Affiliate
Transactions involving aggregate payments in excess of $5 mil-
lion and less than $15 million, the Company or such Subsidiary,
as the case may be, shall have delivered an Officers' Certifi-
cate to the Trustee certifying that such Affiliate Transaction
complies with clause (y) above and that such Affiliate Transac-
tion has received the approval of a majority of the
<PAGE> 51
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disinterested members of the Board of Directors of the Company
or the Subsidiary, as the case may be, or in the absence of any
such approval by the disinterested members of the Board of
Directors of the Company or the Subsidiary, as the case may be,
that an Independent Financial Advisor has reasonably and in
good faith determined that the financial terms of such Affili-
ate Transaction are fair to the Company or such Subsidiary, as
the case may be, or that the terms of such Affiliate Transac-
tion are at least as favorable as might reasonably have been
obtained at such time from an unaffiliated party and that such
Independent Financial Advisor has provided written confirmation
of such determination to the Board of Directors and (C) with
respect to Affiliate Transactions involving aggregate payments
in excess of $15 million, the Company or such Subsidiary, as
the case may be, shall have delivered to the Trustee a written
opinion from an Independent Financial Advisor to the effect
that the financial terms of such Affiliate Transaction are fair
to the Company or such Subsidiary, as the case may be, or that
the terms of such Affiliate Transaction are at least as favor-
able as those that might reasonably have been obtained at the
time from an unaffiliated party.
(b) The provisions of Section 4.11(a) shall not
apply to (i) any Permitted Payment, (ii) any Restricted Payment
that is made in compliance with the provisions of Section 4.03,
(iii) reasonable and customary fees and compensation paid to,
and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Subsidiary, as
determined by the Board of Directors of the Company or any Sub-
sidiary or the senior management thereof in good faith,
(iv) transactions exclusively between or among the Company and
any of its wholly-owned Subsidiaries or exclusively between or
among such wholly-owned Subsidiaries, provided such transac-
tions are not otherwise prohibited by this Indenture, (v) any
agreement as in effect as of the Issue Date or any amendment
thereto or any transaction contemplated thereby (including pur-
suant to any amendment thereto) so long as any such amendment
is not disadvantageous to the Securityholders in any material
respect, (vi) the existence of, or the performance by the Com-
pany or any of its Subsidiaries of its obligations under the
terms of, any stockholder agreement (including any registration
rights agreement or purchase agreement related thereto) to
which it (or New Holdings) is a party as of the Issue Date and
any similar agreements which it (or New Holdings) may enter
into thereafter; provided, however, that the existence of, or
the performance by the Company or any Subsidiaries of obliga-
tions under any future amendment to, any such existing
<PAGE> 52
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agreement or under any similar agreement entered into after the
Issue Date shall only be permitted by this clause (vi) to the
extent that the terms of any such amendment or new agreement
are not otherwise disadvantageous to the Securityholders in any
material respect, (vii) transactions permitted by, and comply-
ing with, the provisions of Section 5.01 and (viii) purchases
or sales of goods or services or other transactions with sup-
pliers, in each case, in the ordinary course of business
(including, without limitation, pursuant to joint venture
agreements) and otherwise in compliance with the terms of this
Indenture which are fair to the Company, in the reasonable
determination of the Board of Directors, or are on terms at
least as favorable as might reasonably have been obtained at
such time from an unaffiliated party.
SECTION 4.12. Limitation on Incurrences of
Additional Indebtedness.
The Company shall not, and shall not permit any of
its Subsidiaries, directly or indirectly, to incur, assume,
guarantee, become liable, contingently or otherwise, with
respect to, or otherwise become responsible for the payment of
(collectively "incur") any Indebtedness other than Permitted
Indebtedness; provided, however, that if no Default with
respect to payment of principal of, or interest on, the Securi-
ties or Event of Default shall have occurred and be continuing
at the time of or as a consequence of the incurrence of any
such Indebtedness, the Company or any Subsidiary Guarantor may
incur Indebtedness if immediately before and immediately after
giving effect to the incurrence of such Indebtedness the Oper-
ating Coverage Ratio of the Company would be greater than 2.0
to 1.0; provided further a Subsidiary may incur Acquired
Indebtedness to the extent such Indebtedness could have been
incurred by the Company pursuant to the immediately preceding
proviso.
In addition, neither the Company nor any Subsidiary
Guarantor will, directly or indirectly, in any event incur any
Indebtedness that by its terms (or by the terms of any agree-
ment governing such Indebtedness) is subordinated to any other
Indebtedness of the Company or such Subsidiary Guarantor, as
the case may be, unless such Indebtedness is also by its terms
(or by the terms of any agreement governing such Indebtedness)
made expressly subordinate to the Securities or the Guarantee
of such Subsidiary Guarantor, as the case may be, to the same
extent and in the same manner as such Indebtedness is subordi-
nated pursuant to subordination provisions that are most
<PAGE> 53
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favorable to the holders of any other Indebtedness of the Com-
pany or such Subsidiary Guarantor, as the case may be.
SECTION 4.13. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any Sub-
sidiary to, directly or indirectly, create or suffer to exist,
or allow to become effective any consensual Payment Restriction
with respect to any of its Subsidiaries, except for (a) any
such restrictions contained in (i) the Credit Agreement in
effect on the Issue Date, as any such payment restriction may
apply to any present or future Subsidiary, (ii) this Indenture
and any agreement in effect at or entered into on the Issue
Date, (iii) Indebtedness of a person existing at the time such
person becomes a Subsidiary (provided that (x) such Indebted-
ness is not incurred in connection with, or in contemplation
of, such person becoming a Subsidiary, (y) such restriction is
not applicable to any person, or the properties or assets or
any person, other than the person so acquired and (z) such
Indebtedness is otherwise permitted to be incurred pursuant to
Section 4.12), (iv) secured Indebtedness otherwise permitted to
be incurred pursuant to Sections 4.12 and 4.14 that limit the
right of the debtor to dispose of the assets securing such
Indebtedness; (b) customary non-assignment provisions restrict-
ing subletting or assignment of any lease or other agreement
entered into by a Subsidiary; (c) customary net worth provi-
sions contained in leases and other agreements entered into by
a Subsidiary in the ordinary course of business; (d) customary
restrictions with respect to a Subsidiary pursuant to an agree-
ment that has been entered into for the sale or disposition of
all or substantially all of the Capital Stock or assets of such
Subsidiary; (e) customary provisions in joint venture agree-
ments and other similar agreements; (f) restrictions contained
in Indebtedness incurred to refinance, refund, extend or renew
Indebtedness referred to in clause (a) above; provided that the
restrictions contained therein are not materially more restric-
tive taken as a whole than those provided for in such Indebted-
ness being refinanced, refunded, extended or renewed and
(g) Payment Restrictions contained in any other Indebtedness
permitted to be incurred subsequent to the Issue Date pursuant
to the provisions of Section 4.12; provided that any such Pay-
ment Restrictions are ordinary and customary with respect to
the type of Indebtedness being incurred (under the relevant
circumstances) and, in any event, no more restrictive than the
most restrictive Payment Restrictions in effect on the Issue
Date.
<PAGE> 54
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SECTION 4.14. Limitation on Liens.
The Company shall not and shall not permit any Sub-
sidiary to create, incur, assume or suffer to exist any Liens
upon any of their respective assets unless the Securities are
equally and ratably secured by the Liens covering such assets,
except for (i) existing and future Liens securing Indebtedness
and other obligations of the Company and its Subsidiaries under
the Credit Agreement or any refinancing or replacement thereof
in whole or in part permitted under this Indenture, (ii) Per-
mitted Liens, (iii) Liens securing Acquired Indebtedness, pro-
vided that such Liens (x) are not incurred in connection with,
or in contemplation of, the acquisition of the property or
assets acquired and (y) do not extend to or cover any property
or assets of the Company or any Subsidiary other than the prop-
erty or assets so acquired, (iv) Liens to secure Capitalized
Lease Obligations and certain other Indebtedness that is other-
wise permitted under this Indenture, provided that (A) any such
Lien is created solely for the purpose of securing such other
Indebtedness representing, or incurred to finance, refinance or
refund, the cost (including sales and excise taxes, installa-
tion and delivery charges and other direct costs of, and other
direct expenses paid or charged in connection with, the pur-
chase (whether through stock or asset purchase, merger or
otherwise) or construction) or improvement of the property sub-
ject thereto (whether real or personal, including fixtures and
other equipment), (B) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such costs and
(C) such Lien does not extend to or cover any other property
other than such item of property and any improvements on such
item, (v) Liens existing on the Issue Date (after giving effect
to the Merger), (vi) Liens in favor of the Trustee under this
Indenture and any substantially equivalent Lien granted to any
trustee or similar institution under any indenture for Indebt-
edness permitted by the terms of this Indenture, and (vii) any
replacement, extension or renewal, in whole or in part, of any
Lien described in the foregoing clauses including in connection
with any refinancing of the Indebtedness, in whole or in part,
secured by any such Lien provided that to the extent any such
clause limits the amount secured or the assets subject to such
Liens, no extension or renewal shall increase the amount or the
assets subject to such Liens, except to the extent that the
Liens associated with such additional assets are otherwise per-
mitted hereunder.
<PAGE> 55
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SECTION 4.15. Limitation on Change of Control.
(a) Upon the occurrence of a Change of Control, each
Holder will have the right to require the repurchase of such
Holder's Securities pursuant to the offer described in para-
graph (b), below (the "Change of Control Offer"), at a purchase
price equal to 101% of the principal amount thereof plus
accrued and unpaid interest to the date of repurchase.
(b) Within 30 days following the date upon which the
Change of Control occurred (the "Change of Control Date"), the
Company must send, by first class mail, a notice to each Holder
of Securities, with a copy to the Trustee, which notice shall
govern the terms of the Change of Control Offer. The notice to
the Holders shall contain all instructions and materials neces-
sary to enable such Holders to tender Securities pursuant to
the Change of Control Offer. The Company shall give notice of
an event giving rise to a Change of Control on the same date
and in the same manner to all Holders of Securities. Such
notice shall state:
(1) that the Change of Control Offer is being made
pursuant to this Section 4.15 and that all Securities ten-
dered will be accepted for payment;
(2) the purchase price (including the amount of
accrued interest) and the purchase date (which shall be no
earlier than 30 days nor later than 40 days from the date
such notice is mailed, other than as may be required by
law) (the "Change of Control Payment Date"); provided,
however, that the Change of Control Payment Date for the
Securities shall be one Business Day prior to the Change
of Control Payment Date with respect to the Change of Con-
trol Payment Date under the Senior Subordinated Note
Indentures with respect to such Change of Control;
(3) that any Security not tendered will continue to
accrue interest if interest is then accruing;
(4) that, unless the Company defaults in making pay-
ment therefor, any Security accepted for payment pursuant
to the Change of Control Offer shall cease to accrue
interest after the Change of Control Payment Date;
(5) that Holders electing to have a Security pur-
chased pursuant to a Change of Control Offer will be
required to surrender the Security, with the form entitled
<PAGE> 56
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"Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address
specified in the notice prior to the close of business on
the Business Day prior to the Change of Control Payment
Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than two
Business Days prior to the Change of Control Payment Date,
a telegram, telex, facsimile transmission or letter set-
ting forth the name of the Holder, the principal amount of
the Securities the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to
have such Security purchased;
(7) that Holders whose Securities are purchased only
in part will be issued new Securities equal in principal
amount to the unpurchased portions of the Securities sur-
rendered; provided that each Security purchased and each
Security issued shall be in an original principal amount
of $1,000 or integral multiples thereof;
(8) that each Change of Contol Offer is required to
remain open for at least 20 Business Days and until 12:00
Midnight New York City time on the applicable Change of
Control Payment Date; and
(9) the circumstances and relevant facts regarding
such Change of Control.
On or before the Change of Control Payment Date, the
Company shall (i) accept for payment Securities or portions
thereof tendered pursuant to the Change of Control Offer,
(ii) deposit with the Paying Agent U.S. Legal Tender sufficient
to pay the purchase price of all Securities so tendered and
(iii) deliver to the Trustee Securities so accepted together
with an Officers' Certificate stating the Securities or por-
tions thereof being purchased by the Company. The Paying Agent
shall promptly mail to the Holders of Securities so accepted
payment in an amount equal to the purchase price (and the Trus-
tee shall promptly authenticate and mail to such Holders new
Securities equal in principal amount to any unpurchased portion
of the Securities surrendered) unless such payment is prohib-
ited pursuant to Article Four or otherwise. The Company will
publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment
<PAGE> 57
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Date. For purposes of this Section 4.15, the Trustee shall act
as the Paying Agent.
The Company shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regula-
tions are applicable in connection with the repurchase of Secu-
rities pursuant to a Change of Control Offer. To the extent
the provisions of any securities laws or regulations conflict
with the provisions under this Section 4.15, the Company shall
comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this
Section 4.15 by virtue thereof.
SECTION 4.16. Limitation on Asset Sales.
The Company will not, and will not permit any of its
Subsidiaries to, make any Asset Sale, unless (a) the Company or
the applicable Subsidiary receives consideration at the time of
such Asset Sale at least equal to the fair market value of the
assets sold and (b) upon consummation of an Asset Sale, the
Company will within 365 days of the receipt of the proceeds
therefrom, either: (i) apply or cause its subsidiary to apply
the Net Cash Proceeds of any Asset Sale to (1) a Related Busi-
ness Investment, (2) an investment in properties and assets
that replace the properties and assets that are the subject of
such Asset Sale or (3) an investment in properties and assets
that will be used in the business of the Company and its Sub-
sidiaries existing on the Issue Date or in a business reason-
ably related thereto; (ii) apply or cause to be applied such
Net Cash Proceeds to the permanent repayment of Pari Passu
Indebtedness; provided, however, that the repayment of any
revolving loan (under the Credit Agreement or otherwise) shall
result in a permanent reduction in the commitment thereunder;
(iii) use such Net Cash Proceeds to secure Letter of Credit
Obligations to the extent related letters of credit have not
been drawn upon or returned undrawn; or (iv) after such time as
the accumulated Net Cash Proceeds equals or exceeds $20 mil-
lion, apply or cause to be applied such Net Cash Proceeds to
the purchase of Securities tendered to the Company for purchase
at a price equal to 100% of the principal amount thereof plus
accrued interest thereon to the date of purchase pursuant to an
offer to purchase made by the Company as set forth below (a
"Net Proceeds Offer"); provided, however, that the Company
shall have the right to exclude from the foregoing provisions
Asset Sales subsequent to the Issue Date, (x) the proceeds of
which are derived from the sale and substantially concurrent
<PAGE> 58
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lease-back of a supermarket and/or related assets which are
acquired or constructed by the Company or a Subsidiary subse-
quent to the Issue Date, provided that such sale and substan-
tially concurrent lease-back occurs within 180 days following
such acquisition or the completion of such construction, as the
case may be, and (y) the proceeds of which in the aggregate do
not exceed $20 million; provided further that pending the uti-
lization of any Net Cash Proceeds in the manner (and within the
time period) described above, the Company may use any such Net
Cash Proceeds to repay revolving loans under the Credit Agree-
ment without a permanent reduction of the commitment
thereunder.
Notice of a Net Proceeds Offer pursuant to this
Section 4.16 will be mailed to record Holders of Securities as
shown on the register of Holders not less than 325 days nor
more than 365 days after the relevant Asset Sale, with a copy
to the Trustee. The notice shall contain all instructions and
materials necessary to enable such Holders to tender Securities
pursuant to the Net Proceeds Offer and shall state the follow-
ing terms:
(1) that the Net Proceeds Offer is being made pursu-
ant to Section 4.16 and that all Securities tendered will
be accepted for payment, provided, however, that if the
aggregate principal amount of Securities tendered in a Net
Proceeds Offer plus accrued interest at the expiration of
such offer exceeds the aggregate amount of the Net Pro-
ceeds Offer, the Company shall select the Securities to be
purchased on a pro rata basis (with such adjustments as
may be deemed appropriate by the Company so that only
Securities in denominations of $1,000 or multiples thereof
shall be purchased);
(2) the purchase price (including the amount of
accrued interest) and the purchase date (which shall be no
earlier than 30 days nor later than 40 days from the date
such notice is mailed, other than as may be required by
law) (the "Proceeds Purchase Date");
(3) that any Security not tendered will continue to
accrue interest if interest is then accruing;
(4) that, unless the Company defaults in making pay-
ment therefor, any Security accepted for payment pursuant
to the Net Proceeds Offer shall cease to accrue interest
after the Proceeds Purchase Date;
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(5) that Holders electing to have a Security pur-
chased pursuant to a Net Proceeds Offer will be required
to surrender the Security, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the Secu-
rity completed, to the Paying Agent at the address speci-
fied in the notice prior to the close of business on the
Business Day prior to the Proceeds Purchase Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than two
Business Days prior to the Proceeds Purchase Date, a tele-
gram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a state-
ment that such Holder is withdrawing his election to have
such Security purchased; and
(7) that Holders whose Securities were purchased
only in part will be issued new Securities equal in prin-
cipal amount to the unpurchased portion of the Securities
surrendered; provided that each Security purchased and
each new Security issued shall be in an original principal
amount of $1,000 or integral multiples thereof.
On or before the Proceeds Purchase Date, the Company
shall (i) accept for payment Securities or portions thereof
tendered pursuant to the Net Proceeds Offer which are to be
purchased in accordance with item (b)(1) above, (ii) deposit
with the Paying Agent U.S. Legal Tender sufficient to pay the
purchase price of all Securities to be purchased and (iii)
deliver to the Trustee Securities so accepted together with an
Officers' Certificate stating the Securities or portions
thereof being purchased by the Company. The Paying Agent shall
promptly mail to the Holders of Securities so accepted payment
in an amount equal to the purchase price (and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new
Security equal in principal amount to any unpurchased portion
of the Security surrendered). The Company will publicly
announce the results of the Net Proceeds Offer on or as soon as
practicable after the Proceeds Purchase Date. For purposes of
this Section 4.16, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Securi-
ties pursuant to a Net Proceeds Offer shall be returned by the
Trustee to the Company.
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The Company shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regula-
tions are applicable in connection with the purchase of Securi-
ties pursuant to a Net Proceeds Offer. To the extent the pro-
visions of any securities laws or regulations conflict with the
provisions under this Section 4.16, the Company shall comply
with the applicable securities laws and regulations and shall
not be deemed to have breached its obligations under this Sec-
tion 4.16 by virtue thereof.
SECTION 4.17. Guarantees of Certain Indebtedness.
The Company will not permit any of its Subsidiaries
to (a) incur, guarantee or secure through the granting of Liens
the payment of any Indebtedness under the term portion of the
Credit Agreement or refinancings thereof or (b) pledge any
intercompany notes representing obligations of any of its Sub-
sidiaries, to secure the payment of any Indebtedness under the
term portion of the Credit Agreement or refinancings thereof,
in each case unless such Subsidiary, the Company and the Trus-
tee execute and deliver a supplemental indenture evidencing
such Subsidiary's Guarantee.
SECTION 4.18. Limitation on Preferred Stock of Subsidiaries.
The Company will not permit any of its Subsidiaries
to issue any Preferred Stock (other than to the Company or to a
wholly-owned Subsidiary) or permit any person (other than the
Company or a wholly-owned Subsidiary) to own any Preferred
Stock of any Subsidiary.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Limitations on Mergers and Certain Other
Transactions.
(a) The Company shall not in a single transaction or
through a series of related transactions, (i) consolidate with
or merge with or into any other person, or transfer (by lease,
assignment, sale or otherwise) all or substantially all of its
properties and assets as an entirety or substantially as an
entirety to another person or group of affiliated persons or
(ii) adopt a Plan of Liquidation, unless, in either case:
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(1) either the Company shall be the continuing per-
son, or the person (if other than the Company) formed by
such consolidation or into which the Company is merged or
to which all or substantially all of the properties and
assets of the Company as an entirety or substantially as
an entirety are transferred (or, in the case of a Plan of
Liquidation, any person to which assets are transferred)
(the Company or such other person being hereinafter
referred to as the "Surviving Person") shall be a corpora-
tion organized and validly existing under the laws of the
United States, any State thereof or the District of Colum-
bia, and shall expressly assume, by an indenture supple-
ment, all the obligations of the Company under the Securi-
ties and this Indenture;
(2) immediately after and giving effect to such
transaction and the assumption contemplated by clause
(1) above and the incurrence or anticipated incurrence of
any Indebtedness to be incurred in connection therewith,
(A) the Surviving Person shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth
of the Company immediately preceding the transaction and
(B) the Surviving Person could incur at least $1 of addi-
tional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 4.12;
(3) immediately before and immediately after and
giving effect to such transaction and the assumption of
the obligations as set forth in clause (1) above and the
incurrence or anticipated incurrence of any Indebtedness
to be incurred in connection therewith, no Default or
Event of Default shall have occurred and be continuing;
and
(4) each Subsidiary Guarantor, unless it is the
other party to the transaction, shall have by supplemental
indenture confirmed that its Guarantee of the obligations
of the Company under the Securities and this Indenture
shall apply, without alteration or amendment as such Guar-
antee applies on the date it was granted under this Inden-
ture to the obligations of the Company under this Inden-
ture and the Securities to the obligations of the Company
or such Person as the case may be, under this Indenture
and the Securities, after consummation of such
transaction.
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(b) Notwithstanding the foregoing, the consummation
of the Merger on the Issue Date need only comply with clauses
(1) and (3) of the foregoing paragraph.
(c) For purposes of the foregoing, the transfer (by
lease, assignment, sale or otherwise, in a single transaction
or series of transactions) of all or substantially all of the
properties and assets of one or more direct or indirect Subsid-
iaries, the Capital Stock of which constitutes all or substan-
tially all of the properties and assets of the Company shall be
deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
SECTION 5.02 Successor Corporation Substituted.
Upon any consolidation or merger, or any transfer of
assets in accordance with Section 5.01, the successor person
formed by such consolidation or into which the Company is
merged or to which such transfer is made shall succeed to, and
be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if
such successor person had been named as the Company herein;
provided, however, that solely for purposes of computing
amounts described in subclause (c) of the first paragraph of
Section 4.03, any such successor person shall only be deemed to
have succeeded to and be substituted for the Company with
respect to periods subsequent to the effective time of such
merger, consolidation or transfer of assets. When a successor
corporation assumes all of the obligations of the Company here-
under and under the Securities and agrees to be bound hereby
and thereby, the predecessor shall be released from such
obligations.
ARTICLE SEVEN
DEFAULT AND REMEDIES
SECTION 7.01. Events of Default.
An "Event of Default" occurs if:
(i) the Company defaults in the payment of
interest on any Securities when the same becomes due and
payable and the Default continues for a period of 30 days;
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(ii) the Company defaults in the payment of the
principal of, or premium, if any, on the Securities when
due whether at maturity, upon acceleration, redemption,
required repurchase or otherwise;
(iii) the Company fails to comply with any of its
agreements contained in the Securities or this Indenture
(other than a default specified in clause (i) or (ii)
above), if such failure continues for the period and after
the notice specified below;
(iv) there shall be a default under any
Indebtedness of the Company or any of its Subsidiaries,
whether such Indebtedness now exists or shall hereafter be
created, if both (A) such default either (1) results from
the failure to pay any such Indebtedness at its stated
final maturity or (2) relates to an obligation other than
the obligation to pay such Indebtedness at its stated
final maturity and results in the holder or holders of
such Indebtedness causing such Indebtedness to become due
prior to its stated final maturity and (B) the principal
amount of such Indebtedness, together with the principal
amount of any other such Indebtedness in default for
failure to pay principal at stated final maturity or the
maturity of which has been so accelerated, aggregates $20
million or more at any one time outstanding;
(v) one or more judgments, orders or decrees of
any court or regulatory or administrative agency of
competent jurisdiction for the payment of money in excess
of $20 million, either individually or in the aggregate,
shall be entered against the Company or any Subsidiary of
the Company or any of their respective properties and
shall not be discharged and there shall have been a period
of 60 days after the date on which any period for appeal
has expired and during which a stay of enforcement of such
judgment, order or decree shall not be in effect;
(vi) either the Company or any Significant
Subsidiary pursuant to or within the meaning of any
Bankruptcy Law: (a) commences a voluntary case or
proceeding; (b) consents to the entry of a Bankruptcy
Order for relief against it in an involuntary case or
proceeding or the commencement of any case or proceeding
against it; (c) consents to the appointment of a custodian
of it or for substantially all of its property; or
(d) makes a general assignment for the benefit of its
creditors;
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(vii) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that: (a) is for
relief against the Company or any Significant Subsidiary,
in an involuntary case or proceeding; (b) appoints a cus-
todian of the Company or any Significant Subsidiary, or
for all or any substantial part of their respective prop-
erties; or (c) orders the liquidation of the Company or
any Significant Subsidiary and in each case the order or
decree remains unstayed and in effect for 60 days;
(viii) the lenders under the Credit Agreement
shall commence judicial proceedings to foreclose upon any
material portion of the assets of the Company and its
Subsidiaries or shall have exercised any right under
applicable law or applicable security documents to take
ownership of any such assets in lieu of foreclosure; or
(ix) any of the Guarantees shall be declared or
adjudged invalid in a final judgment or order issued by
any court or governmental authority.
A Default under clause (iii) above (other than in the
case of any Default under Section 4.03, 4.15, 4.16 or 5.01,
which Defaults shall be Events of Default with the notice spec-
ified in this paragraph but without the passage of time speci-
fied in this paragraph) is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in
principal amount of the outstanding Securities notify the Com-
pany and the Trustee of the Default, and the Company does not
cure the Default within 30 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied
and state that the notice is a "Notice of Default." Such
notice shall be given by the Trustee if so requested by the
Holders of at least 25% in principal amount of the Securities
then outstanding. When a Default is cured, it ceases.
SECTION 7.02. Acceleration.
(a) If an Event of Default (other than an Event of
Default specified in Section 6.01(vi) or (vii) with respect to
the Company or a Subsidiary Guarantor) occurs and is continu-
ing, the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Securities may, and the Trustee
upon the request of the Holders of not less than 25% in aggre-
gate principal amount of the then outstanding Securities shall,
declare due and payable all unpaid principal and interest
accrued and unpaid on the then outstanding Securities by
<PAGE> 65
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written notice to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of accel-
eration" (the "Acceleration Notice"), and the same (i) shall
become immediately due and payable or (ii) if there are any
amounts outstanding under the Credit Agreement, shall become
due and payable upon the first to occur of an acceleration
under the Credit Agreement, or five business days after receipt
by the Company and the Credit Agent of such Acceleration
Notice. If an Event of Default specified in Section 6.01(vi)
or (vii) occurs with respect to the Company or a Subsidiary
Guarantor, all unpaid principal of and accrued interest on all
then outstanding Securities shall be immediately due and pay-
able without any declaration or other act on the part of the
Trustee or any of the Holders. Upon payment of such principal
amount, interest, and premium, if any, all of the Company's
obligations under the Securities and this Indenture, other than
obligations under Section 7.07, shall terminate. After a dec-
laration of acceleration, the Holders of a majority in princi-
pal amount of the Securities then outstanding, by notice to the
Trustee, may rescind an acceleration and its consequences if
(i) all existing Events of Default, other than the non-payment
of the principal of the Securities which has become due solely
by such declaration of acceleration, have been cured or waived,
(ii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue prin-
cipal, which has become due otherwise than by such declaration
of acceleration, has been paid, (iii) the rescission would not
conflict with any judgment or decree of a court of competent
jurisdiction and (iv) the Company has paid or deposited with
the Trustee a sum sufficient to pay all sums paid or advanced
by the Trustee under this Indenture and the compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel.
(b) In the event of a declaration of acceleration
under this Indenture because an Event of Default set forth in
Section 6.01(iv) has occurred and is continuing, such declara-
tion of acceleration shall be automatically rescinded and
annulled if either (i) the holders of the Indebtedness which is
the subject of such Event of Default have waived such failure
to pay at maturity or have rescinded the acceleration in
respect of such Indebtedness within 90 days of such maturity or
declaration of acceleration, as the case may be, and no other
Event of Default has occurred during such 90-day period which
has not been cured or waived, or (ii) such Indebtedness shall
have been discharged or the maturity thereof shall have been
extended such that it is not then due and payable, or the
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underlying default has been cured, within 90 days of such
maturity or declaration of acceleration, as the case may be.
SECTION 7.03. Other Remedies.
If an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of or interest on
the Securities or to enforce the performance of any provision
of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does
not possess any of the Securities or does not produce any of
them in the proceeding. A delay or omission by the Trustee or
any Securityholder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of
Default. No remedy is exclusive of any other remedy. All
available remedies are cumulative to the extent permitted by
law.
SECTION 7.04. Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02, the Holders of a
majority in principal amount of the outstanding Securities by
notice to the Trustee may waive an existing Default or Event of
Default and its consequences, except a Default in the payment
of principal of or interest on any Security as specified in
clauses (i) and (ii) of Section 6.01. When a Default or Event
of Default is waived, it is cured and ceases.
SECTION 7.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in
principal amount of the outstanding Securities may direct the
time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or
power conferred on it, including, without limitation, any reme-
dies provided for in Section 6.03. Subject to Section 7.01,
however, the Trustee may refuse to follow any direction that
conflicts with any law or this Indenture, that the Trustee
determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal
liability; provided that the Trustee may take any other action
deemed proper by the Trustee which is not inconsistent with
such direction.
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SECTION 7.06. Limitation on Suits.
A Securityholder may not pursue any remedy with
respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice
of a continuing Event of Default;
(2) the Holder or Holders of at least 25% in princi-
pal amount of the outstanding Securities make a written
request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee
indemnity satisfactory to the Trustee against any loss,
liability or expense to be incurred in compliance with
such request;
(4) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer
of indemnity; and
(5) during such 60-day period the Holder or Holders
of a majority in principal amount of the outstanding Secu-
rities do not give the Trustee a direction which, in the
opinion of the Trustee, is inconsistent with the request.
A Securityholder may not use this Indenture to preju-
dice the rights of another Securityholder or to obtain a pref-
erence or priority over such other Securityholder.
SECTION 7.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Inden-
ture, the right of any Holder to receive payment of principal
of and interest on a Security, on or after the respective due
dates expressed in such Security, or to bring suit for the
enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of
the Holder.
SECTION 7.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or
interest specified in clause (i) or (ii) of Section 6.01 occurs
and is continuing, the Trustee may recover judgment in its own
name and as trustee of an express trust against the Company or
any other obligor on the Securities for the whole amount of
<PAGE> 68
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principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment
of such interest is lawful, interest on overdue installments of
interest, in each case at the rate per annum borne by the Secu-
rities and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trus-
tee, its agents and counsel.
SECTION 7.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other
papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and the Securityholders
allowed in any judicial proceedings relating to the Company or
any other obligor upon the Securities, any of their respective
creditors or any of their respective property and shall be
entitled and empowered to collect and receive any monies or
other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial
proceedings is hereby authorized by each Securityholder to make
such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein
contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Security
holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Securityholder in any such proceeding.
SECTION 7.10. Priorities.
If the Trustee collects any money pursuant to this
Article Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under
Section 7.07;
Second: to Holders for interest accrued on the Secu-
rities, ratably, without preference or priority of any
<PAGE> 69
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kind, according to the amounts due and payable on the
Securities for interest;
Third: to Holders for principal amounts due and
unpaid on the Securities, ratably, without preference or
priority of any kind, according to the amounts due and
payable on the Securities for principal; and
Fourth: to the Company or the Subsidiary Guarantors,
as their respective interests may appear.
The Trustee, upon prior notice to the Company, may
fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10.
SECTION 7.11. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or here
after existing at law or in equity or otherwise. The assertion
or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
SECTION 7.12. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder
of any Security to exercise any right or remedy accruing upon
any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquies-
cence therein. Every right and remedy given by this Article
Six or by law to the Trustee or to the Holders may be exercised
from time to time, and as often as may be deemed expedient, by
the Trustee or by the Holders, as the case may be.
SECTION 7.13. Undertaking for Costs.
In any suit for the enforcement of any right or rem-
edy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the
suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the
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suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This
Section 6.13 does not apply to a suit by the Trustee, a suit by
a Holder pursuant to Section 6.07, or a suit by a Holder or
Holders of more than 10% in principal amount of the outstanding
Securities.
ARTICLE EIGHT
TRUSTEE
The Trustee hereby accepts the trust imposed upon it
by this Indenture and covenants and agrees to perform the same,
as herein expressed.
SECTION 8.01. Duties of Trustee.
(a) If a Default or an Event of Default has occurred
and is continuing, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture and use the
same degree of care and skill in its exercise thereof as a pru-
dent person would exercise or use under the circumstances in
the conduct of his own affairs.
(b) Except during the continuance of a Default or an
Event of Default:
(1) The Trustee need perform only those duties as
are specifically set forth in this Indenture and no cove-
nants or obligations shall be implied in this Indenture
that are adverse to the Trustee.
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Inden-
ture. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act,
or its own willful misconduct, except that:
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(1) This paragraph does not limit the effect of
paragraph (b) of this Section 7.01.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it
is proved that the Trustee was negligent in ascertaining
the pertinent facts.
(3) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 6.05.
(d) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers if
it shall have reasonable grounds for believing that repayment
of such funds or adequate indemnity against such risk or lia-
bility is not reasonably assured to it.
(e) Every provision of this Indenture that in any
way relates to the Trustee is subject to paragraphs (a), (b),
(c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on
any assets received by it except as the Trustee may agree with
the Company. Assets held in trust by the Trustee need not be
segregated from other assets except to the extent required by
law.
SECTION 8.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by
it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting,
it may consult with counsel and may require an Officers'
Certificate or an Opinion of Counsel, which shall conform
to Sections 11.04 and 11.05. The Trustee shall not be
liable for any action it takes or omits to take in good
faith in reliance on such certificate or opinion.
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(c) The Trustee may act through its attorneys and
agents and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action
that it takes or omits to take in good faith which it
believes to be authorized or within its rights or powers.
(e) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any res-
olution, certificate, statement, instrument, opinion,
notice, request, direction, consent, order, bond, deben-
ture, or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit.
(f) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request, order or direction of any of the
Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee rea-
sonable security or indemnity against the costs, expenses
and liabilities which may be incurred therein or thereby.
SECTION 8.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity
may become the owner or pledgee of Securities and may otherwise
deal with the Company, its Subsidiaries, or their respective
Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11.
SECTION 8.04. Trustee's Disclaimer.
The Trustee makes no representation as to the valid-
ity or adequacy of this Indenture or the Securities, it shall
not be accountable for the Company's use of the proceeds from
the Securities, and it shall not be responsible for any state-
ment in the Securities other than the Trustee's certificate of
authentication.
SECTION 8.05. Notice of Default.
If a Default or an Event of Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall
mail to each Holder of Securities notice of the Default or
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Event of Default within 90 days after such Default or Event of
Default occurs; provided, however, that, except in the case of
a Default or Event of Default in the payment of the principal
of or interest on any Security, including the failure to make
payment on a Change of Control Payment Date pursuant to a
Change of Control Offer or payment when due pursuant to a Net
Proceeds Offer the Trustee may withhold such notice if it in
good faith determines that withholding such notice is in the
interest of the Holders.
SECTION 8.06. Reports by Trustee to Holders.
Within 60 days after each beginning with the
following the date of this Indenture, the Trustee shall,
to the extent that any of the events described in TIA Sec. 313(a)
occurred within the previous twelve months, but not otherwise,
mail to each Securityholder a brief report dated as of such
that complies with TIA Sec. 313(a). The Trustee also shall
comply with TIA Secs. 313(b) and 313(c).
A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with
the Commission and each stock exchange, if any, on which the
Securities are listed.
The Company shall notify the Trustee if the Securi-
ties become listed on any stock exchange.
SECTION 8.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to
time reasonable compensation for its services. The Trustee's
compensation shall not be limited by any law on compensation of
a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it. Such expenses shall
include the reasonable compensation, disbursements and expenses
of the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold
it harmless against, any loss or liability incurred by it
except for such actions to the extent caused by any negligence
or bad faith on its part, arising out of or in connection with
the administration of this trust and its rights or duties here-
under. The Trustee shall notify the Company promptly of any
claim asserted against the Trustee for which it may seek indem-
nity. The Company shall defend the claim and the Trustee shall
<PAGE> 74
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cooperate in the defense. The Trustee may have separate coun-
sel and the Company shall pay the reasonable fees and expenses
of such counsel; provided that the Company will not be required
to pay such fees and expenses if it assumes the Trustee's
defense and there is no conflict of interest between the Com-
pany and the Trustee in connection with such defense as reason-
ably determined by the Trustee. The Company need not pay for
any settlement made without its written consent. The Company
need not reimburse any expense or indemnify against any loss or
liability to the extent incurred by the Trustee through its
negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this
Section 7.07, the Trustee shall have a lien prior to the Secu-
rities on all assets held or collected by the Trustee, in its
capacity as Trustee, except assets held in trust to pay princi-
pal of or interest on particular Securities.
When the Trustee incurs expenses or renders services
after an Event of Default specified in Section 6.01(vi) or
(vii) occurs, the expenses and the compensation for the ser-
vices are intended to constitute expenses of administration
under any Bankruptcy Law.
SECTION 8.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company.
The Holders of a majority in principal amount of the outstand-
ing Securities may remove the Trustee and appoint a successor
trustee with the Company's consent, by so notifying the Company
and the Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an
insolvent;
(3) a receiver or other public officer takes charge
of the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the Company
shall notify each Holder of such event and shall promptly
appoint a successor Trustee. Within one year after the succes-
sor Trustee takes office, the Holders of a majority in
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principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the
Company.
A successor Trustee shall deliver a written accep-
tance of its appointment to the retiring Trustee and to the
Company. Immediately after that, the retiring Trustee shall
transfer all property held by it as Trustee to the successor
Trustee, subject to the lien provided in Section 7.07, the res-
ignation or removal of the retiring Trustee shall become effec-
tive, and the successor Trustee shall have all the rights, pow-
ers and duties of the Trustee under this Indenture. A succes-
sor Trustee shall mail notice of its succession to each
Securityholder.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Company or the Holders of at least 10% in
principal amount of the outstanding Securities may petition any
court of competent jurisdiction for the appointment of a suc-
cessor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a succes-
sor Trustee.
Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under
Section 7.07 shall continue for the benefit of the retiring
Trustee.
SECTION 8.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts
into, or transfers all or substantially all of its corporate
trust business to, another corporation, the resulting, surviv-
ing or transferee corporation without any further act shall, if
such resulting, surviving or transferee corporation is other-
wise eligible hereunder, be the successor Trustee.
SECTION 8.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satis-
fies the requirement of TIA Secs. 310(a)(1) and 310(a)(5). The
Trustee shall have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual
<PAGE> 76
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report of condition. The Trustee shall comply with TIA
Sec. 310(b); provided, however, that there shall be excluded from
the operation of TIA Sec. 310(b)(1) any indenture or indentures
under which other securities, or certificates of interest or
participation in other securities, of the Company are outstand-
ing, if the requirements for such exclusion set forth in TIA
Sec. 310(b)(1) are met.
SECTION 8.11. Preferential Collection of Claims Against
Company.
The Trustee shall comply with TIA Sec. 311(a), excluding
any creditor relationship listed in TIA Sec. 311(b). A Trustee
who has resigned or been removed shall be subject to TIA
Sec. 311(a) to the extent indicated.
ARTICLE NINE
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 9.01. Termination of the Company's
Obligations.
The Company may terminate its obligations under the
Securities and this Indenture, and the obligations of any Sub-
sidiary Guarantor shall terminate, except those obligations
referred to in the penultimate paragraph of this Section 8.01,
if all Securities previously authenticated and delivered (other
than destroyed, lost or stolen Securities which have been
replaced or paid or Securities for whose payment money has
theretofore been deposited with the Trustee or the Paying Agent
in trust or segregated and held in trust by the Company and
thereafter repaid to the Company, as provided in Section 8.04)
have been delivered to the Trustee for cancellation and the
Company has paid all sums payable by it hereunder, or if:
(1) either (i) pursuant to Article Three, the Com-
pany shall have given notice to the Trustee and mailed a
notice of redemption to each Holder of the redemption of
all of the Securities under arrangements satisfactory to
the Trustee for the giving of such notice or (ii) all
Securities have otherwise become due and payable
hereunder;
<PAGE> 77
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(2) the Company shall have irrevocably deposited or
caused to be deposited with the Trustee or a trustee sat-
isfactory to the Trustee, under the terms of an irrevo-
cable trust agreement in form and substance satisfactory
to the Trustee, as trust funds in trust solely for the
benefit of the Holders for that purpose, money in such
amount as is sufficient without consideration of reinvest-
ment of such interest, to pay principal of, premium, if
any, and interest on the outstanding Securities to matur-
ity or redemption; provided that the Trustee shall have
been irrevocably instructed to apply such money to the
payment of said principal, premium, if any, and interest
with respect to the Securities;
(3) no Default or Event of Default with respect to
this Indenture or the Securities shall have occurred and
be continuing on the date of such deposit or shall occur
as a result of such deposit and such deposit will not
result in a breach or violation of, or constitute a
default under, any other instrument to which the Company
is a party or by which it is bound;
(4) the Company shall have paid all other sums pay-
able by it hereunder; and
(5) the Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent providing for the
termination of the Company's and any Subsidiary Guaran-
tor's obligation under the Securities and this Indenture
have been complied with. Such Opinion of Counsel shall
also state that such satisfaction and discharge does not
result in a default under the Credit Agreement (if then in
effect) or any other agreement or instrument then known to
such counsel that binds or affects the Company.
Notwithstanding the foregoing paragraph, the Compa-
ny's obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02
and 7.07 and any Subsidiary Guarantor's obligations in respect
thereof shall survive until the Securities are no longer out-
standing pursuant to the last paragraph of Section 2.08. After
the Securities are no longer outstanding, the Company's obliga-
tions in Sections 7.07, 8.04 and 8.05 and any Subsidiary Guar-
antor's obligations in respect thereof shall survive.
After such delivery or irrevocable deposit the Trus-
tee upon request shall acknowledge in writing the discharge of
<PAGE> 78
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the Company's and any Subsidiary Guarantor's obligations under
the Securities and this Indenture except for those surviving
obligations specified above.
SECTION 9.02. Legal Defeasance and Covenant
Defeasance.
(a) The Company may, at its option by Board Resolu-
tion of the Board of Directors of the Company, at any time,
with respect to the Securities, elect to have either
paragraph (b) or paragraph (c) below be applied to the out
standing Securities upon compliance with the conditions set
forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a)
of the option applicable to this paragraph (b), the Company and
any Subsidiary Guarantor shall be deemed to have been released
and discharged from its obligations with respect to the out-
standing Securities on the date the conditions set forth below
are satisfied (hereinafter, "legal defeasance"). For this pur-
pose, such legal defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness rep-
resented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of para-
graph (e) below and the other Sections of and matters under
this Indenture referred to in (i) and (ii) below, and to have
satisfied all its other obligations under such Securities and
this Indenture insofar as such Securities are concerned (and
the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same) except for the fol-
lowing which shall survive until otherwise terminated or dis-
charged hereunder: (i) the rights of Holders of outstanding
Securities to receive solely from the trust fund described in
paragraph (d) below and as more fully set forth in such para-
graph, payments in respect of the principal of, premium, if
any, and interest on such Securities when such payments are
due, (ii) the Company's obligations with respect to such Secu-
rities under Sections 2.06, 2.07 and 4.02, and, with respect to
the Trustee, under Section 7.07 and any Subsidiary Guarantor's
obligations in respect thereof, (iii) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and (iv)
this Section 8.02 and Section 8.05. Subject to compliance with
this Section 8.02, the Company may exercise its option under
this paragraph (b) notwithstanding the prior exercise of its
option under paragraph (c) below with respect to the
Securities.
<PAGE> 79
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(c) Upon the Company's exercise under paragraph (a)
of the option applicable to this paragraph (c), the Company
shall be released and discharged from its obligations under any
covenant contained in Article five and in Sections 4.03, 4.05
through 4.09 and 4.11 through 4.18 with respect to the out-
standing Securities on and after the date the conditions set
forth below are satisfied (hereinafter, "covenant defeasance"),
and the Securities shall thereafter be deemed to be not "out-
standing" for the purpose of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue
to be deemed "outstanding" for all other purposes hereunder.
For this purpose, such covenant defeasance means that, with
respect to the outstanding Securities, the Company and any Sub-
sidiary Guarantor may omit to comply with and shall have no
liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default
under Section 6.01(iii), but, except as specified above, the
remainder of this Indenture and such Securities shall be unaf-
fected thereby.
(d) The following shall be the conditions to appli-
cation of either paragraph (b) or paragraph (c) above to the
outstanding Securities:
(i) the Company shall irrevocably have
deposited or caused to be deposited with the Trustee (or
another trustee satisfying the requirements of
Section 7.10 who shall agree to comply with the provisions
of this Section 8.02 applicable to it) as trust funds in
trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities,
(x) money in an amount or (y) direct non-callable
obligations of, or non-callable obligations guaranteed by,
the United States of America for the payment of which
guarantee or obligation the full faith and credit of the
United States is pledged ("U.S. Government Obligations")
maturing as to principal, premium, if any, and interest
in such amounts of money and at such times as are
sufficient without consideration of any reinvestment of
such interest, to pay principal of and interest on the
outstanding Securities not later than one day before the
due date of any payment, or (z) a
<PAGE> 80
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combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to
the Trustee, to pay and discharge and which shall be applied
by the Trustee (or other qualifying trustee) to pay and
discharge principal of, premium, if any, and interest on the
outstanding Securities on the Maturity Date or otherwise
in accordance with the terms of this Indenture and of such
Securities; provided, however, that the Trustee (or other
qualifying trustee) shall have received an irrevocable
written order from the Company instructing the Trustee (or
other qualifying trustee) to apply such money or the
proceeds of such U.S. Government Obligations to said
payments with respect to the Securities;
(ii) no Default or Event of Default or event
which with notice or lapse of time or both would become a
Default or an Event of Default with respect to the Securi-
ties shall have occurred and be continuing on the date of
such deposit or, insofar as Section 6.01(vi) or (vii) is
concerned, at any time during the period ending on the
91st day after the date of such deposit (it being under-
stood that this condition shall not be deemed satisfied
until the expiration of such period);
(iii) such legal defeasance or covenant
defeasance shall not cause the Trustee to have a
conflicting interest with respect to any Securities of the
Company or any Subsidiary Guarantor;
(iv) such legal defeasance or covenant
defeasance shall not result in a breach or violation of,
or constitute a Default or Event of Default under, this
Indenture or any other material agreement or instrument to
which the Company or any Subsidiary Guarantor is a party
or by which it is bound (and in that connection, the
Trustee shall have received a certificate from the Credit
Agent to that effect with respect to such Credit Agreement
if then in effect);
(v) in the case of an election under
paragraph (b) above, the Company shall have delivered to
the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by,
the Internal Revenue Service a ruling or (y) since the
Issue Date, there has been a change in the applicable
Federal income
<PAGE> 81
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tax law, in either case to the effect that,
and based thereon such opinion shall confirm that, the
Holders of the outstanding Securities will not recognize
income, gain or loss for Federal income tax purposes as a
result of such legal defeasance and will be subject to
Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such
legal defeasance had not occurred;
(vi) in the case of an election under
paragraph (c) above, the Company shall have delivered to
the Trustee an Opinion of Counsel to the effect that the
Holders of the outstanding Securities will not recognize
income, gain or loss for Federal income tax purposes as a
result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such
covenant defeasance had not occurred;
(vii) in the case of an election under either
paragraph (b) or (c) above, an Opinion of Counsel to the
effect that, after the 91st day following the deposit, the
trust funds will not be subject to the effect of any
applicable Bankruptcy Law;
(viii) the Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent
provided for relating to either the legal defeasance
under paragraph (b) above or the covenant defeasance under
paragraph (c) above, as the case may be, have been
complied with; and
(ix) the Company shall have delivered to the
Trustee an Officer's Certificate stating that the deposit
was not made by the Company with the intent of preferring
the Holders of the Securities over other creditors of the
Company or any Subsidiary Guarantor or with the intent of
defeating, hindering, delaying or defrauding creditors of
the Company, any Subsidiary Guarantor or others.
(e) All money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this
paragraph (e), the "Trustee") pursuant to paragraph (d) above
in respect of the outstanding Securities shall be held in trust
and applied by the Trustee, in accordance with the provisions
of such Securities and this Indenture, to the payment, either
<PAGE> 82
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directly or through any Paying Agent (other than the Company or
any Affiliate of the Company) as the Trustee may determine, to
the Holders of such Securities of all sums due and to become
due thereon in respect of principal, premium and interest, but
such money need not be segregated from other funds except to
the extent required by law.
The Company shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed
against the U.S. Government Obligations deposited pursuant to
paragraph (d) above or the principal, premium, if any, and
interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the
Holders of the outstanding Securities.
Anything in this Section 8.02 to the contrary not-
withstanding, the Trustee shall deliver or pay to the Company
from time to time upon the request, in writing, by the Company
any money or U.S. Government Obligations held by it as provided
in paragraph (d) above which, in the opinion of a nationally
recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee, are
in excess of the amount thereof which would then be required to
be deposited to effect an equivalent legal defeasance or cove-
nant defeasance.
SECTION 9.03. Application of Trust Money.
The Trustee shall hold in trust money or U.S. Govern-
ment Obligations deposited with it pursuant to Sections 8.01
and 8.02, and shall apply the deposited money and the money
from U.S. Government Obligations in accordance with this Inden-
ture to the payment of principal of, premium, if any, and
interest on the Securities.
SECTION 9.04. Repayment to Company or Subsidiary
Guarantors.
Subject to Sections 7.07, 8.01 and 8.02, the Trustee
shall promptly pay to the Company, or if deposited with the
Trustee by any Subsidiary Guarantor, to such Guarantor, upon
receipt by the Trustee of an Officers' Certificate, any excess
money, determined in accordance with Section 8.02, held by it
at any time. The Trustee and the Paying Agent shall pay to the
Company or any Subsidiary Guarantor, as the case may be, upon
receipt by the Trustee or the Paying Agent, as the case may be,
of an Officers' Certificate, any money held by it for the
<PAGE> 83
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payment of principal, premium, if any, or interest that remains
unclaimed for two years after payment to the Holders is
required; provided, however, that the Trustee and the Paying
Agent before being required to make any payment may, but need
not, at the expense of the Company cause to be published once
in a newspaper of general circulation in The City of New York
or mail to each Holder entitled to such money notice that such
money remains unclaimed and that after a date specified
therein, which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money
then remaining will be repaid to the Company. After payment to
the Company or any Subsidiary Guarantor, as the case may be,
Securityholders entitled to money must look solely to the Com-
pany for payment as general creditors unless an applicable
abandoned property law designates another person, and all lia-
bility of the Trustee or Paying Agent with respect to such
money shall thereupon cease.
SECTION 9.05. Reinstatement.
If the Trustee or Paying Agent is unable to apply any
money or U.S. Government Obligations in accordance with this
Indenture by reason of any legal proceeding or by reason of any
order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such applica-
tion, then and only then the Company's and each Subsidiary
Guarantor's, if any, obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit
had been made pursuant to this Indenture until such time as the
Trustee is permitted to apply all such money or U.S. Government
Obligations in accordance with this Indenture; provided, how-
ever, that if the Company or the Subsidiary Guarantors, as the
case may be, has made any payment of principal of, premium, if
any, or interest on any Securities because of the reinstatement
of its obligations, the Company or the Subsidiary Guarantors,
as the case may be, shall be, subrogated to the rights of the
holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or
Paying Agent.
<PAGE> 84
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ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
The Company and the Subsidiary Guarantors, when
authorized by a Board Resolution, and the Trustee, together,
may amend or supplement this Indenture or the Securities with-
out notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
provided that such amendment or supplement does not
adversely affect the rights of any Holder;
(2) to comply with Article Five and Section 10.06;
(3) to provide for uncertificated Securities in
addition to or in place of certificated Securities;
(4) to make any other change that does not adversely
affect the rights of any Securityholder; or
(5) to comply with any requirements of the Commis-
sion in connection with the qualification of this Inden-
ture under the TIA;
provided that the Company has delivered to the Trustee an Opin-
ion of Counsel stating that such amendment or supplement com-
plies with the provisions of this Section 9.01.
SECTION 10.02. With Consent of Holders.
Subject to Section 6.07, the Company and each Subsid-
iary Guarantor, when authorized by a Board Resolution, and the
Trustee, together with the written consent of the Holder or
Holders of at least a majority in aggregate principal amount of
the outstanding Securities, may amend or supplement, or waive
compliance with any provision of, this Indenture, the Securi-
ties or any Guarantee without notice to any other
Securityholders; provided that without the consent of Holders
of not less than two thirds in aggregate principal amount of
Securities then outstanding, no such amendment, supplement or
waiver may release any Subsidiary Guarantor from any of its
obligations under its Guarantee or this Indenture other than in
accordance with the terms of such Guarantee and this Indenture.
<PAGE> 85
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Without the consent of each Securityholder affected, however,
no amendment, supplement or waiver, including a waiver pursuant
to Section 6.04, may:
(1) change the principal amount of Securities whose
Holders must consent to an amendment, supplement or waiver
of any provision of this Indenture, the Securities or the
Guarantees;
(2) reduce the rate or extend the time for payment
of interest on any Security;
(3) reduce the principal amount of any Security;
(4) change the Maturity Date of any Security or the
Change of Control Payment Date, or alter the redemption
provisions in this Indenture or the Securities or the pur-
chase price in connection with any repurchase of Securi-
ties pursuant to Section 4.15 in a manner adverse to any
Holder;
(5) make any changes in the provisions concerning
waivers of Defaults or Events of Default by Holders of the
Securities or the rights of Holders to recover the princi-
pal of, interest on, or redemption payment with respect
to, any Security;
(6) make any changes in Section 6.04, 6.07 or this
Section 9.02;
(7) make the principal of, or the interest on any
Security payable with anything or in any manner other than
as provided for in this Indenture, the Securities and the
Guarantees as in effect on the date hereof; or
(8) waive a Default or Event of Default resulting
from failure to comply with the provisions of Section
4.15.
It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of
any proposed amendment, supplement or waiver, but it shall be
sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this
Section becomes effective, the Company shall mail to the Hold-
ers affected thereby a notice briefly describing the amendment,
<PAGE> 86
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supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental
indenture.
In connection with any amendment, supplement or
waiver under this Article Nine, the Company may, but shall not
be obligated to, offer to any Holder who consents to such
amendment, supplement or waiver, or to all Holders, considera-
tion for such Holder's consent to such amendment, supplement or
waiver.
SECTION 10.03. Compliance with TIA.
From the date on which the Indenture is qualified
under the TIA, every amendment, waiver or supplement of this
Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 10.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes
effective, a consent to it by a Holder is a continuing consent
by the Holder and every subsequent Holder of a Security or por-
tion of a Security that evidences the same debt as the consent
ing Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent
Holder may revoke the consent as to his Security or portion of
his Security by notice to the Trustee or the Company received
before the date on which the Trustee receives an Officers' Cer-
tificate certifying that the Holders of the requisite principal
amount of Securities have consented (and not theretofore
revoked such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled
to consent to any amendment, supplement or waiver, which record
date shall be at least 30 days prior to the first solicitation
of such consent. If a record date is fixed, then notwithstand-
ing the last sentence of the immediately preceding paragraph,
those persons who were Holders at such record date (or their
duly designated proxies), and only those persons, shall be
entitled to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date. No
such consent shall be valid or effective for more than 90 days
after such record date.
<PAGE> 87
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After an amendment, supplement or waiver becomes
effective, it shall bind every Securityholder, unless it makes
a change described in any of clauses (1) through (8) of Section
9.02, in which case, the amendment, supplement or waiver shall
bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security
that evidences the same debt as the consenting Holder's Secu-
rity; provided that any such waiver shall not impair or affect
the right of any Holder to receive payment of principal of and
interest on a Security, on or after the respective due dates
expressed in such Security, or to bring suit for the enforce-
ment of any such payment on or after such respective dates
without the consent of such Holder.
SECTION 10.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the
terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place
an appropriate notation on the Security about the changed terms
and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new
Security that reflects the changed terms.
SECTION 10.06. Trustee to Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement
or waiver authorized pursuant to this Article Nine; provided
that the Trustee may, but shall not be obligated to, execute
any such amendment, supplement or waiver which affects the
Trustee's own rights, duties or immunities under this Inden-
ture. The Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an Opinion of Counsel stating
that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or per-
mitted by this Indenture.
<PAGE> 88
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ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee.
Each Subsidiary Guarantor hereby unconditionally,
jointly and severally, guarantees (such guarantee to be
referred to herein as the "Guarantee") to each Holder of a
Security authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, the Securities or the
Obligations of the Company hereunder or thereunder, that: (i)
the principal of and interest on the Securities will be
promptly paid in full when due, subject to any applicable grace
period, whether at maturity, by acceleration or otherwise and
interest on the overdue principal, if any, and interest on any
interest, to the extent lawful, of the Securities and all other
obligations of the Company to the Holders or the Trustee here-
under or thereunder will be promptly paid in full or performed,
all in accordance with the terms hereof and thereof; and (ii)
in case of any extension of time of payment or renewal of any
Securities or of any such other obligations, the same will be
promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, subject to any appli-
cable grace period, whether at stated maturity, by acceleration
or otherwise, subject, however, in the case of clauses (i) and
(ii) above, to the limitations set forth in Section 10.05.
Each Subsidiary Guarantor hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Securities or this Inden
ture, the absence of any action to enforce the same, any waiver
or consent by any Holder of the Securities with respect to any
provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any
other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor. Each Subsidiary
Guarantor hereby waives diligence, presentment, demand of pay-
ment, filing of claims with a court in the event of insolvency
or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest, notice and all demands
whatsoever and covenants that this Guarantee will not be dis-
charged except by complete performance of the obligations con-
tained in the Securities, this Indenture and in this Guarantee.
If any Securityholder or the Trustee is required by any court
or otherwise to return to the Company, any Subsidiary Guaran-
tor, or any custodian, trustee, liquidator or other similar
<PAGE> 89
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official acting in relation to the Company or any Subsidiary
Guarantor, any amount paid by the Company or any Subsidiary
Guarantor to the Trustee or such Securityholder, this Guaran-
tee, to the extent theretofore discharged, shall be reinstated
in full force and effect. Each Subsidiary Guarantor further
agrees that, as between each Subsidiary Guarantor, on the one
hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohi-
bition preventing such acceleration in respect of the obliga-
tions guaranteed hereby, and (y) in the event of any accelera-
tion of such obligations as provided in Article Six, such obli-
gations (whether or not due and payable) shall forthwith become
due and payable by each Subsidiary Guarantor for the purpose of
this Guarantee.
SECTION 11.02. Severability.
In case any provision of this Guarantee shall be
invalid, illegal or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
SECTION 11.03. Release of a Subsidiary Guarantor.
Upon (i) the release by the lenders under the Term
Loans, related documents and future refinancings thereof of all
guarantees of a Subsidiary Guarantor and all Liens on the prop-
erty and assets of such Subsidiary Guarantor relating to such
Indebtedness, or (ii) the sale or disposition (whether by
merger, stock purchase, asset sale or otherwise) of a Subsid-
iary Guarantor (or all or substantially all its assets) to an
entity which is not a Subsidiary of the Company and which sale
or disposition is otherwise in compliance with the terms of
this Indenture, such Subsidiary Guarantor shall be deemed
released from all obligations under this Article Ten without
any further action required on the part of the Trustee or any
Holder; provided, however, that any such termination shall
occur only to the extent that all obligations of such Subsid-
iary Guarantor under all of its guarantees of, and under all of
its pledges of assets or other security interests which secure,
such Indebtedness of the Company shall also terminate upon such
release, sale or transfer.
The Trustee shall deliver an appropriate instrument
evidencing such release upon receipt of a request by the
<PAGE> 90
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Company accompanied by an Officers' Certificate certifying as
to the compliance with this Section 10.03. Any Subsidiary
Guarantor not so released remains liable for the full amount of
principal of and interest on the Securities as provided in this
Article Ten.
SECTION 11.04. Limitation of Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor and by its acceptance
hereof each Holder hereby confirms that it is the intention of
all such parties that the guarantee by such Subsidiary Guaran-
tor pursuant to its Guarantee not constitute a fraudulent
transfer or conveyance for purposes of the Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar Federal or state law. To effec-
tuate the foregoing intention, the Holders and such Subsidiary
Guarantor hereby irrevocably agree that the obligations of such
Subsidiary Guarantor under the Guarantee shall be limited to
the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor
and after giving effect to any collections from or payments
made by or on behalf of any other Subsidiary Guarantor in
respect of the obligations of such other Subsidiary Guarantor
under its Guarantee or pursuant to Section 11.06, result in the
obligations of such Subsidiary Guarantor under the Guarantee
not constituting such fraudulent transfer or conveyance.
SECTION 11.05. Subsidiary Guarantors May Consolidate,
etc., on Certain Terms.
(a) Nothing contained in this Indenture or in any of
the Securities shall prevent any consolidation or merger of a
Subsidiary Guarantor with or into the Company or another Sub-
sidiary Guarantor or shall prevent any sale or conveyance of
the property of a Subsidiary Guarantor as an entirety or sub-
stantially as an entirety, to the Company or another Subsidiary
Guarantor. Upon any such consolidation, merger, sale or con-
veyance, the Guarantee given by such Subsidiary Guarantor shall
no longer have any force or effect.
(b) Except as set forth in Article Four and Article
Five hereof, nothing contained in this Indenture or in any of
the Securities shall prevent any consolidation or merger of a
Subsidiary Guarantor with or into a corporation or corporations
other than the Company or another Subsidiary Guarantor (whether
or not affiliated with the Subsidiary Guarantor); provided,
however, that, subject to Sections 10.03 and 10.05(a),
<PAGE> 91
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(i) immediately after such transaction, and giving effect
thereto, no Default or Event of Default shall have occurred as
a result of such transaction and be continuing, and (ii) upon
any such consolidation, merger, sale or conveyance, the Subsid-
iary Guarantee set forth in this Article Ten, and the due and
punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed by such Subsidiary
Guarantor, shall be expressly assumed (in the event that the
Subsidiary Guarantor is not the surviving corporation in the
merger), by supplemental indenture satisfactory in form to the
Trustee, executed and delivered to the Trustee, by the corpora-
tion formed by such consolidation, or into which the Subsidiary
Guarantor shall have merged, or by the corporation that shall
have acquired such property. In the case of any such consoli-
dation, merger, sale or conveyance and upon the assumption by
the successor corporation, by supplemental indenture executed
and delivered to the Trustee and satisfactory in form to the
Trustee of the due and punctual performance of all of the cove-
nants and conditions of this Indenture to be performed by the
Subsidiary Guarantor, such successor corporation shall succeed
to and be substituted for the Subsidiary Guarantor with the
same effect as if it had been named herein as a Subsidiary
Guarantor; provided, however, that solely for purposes of com-
puting amounts described in subclause (c) of the first para-
graph of Section 4.03, any such successor corporation shall
only be deemed to have succeeded to and be substituted for any
Subsidiary Guarantor with respect to periods subsequent to the
effective time of such merger, consolidation or transfer of
assets.
SECTION 11.06. Contribution.
In order to provide for just and equitable contribu-
tion among the Subsidiary Guarantors, the Subsidiary Guarantors
agree, inter se, that in the event any payment or distribution
is made by any Subsidiary Guarantor (a "Funding Guarantor")
under the Guarantee, such Funding Guarantor shall be entitled
to a contribution from all other Subsidiary Guarantors in a pro
rata amount based on the Adjusted Net Assets of each Subsidiary
Guarantor (including the Funding Guarantor) for all payments,
damages and expenses incurred by that Funding Guarantor in dis-
charging the Company's obligations with respect to the Securi-
ties or any other Subsidiary Guarantor's obligations with
respect to the Guarantee. "Adjusted Net Assets" of such Sub-
sidiary Guarantor at any date shall mean the lesser of the
amount by which (x) the fair value of the property of such Sub-
sidiary Guarantor exceeds the total amount of liabilities,
<PAGE> 92
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including, without limitation, contingent liabilities (after
giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities
under the Guarantee, of such Subsidiary Guarantor at such date
and (y) the present fair salable value of the assets of such
Subsidiary Guarantor at such date exceeds the amount that will
be required to pay the probable liability of such Subsidiary
Guarantor on its debts (after giving effect to all other fixed
and contingent liabilities incurred or assumed on such date and
after giving effect to any collection from any Subsidiary of
such Subsidiary Guarantor in respect of the obligations of such
Subsidiary under the Guarantee), excluding debt in respect of
the Guarantee of such Subsidiary Guarantor, as they become
absolute and matured.
SECTION 11.07. Waiver of Subrogation.
Each Subsidiary Guarantor hereby irrevocably waives
any claim or other rights which it may now or hereafter acquire
against the Company that arise from the existence, payment,
performance or enforcement of such Subsidiary Guarantor's obli-
gations under the Guarantee and this Indenture, including,
without limitation, any right of subrogation, reimbursement,
exoneration, indemnification, and any right to participate in
any claim or remedy of any Holder of Securities against the
Company, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law, including,
without limitation, the right to take or receive from the Com-
pany, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment or security on account
of such claim or other rights. If any amount shall be paid to
any Subsidiary Guarantor in violation of the preceding sentence
and the Securities shall not have been paid in full, such
amount shall have been deemed to have been paid to such Subsid-
iary Guarantor for the benefit of, and held in trust for the
benefit of, the Holders of the Securities, and shall forthwith
be paid to the Trustee for the benefit of such Holders to be
credited and applied upon the Securities, whether matured or
unmatured, in accordance with the terms of this Indenture.
Each Subsidiary Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in
this Section 10.07 is knowingly made in contemplation of such
benefits.
SECTION 11.08. Execution of Guarantee.
<PAGE> 93
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To evidence their guarantee to the Securityholders
set forth in this Article Ten, the Subsidiary Guarantors hereby
agree to execute the Guarantee in substantially the form
included in Exhibit A, which shall be endorsed on each Security
ordered to be authenticated and delivered by the Trustee. Each
Subsidiary Guarantor hereby agrees that its Guarantee set forth
in this Article Ten shall remain in full force and effect not
withstanding any failure to endorse on each Security a notation
of such Guarantee. Each such Guarantee shall be signed on
behalf of each Subsidiary Guarantor by two Officers, or an
Officer and an Assistant Secretary or one Officer shall sign
and one Officer or an Assistant Secretary (each of whom shall,
in each case, have been duly authorized by all requisite corpo-
rate actions) shall attest to such Guarantee prior to the
authentication of the Security on which it is endorsed, and the
delivery of such Security by the Trustee, after the authentica-
tion thereof hereunder, shall constitute due delivery of such
Guarantee on behalf of such Subsidiary Guarantor. Such signa-
tures upon the Guarantee may be by manual or facsimile signa-
ture of such officers and may be imprinted or otherwise repro-
duced on the Guarantee, and in case any such officer who shall
have signed the Guarantee shall cease to be such officer before
the Security on which such Guarantee is endorsed shall have
been authenticated and delivered by the Trustee or disposed of
by the Company, such Security nevertheless may be authenticated
and delivered or disposed of as though the person who signed
the Guarantee had not ceased to be such officer of the Subsid-
iary Guarantor.
SECTION 11.09. Waiver of Stay, Extension or Usury Laws.
Each Subsidiary Guarantor covenants (to the extent
that it may lawfully do so) that it will not at any time insist
upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury
law or other law that would prohibit or forgive each such Sub-
sidiary Guarantor from performing its Guarantee as contemplated
herein, wherever enacted, now or at any time hereafter in
force, or which may affect the covenants or the performance of
this Indenture; and (to the extent that it may lawfully do so)
each such Subsidiary Guarantor hereby expressly waives all
benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been
enacted.
<PAGE> 94
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ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA Controls.
If any provision of this Indenture limits, qualifies,
or conflicts with the duties imposed by operation of Section
3.18(c) of the TIA, the imposed duties shall control.
SECTION 12.02. Notices.
Any notices or other communications required or per-
mitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery, by telex, by telecopier or reg-
istered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Company or any Subsidiary Guarantor:
c/o The Yucaipa Companies
10000 Santa Monica Boulevard
Fifth Floor
Los Angeles, California 90067
Attention: Mark A. Resnik
if to the Trustee:
NorWest Bank Minnesota, N.A.
Attention: Corporate Trust Division
if to the Credit Agent:
Bankers Trust Company
Attention: [ ]
Each of the Company, the Trustee, the Subsidiary
Guarantors and the Credit Agent by written notice to each other
such person may designate additional or different addresses for
notices to such person. Any notice or communication to the
Company, the Trustee, the Subsidiary Guarantors and the Credit
Agent shall be deemed to have been given or made as of the date
so delivered if personally delivered; when answered back, if
<PAGE> 95
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telexed; when receipt is acknowledged, if telecopied; and five
(5) calendar days after mailing if sent by registered or certi-
fied mail, postage prepaid (except that a notice of change of
address shall not be deemed to have been given until actually
received by the addressee).
Any notice or communication mailed to a Security-
holder shall be mailed to him by first class mail or other
equivalent means at his address as it appears on the registra-
tion books of the Registrar and shall be sufficiently given to
him if so mailed within the time prescribed.
Failure to mail a notice or communication to a
Securityholder or any defect in it shall not affect its suffi-
ciency with respect to other Securityholders. If a notice or
communication is mailed in the manner provided above, it is
duly given, whether or not the addressee receives it.
SECTION 12.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA
Sec. 312(b) with other Securityholders with respect to their
rights under this Indenture or the Securities. The Company,
the Subsidiary Guarantors, the Trustee, the Registrar and any
other person shall have the protection of TIA Sec. 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company to the
Trustee to take any action under this Indenture, the Company
shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the
opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel stating that, in the opin-
ion of such counsel, all such conditions precedent have
been complied with.
SECTION 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compli-
ance with a condition or covenant provided for in this
<PAGE> 96
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Indenture, other than the Officers' Certificate required by
Section 4.07, shall include:
(1) a statement that the person making such certifi-
cate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such person,
he has made such examination or investigation as is neces-
sary to enable him to express an informed opinion as to
whether or not such convenant or condition has been com-
plied with; and
(4) a statement as to whether or not, in the opinion
of each such person, such condition or covenant has been
complied with; provided, however, that with respect to
matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 12.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by
or at a meeting of Securityholders. The Paying Agent or Regis-
trar may make reasonable rules for its functions.
SECTION 12.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular
place of payment is a Saturday, a Sunday or a day on which
banking institutions in New York, New York, Los Angeles, Cali-
fornia or at such place of payment are not required to be open.
If a payment date is a Legal Holiday at such place, payment may
be made at such place on the next succeeding day that is not a
Legal Holiday, and no interest shall accrue for the intervening
period.
SECTION 12.08. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW. Each of the parties hereto agrees to submit to the
<PAGE> 97
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jurisdiction of the courts of the State of New York in any
action or proceeding arising out of or relating to this
Indenture.
SECTION 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of any of the Company or any
of its Subsidiaries. Any such indenture, loan or debt agree-
ment may not be used to interpret this Indenture.
SECTION 12.10. No Recourse Against Others.
A director, officer, employee, stockholder or incor-
porator, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason
of such obligations or their creations. Each Securityholder by
accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the
issuance of the Securities.
SECTION 12.11. Successors.
All agreements of the Company and each Subsidiary
Guarantor in this Indenture and the Securities shall bind their
respective successors. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 12.12. Duplicate Originals.
All parties may sign any number of copies of this
Indenture. Each signed copy shall be an original, but all of
them together shall represent the same agreement.
SECTION 12.13. Severability.
In case any one or more of the provisions in this
Indenture or in the Securities shall be held invalid, illegal
or unenforceable, in any respect for any reason, the validity,
legality and enforceability of any such provision in every
other respect and of the remaining provisions shall not in any
way be affected or impaired thereby, it being intended that all
of the provisions hereof shall be enforceable to the full
extent permitted by law.
<PAGE> 98
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SECTION 12.14. No Violation.
Notwithstanding the provisions of this Indenture, in
no event shall any transaction, agreement, payment or other
event to be consummated, entered into or made in connection
with the Acquisition or any financing thereof (including with-
out limitation the transaction referred to in Section 5.01(c))
be considered a violation of any provision of this Indenture or
constitute a Change of Control hereunder.
<PAGE> 99
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed, and their respective corpo-
rate seals to be hereunto affixed and attested, all as of the
date first written above.
Dated: January , 1995
FOOD 4 LESS SUPERMARKETS, INC.
By: ____________________________
Name:
Title:
Attest: ___________________
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee
By: ____________________________
Name:
Title:
Attest: ____________________
SUBSIDIARY GUARANTORS:
CALA CO.
CALA FOODS, INC.
BELL MARKETS, INC.
FOOD 4 LESS OF SOUTHERN
CALIFORNIA, INC.
ALPHA BETA COMPANY
FOOD 4 LESS OF CALIFORNIA, INC.
FALLEY'S, INC.
BAY AREA WAREHOUSE STORES, INC.
FOOD 4 LESS MERCHANDISING, INC.
FOOD 4 LESS GM, INC.
<PAGE> 100
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By: ____________________________
Name:
(for each of the above-
listed Subsidiary Guarantors)
Attest: _____________________
(for each of the
above-listed
Subsidiary Guarantors)
<PAGE> 101
EXHIBIT A
[FORM OF NOTE]
FOOD 4 LESS SUPERMARKETS, INC.
_____% Senior Notes
due 2004
No. $
FOOD 4 LESS SUPERMARKETS, INC., a Delaware corpora-
tion (the "Company", which term includes any successor corpora-
tion), for value received promises to pay to
or registered assigns, the principal sum of Dollars, on
, 2004.
Interest Payment Dates: and .
Record Dates: and .
Reference is made to the further provisions of this
Security contained herein, which will for all purposes have the
same effect as if set forth at this place.
<PAGE> 102
IN WITNESS WHEREOF, the Company has caused this Secu-
rity to be signed manually or by facsimile by its duly autho-
rized officers.
Dated:
Attest: FOOD 4 LESS SUPERMARKETS, INC.
By:
- -------------------------- --------------------------
Name: Name:
Title: Title:
A-2
<PAGE> 103
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the
within-mentioned Indenture.
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee
By_______________________________
Authorized Signatory
A-3
<PAGE> 104
FOOD 4 LESS SUPERMARKETS, INC.
_____% Senior Notes
due 2004
1. Interest.
FOOD 4 LESS SUPERMARKETS, INC., a Delaware corpora-
tion (the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The
Company will pay interest semi-annually on February 1 and
August 1 of each year (the "Interest Payment Date"), commencing
August 1, 1995. Interest on the Securities will accrue from
the most recent date to which interest has been paid or, if no
interest has been paid, from the date of issuance of the Secu-
rities. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
The Company shall pay interest on overdue principal
and interest on overdue installments of interest, to the extent
lawful, at a rate equal to the rate of interest otherwise pay-
able on the Securities.
2. Method of Payment.
The Company shall pay interest on the Securities
(except defaulted interest) to the persons who are the regis-
tered Holders at the close of business on the Record Date imme-
diately preceding the Interest Payment Date even if the Securi-
ties are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments.
The Company shall pay principal and interest in money of the
United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and interest by wire
transfer of Federal funds, or interest by its check payable in
such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the
Holder's registered address. Notwithstanding the foregoing,
the Company shall pay or cause to be paid all amounts payable
with respect to non-DTC eligible Securities by wire transfer of
Federal funds to the account of the Holders of such Securities.
3. Paying Agent and Registrar.
Initially, NorWest Bank Minnesota, N.A. (the "Trus-
tee") will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without
notice to the Holders. The Company or any of its Subsidiaries
A-4
<PAGE> 105
may, subject to certain exceptions, act as Paying Agent, Regis-
trar or co-Registrar.
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture,
dated as of , 1995 (the "Indenture"), among the Com-
pany, the Subsidiary Guarantors and the Trustee. Capitalized
terms herein are used as defined in the Indenture unless other-
wise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code
Secs. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture until such time as the Indenture is qualified under
the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything
to the contrary herein, the Securities are subject to all such
terms, and Holders of Securities are referred to the Indenture
and said Act for a statement of them. The Securities are gen-
eral unsecured obligations of the Company limited in aggregate
principal amount to $575,000,000. Payment on each Security is
guaranteed on a senior subordinated basis, jointly and sever-
ally, by the Subsidiary Guarantors pursuant to Article Ten of
the Indenture.
5. Optional Redemption.
On or after February 1, 2000 the Securities may be
redeemed in whole at any time or in part from time to time, at
the option of the Company, at a redemption price equal to the
applicable percentage of the principal amount thereof set forth
below, together with accrued and unpaid interest to the Redemp-
tion Date, if redeemed during the 12 months commencing on
February 1 in the years set forth below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2000 ................. - %
2001 ................. - %
2002 ................. - %
2003 and thereafter .. 100%
</TABLE>
In addition, on or prior to February 1, 1998, the
Company may, at its option, use the net cash proceeds of one or
more Public Equity Offerings to redeem up to an aggregate of
35% of the principal amount of the Securities originally
issued, at a redemption price equal to % of the principal
amount thereof plus accrued and unpaid interest, if any, to the
redemption date.
A-5
<PAGE> 106
The documents evidencing Senior Indebtedness will
restrict the Company's ability to optionally redeem the
Securities.
6. Notice of Redemption.
Notice of redemption will be mailed at least 30 days
but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at such Holder's registered
address. In order to effect a redemption with the proceeds of
a Public Equity Offering, the Company shall send the redemption
notice not later than 60 days after the consummation of such
Public Equity Offering. Securities in denominations larger
than $1,000 may be redeemed in part.
Except as set forth in the Indenture, from and after
any Redemption Date, if monies for the redemption of the Secu-
rities called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then,
unless the Company defaults in the payment of such Redemption
Price, the Securities called for redemption will cease to bear
interest and the only right of the Holders of such Securities
will be to receive payment of the Redemption Price.
7. Change of Control Offer.
Upon the occurrence of a Change of Control, each
Holder shall have the right to require the repurchase of such
Holder's Securities pursuant to a Change of Control Offer at a
purchase price equal to 101% of the principal amount thereof
plus accrued interest, if any, to the date of purchase.
8. Limitation on Asset Sales.
Under certain circumstances the Company is required
to apply the net proceeds from Asset Sales to the repayment of
Pari Passu Indebtedness, to make Related Business Investments,
an investment in properties and assets that replace the proper-
ties and assets that are the subject of such Asset Sale, an
investment in properties and assets that will be used in the
business of the Company and its Subsidiaries existing on the
Issue Date or in a business reasonably related thereto or to
purchase in a Net Proceeds Offer (at a price equal to 100% of
the aggregate principal amount thereof, plus accrued interest
to the date of purchase) such aggregate principal amount of
Securities which, when added to the accrued interest thereon,
shall be equal to the net proceeds required to be applied
thereto.
A-6
<PAGE> 107
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without cou-
pons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange
Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need
not register the transfer of or exchange any Securities or por-
tions thereof selected for redemption.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated
as the owner of it for all purposes.
11. Unclaimed Money.
If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying
Agents will pay the money back to the Company at its request.
After that, all liability of the Trustee and such Paying Agents
with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity.
If the Company at any time deposits with the Trustee
U.S. Legal Tender or U.S. Government Obligations sufficient to
pay the principal of and interest on the Securities to redemp-
tion or maturity and complies with the other provisions of the
Indenture relating thereto, the Company will be discharged from
certain provisions of the Indenture and the Securities (includ-
ing the financial covenants, but excluding its obligation to
pay the principal of and interest on the Securities).
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture, the
Securities and the Guarantees may be amended or supplemented
with the written consent of the Holders of at least a majority
in aggregate principal amount of the Securities then outstand-
ing, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Hold-
ers of a majority in aggregate principal amount of the Securi-
ties then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Inden-
ture or the Securities to, among other things, cure any ambigu-
ity, defect or inconsistency, provide for uncertificated
A-7
<PAGE> 108
Securities in addition to or in place of certificated Securi-
ties, comply with Article Five or Section 10.05 of the Inden-
ture, or comply with any requirements of the SEC in connection
with the qualification of the Indenture under the TIA, or make
any other change that does not adversely affect the rights of
any Holder of a Security.
14. Restrictive Covenants.
The Indenture imposes certain limitations on the
ability of the Company and its Subsidiaries to, among other
things, incur additional Indebtedness or Liens, make payments
in respect of its Capital Stock and merge or consolidate with
any other person and sell, lease, transfer or otherwise dispose
of substantially all of its properties or assets. The limita-
tions are subject to a number of important qualifications and
exceptions. The Company must annually report to the Trustee on
compliance with such limitations.
15. Successors.
When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture, the prede-
cessor will be released from those obligations.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal
amount of Securities then outstanding may declare all the Secu-
rities to be due and payable immediately in the manner and with
the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as pro-
vided in the Indenture. The Trustee may require indemnity sat-
isfactory to it before it enforces the Indenture or the Securi-
ties. Subject to certain limitations, Holders of a majority in
aggregate principal amount of the Securities then outstanding
may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of Securities notice of
any continuing Default or Event of Default (except a Default in
payment of principal or interest, including an Accelerated Pay-
ment) if it determines that withholding notice is in their
interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or
any other capacity, may become the owner or pledgee of Securi-
ties and may otherwise deal with the Company, its Subsidiaries
or their respective Affiliates as if it were not the Trustee.
A-8
<PAGE> 109
18. No Recourse Against Others.
No stockholder, director, officer, employee or incor-
porator, as such, of the Company shall have any liability for
any obligation of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason
of, such obligations or their creation. Each Holder of a Secu-
rity by accepting a Security waives and releases all such lia-
bility. The waiver and release are part of the consideration
for the issuance of the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authen-
tication on this Security.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a
Holder of a Security or an assignee, such as: TEN COM (= ten-
ants in common), TEN ENT (= tenants by the entireties), JT TEN
(= joint tenants with right of survivorship and not as tenants
in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Com-
mittee on Uniform Security Identification Procedures, the Com-
pany will cause CUSIP numbers to be printed on the Securities
immediately prior to the qualification of the Indenture under
the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on
the other identification numbers printed hereon.
The Company will furnish to any Holder of a Security
upon written request and without charge a copy of the Inden-
ture. Requests may be made to: Food 4 Less Supermarkets,
Inc., c/o The Yucaipa Companies, 10000 Santa Monica Boulevard,
Fifth Floor, Los Angeles, California 90067, Attn: Mark Resnik.
A-9
<PAGE> 110
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
SENIOR GUARANTEE
The Subsidiary Guarantors (as defined in the Inden-
ture (the "Indenture") referred to in the Security upon which
this notation is endorsed and each hereinafter referred to as a
"Subsidiary Guarantor," which term includes any successor per-
son under the Indenture) have unconditionally guaranteed on a
senior unsecured basis (such guarantee by each Subsidiary Guar-
antor being referred to herein as the "Guarantee") (i) the due
and punctual payment of the principal of and interest on the
Securities, whether at maturity, by acceleration or otherwise,
the due and punctual payment of interest on the overdue princi-
pal and interest, if any, on the Securities, to the extent law-
ful, and the due and punctual performance of all other obliga-
tions of the Company to the Holders or the Trustee all in
accordance with the terms set forth in Article Ten of the
Indenture and (ii) in case of any extension of time of payment
or renewal of any Securities or any of such other obligations,
that the same will be promptly paid in full when due or per-
formed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or
otherwise.
The obligations of each Subsidiary Guarantor to the
Holders of Securities and to the Trustee pursuant to the Guar-
antee and the Indenture are expressly set forth and are senior
unsecured obligations of each such Subsidiary Guarantor, to the
extent and in the manner provided, in Article Ten of the Inden-
ture, and reference is hereby made to such Indenture for the
precise terms of the Guarantee therein made.
No stockholder, officer, director or incorporator, as
such, past, present or future, of any Subsidiary Guarantor
shall have any liability under the Guarantee by reason of his
or its status as such stockholder, officer, director or
incorporator.
A-10
<PAGE> 111
The Guarantee shall not be valid or obligatory for
any purpose until the certificate of authentication on the
Securities upon which the Guarantee is noted shall have been
executed by the Trustee under the Indenture by the manual sig-
nature of one of its authorized officers.
SUBSIDIARY GUARANTORS:
CALA CO.
CALA FOODS, INC.
BELL MARKETS, INC.
FOOD 4 LESS OF SOUTHERN
CALIFORNIA, INC.
ALPHA BETA COMPANY
FOOD 4 LESS OF CALIFORNIA, INC.
FALLEY'S, INC.
FOOD 4 LESS MERCHANDISING, INC.
BAY AREA WAREHOUSE STORES, INC.
FOOD 4 LESS GM, INC.
By:______________________________
Name:
(for each of the above-listed
Subsidiary Guarantors)
By:______________________________
Name:
(for each of the above-listed
Subsidiary Guarantors)
A-11
<PAGE> 112
[FORM OF ASSIGNMENT]
I or we assign this Security to
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
_______________________________________
and irrevocably appoint _______________________ agent to trans-
fer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:____________________ Signed:____________________________
______________________________________________________________
(Sign exactly as your name appears on
the front of this Security)
Signature Guarantee:__________________________________________
A-12
<PAGE> 113
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the
Indenture, check the appropriate box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Secu-
rity purchased by the Company pursuant to Section 4.15 or
Section 4.16 of the Indenture, state the amount:
$
Date:__________ Signature:____________________________
(Sign exactly as your name
appears on the front of
this Security)
Signature Guarantee:______________________________________
A-13
<PAGE> 1
EXHIBIT 4.2
_____________________________________________________________________________
FOOD 4 LESS SUPERMARKETS, INC.
TO BE MERGED WITH AND INTO RALPH'S GROCERY COMPANY
AND
SUBSIDIARY GUARANTORS
AND
UNITED STATES TRUST COMPANY OF NEW YORK
TRUSTEE
_________________
INDENTURE
Dated as of , 1995
________________
$145,000,000
13.75% Senior Subordinated Notes
due 2005
_____________________________________________________________________________
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- -------
<S> <C>
310(a)(1).................................. 8.10
(a)(2).................................. 8.10
(a)(3).................................. N.A.
(a)(4).................................. N.A
(a)(5).................................. 8.10; 8.11
(b)..................................... 8.08; 8.10;
13.02
(c)..................................... N.A.
311(a)..................................... 8.11
(b)..................................... 8.11
(c)..................................... N.A.
312(a)..................................... 2.05
(b)..................................... 13.03
(c)..................................... 13.03
313(a)..................................... 8.06
(b)(1).................................. N.A.
(b)(2).................................. 8.06
(c)..................................... 8.06; 13.02
(d)..................................... 8.06
314(a)..................................... 5.07; 5.09;
13.02
(b)..................................... N.A.
(c)(1).................................. 8.02; 13.04
(c)(2).................................. 8.02; 13.04
(c)(3).................................. N.A.
(d)..................................... N.A.
(e)..................................... 13.05
(f)..................................... N.A.
315(a)..................................... 8.01(b)
(b)..................................... 8.05; 13.02
(c)..................................... 8.01(a)
(d)..................................... 8.01(c)
(e)..................................... 7.11
316(a)(last sentence)...................... 2.09
(a)(1)(A)............................... 7.05
(a)(1)(B)............................... 7.04
(a)(2).................................. N.A.
(b)..................................... 7.07
317(a)(1).................................. 7.08
(a)(2).................................. 7.09
(b)..................................... 2.04
318(a)..................................... 13.01
(c)..................................... 13.01
- ----------------------
</TABLE>
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of the Indenture.
-i-
<PAGE> 3
TABLE OF CONTENTS
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1.01 Definitions.................................
Section 1.02 Incorporation by Reference of TIA...........
Section 1.03 Rules of Construction
ARTICLE TWO
THE SECURITIES
Section 2.01 Form and Dating.............................
Section 2.02 Execution and Authentication................
Section 2.03 Registrar and Paying Agent..................
Section 2.04 Paying Agent to Hold Assets in
Trust.....................................
Section 2.05 Securityholder Lists........................
Section 2.06 Transfer and Exchange.......................
Section 2.07 Replacement Securities......................
Section 2.08 Outstanding Securities......................
Section 2.09 Treasury Securities.........................
Section 2.10 Temporary Securities........................
Section 2.11 Cancellation................................
Section 2.12 Defaulted Interest..........................
Section 2.13 CUSIP Number................................
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee..........................
Section 3.02 Selection of Securities to Be
Redeemed..................................
Section 3.03 Notice of Redemption........................
Section 3.04 Effect of Notice of Redemption..............
Section 3.05 Deposit of Redemption Price.................
Section 3.06 Securities Redeemed in Part.................
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE FOUR
SUBORDINATION
Section 4.01 Securities Subordinated to Senior
Indebtedness............................
Section 4.02 Suspension of Payment When Senior
Indebtedness in Default.................
Section 4.03 Securities Subordinated to Prior
Payment of All Senior Indebted-
ness on Dissolution, Liquidation
or Reorganization of Company............
Section 4.04 Securityholders to Be Subrogated
to Rights of Holders of Senior
Indebtedness............................
Section 4.05 Obligations of the Company
Unconditional...........................
Section 4.06 Trustee Entitled to Assume Pay-
ments Not Prohibited in Absence
of Notice...............................
Section 4.07 Application by Trustee of Assets
Deposited with It.......................
Section 4.08 No Waiver of Subordination
Provisions..............................
Section 4.09 Securityholders Authorize Trustee
to Effectuate Subordination of
Securities..............................
Section 4.10 Right of Trustee to Hold Senior
Indebtedness............................
Section 4.11 No Suspension of Remedies.................
Section 4.12 No Fiduciary Duty of Trustee to
Holders of Senior Indebtedness..........
ARTICLE FIVE
COVENANTS
Section 5.01 Payment of Securities.....................
Section 5.02 Maintenance of Office or Agency...........
Section 5.03 Limitation on Restricted Payments.........
Section 5.04 Corporate Existence.......................
Section 5.05 Payment of Taxes and Other Claims.........
Section 5.06 Maintenance of Properties and
Insurance...............................
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 5.07 Compliance Certificate; Notice of
Default..................................
Section 5.08 Compliance with Laws.......................
Section 5.09 SEC Reports................................
Section 5.10 Waiver of Stay, Extension or Usury
Laws.....................................
Section 5.11 Limitation on Transactions with
Affiliates...............................
Section 5.12 Limitation on Incurrences of Addi-
tional Indebtedness......................
Section 5.13 Limitation on Dividends and Other
Payment Restrictions Affecting
Subsidiaries.............................
Section 5.14 Limitation on Liens........................
Section 5.15 Limitation on Change of Control............
Section 5.16 Limitation on Asset Sales..................
Section 5.17 Guarantees of Certain Indebtedness.........
Section 5.18 Limitation on Preferred Stock of
Subsidiaries.............................
Section 5.19 Limitation on Other Senior Subor-
dinated Indebtedness.....................
ARTICLE SIX
SUCCESSOR CORPORATION
Section 6.01 Limitation on Mergers and Certain
Other Transactions.......................
Section 6.02 Successor Corporation Substituted..........
ARTICLE SEVEN
DEFAULT AND REMEDIES
Section 7.01 Events of Default..........................
Section 7.02 Acceleration...............................
Section 7.03 Other Remedies.............................
Section 7.04 Waiver of Past Defaults....................
Section 7.05 Control by Majority........................
Section 7.06 Limitation on Suits........................
Section 7.07 Rights of Holders to Receive
Payment..................................
Section 7.08 Collection Suit by Trustee.................
Section 7.09 Trustee May File Proofs of Claim...........
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 7.10 Priorities..................................
Section 7.11 Right and Remedies Cumulative...............
Section 7.12 Delay or Omission Not Waiver................
Section 7.13 Undertaking for Costs.......................
ARTICLE EIGHT
TRUSTEE
Section 8.01 Duties of Trustee...........................
Section 8.02 Rights of Trustee...........................
Section 8.03 Individual Rights of Trustee................
Section 8.04 Trustee's Disclaimer........................
Section 8.05 Notice of Default...........................
Section 8.06 Reports by Trustee to Holders...............
Section 8.07 Compensation and Indemnity..................
Section 8.08 Replacement of Trustee......................
Section 8.09 Successor Trustee by Merger, Etc............
Section 8.10 Eligibility; Disqualification...............
Section 8.11 Preferential Collection of Claim
Against Company...........................
ARTICLE NINE
SATISFACTION AND DISCHARGE OF INDENTURE
Section 9.01 Termination of the Company's
Obligations...............................
Section 9.02 Legal Defeasance and Covenant
Defeasance................................
Section 9.03 Application of Trust Money..................
Section 9.04 Repayment to the Company or Sub-
sidiary Guarantors........................
Section 9.05 Reinstatement...............................
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 10.01 Without Consent of Holders..................
Section 10.02 With Consent of Holders.....................
Section 10.03 Compliance with TIA.........................
Section 10.04 Revocation and Effect of Consents...........
</TABLE>
-v-
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 10.05 Notation on or Exchange of
Securities................................
Section 10.06 Trustee to Sign Amendments, Etc.............
ARTICLE ELEVEN
GUARANTEE
Section 11.01 Unconditional Guarantee.....................
Section 11.02 Subordination of Guarantee..................
Section 11.03 Severability................................
Section 11.04 Release of a Subsidiary Guarantor...........
Section 11.05 Limitation of Subsidiary Guaran-
tor's Liability...........................
Section 11.06 Subsidiary Guarantors May Consoli-
date, etc., on Certain Terms..............
Section 11.07 Contribution................................
Section 11.08 Waiver of Subrogation.......................
Section 11.09 Execution of Guarantee......................
Section 11.10 Waiver of Stay, Extension or Usury
Laws......................................
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE OBLIGATIONS
Section 12.01 Guarantee Obligations Subordinated
to Guarantor Senior Indebtedness..........
Section 12.02 Suspension of Guarantee Obliga-
tions When Guarantor Senior
Indebtedness in Default...................
Section 12.03 Guarantee Obligations Subordinated
to Prior Payment of All Guaran-
tor Senior Indebtedness on Dis-
solution, Liquidation or Reor-
ganization of Such Subsidiary
Guarantor.................................
Section 12.04 Holders of Guarantee Obligations
To Be Subrogated to Rights of
Holders of Guarantor Senior
Indebtedness..............................
Section 12.05 Obligations of the Subsidiary
Guarantors Unconditional..................
</TABLE>
-vi-
<PAGE> 8
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 12.06 Trustee Entitled to Assume Pay-
ments Not Prohibited in Absence
of Notice.................................
Section 12.07 Application by Trustee of Assets
Deposited with It.........................
Section 12.08 No Waiver of Subordination
Provisions................................
Section 12.09 Holders Authorize Trustee to
Effectuate Subordination of
Guarantee Obligations.....................
Section 12.10 Right of Trustee to Hold Guarantor
Senior Indebtedness.......................
Section 12.11 No Suspension of Remedies...................
Section 12.12 No Fiduciary Duty of Trustee to
Holders of Guarantor Senior
Indebtedness..............................
ARTICLE THIRTEEN
MISCELLANEOUS
Section 13.01 TIA Controls................................
Section 13.02 Notices.....................................
Section 13.03 Communications by Holders with
Other Holders.............................
Section 13.04 Certificate and Opinion as to Con-
ditions Precedent.........................
Section 13.05 Statements Required in Certificate
or Opinion................................
Section 13.06 Rules by Trustee, Paying Agent,
Registrar.................................
Section 13.07 Legal Holidays..............................
Section 13.08 Governing Law...............................
Section 13.09 No Adverse Interpretation of Other
Agreements................................
Section 13.10 No Recourse Against Others..................
Section 13.11 Successors..................................
Section 13.12 Duplicate Originals.........................
Section 13.13 Severability................................
Section 13.14 No Violation................................
Signatures
Exhibit A - Form of Note
</TABLE>
-vii-
<PAGE> 9
Note: This Table of Contents shall not, for any purpose, be
deemed to be part of the Indenture.
-viii-
<PAGE> 10
INDENTURE dated as of , 1995, among FOOD 4
LESS SUPERMARKETS, INC., a Delaware corporation (the "Com-
pany"), the SUBSIDIARY GUARANTORS, and UNITED STATES TRUST COM-
PANY OF NEW YORK, a New York corporation, as Trustee.
Each party hereto agrees as follows for the benefit
of each other party and for the equal and ratable benefit of
the Holders of the Company's 13.75% Senior Subordinated Notes
due 2005:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means (i) with respect to any
person that becomes a Subsidiary of the Company (or is merged
into the Company or any of its Subsidiaries) after the Issue
Date, Indebtedness of such person or any of its Subsidiaries
existing at the time such person becomes a Subsidiary of the
Company (or is merged into the Company or any of its Subsidiar-
ies) and which was not incurred in connection with, or in con-
templation of, such person becoming a Subsidiary of the Company
(or being merged into the Company or any of its Subsidiaries)
and (ii) with respect to the Company or any of its Subsidiar-
ies, any Indebtedness assumed by the Company or any of its Sub-
sidiaries in connection with the acquisition of any assets from
another person (other than the Company or any of its Subsidiar-
ies), and which was not incurred by such other person in con-
nection with, or in contemplation of, such acquisition.
"Adjusted Net Assets" shall have the meaning provided
in Section 11.07.
"Affiliate" means, with respect to any person, any
other person directly or indirectly controlling or controlled
by or under direct or indirect common control with such speci-
fied person. For the purposes of this definition, "control"
when used with respect to any person means the power to direct
the management and policies of such person, directly or indi-
rectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "affiliated," "control-
ling" and "controlled" have meanings correlative to the fore-
going. For purposes of Section 5.11, the term "Affiliate"
shall include any person who, as a result of any transaction
<PAGE> 11
-2-
described in Section 5.11, would become an Affiliate. Notwith-
standing the foregoing, the term "Affiliate," with respect to
the Company and its Subsidiaries, shall not include BT Securi-
ties Corporation or any of its Affiliates.
"Affiliate Transaction" shall have the meaning pro-
vided in Section 5.11.
"Agent" means any Registrar, Paying Agent or
co-Registrar.
"Asset Sale" means, with respect to any person, any
sale, transfer or other disposition or series of sales, trans-
fers or other dispositions (including, without limitation, by
merger or consolidation or by exchange of assets and whether by
operation of law or otherwise) made by such person or any of
its subsidiaries to any person other than such person or one of
its wholly owned subsidiaries (or, in the case of a sale,
transfer or other disposition by a Subsidiary, to any person
other than the Company or a directly or indirectly wholly owned
Subsidiary) of any assets of such person or any of its subsid-
iaries including, without limitation, assets consisting of any
Capital Stock or other securities held by such person or any of
its subsidiaries, and any Capital Stock issued by any subsid-
iary of such person, in each case, outside of the ordinary
course of business, excluding, however, any sale, transfer or
other disposition, or series of related sales, transfers or
other dispositions (i) involving any Excluded Assets, (ii)
resulting in Net Proceeds to the Company and the Subsidiaries
of $500,000 or less or (iii) pursuant to any foreclosure of
assets or other remedy provided by applicable law to a creditor
of the Company with a Lien on such assets, which Lien is per-
mitted under this Indenture, provided that such foreclosure or
other remedy is conducted in a commercially reasonable manner
or in accordance with any Bankruptcy Law.
"Average Life" means, as of the date of determina-
tion, with respect to any debt security, the quotient obtained
by dividing (i) the sum of the products of the number of years
from the date of determination to the dates of each successive
scheduled principal payments of such debt security multiplied
by the amount of such principal payment by (ii) the sum of all
such principal payments.
"Bankruptcy Law" means Title 11, U.S. Code or any
similar Federal, state or foreign law for the relief of
debtors.
<PAGE> 12
-3-
"Board of Directors" means, with respect to any per-
son, the Board of Directors of such person or any committee of
the Board of Directors of such person duly authorized, with
respect to any particular matter, to exercise the power of the
Board of Directors of such person.
"Board Resolution" means, with respect to any person,
a duly adopted resolution of the Board of Directors of such
person.
"Business Day" means a day that is not a Legal
Holiday.
"Capital Stock" means, with respect to any person,
any and all shares, interests, participations or other equiva-
lents (however designated) of corporate stock, including each
class of common stock and preferred stock of such person.
"Capitalized Lease Obligation" means obligations
under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligations shall be the capi-
talized amount of such obligations determined in accordance
with GAAP.
"Cash Equivalents" means (i) obligations issued or
unconditionally guaranteed by the United States of America or
any agency thereof, or obligations issued by any agency or
instrumentality thereof and backed by the full faith and credit
of the United States of America, (ii) commercial paper rated
the highest grade by Moody's Investors Service, Inc. and Stan-
dard & Poor's Ratings Group and maturing not more than one year
from the date of creation thereof, (iii) time deposits with,
and certificates of deposit and banker's acceptances issued by,
any bank having capital surplus and undivided profits aggre-
gating at least $500 million and maturing not more than one
year from the date of creation thereof, (iv) repurchase agree-
ments that are secured by a perfected security interest in an
obligation described in clause (i) and are with any bank
described in clause (iii) and (v) readily marketable direct
obligations issued by any state of the United States of America
or any political subdivision thereof having one of the two
highest rating categories obtainable from either Moody's Inves-
tors Service, Inc. or Standard & Poor's Ratings Group.
"Change of Control" means the acquisition after the
Issue Date, in one or more transactions, of beneficial
<PAGE> 13
-4-
ownership (within the meaning of Rule 13d-3 under the Exchange
Act) by (i) any person or entity (other than any Permitted
Holder) or (ii) any group of persons or entities (excluding any
Permitted Holders) who constitute a group (within the meaning
of Section 13(d)(3) of the Exchange Act), in either case, of
any securities of New Holdings or the Company such that, as a
result of such acquisition, such person, entity or group
beneficially owns (within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, 40% or more of the then
outstanding voting securities entitled to vote on a regular
basis for a majority of the Board of Directors of the Company
(but only to the extent that such beneficial ownership is not
shared with any Permitted Holder who has the power to direct
the vote thereof); provided, however, that no such Change of
Control shall be deemed to have occurred if (A) the Permitted
Holders beneficially own, in the aggregate, at such time, a
greater percentage of such voting securities than such other
person, entity or group or (B) at the time of such acquisition,
the Permitted Holders (or any of them) possess the ability (by
contract or otherwise) to elect, or cause the election, of a
majority of the members of the Company's Board of Directors.
"Change of Control Date" shall have the meaning pro-
vided in Section 5.15.
"Change of Control Offer" shall have the meaning pro-
vided in Section 5.15.
"Change of Control Payment Date" shall have the mean-
ing provided in Section 5.15.
"Commission" means the Securities and Exchange
Commission.
"Common Stock" means, with respect to any person, any
and all shares, interests or other participations in, and other
equivalents (however designated and whether voting or nonvot-
ing) of, such person's common stock, whether outstanding at the
Issue Date or issued after the Issue Date, and includes, with-
out Limitation, all series and classes of such common stock.
"Company" means the party named as such in this
Indenture until a successor replaces it pursuant to this Inden-
ture and thereafter means such successor.
"Consolidated Net Income," means, with respect to any
person, for any period, the aggregate of the net income (or
<PAGE> 14
-5-
loss) of such person and its subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP; pro-
vided that (a) the net income of any other person in which such
person or any of its subsidiaries has an interest (which inter-
est does not cause the net income of such other person to be
consolidated with the net income of such person and its subsid-
iaries in accordance with GAAP) shall be included only to the
extent of the amount of dividends or distributions actually
paid to such person or such subsidiary by such other person in
such period; (b) the net income of any subsidiary of such per-
son that is subject to any Payment Restriction shall be
excluded to the extent such Payment Restriction actually pre-
vented the payment of an amount that otherwise could have been
paid to, or received by, such person or a subsidiary of such
person not subject to any Payment Restriction; and (c)(i) the
net income (or loss) of any other person acquired in a pooling
of interests transaction for any period prior to the date of
such acquisition, (ii) all gains and losses realized on any
Asset Sale, (iii) all gains realized upon or in connection with
or as a consequence of the issuance of the Capital Stock of
such person or any of its subsidiaries and any gains on pension
reversions received by such person or any of its subsidiaries,
(iv) all gains and losses realized on the purchase or other
acquisition by such person or any of its subsidiaries of any
securities of such person or any of its subsidiaries, (v) all
gains and losses resulting from the cumulative effect of any
accounting change pursuant to the application of Accounting
Principles Board Opinion No. 20, as amended, (vi) all other
extraordinary gains and losses, (vii) (A) all non-cash charges,
(B) up to $10 million of severance costs and (C) any other
restructuring reserves or charges (provided, however, that any
cash payments actually made with respect to the liabilities for
which such restructuring reserves or charges were created shall
be deducted from Consolidated Net Income in the period when
made), in each case, incurred by the Company or any of its Sub-
sidiaries in connection with the Merger, including, without
limitation, the divestiture of the Excluded Assets, (viii)
losses incurred by the Company and its Subsidiaries resulting
from earthquakes and (ix) with respect to the Company, all
deferred financing costs written off in connection with the
early extinguishment of any Indebtedness, shall each be
excluded.
"Consolidated Net Worth" means, with respect to any
person, the total stockholders' equity (exclusive of any Dis-
qualified Capital Stock) of such person and its subsidiaries
determined on a consolidated basis in accordance with GAAP.
<PAGE> 15
-6-
"Credit Agent" means, at any time, the then-acting
Administrative Agent as defined in and under the Credit Agree-
ment, which initially shall be Bankers Trust Company. The Com-
pany shall promptly notify the Trustee of any change in the
Credit Agent.
"Credit Agreement" means the Credit Agreement, dated
as of the Issue Date, by and among the Company, certain of its
subsidiaries, the Lenders referred to therein and Bankers Trust
Company, as administrative agent, as the same may be amended,
extended, renewed, restated, supplemented or otherwise modified
(in whole or in part, and without limitation as to amount,
terms, conditions, covenants and other provisions) from time to
time, and any agreement governing Indebtedness incurred to
refund or refinance the borrowings and commitments then out-
standing or permitted to be outstanding under such Credit
Agreement or such agreement. The Company shall promptly notify
the Trustee of any such refunding or refinancing of the Credit
Agreement.
"Custodian" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bank-
ruptcy Law.
"Default" means any event which is, or after notice
or passage of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) in the
event any Indebtedness is outstanding under the Credit Agree-
ment, all Senior Indebtedness under the Credit Agreement and
(ii) if no Indebtedness is outstanding under the Credit Agree-
ment, any other issue of Senior Indebtedness which (a) at the
time of determination is equal to or greater than $50 million
in aggregate principal amount and (b) is specifically desig-
nated in the instrument evidencing such Senior Indebtedness as
"Designated Senior Indebtedness" by the Company.
"Disqualified Capital Stock" means, with respect to
any Capital Stock of such person or its subsidiaries that, by
its terms, by the terms of any agreement related thereto or by
the terms of any security into which it is convertible,
puttable or exchangeable, is, or upon the happening of an event
or the passage of time would be, required to be redeemed or
repurchased by such person or its subsidiaries, including at
the option of the holder thereof, in whole or in part, or has,
or upon the happening of an event or passage of time would
have, a redemption or similar payment due, on or prior to the
<PAGE> 16
-7-
Maturity Date of the Securities or any other Capital Stock of
such person or its subsidiaries designated as Disqualified Cap-
ital Stock by such person at the time of issuance; provided,
however, that if such Capital Stock is either (i) redeemable or
repurchasable solely at the option of such person or
(ii) issued to employees of the Company or its Subsidiaries or
to any plan for the benefit of such employees, such Capital
Stock shall not constitute Disqualified Capital Stock unless so
designated.
"EBDIT" means, with respect to any person, for any
period, the Consolidated Net Income of such person for such
period, plus, in each case to the extent deducted in computing
Consolidated Net Income of such person for such period (without
duplication) (i) provisions for income taxes or similar charges
recognized by such persons and its consolidated subsidiaries
accrued during such period, (ii) depreciation and amortization
expense of such person and its consolidated subsidiaries
accrued during such period (but only to the extent not included
in Fixed Charges), (iii) Fixed Charges of such person and its
consolidated subsidiaries for such period, (iv) LIFO charges
(credit) of such person and its consolidated subsidiaries for
such period, (v) the amount of any restructuring reserve or
charge recorded during such period in accordance with GAAP,
including any such reserve or charge related to the Merger, and
(vi) any other non-cash charges reducing Consolidated Net
Income for such period (excluding any such charge which
requires an accrual of or a cash reserve for cash charges for
any future period), less, without duplication, (i) non-cash
items increasing Consolidated Net Income of such person for
such period in each case determined in accordance with GAAP and
(ii) the amount of all cash payments made by such person or its
subsidiaries during such period to the extent that such cash
payment has been provided for in a restructuring reserve or
charge referred to in clause (v) above (and was not otherwise
deducted in the computation of Consolidated Net Income of such
person for such period).
"Event of Default" shall have the meaning provided in
Section 7.01.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated by
the Commission thereunder.
"Excluded Assets" means assets of the Company
required to be disposed of by applicable regulatory authorities
in connection with the Merger.
<PAGE> 17
-8-
"Fixed Charges" means, with respect to any person,
for any period, the aggregate amount of (i) interest, whether
expensed or capitalized, paid, accrued or scheduled to be paid
or accrued during such period (except to the extent accrued in
a prior period) in respect of all Indebtedness of such person
and its consolidated subsidiaries (including (a) original issue
discount on any Indebtedness (including, (without duplication)
in the case of the Company, any original issue discount on the
Securities but excluding amortization of debt issuance costs)
and (b) the interest portion of all deferred payment obliga-
tions, calculated in accordance with the effective interest
method, in each case to the extent attributable to such period
but excluding the amortization of debt issuance costs) and
(ii) dividend requirements on Capital Stock of such person and
its consolidated subsidiaries (whether in cash or otherwise
(except dividends payable in shares of Qualified Capital
Stock)) paid, accrued or scheduled to be paid or accrued during
such period (except to the extent accrued in a prior period)
and excluding items eliminated in consolidation. For purposes
of this definition, (a) interest on a Capitalized Lease Obliga-
tion shall be deemed to accrue at an interest rate reasonably
determined by the Board of Directors of such person (as evi-
denced by a Board Resolution) to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance
with GAAP, (b) interest on Indebtedness that is determined on a
fluctuating basis shall be deemed to have accrued at a fixed
rate per annum equal to the rate of interest of such Indebted-
ness in effect on the date Fixed Charges are being calculated,
(c) interest on Indebtedness that may optionally be determined
at an interest rate based upon a factor of a prime or similar
rate, a eurocurrency interbank offered rate, or other rate,
shall be deemed to have been based upon the rate actually cho-
sen, or, if none, then based upon such optional rate chosen as
the Company may designate, and (d) Fixed Charges shall be
increased or reduced by the net cost (including amortization of
discount) or benefit associated with Interest Swap Obligations
attributable to such period. For purposes of clause (ii)
above, dividend requirements shall be increased to an amount
representing the pretax earnings that would be required to
cover such dividend requirements; accordingly, the increased
amount shall be equal to a fraction, the numerator of which is
such dividend requirements and the denominator of which is one
(1) minus the applicable actual combined federal, state, local
and foreign income tax rate of such person and its subsidiaries
(expressed as a decimal), on a consolidated basis, for the fis-
cal year immediately preceding the date of the transaction giv-
ing rise to the need to calculate Fixed Charges.
<PAGE> 18
-9-
"FFL" means Food 4 Less, Inc., a Delaware corpora-
tion, and its successors including, without limitation, Hold
ings following the FFL Merger and New Holdings following the
Reincorporation Merger.
"FFL Merger" means the merger, prior to the Merger,
of FFL and Holdings, Inc.
"Food 4 Less" means Food 4 Less Supermarkets, Inc. a
Delaware corporation, and its successors, including, without
limitation, Ralphs Supermarkets, Inc. (to be renamed Ralphs
Grocery Company) following the Merger.
"Foreign Exchange Agreement" means any foreign
exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect against fluctua-
tions in currency values.
"Forward Period" shall have the meaning provided in
the definition of "Operating Coverage Ratio" contained in this
Section 1.01.
"GAAP" means generally accepted accounting principles
as in effect in the United States of America as of the date of
this Indenture.
"Guarantee" means the guarantee of each Subsidiary
Guarantor set forth in Article Eleven and any additional guar-
antee of the Securities executed by any Subsidiary of the
Company.
"Guarantee Obligations" shall have the meaning pro-
vided in Section 12.01.
"Guarantor Payment Blockage Period" shall have the
meaning provided in Section 12.02.
"Guarantor Senior Indebtedness" means, with respect
to any Subsidiary Guarantor, the principal of, premium, if any,
and interest on any Indebtedness of such Subsidiary Guarantor,
whether outstanding on the Issue Date or thereafter created,
incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides
that such Indebtedness shall not be senior in right of payment
to the Guarantee of such Subsidiary Guarantor. Without limit-
ing the generality of the foregoing, "Guarantor Senior
<PAGE> 19
-10-
Indebtedness" shall include the principal of, premium, if any,
and interest on all obligations of every nature of such
Subsidiary Guarantor from time to time owed to the lenders under
the Credit Agreement, including, without limitation, the Letter
of Credit Obligations and principal of and interest on, and all
fees, indemnities and expenses payable under the Credit Agree-
ment. Notwithstanding the foregoing, "Guarantor Senior Indebt-
edness" shall not include (a) Indebtedness evidenced by the
Guarantee of such Subsidiary Guarantor, (b) Indebtedness that
is expressly subordinate or junior in right of payment to any
Indebtedness of such Subsidiary Guarantor, (c) Indebtedness
which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without
recourse to such Subsidiary Guarantor, (d) Indebtedness which
is represented by Disqualified Capital Stock, (e) obligations
for goods, materials or services purchased in the ordinary
course of business or obligations consisting of trade payables,
(f) Indebtedness of or amounts owed by such Subsidiary Guaran-
tors for compensation to employees or for services rendered to
such Subsidiary Guarantors, (g) any liability for federal,
state, local or other taxes owed or owing by such Subsidiary
Guarantor, (h) Indebtedness of such Subsidiary Guarantor repre-
senting a guarantee of Subordinated Indebtedness or Pari Passu-
Indebtedness of the Company or any other Subsidiary Guarantor,
(i) Indebtedness of such Subsidiary Guarantor to a Subsidiary
of the Company and (j) that portion of any Indebtedness which
is incurred by such Subsidiary Guarantor in violation of this
Indenture.
"Holder" or "Securityholder" means the person in
whose name a Security is registered on the Registrar's books.
"Holdings" means Food 4 Less Holdings, Inc., a Cali-
fornia corporation, and its successors including, without limi-
tation, New Holdings following the Reincorporation Merger.
"Holdings Discount Notes" means the 15.25% Senior
Discount Notes due 2004 of Holdings, as the same may be modi-
fied or amended from time to time and refinancings thereof.
"Indebtedness" means with respect to any person,
without duplication, (i) all liabilities, contingent or
otherwise, of such person (a) for borrowed money (whether or
not the recourse of the lender is to the whole of the assets of
such person or only to a portion thereof), (b) evidenced by
bonds, notes, debentures, drafts accepted or similar instru-
ments or letters of credit or representing the balance deferred
and
<PAGE> 20
-11-
unpaid of the purchase price of any property (other than
any such balance that represents an account payable or any
other monetary obligation to a trade creditor (whether or not
an Affiliate) created, incurred, assumed or guaranteed by such
person in the ordinary course of business of such person in
connection with obtaining goods, materials or services and due
within twelve months (or such longer period for payment as is
customarily exended by such trade creditor) of the incurrence
thereof, which account is not overdue by more than 90 days,
according to the original terms of sale, unless such account
payable is being contested in good faith), or (c) for the pay-
ment of money relating to a Capitalized Lease Obligation;
(ii) the maximum fixed repurchase price of all Disqualified
Capital Stock of such person; (iii) reimbursement obligations
of such person with respect to letters of credit; (iv) obliga-
tions of such person with respect to Interest Swap Obligations
and Foreign Exchange Agreements; (v) all liabilities of others
of the kind described in the preceding clause (i), (ii), (iii)
or (iv) that such person has guaranteed or that is otherwise
its legal liability; and (vi) all obligations of others secured
by a Lien to which any of the properties or assets (including,
without limitation, leasehold interests and any other tangible
or intangible property rights) of such person are subject,
whether or not the obligations secured thereby shall have been
assumed by such person or shall otherwise be such person's
legal liability (provided that if the obligations so secured
have not been assumed by such person or are not otherwise such
person's legal liability, such obligations shall be deemed to
be in an amount equal to the fair market value of such proper-
ties or assets, as determined in good faith by the Board of
Directors of such person, which determination shall be evi-
denced by a Board Resolution). For purposes of the preceding
sentence, the "maximum fixed repurchase price" of any Disquali-
fied Capital Stock that does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Dis-
qualified Capital Stock as if such Disqualified Capital Stock
were purchased on any date on which Indebtedness shall be
required to be determined pursuant to this Indenture, and if
such price is based upon, or measured by, the fair market value
of such Disqualified Capital Stock (or any equity security for
which it may be exchanged or converted), such fair market value
shall be determined in good faith by the Board of Directors of
such person, which determination shall be evidenced by a Board
Resolution. For purposes of this Indenture, Indebtedness
incurred by any person that is a general partnership (other
than non-recourse Indebtedness) shall be deemed to have been
incurred by the general partners of such partnership pro rata
<PAGE> 21
-12-
in accordance with their respective interests in the liabili-
ties of such partnership unless any such general partner shall,
in the reasonable determination of the Board of Directors of
the Company, be unable to satisfy its pro rata share of the
liabilities of the partnership, in which case the pro rata
share of any Indebtedness attributable to such partner shall be
deemed to be incurred at such time by the remaining general
partners on a pro rata basis in accordance with their
interests.
"Indenture" means this Indenture, as amended or sup-
plemented from time to time in accordance with the terms
hereof.
"Independent Financial Advisor" means a reputable
accounting, appraisal or nationally recognized investment bank-
ing firm that is, in the reasonable judgment of the Board of
Directors of the Company, qualified to perform the task for
which such firm has been engaged hereunder and disinterested
and independent with respect to the Company and its Affiliates.
"Interest Payment Date" means the stated maturity of
an installment of interest on the Securities.
"Interest Swap Obligation" means any obligation of
any person pursuant to any arrangement with any other person
whereby, directly or indirectly, such person is entitled to
receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a
stated notional amount in exchange for periodic payments made
by such person calculated by applying a fixed or floating rate
of interest on the same notional amount; provided that the term
"Interest Swap Obligation" shall also include interest rate
exchange, collar, cap, swap option or similar agreements pro-
viding interest rate protection.
"Investment" by any person in any other person means
any investment by such person in such other person, whether by
a purchase of assets, in any transaction or series of related
transactions, individually or in the aggregate, in an amount
greater than $5 million, share purchase, capital contribution,
loan, advance (other than reasonable loans and advances to
employees for moving and travel expenses, as salary advances,
or to permit the purchase of Qualified Capital Stock of the
Company and other similar customary expenses incurred, in each
case in the ordinary course of business consistent with past
practice) or similar credit extension constituting Indebtedness
<PAGE> 22
-13-
of such other person, and any guarantee of Indebtedness of any
other person.
"Issue Date" means the date of original issuance of
the Securities under this Indenture.
"Legal Holiday" shall have the meaning provided in
Section 13.07.
"Letter of Credit Obligations" means Indebtedness of
the Company or any of its Subsidiaries with respect to letters
of credit issued pursuant to the Credit Agreement, and for pur-
poses of the definition of the term "Permitted Indebtedness,"
the aggregate principal amount of Indebtedness outstanding at
any time with respect thereto shall be deemed to consist of (a)
the aggregate maximum amount then available to be drawn under
all such letters of credit (the determination of such maximum
amount to assume compliance with all conditions for drawing),
and (b) the aggregate amount that has been paid by, and not
reimbursed to, the issuers under such letters of credit.
"Lien" means any mortgage, pledge, lien, encumbrance,
charge or adverse claim affecting title or resulting in an
encumbrance against real or personal property, or a security
interest of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, any
option or other agreement to sell which is intended to consti-
tute or create a security interest, mortgage, pledge or lien,
and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of
any jurisdiction); provided that in no event shall an operating
lease be deemed to constitute a Lien under this Indenture.
"Maturity Date" means February 1, 2005.
"Merger" means (i) the merger of the Company into
Ralphs Supermarkets, Inc. (with Ralphs Supermarkets, Inc. sur-
viving such merger) pursuant to the Merger Agreement and (ii)
immediately following the merger described in clause (i) of
this definition, the merger of Ralphs Grocery Company into
Ralphs Supermarkets, Inc. (with Ralphs Supermarkets, Inc.
surviving such merger and changing its name to "Ralphs Grocery
Company" in connection with such merger).
"Merger Agreement" means the Agreement and Plan of
Merger, dated September 14, 1994, by and among Holdings, FFL,
Food 4 Less, Ralphs Supermarkets, Inc. and the stockholders of
<PAGE> 23
-14-
Ralphs Supermarkets, Inc., as such agreement is amended and is
in effect on the Issue Date.
"Net Cash Proceeds" means the Net Proceeds of any
Asset Sale received in the form of cash or Cash Equivalents.
"Net Proceeds" means (a) in the case of any Asset
Sale or any issuance and sale by any person of Qualified Capi-
tal Stock, the aggregate net proceeds received by such person
after payment of expenses, taxes, commissions and the like
incurred in connection therewith (and, in the case of any Asset
Sale, net of the amount of cash applied to repay Indebtedness
secured by the asset involved in such Asset Sale), whether such
proceeds are in cash or in property (valued at the fair market
value thereof at the time of receipt, as determined with
respect to any Asset Sale resulting in Net Proceeds in excess
of $5 million in good faith by the Board of Directors of such
person, which determination shall be evidenced by a Board Reso-
lution) and (b) in the case of any conversion or exchange of
any outstanding Indebtedness or Disqualified Capital Stock of
such person for or into shares of Qualified Capital Stock of
the Company, the sum of (i) the fair market value of the pro-
ceeds received by the Company in connection with the issuance
of such Indebtedness or Disqualified Capital Stock on the date
of such issuance and (ii) any additional amount paid by the
holder to the Company upon such conversion or exchange.
"New Holdings" means Food 4 Less Holdings, Inc., a
Delaware corporation, and its successors.
"Non-payment Default" means any event (other than a
Payment Default) the occurrence of which entitles one or more
persons to act to accelerate the maturity of any Designated
Senior Indebtedness or Significant Senior Indebtedness.
"Obligations" means any principal, interest, penal-
ties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any
Indebtedness.
"Officer" means, with respect to any person, the
Chairman of the Board, the President, any Vice President, the
Chief Financial Officer, the Controller, or the Secretary of
such person.
"Officers' Certificate" means, with respect to any
person, a certificate signed by two Officers or by an Officer
<PAGE> 24
-15-
and either an Assistant Treasurer or an Assistant Secretary of
such person and otherwise complying with the requirements of
Sections 13.04 and 13.05.
"Operating Coverage Ratio" means, with respect to any
person, the ratio of (1) EBDIT of such person for the period
(the "Pro Forma Period") consisting of the most recent four
full fiscal quarters for which financial information in respect
thereof is available immediately prior to the date of the
transaction giving rise to the need to calculate the Operating
Coverage Ratio (the "Transaction Date") to (2) the aggregate
Fixed Charges of such person for the fiscal quarter in which
the Transaction Date occurs and the three fiscal quarters imme-
diately subsequent to such fiscal quarter (the "Forward
Period") reasonably anticipated by the Board of Directors of
such person to become due from time to time during such period.
For purposes of this definition, if the Transaction Date occurs
prior to the first anniversary of the Merger, "EBDIT" for the
Pro Forma Period shall be calculated, in the case of the Com-
pany, after giving effect on a pro forma basis to the Merger as
if it had occurred on the first day of the Pro Forma Period.
In addition to, but without duplication of, the foregoing, for
purposes of this definition, "EBDIT" shall be calculated after
giving effect (without duplication), on a pro forma basis for
the Pro Forma Period (but no longer), to (a) any Investment,
during the period commencing on the first day of the Pro Forma
Period to and including the Transaction Date (the "Reference
Period"), in any other person that, as a result of such Invest-
ment, becomes a subsidiary of such person, (b) the acquisition,
during the Reference Period (by merger, consolidation or pur-
chase of stock or assets) of any business or assets, which
acquisition is not prohibited by this Indenture, and (c) any
sales or other dispositions of assets (other than sales of
inventory in the ordinary course of business) occurring during
the Reference Period, in each case as if such incurrence,
Investment, repayment, acquisition or asset sale had occurred
on the first day of the Reference Period. In addition, for
purposes of this definition, "Fixed Charges" shall be calcu-
lated after giving effect (without duplication), on a pro forma
basis for the Forward Period, to any Indebtedness incurred or
repaid on or after the first day of the Forward Period and
prior to the Transaction Date. If such person or any of its
subsidiaries directly or indirectly guarantees any Indebtedness
of a third person, the Operating Coverage Ratio shall give
effect to the incurrence of such Indebtedness as if such person
or subsidiary had directly incurred such guaranteed
Indebtedness.
<PAGE> 25
-16-
"operating lease" means any lease the obligations
under which do not constitute Capitalized Lease Obligations.
"Opinion of Counsel" means a written opinion from
legal counsel who is reasonably acceptable to the Trustee com-
plying with the requirements of Sections 13.04 and 13.05.
Unless otherwise required by the Trustee, the legal counsel may
be an employee of or counsel to the Company or the Trustee.
"Pari Passu Indebtedness" means, with respect to the
Company or any Subsidiary Guarantor, Indebtedness of such per-
son which ranks pari passu in right of payment to the Securi-
ties or the Guarantee of such Subsidiary Guarantor, as the case
may be.
"Paying Agent" shall have the meaning provided in
Section 2.03, except that, for the purposes of Articles Three
and Nine and Sections 5.15 and 5.16, the Paying Agent shall not
be the Company or an Affiliate of the Company.
"Payment Blockage Notice" shall have the meaning pro-
vided in Section 4.02.
"Payment Blockage Period" shall have the meaning pro-
vided in Section 4.02.
"Payment Default" means any default in the payment of
principal, premium, if any, or interest on any Designated
Senior Indebtedness or Significant Senior Indebtedness beyond
any applicable grace period with respect thereto.
"Payment Restriction" means, with respect to a sub-
sidiary of any person, any encumbrance, restriction or limita-
tion, whether by operation of the terms of its charter or by
reason of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation, on the ability of
(i) such subsidiary to (a) pay dividends or make other distri-
butions on its Capital Stock or make payments on any obliga-
tion, liability or Indebtedness owed to such person or any
other subsidiary of such person, (b) make loans or advances to
such person or any other subsidiary of such person, or
(c) transfer any of its properties or assets to such person or
any other subsidiary of such person, or (ii) such person or any
other subsidiary of such person to receive or retain any such
(a) dividends, distributions or payments, (b) loans or
advances, or (c) transfer of properties or assets.
<PAGE> 26
-17-
"Permitted Holder" means (i) Food 4 Less Equity Part-
ners, L.P., The Yucaipa Companies or any entity controlled
thereby or any of the partners thereof, (ii) Apollo Advisors,
L.P., Lion Advisors, L.P. or any entity controlled thereby or
any of the partners thereof, (iii) an employee benefit plan of
the Company, or any participant therein or any of its subsid-
iaries, (iv) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
subsidiaries or (v) any Permitted Transferee of any of the
foregoing persons.
"Permitted Indebtedness" means (a) Indebtedness of
the Company and its Subsidiaries pursuant to (i) the Term Loans
in an aggregate principal amount at any time outstanding not to
exceed $750 million, less the aggregate amount of all principal
repayments thereunder pursuant to and in accordance with the
requirements of Section 5.16 subsequent to the Issue Date, and
(ii) the revolving credit facility under the Credit Agreement
(and the Company and each Subsidiary (to the extent it is not
an obligor) may guarantee such Indebtedness) in an aggregate
principal amount at any time outstanding not to exceed $325
million, less all permanent reductions thereunder pursuant to
and in accordance with the requirements of Section 5.16, (b)
Indebtedness of the Company or a Subsidiary Guarantor owed to
and held by the Company or a Subsidiary Guarantor, (c) Indebt-
edness incurred by the Company or any Subsidiary in connection
with the purchase or improvement of property (real or personal)
or equipment or other capital expenditures in the ordinary
course of business (including for the purchase of assets or
stock of any retail grocery store or business) or consisting of
Capitalized Lease Obligations, provided that (i) at the time of
the incurrence thereof, such Indebtedness, together with any
other Indebtedness incurred during the most recently completed
four fiscal quarter period in reliance upon this clause (c)
does not exceed, in the aggregate, 3% of net sales of the Com-
pany and its Subsidiaries during the most recently completed
four fiscal quarter period on a consolidated basis (calculated
on a pro forma basis if the date of incurrence is prior to the
first anniversary of the Merger) and (ii) such Indebtedness,
together with all then outstanding Indebtedness incurred in
reliance upon this clause (c) does not exceed, in the aggre-
gate, 3% of the aggregate net sales of the Company and its Sub-
sidiaries during the most recently completed twelve fiscal
quarter period on a consolidated basis (calculated on a pro
forma basis if the date of incurrence is prior to the third
anniversary of the Merger); (d) Indebtedness incurred by the
Company or any Subsidiary in connection with capital
<PAGE> 27
-18-
expenditures in an aggregate principal amount not exceeding $150
million, provided that such capital expenditures relate solely to
the integration of the operations of RSI, the Company and their
respective subsidiaries as described in the Prospectus; (e)
Indebtedness of the Company incurred under Foreign Exchange
Agreements and Interest Swap Obligations entered into with
respect to Indebtedness in a notional amount not exceeding the
aggregate principal amount of Indebtedness outstanding or com-
mitted under the Credit Agreement at the date of such incur-
rence and otherwise permitted to be outstanding pursuant to
Section 5.12; (f) guarantees incurred in the ordinary course of
business, by the Company or a Subsidiary, of Indebtedness of
any other person in the aggregate not to exceed $25 million at
any time outstanding; (g) guarantees by the Company or a Sub-
sidiary Guarantor of Indebtedness incurred by a wholly-owned
Subsidiary Guarantor so long as the incurrence of such Indebt-
edness incurred by such wholly-owned Subsidiary Guarantor is
permitted under the terms of this Indenture; (h) Refinancing
Indebtedness; (i) Indebtedness for letters of credit relating
to workers' compensation claims and self-insurance or similar
requirements in the ordinary course of business; (j) other
Indebtedness outstanding on the Issue Date (after giving effect
to the Merger); (k) Indebtedness arising from guarantees of
Indebtedness of the Company or any Subsidiary or other agree-
ments of the Company or a Subsidiary providing for indemnifica-
tion, adjustment of purchase price or similar obligations, in
each case, incurred or assumed in connection with the disposi-
tion of any business, assets or Subsidiary, other than guaran-
tees of Indebtedness incurred by any person acquiring all or
any portion of such business, assets or Subsidiary for the pur-
pose of financing such acquisition; provided that the maximum
assumable liability in respect of all such Indebtedness shall
at no time exceed the gross proceeds actually received by the
Company and its Subsidiaries in connection with such disposi-
tion; (l) obligations in respect of performance bonds and com-
pletion guarantees provided by the Company or any Subsidiary in
the ordinary course of business; and (m) additional Indebted-
ness of the Company and the Subsidiary Guarantors in an amount
not to exceed $200 million at any time outstanding.
"Permitted Investment" by any person means (i) any
Related Business Investment, (ii) Investments in securities not
constituting cash or Cash Equivalents and received in connec-
tion with an Asset Sale made pursuant to Section 5.16 or any
other disposition of assets not constituting an Asset Sale by
reason of the $500,000 threshold contained in the definition
thereof, (iii) cash and Cash Equivalents, (iv) Investments
<PAGE> 28
-19-
existing on the Issue Date, (v) Investments specifically per-
mitted by and made in accordance with Section 5.11, (vi)
Investments by Subsidiary Guarantors in other Subsidiary Guar-
antors and Investments by Subsidiaries which are not Subsidiary
Guarantors in other Subsidiaries which are not Subsidiary Guar-
antors and (vii) additional Investments in an aggregate amount
not exceeding $5 million.
"Permitted Liens" shall mean (i) Liens for taxes,
assessments, and governmental charges or claims not yet due or
which are being contested in good faith by appropriate proceed-
ings promptly instituted and diligently conducted and if a
reserve or other appropriate provision, if any, as shall be
required in conformity wity GAAP shall have been made thereof;
(ii) statutory Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen, or other like
Liens arising in the ordinary course of business, deposits made
to obtain the release of such Liens, and with respect to
amounts not yet delinquent for a period of more than 60 days or
being contested in good faith by appropriate process of law,
and for which a reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been made; (iii) Liens
incurred or pledges or deposits made in the ordinary course of
business to secure obligations under workers' compensation,
unemployment insurance and other types of social security or
similar legislation; (iv) Liens incurred or deposits made to
secure the performance of tenders, bids, leases, statutory
obligations, surety and appeal bonds, government contracts,
performance and return of money bonds and other obligations of
a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money);
(v) easements, rights-of-way, zoning or other restrictions,
minor defects or irregularities in title and other similar
charges or encumbrances not interfering in any material respect
with the business of the Company or any of its Subsidiaries
incurred in the ordinary course of business; (vi) Liens upon
specific items of inventory or other goods and proceeds of any
person securing such person's obligations in respect of bank-
ers' acceptances issued or created for the account of such per-
son to facilitate the purchase, shipment or storage of such
inventory or other goods in the ordinary course of business;
(vii) Liens securing reimbursement obligations with respect to
letters of credit which encumber documents and other property
relating to such letters of credit and the products and pro-
ceeds thereof; (viii) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of
nondelinquent customs duties in connection with the importation
<PAGE> 29
-20-
of goods; (ix) judgment and attachment Liens not giving rise to
a Default or Event of Default; (x) leases or subleases granted
to others not interfering in any material respect with the
business of the Company or any Subsidiary; (xi) Liens encumber-
ing customary initial deposits and margin deposits, and other
Liens incurred in the ordinary course of business that are
within the general parameters customary in the industry, in
each case securing Indebtedness under Interest Swap Obligations
and Foreign Exchange Agreements and forward contracts, option
futures contracts, futures options or similar agreements or
arrangements designed to protect the Company or any Subsidiary
from fluctuations in the price of commodities; (xii) Liens
encumbering deposits made in the ordinary course of business to
secure nondelinquent obligations arising from statutory, regu-
latory, contractual or warranty requirements of the Company or
its Subsidiaries for which a reserve or other appropriate pro-
vision, if any, as shall be required by GAAP shall have been
made; (xiii) Liens arising out of consignment or similar
arrangements for the sale of goods entered into by the Company
or any Subsidiary in the ordinary course of business in accor-
dance with past practices; (xiv) any interest or title of a
lessor in the property subject to any lease, whether character-
ized as capitalized or operating other than any such interest
or title resulting from or arising out of a default by the Com-
pany or any Subsidiary of its obligations under such lease;
(xv) Liens arising from filing UCC financing statements for
precautionary purposes in connection with true leases of per-
sonal property that are otherwise permitted under this Inden-
ture and under which the Company or any Subsidiary is lessee;
(xvi) Liens on assets of the Company securing Indebtedness
which would constitute Senior Indebtedness but for the provi-
sions of clause (c) in the third sentence of the definition of
"Senior Indebtedness" and Liens on assets of a Subsidiary Guar-
antor securing Indebtedness which would constitute Guarantor
Senior Indebtedness but for the provisions of clause (c) in the
third sentence of the definition of "Guarantor Senior Indebted-
ness"; and (xvii) additional Liens securing Indebtedness in an
aggregate principal amount at any one time outstanding not
exceeding the sum of (i) $25 million and (ii) 10% of the
aggregate Consolidated Net Income of the Company earned subse-
quent to the Issue Date and on or prior to such time.
"Permitted Payments" means (i) any payment by the
Company or any Subsidiary to The Yucaipa Companies or the prin-
cipals or any Affiliates thereof for consulting, management,
investment banking or similar advisory services pursuant to
that certain Consulting Agreement, dated as of the Issue Date,
<PAGE> 30
-21-
between the Company, New Holdings and The Yucaipa Companies,
(as such Consulting Agreement may be amended or replaced, so
long as any amounts paid under any amended or replacement
agreement do not exceed the amounts payable under such Consult-
ing Agreement as in effect on the Issue Date), (ii) any payment
by the Company or any Subsidiary pursuant to the Amended and
Restated Tax Sharing Agreement, dated as of June 17, 1991,
between the Company and certain Subsidiaries, as such Tax Shar-
ing Agreement may be amended from time to time, so long as the
payment thereunder by the Company and its Subsidiaries shall
not exceed the amount of taxes the Company would be required to
pay if it were the filing person for all applicable taxes,
(iii) any payment by the Company or any Subsidiary pursuant to
the Transfer and Assumption Agreement, dated as of June 23,
1989, between the Company and Holdings, as in effect on the
Issue Date, (iv) any payment by the Company or any Subsidiary
(a) in connection with repurchases of outstanding shares of the
Company's or New Holding's Common Stock following the death,
disability or termination of employment of management stock-
holders, and (b) of amounts required to be paid by New Hold-
ings, the Company or any of its Subsidiaries to participants in
employee benefit plans upon termination of employment by such
participants, as provided in the documents related thereto, in
an aggregate amount (for both clauses (a) and (b)) not to
exceed $10 million in any Yearly Period (provided that any
unused amounts may be carried over to any subsequent Yearly
Period subject to a maximum amount of $20 million in any Yearly
Period), (v) from and after June 30, 1998, payments of cash
dividends to New Holdings in an amount sufficient to enable New
Holdings to make payments of interest required to be made in
respect of the Holdings Discount Notes in accordance with the
terms thereof in effect on the Issue Date, (vi) from and after
February , 2000, payments of cash dividends to New Holdings
in an amount sufficient to enable New Holdings to make payments
of interest required to be made in respect of the Seller Deben-
tures in accordance with the terms thereof in effect on the
Issue Date and (vii) dividends or other payments to New Hold-
ings sufficient to enable New Holdings to perform accounting,
legal, corporate reporting and administrative functions in the
ordinary course of business or to pay required fees and
expenses in connection with the Merger, the FFL Merger, the
Reincorporation Merger and the registration under applicable
laws and regulations of its debt or equity securities.
"Permitted Subordinated Reorganization Securities"
means securities of the Company issued in a plan of reorganiza-
tion in a case under the Bankruptcy Law relating to the Company
<PAGE> 31
-22-
which constitutes either (y) Capital Stock (other than Disqual-
ified Capital Stock with the reference to "Maturity Date" in
the definition of such term modified to relate to the final
stated maturity of any debt securities issued in such plan of
reorganization to the holders of Designated Senior Indebtedness
("Senior Reorganization Securities")) or (z) debt securities of
the Company which (i) are unsecured, (ii) have no scheduled
mandatory amortization thereon prior to the final stated matur-
ity of the Senior Reorganization Securities and (iii) are sub-
ordinated in right of payment to the Senior Reorganization
Securities to at least the same extent as the Securities are
subordinated to Designated Senior Indebtedness.
"Permitted Transferees" means, with respect to any
person, (i) any Affiliate of such person, (ii) the heirs, exec-
utors, administrators, testamentary trustees, legatees or bene-
ficiaries of any such person, (iii) a trust, the beneficiaries
of which, or a corporation or partnership, the stockholders or
general or limited partners of which, include only such person
or his or her spouse or lineal descendants, in each case to
whom such person has transferred the beneficial ownership of
any securities of the Company, (iv) any investment account
whose investment managers and investment advisors consist
solely of such person and/or Permitted Transferees of such per-
son and (v) any investment fund or investment entity that is a
subsidiary of such person or a Permitted Transferee of such
person.
"person" means any individual, corporation, partner-
ship, joint venture, association, joint-stock company, trust,
unincorporated organization or government or other agency or
political subdivision thereof.
"Plan of Liquidation" means, with respect to any per-
son, a plan that provides for, contemplates or the effectuation
of which is preceded or accompanied by (whether or not substan-
tially contemporaneously, in phases or otherwise) (i) the sale,
lease, conveyance or other disposition of all or substantially
all of the assets of such person otherwise than as an entirety
or substantially as an entirety and (ii) the distribution of
all or substantially all of the proceeds of such sale, lease,
conveyance or other disposition and all or substantially all of
the remaining assets of such person to holders of Capital Stock
of such person.
"Preferred Stock" means, with respect to any person,
Capital Stock of any class or classes (however designated)
<PAGE> 32
-23-
which is preferred as to the payment of dividends or distribu-
tions, or as to the distribution of assets upon any voluntary
or involuntary liquidation or dissolution of such person, over
shares of Capital Stock of any other class of such person.
"principal" of any Indebtedness (including the Secu-
rities) means the principal of such Indebtedness plus the pre-
mium, if any, on such Indebtedness.
"pro forma" means, with respect to any calculation
made or required to be made pursuant to the terms of this
Indenture, a calculation in accordance with Article 11 of Regu-
lation S-X under the Securities Act of 1933, as amended, as
interpreted by the Company's chief financial officer or Board
of Directors in consultation with its independent certified
public accountants.
"Qualified Capital Stock" means, with respect to any
person, any Capital Stock of such person that is not Disquali-
fied Capital Stock.
"Record Date" means the Record Dates specified in the
Securities; provided that if any such date is a Legal Holiday,
the Record Date shall be the first day immediately preceding
such specified day that is not a Legal Holiday.
"Redemption Date," when used with respect to any
Security to be redeemed, means the date fixed for such redemp-
tion pursuant to this Indenture and Paragraph 5 of the Securi-
ties annexed hereto as Exhibit A.
"Redemption Price," when used with respect to any
Security to be redeemed, means the price fixed for such redemp-
tion pursuant to this Indenture and Paragraph 5 of the Securi-
ties annexed hereto as Exhibit A.
"Reference Date" shall have the meaning provided in
Section 5.03.
"Reference Period" shall have the meaning provided in
the definition of "Operating Coverage Ratio" contained in this
Section 1.01.
"Refinancing Indebtedness" means, with respect to any
person, Indebtedness of such person issued in exchange for, or
the proceeds from the issuance and sale or disbursement of
which are used to substantially concurrently repay, redeem,
<PAGE> 33
-24-
refund, refinance, discharge or otherwise retire for value, in
whole or in part (collectively, "repay"), or constituting an
amendment, modification or supplement to, or a deferral or
renewal of (collectively, an "amendment"), any Indebtedness of
such person existing on the Issue Date or Indebtedness (other
than Permitted Indebtedness, except Permitted Indebtedness
incurred pursuant to clauses (a), (c), (d), (h) and (j) of the
definition thereof) incurred in accordance with this Indenture
(a) in a principal amount (or, if such Refinancing Indebtedness
provides for an amount less than the principal amount thereof
to be due and payable upon the acceleration thereof, with an
original issue price) not in excess of (without duplication)
(i) the principal amount or the original issue price, as the
case may be, of the Indebtedness so refinanced (or, if such
Refinancing Indebtedness refinances Indebtedness under a
revolving credit facility or other agreement providing a com-
mitment for subsequent borrowings, with a maximum commitment
not to exceed the maximum commitment under such revolving
credit facility or other agreement) plus (ii) unpaid accrued
interest on such Indebtedness plus (iii) premiums, penalties,
fees and expenses actually incurred by such person in connec-
tion with the repayment or amendment thereof and (b) with
respect to Refinancing Indebtedness that repays or constitutes
an amendment to Subordinated Indebtedness, such Refinancing
Indebtedness (x) shall not have any fixed mandatory redemption
or sinking fund requirement in an amount greater than or at a
time prior to the amounts and times specified in such repaid or
amended Subordinated Indebtedness, except to the extent that
any such requirement applies on a date after the Maturity Date
and (y) shall contain subordination and default provisions no
less favorable in any material respect to Holders than those
contained in such repaid or amended Subordinated Indebtedness.
"Registrar" shall have the meaning provided in
Section 2.03.
"Reincorporation Merger" means the merger, prior to
the Merger of Holdings with and into New Holdings.
"Related Business Investment" means (i) any Invest-
ment by a person in any other person a majority of whose reve-
nues are derived from the operation of one or more retail gro-
cery stores or supermarkets or any other line of business
engaged in by the Company or any of its Subsidiaries as of the
Issue Date; (ii) any Investment by such person in any coopera-
tive or other supplier, including, without limitation, any
joint venture which is intended to supply any product or
<PAGE> 34
-25-
service useful to the business of the Company and its
Subsidiaries as it is conducted as of the Issue Date and as such
business may thereafter evolve or change; and (iii) any capital
expenditure or Investment (without regard to the $5 million
threshold in the definition thereof), in each case reasonably
related to the business of the Company and its Subsidiaries as it
is conducted as of the Issue Date and as such business may
thereafter evolve or change.
"Representative" means the indenture trustee or other
trustee, agent or representative for any Senior Indebtedness;
provided that in no event shall United States Trust Company of
New York, in its capacities as Trustee, Registrar, co-Registrar
or Paying Agent, serve as Representative.
"Restricted Debt Prepayment" means any purchase,
redemption, defeasance (including, but not limited to,
in-substance or legal defeasance) or other acquisition or
retirement for value, directly or indirectly, by the Company or
a Subsidiary, prior to the scheduled maturity or prior to any
scheduled repayment of principal or sinking fund payment, as
the case may be, in respect of Subordinated Indebtedness.
"Restricted Payment" means any (i) Stock Payment,
(ii) Investment (other than a Permitted Investment) or
(iii) Restricted Debt Prepayment.
"RSI" means Ralphs Supermarkets, Inc., a Delaware
corporation.
"Securities" means the Company's 13.75% Senior Subor-
dinated Notes due 2005, as amended or supplemented from time to
time in accordance with the terms hereof, that are issued pur-
suant to this Indenture.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission pro-
mulgated thereunder.
"Seller Debentures" means the 13% Senior Subordinated
Pay-in-Kind Debentures of New Holdings, as the same may be mod-
ified or amended from time to time, and future refinancings
thereof.
"Senior F4L Notes" means (i) the % (subject to
adjustment) Senior Notes due 2004 of the Company to be issued
on the Merger Date and (ii) the 10.45% Senior Notes due 2000 of
the Company.
<PAGE> 35
-26-
"Senior Indebtedness" means the principal of, pre-
mium, if any, and interest on any Indebtedness of the Company,
whether outstanding on the Issue Date or thereafter created,
incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides
that such Indebtedness shall not be senior in right of payment
to the Securities. Without limiting the generality of the
foregoing, "Senior Indebtedness" shall include (x) the princi-
pal of, premium, if any, and interest on all obligations of
every nature of the Company from time to time owed to the lend-
ers under the Credit Agreement, including, without limitation,
the Letter of Credit Obligations and principal of and interest
on and all fees, indemnities, and expenses payable under the
Credit Agreement and (y) interest accruing thereon subsequent
to the occurrence of any Event of Default specified in clause
(vi) or (vii) of Section 7.01 relating to the Company, whether
or not the claim for such interest is allowed under any appli-
cable Bankruptcy Code. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (a) Indebtedness evidenced by
the Securities, (b) Indebtedness that is expressly subordinate
or junior in right of payment to any Indebtedness of the Com-
pany, (c) Indebtedness which, when incurred and without respect
to any election under Section 1111(b) of Title 11, United
States Code, is without recourse to the Company, (d) Indebted-
ness which is represented by Disqualified Capital Stock, (e)
obligations for goods, materials or services purchased in the
ordinary course of business or obligations consisting of trade
payables, (f) Indebtedness of or amounts owed by the Company
for compensation to employees or for services rendered to the
Company, (g) any liability for federal, state, local or other
taxes owed or owing by the Company, (h) Indebtedness of the
Company to a Subsidiary of the Company, and (i) that portion of
any Indebtedness which is incurred by the Company in violation
of this Indenture.
"Significant Senior Indebtedness" means Senior
Indebtedness which, at the time of determination, is equal to
or greater than $50 million in aggregate principal amount.
"Significant Stockholder" means, with respect to any
person, any other person who is the beneficial owner (within
the meaning of Rule 13d-3 under the Exchange Act) of more than
10% of any class of equity securities of such person that are
entitled to vote on a regular basis for the election of direc-
tors of such person.
<PAGE> 36
-27-
"Significant Subsidiary" means each subsidiary of the
Company that is either (a) a "significant subsidiary" as
defined in Rule 1-02(v) of Regulation S-X under the Securities
Act and the Exchange Act (as such regulation is in effect on
the date hereof) or (b) material to the financial condition or
results of operations of the Company and its Subsidiaries taken
as a whole.
"Stock Payment" means, with respect to any person,
(a) the declaration or payment by such person, either in cash
or in property, of any dividend on (except, in the case of the
Company, dividends payable solely in Qualified Capital Stock of
the Company), or the making by such person or any of its sub-
sidiaries of any other distribution in respect of, such per-
son's Qualified Capital Stock or any warrants, rights or
options to purchase or acquire shares of any class of such Cap-
ital Stock (other than exchangeable or convertible Indebtedness
of such person), or (b) the redemption, repurchase, retirement
or other acquisition for value by such person or any of its
subsidiaries, directly or indirectly, of such person's Quali-
fied Capital Stock (and, in the case of a Subsidiary, Qualified
Capital Stock of the Company) or any warrants, rights or
options to purchase or acquire shares of any class of such Cap-
ital Stock (other than exchangeable or convertible Indebtedness
of such person), other than, in the case of the Company,
through the issuance in exchange therefor solely of Qualified
Capital Stock of the Company; provided, however, that in the
case of a Subsidiary, the term "Stock Payment" shall not
include any such payment with respect to its Capital Stock or
warrants, rights or options to purchase or acquire shares of
any class of its Capital Stock that are owned solely by the
Company or a wholly owned Subsidiary.
"Subordinated Indebtedness" means, with respect to
the Company or any Subsidiary Guarantor, Indebtedness of such
person which is subordinated in right of payment to the
Securities or the Guarantee of such Subsidiary Guarantor, as
the case may be.
"subsidiary" of any person means (i) a corporation a
majority of whose Capital Stock with voting power, under ordi-
nary circumstances, to elect directors is, at the date of
determination, directly or indirectly, owned by such person, by
one or more subsidiaries of such person or by such person and
one or more subsidiaries of such person or (ii) a partnership
in which such person or a subsidiary of such person is, at the
date of determination, a general partner of such partnership,
<PAGE> 37
-28-
but only if such person or its subsidiary is entitled to
receive more than fifty percent of the assets of such partner-
ship upon its dissolution, or (iii) any other person (other
than a corporation or a partnership) in which such person, a
subsidiary of such person or such person and one or more sub-
sidiaries of such person, directly or indirectly, at the date
of determination, has (x) at least a majority ownership inter-
est or (y) the power to elect or direct the election of a
majority of the directors or other governing body of such
person.
"Subsidiary" means any subsidiary of the Company.
"Subsidiary Guarantor" means (i) each of Alpha Beta
Company, Bay Area Warehouse Stores, Inc., Bell Markets, Inc.,
Cala Co., Cala Foods, Inc., Falley's Inc., Food 4 Less of Cali-
fornia, Inc., Food 4 Less Merchandising, Inc., Food 4 Less GM,
Inc. and Food 4 Less of Southern California, Inc., (ii) upon
consummation of the Merger, Crawford Stores, Inc., (iii) each
of the Company's Subsidiaries which becomes a guarantor of the
Securities in compliance with the provisions set forth in Sec-
tion 5.17, and (iv) each of the Company's Subsidiaries execut-
ing a supplemental indenture in which such Subsidiary agrees to
be bound by the terms of this Indenture.
"Term Loans" means the term loan facility under the
Credit Agreement.
"The Yucaipa Companies" means The Yucaipa Companies,
a California general partnership.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.
Code Secs. 77aaa-77bbbb), as amended, as in effect on the date of
the execution of this Indenture until such time as this Inden-
ture is qualified under the TIA, and thereafter as in effect on
the date on which this Indenture is qualified under the TIA,
except as otherwise provided in Section 10.03.
"Transaction Date" shall have the meaning provided in
the definition of "Operating Coverage Ratio" contained in this
Section 1.01.
"Trustee" means the party named as such in this
Indenture until a successor replaces it in accordance with the
provisions of this Indenture and thereafter means such
successor.
<PAGE> 38
-29-
"Trust Officer" means any officer of the Trustee
assigned by the Trustee to administer its corporate trust
matters.
"U.S. Government Obligations" shall have the meaning
provided in Section 9.02.
"U.S. Legal Tender" means such coin or currency of
the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts.
"Yearly Period" means each fiscal year of the Com-
pany; provided that the first Yearly Period shall begin on the
Issue Date and shall end on January 28, 1996.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the
TIA, such provision is incorporated by reference in, and made a
part of, this Indenture. The following TIA terms used in this
Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or a
Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the indenture securities means the Com-
pany, any Subsidiary Guarantor, or any other obligor on the
Securities or the Guarantees.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute
or defined by SEC rule and not otherwise defined herein have
the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
<PAGE> 39
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(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and
words in the plural include the singular;
(5) provisions apply to successive events and trans
actions; and
(6) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Securities, the notation thereon relating to the
Guarantee and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A. The Securities may
have notations, legends or endorsements required by law, stock
exchange rule or usage. The Company and the Trustee shall
approve the form of the Securities and any notation, legend or
endorsement on them. Each Security shall be dated the date of
its authentication.
The terms and provisions contained in the Securities
and the Guarantee shall constitute, and are hereby expressly
made, a part of this Indenture and, to the extent applicable,
the Company and the Trustee, by their execution and delivery of
this Indenture, expressly agree to such terms and provisions
and to be bound thereby.
SECTION 2.02. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secre-
tary, shall sign, or one Officer shall sign and one Officer or
an Assistant Secretary (each of whom shall, in each case, have
been duly authorized by all requisite corporate actions) shall
<PAGE> 40
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attest to, the Securities for the Company by manual or fac-
simile signature. Each Subsidiary Guarantor shall execute the
Guarantee in the manner set forth in Section 11.09.
If an Officer whose signature is on a Security was an
Officer at the time of such execution but no longer holds that
office at the time the Trustee authenticates the Security, the
Security shall be valid nevertheless.
A Security shall not be valid until an authorized
signatory of the Trustee manually signs the certificate of
authentication on the Security. The signature shall be conclu-
sive evidence that the Security has been authenticated under
this Indenture.
The Trustee shall authenticate Securities for origi-
nal issue in the aggregate principal amount of up to
$145,000,000 upon a written order of the Company in the form of
an Officers' Certificate. The Officers' Certificate shall
specify the amount of Securities to be authenticated and the
date on which the Securities are to be authenticated. The
aggregate principal amount of Securities outstanding at any
time may not exceed $145,000,000, except as provided in Section
2.07. Upon the written order of the Company in the form of an
Officers' Certificate, the Trustee shall authenticate Securi-
ties in substitution of Securities originally issued to reflect
any name change of the Company.
The Trustee may appoint an authenticating agent rea-
sonably acceptable to the Company to authenticate Securities.
Unless otherwise provided in the appointment, an authenticating
agent may authenticate Securities whenever the Trustee may do
so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal
with the Company and Affiliates of the Company.
The Securities shall be issuable only in registered
form without coupons in denominations of $1,000 and integral
multiples thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency in the
Borough of Manhattan, The City of New York, where (a) Secu-
rities may be presented or surrendered for registration of
transfer or for exchange ("Registrar"), (b) Securities may be
<PAGE> 41
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presented or surrendered for payment ("Paying Agent") and
(c) notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served. The Company
may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surren-
dered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such des-
ignation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Bor-
ough of Manhattan, The City of New York, for such purposes.
The Company may act as its own Registrar or Paying Agent except
that for the purposes of Articles Three and Nine and Sections
5.15 and 5.16, neither the Company nor any Affiliate of the
Company shall act as Paying Agent. The Registrar shall keep a
register of the Securities and of their transfer and exchange.
The Company, upon notice to the Trustee, may have one or more
co-Registrars and one or more additional paying agents reason-
ably acceptable to the Trustee. The term "Paying Agent"
includes any additional paying agent. The Company initially
appoints the Trustee as Registrar and Paying Agent until such
time as the Trustee has resigned or a successor has been
appointed.
The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which
agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee, in
advance, of the name and address of any such Agent. If the
Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such.
SECTION 2.04. Paying Agent to Hold Assets in Trust.
The Company shall require each Paying Agent other
than the Trustee to agree in writing that, subject to Article
Four and Article Twelve, each Paying Agent shall hold in trust
for the benefit of Holders or the Trustee all assets held by
the Paying Agent for the payment of principal of, or interest
on, the Securities (whether such assets have been distributed
to it by the Company or any other obligor on the Securities),
and shall notify the Trustee of any Default by the Company (or
any other obligor on the Securities) in making any such pay-
ment. If the Company or a Subsidiary acts as Paying Agent, it
shall segregate such assets and hold them as a separate trust
fund, subject to Article Four and Article Twelve. The Company
at any time may require a Paying Agent to distribute all assets
held by it to the Trustee and account for any assets disbursed
<PAGE> 42
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and the Trustee may at any time during the continuance of any
payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it
to the Trustee and to account for any assets distributed. Upon
distribution to the Trustee of all assets that shall have been
delivered by the Company to the Paying Agent, the Paying Agent
shall have no further liability for such assets.
SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of Holders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee on or
before each Interest Payment Date and at such other times as
the Trustee may request in writing a list in such form and as
of such date as the Trustee may reasonably require of the names
and addresses of Holders, which list may be conclusively relied
upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
When Securities are presented to the Registrar or a
co-Registrar with a request to register the transfer of such
Securities or to exchange such Securities for an equal princi-
pal amount of Securities of other authorized denominations, the
Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transac-
tion are met; provided, however, that the Securities surren-
dered for transfer or exchange shall be duly endorsed or accom-
panied by a written instrument of transfer in form satisfactory
to the Company and the Registrar or co-Registrar, duly executed
by the Holder thereof or his attorney duly authorized in writ-
ing. To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Secu-
rities at the Registrar's or co-Registrar's request. No ser-
vice charge shall be made for any registration of transfer or
exchange, but the Company may require payment of a sum suffi-
cient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer
taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Sections 2.02, 2.07, 2.10, 3.06, 5.15,
5.16 or 10.05). The Registrar or co-Registrar shall not be
required to register the transfer of or exchange of any Secu-
rity (i) during a period beginning at the opening of business
15 days before the mailing of a notice of redemption of Securi-
ties and ending at the close of business on the day of such
<PAGE> 43
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mailing and (ii) selected for redemption in whole or in part
pursuant to Article Three, except the unredeemed portion of any
Security being redeemed in part.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee
or if the Holder of a Security claims that the Security has
been lost, destroyed or wrongfully taken, the Company shall
issue and the Trustee shall authenticate a replacement Security
if the Trustee's requirements are met. If required by the
Trustee or the Company, such Holder must provide an indemnity
bond or other indemnity, sufficient in the judgment of both the
Company and the Trustee, to protect the Company, the Trustee or
any Agent from any loss which any of them may suffer if a Secu-
rity is replaced. The Company may charge such Holder for its
reasonable, out-of-pocket expenses in replacing a Security,
including reasonable fees and expenses of counsel.
Every replacement Security is an additional obliga-
tion of the Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Secu-
rities that have been authenticated by the Trustee except those
cancelled by it, those delivered to it for cancellation and
those described in this Section as not outstanding. A Security
does not cease to be outstanding because the Company, the Sub-
sidiary Guarantors or any of their respective Affiliates holds
the Security.
If a Security is replaced pursuant to Section 2.07
(other than a mutilated Security surrendered for replacement),
it ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced Security is held by a bona
fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursu-
ant to Section 2.07.
If on a Redemption Date or the Maturity Date the Pay-
ing Agent (other than the Company or a Subsidiary) holds U.S.
Legal Tender or U.S. Government Obligations sufficient to pay
all of the principal and interest due on the Securities payable
on that date, then on and after that date such Securities cease
to be outstanding and interest on them ceases to accrue unless,
pursuant to the provisions of Article Four and Article Twelve,
<PAGE> 44
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the Paying Agent is unable to make payments on the Securities
to the Holders thereof.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required
principal amount of Securities have concurred in any direction,
waiver or consent, Securities owned by the Company, the Subsid-
iary Guarantors or any of their respective Affiliates shall be
disregarded, except that, for the purposes of determining
whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities that the Trustee
knows or has reason to know are so owned shall be disregarded.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery,
the Company may prepare and the Trustee shall authenticate tem-
porary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations
that the Company considers appropriate for temporary Securi-
ties. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Securities in
exchange for temporary Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the
Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them
for transfer, exchange or payment. The Trustee, or at the
direction of the Trustee, the Registrar or the Paying Agent
(other than the Company or a Subsidiary), and no one else,
shall cancel and, at the written direction of the Company,
shall dispose of all Securities surrendered for transfer,
exchange, payment or cancellation. Subject to Section 2.07,
the Company may not issue new Securities to replace Securities
that it has paid or delivered to the Trustee for cancellation.
If the Company or any Subsidiary Guarantor shall acquire any of
the Securities, such acquisition shall not operate as a redemp-
tion or satisfaction of the Indebtedness represented by such
Securities unless and until the same are surrendered to the
Trustee for cancellation pursuant to this Section 2.11.
<PAGE> 45
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SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on
the Securities, it shall, unless the Trustee fixes another
record date pursuant to Section 7.10, pay the defaulted inter-
est, plus (to the extent lawful) any interest payable on the
defaulted interest, to the persons who are Holders on a subse-
quent special record date, which date shall be the fifteenth
day next preceding the date fixed by the Company for the pay-
ment of defaulted interest or the next succeeding Business Day
if such date is not a Business Day. At least 15 days before
the subsequent special record date, the Company shall mail to
each Holder, with a copy to the Trustee, a notice that states
the subsequent special record date, the payment date and the
amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP Number.
The Company in issuing the Securities may use a
"CUSIP" number, and if so, the Trustee shall use the CUSIP num-
ber in notices of redemption or exchange as a convenience to
Holders; provided that any such notice may state that no repre-
sentation is made as to the correctness or accuracy of the
CUSIP number printed in the notice or on the Securities, and
that reliance may be placed only on the other identification
numbers printed on the Securities.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant
to Paragraph 5 of the Securities, it shall notify the Trustee,
with a copy to the Credit Agent, of the Redemption Date and the
principal amount of Securities to be redeemed and whether it
wants the Trustee to give notice of redemption to the Holders
at least 30 days (unless a shorter notice shall be satisfactory
to the Trustee) but not more than 60 days before the Redemption
Date. Any such notice may be cancelled at any time prior to
notice of such redemption being mailed to any Holder and shall
thereby be void and of no effect.
<PAGE> 46
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SECTION 3.02. Selection of Securities to Be Redeemed.
If fewer than all of the Securities are to be
redeemed, the Trustee shall select the Securities to be
redeemed pro rata by lot or by any other method that the Trus-
tee considers fair and appropriate and, if such Securities are
listed on any securities exchange, by a method that complies
with the requirements of such exchange.
The Trustee shall make the selection from the Securi-
ties outstanding and not previously called for redemption and
shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Security
selected for partial redemption, the principal amount thereof
to be redeemed. Securities in denominations of $1,000 may be
redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or integral multiples thereof) of the
principal amount of Securities that have denominations larger
than $1,000. Provisions of this Indenture that apply to Secu-
rities called for redemption also apply to portions of Securi-
ties called for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a
Redemption Date, the Company shall mail a notice of redemption
by first class mail to each Holder whose Securities are to be
redeemed at such Holder's registered address, with a copy to
the Credit Agent. At the Company's request, the Trustee shall
give the notice of redemption in the Company's name and at the
Company's expense. Each notice for redemption shall identify
the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption
Price;
(5) that, unless (a) the Company defaults in making
the redemption payment or (b) such redemption payment is
prohibited pursuant to Article Four or Article Twelve
hereof or otherwise, interest on Securities called for
<PAGE> 47
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redemption ceases to accrue on and after the Redemption
Date, and the only remaining right of the Holders of such
Securities is to receive payment of the Redemption Price
upon surrender to the Paying Agent of the Securities
redeemed;
(6) if any Security is being redeemed in part, the
portion of the principal amount of such Security to be
redeemed and that, after the Redemption Date, and upon
surrender of such Security, a new Security or Securities
in aggregate principal amount equal to the unredeemed por-
tion thereof will be issued; and
(7) if fewer than all the Securities are to be
redeemed, the identification of the particular Securities
(or portion thereof) to be redeemed, as well as the aggre-
gate principal amount of Securities to be redeemed and the
aggregate principal amount of Securities to be outstanding
after such partial redemption.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance
with Section 3.03, Securities called for redemption become due
and payable on the Redemption Date and at the Redemption Price.
Upon surrender to the Trustee or Paying Agent, such Securities
called for redemption shall be paid at the Redemption Price
unless prohibited pursuant to Article Four or Article Twelve or
otherwise pursuant to this Indenture. Securities that are
redeemed by the Company or that are purchased by the Company
pursuant to a Net Proceeds Offer as described in Section 5.16
or pursuant to a Change of Control Offer as described in Sec-
tion 5.15 or that are otherwise acquired by the Company will be
surrendered to the Trustee for cancellation.
SECTION 3.05. Deposit of Redemption Price.
On or before the Redemption Date, the Company shall
deposit with the Paying Agent U.S. Legal Tender sufficient to
pay the Redemption Price of all Securities to be redeemed on
that date (other than Securities or portions thereof called for
redemption on that date which have been delivered by the Com-
pany to the Trustee for cancellation). The Paying Agent shall
promptly return to the Company any U.S. Legal Tender so depos-
ited which is not required for that purpose upon the written
request of the Company, except with respect to monies owed as
<PAGE> 48
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obligations to the Trustee pursuant to Article Eight and
Article Twelve hereof.
If the Company complies with the preceding paragraph
and payment of the Securities called for redemption is not pro-
hibited under Article Four or Article Twelve or otherwise,
then, unless the Company defaults in the payment of such
Redemption Price, interest on the Securities to be redeemed
will cease to accrue on and after the applicable Redemption
Date, whether or not such Securities are presented for payment.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed
in part, the Trustee shall authenticate for the Holder a new
Security or Securities equal in principal amount to the
unredeemed portion of the Security surrendered.
ARTICLE FOUR
SUBORDINATION
SECTION 4.01. Securities Subordinated to Senior Indebtedness.
Anything herein to the contrary notwithstanding, the
Company, for itself and its successors, and each Holder, by his
acceptance of Securities, agrees that the payment of the prin-
cipal of, premium, if any, and interest on the Securities is
subordinated, to the extent and in the manner provided in this
Article Four, to the prior payment in full in cash or Cash
Equivalents of all Senior Indebtedness.
This Article Four shall constitute a continuing offer
to all persons who become holders of, or continue to hold,
Senior Indebtedness, and such provisions are made for the bene-
fit of the holders of Senior Indebtedness and such holders are
made obligees hereunder and any one or more of them may enforce
such provisions.
SECTION 4.02. Suspension of Payment When Senior
Indebtedness in Default.
(a) Unless Section 4.03 shall be applicable, upon
(1) the occurrence of a Payment Default and (2) receipt by the
Trustee and the Company from the Representatives of written
<PAGE> 49
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notice of such occurrence, then no payment (other than payments
previously made pursuant to Article Nine hereof) or distribu-
tion of any assets of the Company of any kind or character
shall be made by the Company on account of principal of, pre-
mium, if any, or interest on the Securities or on account of
the purchase or redemption or other acquisition of Securities
unless and until such Payment Default shall have been cured or
waived or shall have ceased to exist or such Senior Indebted-
ness as to which such Payment Default relates shall have been
discharged or paid in full, after which the Company shall
resume making any and all required payments in respect of the
Securities, including any missed payments.
(b) Unless Section 4.03 shall be applicable, upon
(1) the occurrence of a Non-payment Default and (2) the earlier
of (i) receipt by the Trustee and the Company from the Senior
Representatives of written notice of such occurrence stating
that such notice is a "Payment Blockage Notice" pursuant to
Section 4.02(b) of this Indenture or (ii) if such Non-payment
Default results from the acceleration of the Securities, the
date of such acceleration, no payment (other than payments pre-
viously made pursuant to Article Nine hereof) or distribution
of any assets of the Company of any kind or character shall be
made by the Company on account of any principal of, premium, if
any, or interest on the Securities or on account of the pur-
chase or redemption or other acquisition of Securities for a
period ("Payment Blockage Period") commencing on the date of
receipt by the Trustee and the Company of the written notice of
a Non-payment Default from the Representative or the date of
the acceleration referred to in clause (ii) above, as the case
may be, unless and until the earlier to occur of the following
events: (w) 179 days shall have elapsed since receipt of such
notice or the date of the acceleration of the Securities, as
the case may be (provided such Designated Senior Indebtedness
shall theretofore not have been accelerated), (x) such Non-pay-
ment Default shall have been cured or waived or shall have
ceased to exist, (y) such Designated Senior Indebtedness shall
have been discharged or paid in full or (z) such Payment Block-
age Period shall have been terminated by written notice to the
Company or the Trustee from the Representative initiating such
Payment Blockage Period or the holders of at least a majority
in principal amount of such issue of Designated Senior Indebt-
edness initiating such Payment Blockage Period, after which, in
the case of clause (w), (x), (y) or (z), the Company shall
resume making any and all required payments in respect of the
Securities, including any missed payments. Notwithstanding any
other provision of this Indenture, only one Payment Blockage
<PAGE> 50
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Period may be commenced within any consecutive 365-day period
and no Non-payment Default with respect to Designated Senior
Indebtedness which existed or was continuing on the date of the
commencement of any Payment Blockage Period shall be, or shall
be made, the basis for the commencement of a second Payment
Blockage Period, whether or not within a period of 365 consecu-
tive days, unless such event of default shall have been cured
or waived for a period of not less than 90 consecutive days.
In no event shall a Payment Blockage Period extend beyond 179
days from the date of the receipt of the written notice by the
Trustee of a Non-payment Default or the date of the accelera-
tion initiating such Payment Blockage Period, as the case may
be.
(c) In the event that, notwithstanding the fore-
going, the Trustee or the Holder of any Security shall have
received any payment prohibited by the foregoing provisions of
this Section 4.02, then and in such event such payment shall be
paid over and delivered forthwith to the Representatives or as
a court of competent jurisdiction shall direct.
SECTION 4.03. Securities Subordinated to Prior Payment of
All Senior Indebtedness on Dissolution,
Liquidation or Reorganization of Company.
Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or
securities, upon any dissolution, winding-up, total or partial
liquidation or reorganization of the Company (including,
without limitation, in bankruptcy, insolvency or receivership
proceedings or upon any assignment for the benefit of creditors
or any other marshalling of assets and liabilities of the Com-
pany and whether voluntary or involuntary):
(a) the holders of all Senior Indebtedness shall
first be entitled to receive payments in full in cash or
Cash Equivalents of all amounts payable under Senior
Indebtedness (including, with respect to Designated Senior
Indebtedness, any interest accruing after the commencement
of any such proceeding at the rate specified in the appli-
cable Designated Senior Indebtedness whether or not inter-
est is an allowed claim enforceable against the Company in
any such proceeding) before the Holders will be entitled
to receive any payment with respect to the Securities
(excluding Permitted Subordinated Reorganization Securi-
ties), and until all Obligations with respect to the
<PAGE> 51
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Senior Indebtedness are paid in full in cash or Cash
Equivalents, any distribution to which the Holders would
be entitled (excluding Permitted Subordinated Reorganiza-
tion Securities) shall be made to the holders of Senior
Indebtedness; provided, however, that no payment on any
Guarantee shall constitute payment on behalf of the Com-
pany for purposes of this Section 4.03(a);
(b) any payment or distribution of assets of the
Company of any kind or character, whether in cash, prop-
erty or securities, to which the Holders or the Trustee on
behalf of the Holders would be entitled (excluding Permit-
ted Subordinated Reorganization Securities) except for the
provisions of this Article Four, shall be paid by the
liquidating trustee or agent or other person making such a
payment or distribution, directly to the holders of Senior
Indebtedness or their Representative, ratably according to
the respective amounts of Senior Indebtedness remaining
unpaid held or represented by each, until all Senior
Indebtedness remaining unpaid shall have been paid in full
in cash or Cash Equivalents after giving effect to any
concurrent payment or distribution to the holders of such
Senior Indebtedness; and
(c) in the event that, notwithstanding the fore-
going, any payment or distribution of assets of the Com-
pany of any kind or character, whether in cash, property
or securities, shall be received by the Trustee or the
Holders or any Paying Agent on account of principal of,
premium, if any, or interest on the Securities (excluding
Permitted Subordinated Reorganization Securities) before
all Senior Indebtedness is paid in full in cash or Cash
Equivalents, such payment or distribution (subject to the
provisions of Sections 4.06 and 4.07) shall be received,
segregated from other funds, and held in trust by the
Trustee or such Holder or Paying Agent for the benefit of,
and shall immediately be paid over to, the holders of
Senior Indebtedness or their Representative, ratably
according to the respective amounts of Senior Indebtedness
held or represented by each, until all Senior Indebtedness
remaining unpaid shall have been paid in full in cash or
Cash Equivalents, after giving effect to any concurrent
payment or distribution to or for the holders of Senior
Indebtedness. Notwithstanding anything to the contrary
contained herein, in the absence of its gross negligence
or wilful misconduct, the Trustee shall have no duty to
collect or retrieve monies previously paid by it in good
<PAGE> 52
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faith; provided that this sentence shall not affect the
obligation of any other party receiving such payment to
hold such payment for the benefit of, and to pay over such
payment over to, the holders of Senior Indebtedness or
their Representative.
The consolidation of the Company with, or the merger
of the Company with or into, another person or the liquidation
or dissolution of the Company following the conveyance, trans-
fer or lease of its properties and assets substantially as an
entirety to another person upon the terms and conditions set
forth in Article Six hereof shall not be deemed a dissolution,
winding-up, liquidation, reorganization, assignment for the
benefit of creditors or marshaling of assets and liabilities of
the Company for the purposes of this Article Four if the person
formed by such consolidation or the surviving entity of such
merger or the person which acquires by conveyance, transfer or
lease such properties and assets substantially as an entirety,
as the case may be, shall, as a part of such consolidation,
merger, conveyance, transfer or lease, comply with the condi-
tions set forth in such Article Six.
The Company shall give prompt notice to the Trustee
prior to any dissolution, winding-up, total or partial liquida-
tion or reorganization (including, without limitation, in bank-
ruptcy, insolvency, or receivership proceedings or upon any
assignment for the benefit of creditors or any other marshal-
ling of the Company's assets and liabilities).
SECTION 4.04. Securityholders to Be Subrogated to Rights
of Holders of Senior Indebtedness.
Subject to the payment in full in cash or Cash Equiv-
alents of all Senior Indebtedness, the Holders of Securities
shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of assets of
the Company applicable to the Senior Indebtedness until all
amounts owing on the Securities shall be paid in full in cash,
and for the purpose of such subrogation no payments or distri-
butions to the holders of Senior Indebtedness by or on behalf
of the Company, or by or on behalf of the Holders by virtue of
this Article Four, which otherwise would have been made to the
Holders, shall, as between the Company and the Holders, be
deemed to be payment by the Company to or on account of the
Senior Indebtedness, it being understood that the provisions of
this Article Four are and are intended solely for the purpose
of defining the relative rights of the Holders, on the one
<PAGE> 53
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hand, and the holders of Senior Indebtedness, on the other
hand.
If any payment or distribution to which the Holders
would otherwise have been entitled but for the provisions of
this Article Four shall have been applied, pursuant to the pro-
visions of this Article Four, to the payment of all amounts
payable under the Senior Indebtedness, then the Holders shall
be entitled to receive from the holders of such Senior Indebt-
edness any payments or distributions received by such holders
of Senior Indebtedness in excess of the amount sufficient to
pay all amounts payable under or in respect of the Senior
Indebtedness in full in cash or Cash Equivalents.
SECTION 4.05. Obligations of the Company Unconditional.
Nothing contained in this Article Four or elsewhere
in this Indenture or in the Securities is intended to or shall
impair, as between the Company and the Holders, the obligation
of the Company, which is absolute and unconditional, to pay to
the Holders the principal of and interest on the Securities as
and when the same shall become due and payable in accordance
with their terms, or is intended to or shall affect the rela-
tive rights of the Holders and creditors of the Company other
than the holders of the Senior Indebtedness, nor shall anything
herein or therein prevent the Trustee or any Holder from exer-
cising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any,
under this Article Four, of the holders of Senior Indebtedness
in respect of cash, property or securities of the Company
received upon the exercise of any such remedy. Upon any pay-
ment or distribution of assets or securities of the Company
referred to in this Article Four, the Trustee, subject to the
provisions of Sections 8.01 and 8.02, and the Holders shall be
entitled to rely upon any order or decree made by any court of
competent jurisdiction in which any dissolution, winding-up,
liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating
trustee or agent or other person making any payment or distri-
bution to the Trustee or to the Holders for the purpose of
ascertaining the persons entitled to participate in such pay-
ment or distribution, the holders of Senior Indebtedness and
other Indebtedness of the Company, the amount thereof or pay-
able thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article Four.
Nothing in this Section 4.05 shall apply to the claims of, or
payments to, the Trustee under or pursuant to Section 8.07.
<PAGE> 54
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SECTION 4.06. Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice.
The Trustee shall not at any time be charged with
knowledge of the existence of any facts that would prohibit the
making of any payment to or by the Trustee unless and until the
Trustee or any Paying Agent shall have received written notice
thereof from the Company or from one or more holders of Senior
Indebtedness or from any Representative therefor and, prior to
the receipt of any such notice, the Trustee, subject to the
provisions of Sections 8.01 and 8.02, shall be entitled in all
respects conclusively to assume that no such fact exists.
SECTION 4.07. Application by Trustee of Assets Deposited
with It.
U.S. Legal Tender or U.S. Government Obligations
deposited in trust with the Trustee pursuant to and in accor-
dance with Section 9.02 shall be for the sole benefit of
Securityholders and, to the extent allocated for the payment of
Securities, shall not be subject to the subordination provi-
sions of this Article Four. Otherwise, any deposit of assets
or securities by or on behalf of the Company with the Trustee
or any Paying Agent (whether or not in trust) for the payment
of principal of or interest on any Securities shall be subject
to the provisions of this Article Four; provided that if prior
to the second Business Day preceding the date on which by the
terms of this Indenture any such assets may become
distributable for any purpose (including, without limitation,
the payment of either principal of or interest on any Security)
the Trustee or such Paying Agent shall not have received with
respect to such assets the notice provided for in Section 4.06,
then the Trustee or such Paying Agent shall have full power and
authority to receive such assets and to apply the same to the
purpose for which they were received, and shall not be affected
by any notice to the contrary received by it on or after such
date; provided, further, that no payment on any Guarantee shall
constitute payment on behalf of the Company for purposes of
this Section 4.07. The foregoing shall not apply to the Paying
Agent if the Company or any Subsidiary or Affiliate of the Com-
pany is acting as Paying Agent. Nothing contained in this
Section 4.07 shall limit the right of the holders of Senior
Indebtedness to recover payments as contemplated by this
Article Four.
<PAGE> 55
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SECTION 4.08. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any
Senior Indebtedness to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any
non-compliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
(b) Without limiting the generality of subsection
(a) of this Section 4.08, the holders of Senior Indebtedness
may, at any time and from time to time, without the consent of
or notice to the Trustee or the Holders of the Securities,
without incurring responsibility to the Holders of the Securi-
ties and without impairing or releasing the subordination pro-
vided in this Article Four or the obligations hereunder of the
Holders of the Securities to the holders of Senior Indebted-
ness, do any one or more of the following: (1) change the man-
ner, place or terms of payment or extend the time of payment
of, or renew or alter, Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior Indebt-
edness is outstanding; (2) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (3) release any person liable in any man-
ner for the collection or payment of Senior Indebtedness; and
(4) exercise or refrain from exercising any rights against the
Company and any other person; provided, however, that in no
event shall any such actions limit the right of the Holders of
the Securities to take any action to accelerate the maturity of
the Securities pursuant to Article Seven hereof or to pursue
any rights or remedies hereunder or under applicable laws if
the taking of such action does not otherwise violate the terms
of this Indenture.
SECTION 4.09. Securityholders Authorize Trustee to
Effectuate Subordination of Securities.
Each Holder of the Securities by his acceptance
thereof authorizes and expressly directs the Trustee on his
behalf to take such action as may be necessary or appropriate
to effect the subordination provisions contained in this
Article Four, and appoints the Trustee his attorney-in-fact for
such purpose, including, in the event of any dissolution,
winding-up, liquidation or reorganization of the Company
(whether in bankruptcy, insolvency or receivership proceedings
<PAGE> 56
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or upon an assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company) tending
towards liquidation or reorganization of the business and
assets of the Company, the immediate filing of a claim for the
unpaid balance of its or his Securities in the form required in
said proceedings and cause said claim to be approved. If the
Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the
expiration of the time to file such claim or claims, then the
holders of the Senior Indebtedness or their Representative is
hereby authorized to file an appropriate claim for and on
behalf of the Holders of said Securities. Nothing herein con-
tained shall be deemed to authorize the Trustee or the holders
of Senior Indebtedness or their Representative to authorize or
consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composi-
tion affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee or the holders of Senior
Indebtedness or their Representative to vote in respect of the
claim of any Securityholder in any such proceeding.
SECTION 4.10. Right of Trustee to Hold Senior Indebtedness.
The Trustee shall be entitled to all of the rights
set forth in this Article Four in respect of any Senior Indebt-
edness at any time held by it to the same extent as any other
holder of Senior Indebtedness, and nothing in this Indenture
shall be construed to deprive the Trustee of any of its rights
as such holder.
SECTION 4.11. No Suspension of Remedies.
The failure to make a payment on account of principal
of or interest on the Securities by reason of any provision of
this Article Four shall not be construed as preventing the
occurrence of a Default or an Event of Default under Section
7.01.
Nothing contained in this Article Four shall limit
the right of the Trustee or the Holders of Securities to take
any action to accelerate the maturity of the Securities pursu-
ant to Article Seven or to pursue any rights or remedies here-
under or under applicable law, subject to the rights, if any,
under this Article Four of the holders, from time to time, of
Senior Indebtedness.
<PAGE> 57
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SECTION 4.12. No Fiduciary Duty of Trustee to Holders of
Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary
duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders (other than for its willful miscon-
duct or gross negligence) if it shall in good faith mistakenly
pay over or deliver to the Holders of Securities or the Company
or any other person, money or assets to which any holders of
Senior Indebtedness shall be entitled by virtue of this Article
Four or otherwise. Nothing in this Section 4.12 shall affect
the obligation of any person other than the Trustee to hold
such payment for the benefit of, and to pay such payment over
to, the holders of Senior Indebtedness or their Representative.
ARTICLE FIVE
COVENANTS
SECTION 5.01. Payment of Securities.
The Company shall pay the principal of and interest
on the Securities on the dates and in the manner provided in
the Securities. An installment of principal of or interest on
the Securities shall be considered paid on the date it is due
if the Trustee or Paying Agent (other than the Company or a
Subsidiary) holds on that date U.S. Legal Tender designated for
and sufficient to pay the installment; provided, however, that
U.S. Legal Tender held by the Trustee for the benefit of
holders of Senior Indebtedness or Guarantor Senior Indebtedness
or the payment of which to the Holders is prohibited pursuant
to the provisions of Article Four or Article Twelve hereof or
otherwise shall not be considered to be designated for the pay-
ment of any installment of principal or interest on the Securi-
ties within the meaning of this Section 5.01.
The Company shall pay interest on overdue principal
at the rate borne by the Securities and it shall pay interest
on overdue installments of interest at the same rate, to the
extent lawful.
SECTION 5.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhat-
tan, The City of New York, the office or agency required under
<PAGE> 58
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Section 2.03 hereof. The Company shall give prior notice to
the Trustee of the location, and any change in the location, of
such office or agency. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presenta-
tions, surrenders, notices and demands may be made or served at
the address of the Trustee set forth in Section 13.02.
SECTION 5.03. Limitation on Restricted Payments.
The Company shall not, and shall cause each of its
Subsidiaries not to, directly or indirectly, make any
Restricted Payment if, at the time of such proposed Restricted
Payment, or after giving effect thereto, (a) a Default or an
Event of Default shall have occurred and be continuing, (b) the
Company could not incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to Section 5.12 or (c)
the aggregate amount expended for all Restricted Payments,
including such proposed Restricted Payment (the amount of any
Restricted Payment, if other than cash, to be the fair market
value thereof at the date of payment, as determined in good
faith by the Board of Directors of the Company), subsequent to
the Issue Date, shall exceed the sum of (i) 50% of the aggre-
gate Consolidated Net Income (or if such Consolidated Net
Income is a loss, minus 100% of such loss) of the Company
earned subsequent to the Issue Date and on or prior to the date
of the proposed Restricted Payment (the "Reference Date"), plus
(ii) 100% of the aggregate Net Proceeds received by the Company
from any person (other than a Subsidiary of the Company) from
the issuance and sale (including upon exchange or conversion
for other securities of the Company) subsequent to the Issue
Date and on or prior to the Reference Date of Qualified Capital
Stock (excluding (A) Qualified Capital Stock paid as a dividend
on any Capital Stock or as interest on any Indebtedness and (B)
any Net Proceeds from issuances and sales financed directly or
indirectly using funds borrowed from the Company or any Subsid-
iary, until and to the extent such borrowing is repaid), plus
(iii) 100% of the aggregate net cash proceeds received by the
Company as capital contributions to the Company after the Issue
Date, plus (iv) $25 million.
Notwithstanding the foregoing, if no Default or Event
of Default shall have occurred and be continuing as a conse-
quence thereof, the provisions set forth in the immediately
preceding paragraph will not prevent (1) the payment of any
dividend within 60 days after the date of its declaration if
the dividend would have been permitted on the date of
<PAGE> 59
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declaration, (2) the acquisition of any shares of Capital Stock
of the Company or the repurchase, redemption or other repayment
of any Subordinated Indebtedness in exchange for or solely out of
the proceeds of the substantially concurrent sale (other than to
a Subsidiary) of shares of Qualified Capital Stock of the Com-
pany, (3) the repurchase, redemption or other repayment of any
Subordinated Indebtedness in exchange for or solely out of the
proceeds of the substantially concurrent sale (other than to a
Subsidiary) of Subordinated Indebtedness of the Company with an
Average Life equal to or greater than the then remaining Aver-
age Life of the Subordinated Indebtedness repurchased, redeemed
or repaid, and (4) Permitted Payments; provided, however, that
the declaration of each dividend paid in accordance with clause
(1) above, each acquisition, repurchase, redemption or other
repayment made in accordance with, or of the type set forth in,
clause (2) above, and each payment described in clause (iii),
(iv), (v), (vi) or (vii) of the definition of the term "Permit-
ted Payments" shall each be counted for purposes of computing
amounts expended pursuant to subclause (c) in the immediately
preceding paragraph, and no amounts expended pursuant to clause
(3) above or pursuant to clauses (i) or (ii) of the definition
of the term "Permitted Payments" shall be so counted; provided
further that to the extent any payments made pursuant to clause
(vii) of the definition of the term "Permitted Payments" are
deducted for purposes of computing the Consolidated Net Income
of the Company, such payments shall not be counted for purposes
of computing amounts expended as Restricted Payments pursuant
to subclause (c) in the immediately preceding paragraph.
Prior to making any Restricted Payment under the
first paragraph of this Section 5.03, the Company shall deliver
to the Trustee an Officers' Certificate setting forth the com-
putation by which the amount available for Restricted Payments
pursuant to such paragraph was determined. The Trustee shall
have no duty or responsibility to determine the accuracy or
correctness of this computation and shall be fully protected in
relying on such Officers' Certificate.
SECTION 5.04. Corporate Existence.
Except as otherwise permitted by Article Six, the
Company shall do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate exis-
tence and the corporate or other existence of each of its Sig-
nificant Subsidiaries in accordance with the respective organi-
zational documents of each such Significant Subsidiary and the
<PAGE> 60
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rights (charter and statutory) and franchises of the Company
and each such Significant Subsidiary; provided, however, that
the Company shall not be required to preserve, with respect to
itself, any right or franchise, and with respect to any of its
Significant Subsidiaries, any such existence, right or fran-
chise, if the Board of Directors of the Company or such Sig-
nificant Subsidiary, as the case may be, shall determine that
the preservation thereof is no longer desirable in the conduct
of the business of the Company or any such Significant
Subsidiary.
SECTION 5.05. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be
paid or discharged, before the same shall become delinquent,
(i) all taxes, assessments and governmental charges (including
withholding taxes and any penalties, interest and additions to
taxes) levied or imposed upon it or any of its Subsidiaries or
properties of it or any of its Subsidiaries and (ii) all lawful
claims for labor, materials and supplies that, if unpaid, might
by law become a Lien upon the property of it or any of its Sub-
sidiaries; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged
any such tax, assessment, charge or claim if either (a) the
amount, applicability or validity thereof is being contested in
good faith by appropriate proceedings and an adequate reserve
has been established therefor to the extent required by GAAP or
(b) the failure to make such payment or effect such discharge
(together with all other such failures) would not have a mate-
rial adverse effect on the financial condition or results or
operations of the Company and its Subsidiaries taken as a
whole.
SECTION 5.06. Maintenance of Properties and Insurance.
(a) The Company shall cause all properties used or
useful to the conduct of its business or the business of any of
its Subsidiaries to be maintained and kept in good condition,
repair and working order and supplied with all necessary equip-
ment and shall cause to be made all necessary repairs, renew-
als, replacements, betterments and improvements thereof, all as
in its judgment may be necessary, so that the business carried
on in connection therewith may be properly and advantageously
conducted at all times unless the failure to so maintain such
properties (together with all other such failures) would not
have a material adverse effect on the financial condition or
results of operations of the Company and its Subsidiaries taken
<PAGE> 61
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as a whole; provided, however, that nothing in this
Section 5.06 shall prevent the Company or any Subsidiary from
discontinuing the operation or maintenance of any of such prop-
erties, or disposing of any of them, if such discontinuance or
disposal is either (i) in the ordinary course of business,
(ii) in the good faith judgment of the Board of Directors of
the Company or the Subsidiary concerned, or of the senior
officers of the Company or such Subsidiary, as the case may be,
desirable in the conduct of the business of the Company or such
Subsidiary, as the case may be, or (iii) is otherwise permitted
by this Indenture.
(b) The Company shall provide or cause to be pro-
vided, for itself and each of its Subsidiaries, insurance
(including appropriate self-insurance) against loss or damage
of the kinds that, in the reasonable, good faith opinion of the
Company are adequate and appropriate for the conduct of the
business of the Company and such Subsidiaries in a prudent man-
ner, with reputable insurers or with the government of the
United States of America or an agency or instrumentality
thereof, in such amounts, with such deductibles, and by such
methods as shall be either (i) consistent with past practices
of the Company or the applicable Subsidiary or (ii) customary,
in the reasonable, good faith opinion of the Company, for cor-
porations similarly situated in the industry, unless the fail-
ure to provide such insurance (together with all other such
failures) would not have a material adverse effect on the
financial condition or results of operations of the Company and
its Subsidiaries, taken as a whole.
SECTION 5.07. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee within
120 days after the end of the Company's fiscal year an Offic-
ers' Certificate stating that a review of its activities and
the activities of its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Offic-
ers with a view to determining whether it has kept, observed,
performed and fulfilled its obligations under this Indenture
and further stating, as to each such Officer signing such cer-
tificate, that to the best of his knowledge the Company during
such preceding fiscal year has kept, observed, performed and
fulfilled each and every such covenant and no event of default
in respect of any payment obligation under the Credit Agree-
ment, Default or Event of Default occurred during such year or,
if such signers do know of such an event of default, Default or
Event of Default, the certificate shall describe the event of
<PAGE> 62
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default, Default or Event of Default and its status with par-
ticularity. The Officers' Certificate shall also notify the
Trustee should the Company elect to change the manner in which
it fixes its fiscal year end.
(b) So long as not contrary to the then current rec-
ommendations of the American Institute of Certified Public
Accountants, the Company shall deliver to the Trustee within
120 days after the end of each fiscal year a written statement
by the Company's independent certified public accountants stat-
ing (A) that their audit examination has included a review of
the terms of this Indenture and the Securities as they relate
to accounting matters, and (B) whether, in connection with
their audit examination, any Default has come to their atten-
tion and if such a Default has come to their attention, speci-
fying the nature and period of existence thereof.
(c) The Company shall deliver to the Trustee, forth-
with upon becoming aware, and in any event within 5 days after
the occurrence, of (i) any Default or Event of Default in the
performance of any covenant, agreement or condition contained
in this Indenture; (ii) any event of default in respect of any
payment obligation under the Credit Agreement or any event of
default under any other bond, debenture, note, or other evi-
dence of Indebtedness of the Company or any of its Subsidiar-
ies, or under any mortgage, indenture or other instrument if
such event of default related to Indebtedness at any time in an
aggregate principal amount exceeding $20 million, an Officers'
Certificate specifying with particularity such event.
SECTION 5.08. Compliance with Laws.
The Company shall comply, and shall cause each of its
Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders and restrictions of the United States of
America, all states and municipalities thereof, and of any gov-
ernmental department, commission, board, regulatory authority,
bureau, agency and instrumentality of the foregoing, in respect
of the conduct of their respective businesses and the ownership
of their respective properties, except such as are being con-
tested in good faith and by appropriate proceedings and except
for such noncompliances as would not in the aggregate have a
material adverse effect on the financial condition or results
of operations of the Company and its Subsidiaries taken as a
whole.
<PAGE> 63
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SECTION 5.09. SEC Reports.
The Company will deliver to the Trustee within 15
days after the filing of the same with the Commission, copies
of the quarterly and annual report and of the information docu-
ments and other reports, if any, which the Company is required
to file with the Commission pursuant to Section 13 or 15(d) of
the Securities Exchange Act. Notwithstanding that the Company
may not be subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act, the Company will file with the
Commission, to the extent permitted, and provide the Trustee
and Holders of Securities with such annual reports and such
information, documents and other reports specified in Section
13 and 15(d) of the Exchange Act. The Company will also comply
with the other provisions of TIA Section 314(a).
SECTION 5.10. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may law-
fully do so) that it will not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advan-
tage of, any stay or extension law or any usury law or other
law that would prohibit or forgive the Company from paying all
or any portion of the principal of or interest on the Securi-
ties as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or
the performance of this Indenture; and (to the extent that it
may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been
enacted.
SECTION 5.11. Limitation on Transactions with Affiliates.
(a) Neither the Company nor any of its Subsidiaries
shall (i) sell, lease, transfer or otherwise dispose of any of
its properties or assets, or issue securities (other than
equity securities which do not constitute Disqualified Capital
Stock) to, (ii) purchase any property, assets or securities
from, (iii) make any Investment in, or (iv) enter into or suf-
fer to exist any contract or agreement with or for the benefit
of, an Affiliate or Significant Stockholder (or any Affiliate
of such Significant Stockholder) of the Company or any Subsid-
iary (an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under Section 5.11(b) and (y) Affiliate
<PAGE> 64
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Transactions in the ordinary course of business that are fair
to the Company or such Subsidiary, as the case may be, and on
terms at least as favorable as might reasonably have been
obtainable at such time from an unaffiliated party; provided
that (A) with respect to Affiliate Transactions involving
aggregate payments in excess of $1 million and less than $5
million, the Company or such Subsidiary, as the case may be,
shall have delivered an Officers' Certificate to the Trustee
certifying that such transaction or series of transactions com-
plies with clause (y) above, (B) with respect to Affiliate
Transactions involving aggregate payments in excess of $5 mil-
lion and less than $15 million, the Company or such Subsidiary,
as the case may be, shall have delivered an Officers' Certifi-
cate to the Trustee certifying that such Affiliate Transaction
complies with clause (y) above and that such Affiliate Transac-
tion has received the approval of a majority of the disinter-
ested members of the Board of Directors of the Company or the
Subsidiary, as the case may be, or in the absence of any such
approval by the disinterested members of the Board of Directors
of the Company or the Subsidiary, as the case may be, that an
Independent Financial Advisor has reasonably and in good faith
determined that the financial terms of such Affiliate Transac-
tion are fair to the Company or such Subsidiary, as the case
may be, or that the terms of such Affiliate Transaction are at
least as favorable as might reasonably have been obtained at
such time from an unaffiliated party and that such Independent
Financial Advisor has provided written confirmation of such
determination to the Board of Directors and (C) with respect to
Affiliate Transactions involving aggregate payments in excess
of $15 million, the Company or such Subsidiary, as the case may
be, shall have delivered to the Trustee a written opinion from
an Independent Financial Advisor to the effect that the finan-
cial terms of such Affiliate Transaction are fair to the Com-
pany or such Subsidiary, as the case may be, or that the terms
of such Affiliate Transaction are at least as favorable as
those that might reasonably have been obtained at the time from
an unaffiliated party.
(b) The provisions of Section 5.11(a) shall not
apply to (i) any Permitted Payment, (ii) any Restricted Payment
that is made in compliance with the provisions of Section 5.03,
(iii) reasonable and customary fees and compensation paid to,
and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Subsidiary, as
determined by the Board of Directors of the Company or any Sub-
sidiary or the senior management thereof in good faith,
(iv) transactions exclusively between or among the Company and
<PAGE> 65
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any of its wholly-owned Subsidiaries or exclusively between or
among such wholly-owned Subsidiaries, provided such transac-
tions are not otherwise prohibited by this Indenture, (v) any
agreement as in effect as of the Issue Date or any amendment
thereto or any transaction contemplated thereby (including pur-
suant to any amendment thereto) so long as any such amendment
is not disadvantageous to the Securityholders in any material
respect, (vi) the existence of, or the performance by the Com-
pany or any of its Subsidiaries of its obligations under the
terms of, any stockholder agreement (including any registration
rights agreement or purchase agreement related thereto) to
which it (or New Holdings) is a party as of the Issue Date and
any similar agreements which it (or New Holdings) may enter
into thereafter; provided, however, that the existence of, or
the performance by the Company or any Subsidiaries of obliga-
tions under any future amendment to, any such existing agree-
ment or under any similar agreement entered into after the
Issue Date shall only be permitted by this clause (vi) to the
extent that the terms of any such amendment or new agreement
are not otherwise disadvantageous to the Securityholders in any
material respect, (vii) transactions permitted by, and comply-
ing with, the provisions of Section 6.01 and (viii) purchases
or sales of goods or services or other transactions with sup-
pliers, in each case, in the ordinary course of business
(including, without limitation, pursuant to joint venture
agreements) and otherwise in compliance with the terms of this
Indenture which are fair to the Company, in the reasonable
determination of the Board of Directors, or are on terms at
least as favorable as might reasonably have been obtained at
such time from an unaffiliated party.
SECTION 5.12. Limitation on Incurrences of
Additional Indebtedness.
The Company shall not, and shall not permit any of
its Subsidiaries, directly or indirectly, to incur, assume,
guarantee, become liable, contingently or otherwise, with
respect to, or otherwise become responsible for the payment of
(collectively "incur") any Indebtedness other than Permitted
Indebtedness; provided, however, that if no Default with
respect to payment of principal of, or interest on, the Securi-
ties or Event of Default shall have occurred and be continuing
at the time of or as a consequence of the incurrence of any
such Indebtedness, the Company or any Subsidiary Guarantor may
incur Indebtedness if immediately before and immediately after
giving effect to the incurrence of such Indebtedness the Oper-
ating Coverage Ratio of the Company would be greater than 2.0
<PAGE> 66
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to 1.0; provided further a Subsidiary may incur Acquired
Indebtedness to the extent such Indebtedness could have been
incurred by the Company pursuant to the immediately preceding
proviso.
SECTION 5.13. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any Sub-
sidiary to, directly or indirectly, create or suffer to exist,
or allow to become effective any consensual Payment Restriction
with respect to any of its Subsidiaries, except for (a) any
such restrictions contained in (i) the Credit Agreement in
effect on the Issue Date, as any such payment restriction may
apply to any present or future Subsidiary, (ii) this Indenture
and any agreement in effect at or entered into on the Issue
Date, (iii) Indebtedness of a person existing at the time such
person becomes a Subsidiary (provided that (x) such Indebted-
ness is not incurred in connection with, or in contemplation
of, such person becoming a Subsidiary, (y) such restriction is
not applicable to any person, or the properties or assets or
any person, other than the person so acquired and (z) such
Indebtedness is otherwise permitted to be incurred pursuant to
Section 5.12), (iv) secured Indebtedness otherwise permitted to
be incurred pursuant to Sections 5.12 and 5.14 that limit the
right of the debtor to dispose of the assets securing such
Indebtedness; (b) customary non-assignment provisions restrict-
ing subletting or assignment of any lease or other agreement
entered into by a Subsidiary; (c) customary net worth provi-
sions contained in leases and other agreements entered into by
a Subsidiary in the ordinary course of business; (d) customary
restrictions with respect to a Subsidiary pursuant to an agree-
ment that has been entered into for the sale or disposition of
all or substantially all of the Capital Stock or assets of such
Subsidiary; (e) customary provisions in joint venture agree-
ments and other similar agreements; (f) restrictions contained
in Indebtedness incurred to refinance, refund, extend or renew
Indebtedness referred to in clause (a) above; provided that the
restrictions contained therein are not materially more restric-
tive taken as a whole than those provided for in such Indebted-
ness being refinanced, refunded, extended or renewed and (g)
Payment Restrictions contained in any other Indebtedness per-
mitted to be incurred subsequent to the Issue Date pursuant to
the provisions of Section 5.12; provided that any such Payment
Restrictions are ordinary and customary with respect to the
type of Indebtedness being incurred (under the relevant
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circumstances) and, in any event, no more restrictive than the
most restrictive Payment Restrictions in effect on the Issue
Date.
SECTION 5.14. Limitation on Liens.
The Company shall not and shall not permit any Sub-
sidiary to create, incur, assume or suffer to exist any Liens
upon any of their respective assets unless the Securities are
equally and ratably secured by the Liens covering such assets,
except for (i) Liens on assets of the Company securing Senior
Indebtedness and Liens on assets of a Subsidiary Guarantor
which, at the time of incurrence, secure Guarantor Senior
Indebtedness; (ii) existing and future Liens securing Indebted-
ness and other obligations of the Company and its Subsidiaries
under the Credit Agreement or any refinancing or replacement
thereof in whole or in part permitted under this Indenture,
(iii) Permitted Liens, (iv) Liens securing Acquired Indebted-
ness, provided that such Liens (x) are not incurred in connec-
tion with, or in contemplation of, the acquisition of the prop-
erty or assets acquired and (y) do not extend to or cover any
property or assets of the Company or any Subsidiary other than
the property or assets so acquired, (v) Liens to secure Capi-
talized Lease Obligations and certain other Indebtedness that
is otherwise permitted under this Indenture, provided that
(A) any such Lien is created solely for the purpose of securing
such other Indebtedness representing, or incurred to finance,
refinance or refund, the cost (including sales and excise
taxes, installation and delivery charges and other direct costs
of, and other direct expenses paid or charged in connection
with, the purchase (whether through stock or asset purchase,
merger or otherwise) or construction) or improvement of the
property subject thereto (whether real or personal, including
fixtures and other equipment), (B) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of such
costs and (C) such Lien does not extend to or cover any other
property other than such item of property and any improvements
on such item, (vi) Liens existing on the Issue Date (after giv-
ing effect to the Merger), (vii) Liens in favor of the Trustee
under this Indenture and any substantially equivalent Lien
granted to any trustee or similar institution under any inden-
ture for Indebtedness permitted by the terms of this Indenture,
and (viii) any replacement, extension or renewal, in whole or
in part, of any Lien described in the foregoing clauses includ-
ing in connection with any refinancing of the Indebtedness, in
whole or in part, secured by any such Lien provided that to the
extent any such clause limits the amount secured or the assets
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subject to such Liens, no extension or renewal shall increase
the amount or the assets subject to such Liens, except to the
extent that the Liens associated with such additional assets
are otherwise permitted hereunder.
SECTION 5.15. Limitation on Change of Control.
(a) Upon the occurrence of a Change of Control, each
Holder will have the right to require the repurchase of such
Holder's Securities pursuant to the offer described in para-
graph (b), below (the "Change of Control Offer"), at a purchase
price equal to 101% of the principal amount thereof plus
accrued and unpaid interest to the date of repurchase. Prior
to the mailing of the notice of a Change of Control Offer pro-
vided for in paragraph (b) below, within 30 days following any
Change of Control the Company shall either (a) repay in full
and terminate all commitments under Indebtedness under the
Credit Agreement to the extent the terms thereof require repay-
ment upon a Change of Control (or offer to repay in full and
terminate all commitments under all such Indebtedness under the
Credit Agreement and repay the Indebtedness owed to each lender
which has accepted such offer), or (b) obtain the requisite
consent under the Credit Agreement, the terms of which require
repayment upon a Change of Control, to permit the repurchase of
the Securities as provided for in this Section 5.15. The Com-
pany shall first comply with the covenant in the immediately
preceding sentence before it shall be required to repurchase
Securities pursuant to this Section 5.15. The Company's fail-
ure to comply with the covenants described in this paragraph
shall constitute an Event of Default under this Indenture.
(b) Within 30 days following the date upon which the
Change of Control occurred (the "Change of Control Date"), the
Company must send, by first class mail, a notice to each Holder
of Securities, with a copy to the Trustee, which notice shall
govern the terms of the Change of Control Offer. The notice to
the Holders shall contain all instructions and materials neces-
sary to enable such Holders to tender Securities pursuant to
the Change of Control Offer. The Company shall give notice of
an event giving rise to a Change of Control on the same date
and in the same manner to all Holders of Securities. Such
notice shall state:
(1) that the Change of Control Offer is being made
pursuant to this Section 5.15 and that all Securities ten-
dered will be accepted for payment;
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(2) the purchase price (including the amount of
accrued interest) and the purchase date (which shall be no
earlier than 30 days nor later than 40 days from the date
such notice is mailed, other than as may be required by
law) (the "Change of Control Payment Date"); provided,
however, that the Change of Control Payment Date for the
Securities shall be subsequent to such date for the Senior
F4L Notes;
(3) that any Security not tendered will continue to
accrue interest if interest is then accruing;
(4) that, unless (i) the Company defaults in making
payment therefor or (ii) such payment is prohibited pursu-
ant to Article Four, any Security accepted for payment
pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Security pur-
chased pursuant to a Change of Control Offer will be
required to surrender the Security, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address
specified in the notice prior to the close of business on
the Business Day prior to the Change of Control Payment
Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than two
Business Days prior to the Change of Control Payment Date,
a telegram, telex, facsimile transmission or letter set-
ting forth the name of the Holder, the principal amount of
the Securities the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to
have such Security purchased;
(7) that Holders whose Securities are purchased only
in part will be issued new Securities equal in principal
amount to the unpurchased portions of the Securities sur-
rendered; provided that each Security purchased and each
Security issued shall be in an original principal amount
of $1,000 or integral multiples thereof;
(8) that each Change of Contol Offer is required to
remain open for at least 20 Business Days and until 12:00
Midnight New York City time on the applicable Change of
Control Payment Date; and
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(9) the circumstances and relevant facts regarding
such Change of Control.
On or before the Change of Control Payment Date, the
Company shall (i) accept for payment Securities or portions
thereof tendered pursuant to the Change of Control Offer,
(ii) deposit with the Paying Agent U.S. Legal Tender sufficient
to pay the purchase price of all Securities so tendered and
(iii) deliver to the Trustee Securities so accepted together
with an Officers' Certificate stating the Securities or por-
tions thereof being purchased by the Company. The Paying Agent
shall promptly mail to the Holders of Securities so accepted
payment in an amount equal to the purchase price (and the Trus-
tee shall promptly authenticate and mail to such Holders new
Securities equal in principal amount to any unpurchased portion
of the Securities surrendered) unless such payment is prohib-
ited pursuant to Article Four or otherwise. The Company will
publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment
Date. For purposes of this Section 5.15, the Trustee shall act
as the Paying Agent.
The Company shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regula-
tions are applicable in connection with the repurchase of Secu-
rities pursuant to a Change of Control Offer. To the extent
the provisions of any securities laws or regulations conflict
with the provisions under this Section 5.15, the Company shall
comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this
Section 5.15 by virtue thereof.
SECTION 5.16. Limitation on Asset Sales.
The Company will not, and will not permit any of its
Subsidiaries to, make any Asset Sale, unless (a) the Company or
the applicable Subsidiary receives consideration at the time of
such Asset Sale at least equal to the fair market value of the
assets sold and (b) upon consummation of an Asset Sale, the
Company will within 365 days of the receipt of the proceeds
therefrom, either: (i) apply or cause its subsidiary to apply
the Net Cash Proceeds of any Asset Sale to (1) a Related Busi-
ness Investment, (2) an investment in properties and assets
that replace the properties and assets that are the subject of
such Asset Sale or (3) an investment in properties and assets
that will be used in the business of the Company and its
<PAGE> 71
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Subsidiaries existing on the Issue Date or in a business reason-
ably related thereto; (ii) apply or cause to be applied such
Net Cash Proceeds to the permanent repayment of Pari Passu
Indebtedness or Senior Indebtedness; provided, however, that
the repayment of any revolving loan (under the Credit Agreement
or otherwise) shall result in a permanent reduction in the com-
mitment thereunder; (iii) use such Net Cash Proceeds to secure
Letter of Credit Obligations to the extent related letters of
credit have not been drawn upon or returned undrawn; or (iv)
after such time as the accumulated Net Cash Proceeds equals or
exceeds $20 million, apply or cause to be applied such Net Cash
Proceeds to the purchase of Securities tendered to the Company
for purchase at a price equal to 100% of the principal amount
thereof plus accrued interest thereon to the date of purchase
pursuant to an offer to purchase made by the Company as set
forth below (a "Net Proceeds Offer"); provided, however, that
the Company shall have the right to exclude from the foregoing
provisions Asset Sales subsequent to the Issue Date, (x) the
proceeds of which are derived from the sale and substantially
concurrent lease-back of a supermarket and/or related assets
which are acquired or constructed by the Company or a Subsid-
iary subsequent to the Issue Date, provided that such sale and
substantially concurrent lease-back occurs within 180 days fol-
lowing such acquisition or the completion of such construction,
as the case may be, and (y) the proceeds of which in the aggre-
gate do not exceed $20 million; provided further that pending
the utilization of any Net Cash Proceeds in the manner (and
within the time period) described above, the Company may use
any such Net Cash Proceeds to repay revolving loans under the
Credit Agreement without a permanent reduction of the commit-
ment thereunder.
Notice of a Net Proceeds Offer pursuant to this
Section 5.16 will be mailed to record Holders of Securities as
shown on the register of Holders not less than 325 days nor
more than 365 days after the relevant Asset Sale, with a copy
to the Trustee. The notice shall contain all instructions and
materials necessary to enable such Holders to tender Securities
pursuant to the Net Proceeds Offer and shall state the follow-
ing terms:
(1) that the Net Proceeds Offer is being made pursu-
ant to Section 5.16 and that all Securities tendered will
be accepted for payment, provided, however, that if the
aggregate principal amount of Securities tendered in a Net
Proceeds Offer plus accrued interest at the expiration of
such offer exceeds the aggregate amount of the Net
<PAGE> 72
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Proceeds Offer, the Company shall select the Securities to
be purchased on a pro rata basis (with such adjustments as
may be deemed appropriate by the Company so that only
Securities in denominations of $1,000 or multiples thereof
shall be purchased);
(2) the purchase price (including the amount of
accrued interest) and the purchase date (which shall be no
earlier than 30 days nor later than 40 days from the date
such notice is mailed, other than as may be required by
law) (the "Proceeds Purchase Date");
(3) that any Security not tendered will continue to
accrue interest if interest is then accruing;
(4) that, unless (i) the Company defaults in making
payment therefor or (ii) such payment is prohibited pursu-
ant to Article Four hereof or otherwise, any Security
accepted for payment pursuant to the Net Proceeds Offer
shall cease to accrue interest after the Proceeds Purchase
Date;
(5) that Holders electing to have a Security pur-
chased pursuant to a Net Proceeds Offer will be required
to surrender the Security, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the Secu-
rity completed, to the Paying Agent at the address speci-
fied in the notice prior to the close of business on the
Business Day prior to the Proceeds Purchase Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than two
Business Days prior to the Proceeds Purchase Date, a tele-
gram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a state-
ment that such Holder is withdrawing his election to have
such Security purchased; and
(7) that Holders whose Securities were purchased
only in part will be issued new Securities equal in prin-
cipal amount to the unpurchased portion of the Securities
surrendered; provided that each Security purchased and
each new Security issued shall be in an original principal
amount of $1,000 or integral multiples thereof.
<PAGE> 73
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On or before the Proceeds Purchase Date, the Company
shall (i) accept for payment Securities or portions thereof
tendered pursuant to the Net Proceeds Offer which are to be
purchased in accordance with item (b)(1) above, (ii) deposit
with the Paying Agent U.S. Legal Tender sufficient to pay the
purchase price of all Securities to be purchased and (iii)
deliver to the Trustee Securities so accepted together with an
Officers' Certificate stating the Securities or portions
thereof being purchased by the Company. The Paying Agent shall
promptly mail to the Holders of Securities so accepted payment
in an amount equal to the purchase price (and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new
Security equal in principal amount to any unpurchased portion
of the Security surrendered) unless such payment is prohibited
pursuant to Article Four hereof or otherwise. The Company will
publicly announce the results of the Net Proceeds Offer on or
as soon as practicable after the Proceeds Purchase Date. For
purposes of this Section 5.16, the Trustee shall act as the
Paying Agent.
Any amounts remaining after the purchase of Securi-
ties pursuant to a Net Proceeds Offer shall be returned by the
Trustee to the Company.
The Company shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regula-
tions are applicable in connection with the purchase of Securi-
ties pursuant to a Net Proceeds Offer. To the extent the pro-
visions of any securities laws or regulations conflict with the
provisions under this Section 5.16, the Company shall comply
with the applicable securities laws and regulations and shall
not be deemed to have breached its obligations under this Sec-
tion 5.16 by virtue thereof.
SECTION 5.17. Guarantees of Certain Indebtedness.
The Company will not permit any of its Subsidiaries
to (a) incur, guarantee or secure through the granting of Liens
the payment of any Indebtedness under the term portion of the
Credit Agreement or refinancings thereof or (b) pledge any
intercompany notes representing obligations of any of its Sub-
sidiaries, to secure the payment of any Indebtedness under the
term portion of the Credit Agreement or refinancings thereof,
in each case unless such Subsidiary, the Company and the Trus-
tee execute and deliver a supplemental indenture evidencing
such Subsidiary's Guarantee.
<PAGE> 74
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SECTION 5.18. Limitation on Preferred Stock of Subsidiaries.
The Company will not permit any of its Subsidiaries
to issue Preferred Stock (other than to the Company or to a
wholly-owned Subsidiary) or permit any person (other than the
Company or a wholly-owned Subsidiary) to own any Preferred
Stock of any Subsidiary.
SECTION 5.19. Limitation on Other Senior Subordinated
Indebtedness.
Neither the Company nor any Subsidiary Guarantor
will, directly or indirectly, incur any Indebtedness (including
Acquired Indebtedness) that is subordinate in right of payment
to any Indebtedness of the Company or such Subsidiary Guaran-
tor, as the case may be, unless such Indebtedness is either (a)
pari passu in right of payment with the Securities or the Guar-
antee of such Subsidiary Guarantor, as the case may be, or (b)
subordinate in right of payment to the Securities or the Guar-
antee of such Subsidiary Guarantor, as the case may be, in the
same manner and at least to the same extent as the Securities
are subordinate to Senior Indebtedness or as such Guarantee is
subordinated to Senior Guarantor Indebtedness of such Subsid-
iary Guarantor, as the case may be.
ARTICLE SIX
SUCCESSOR CORPORATION
SECTION 6.01. Limitations on Mergers and Certain Other
Transactions.
(a) The Company shall not in a single transaction or
through a series of related transactions, (i) consolidate with
or merge with or into any other person, or transfer (by lease,
assignment, sale or otherwise) all or substantially all of its
properties and assets as an entirety or substantially as an
entirety to another person or group of affiliated persons or
(ii) adopt a Plan of Liquidation, unless, in either case:
(1) either the Company shall be the continuing per-
son, or the person (if other than the Company) formed by
such consolidation or into which the Company is merged or
to which all or substantially all of the properties and
assets of the Company as an entirety or substantially as
<PAGE> 75
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an entirety are transferred (or, in the case of a Plan of
Liquidation, any person to which assets are transferred)
(the Company or such other person being hereinafter
referred to as the "Surviving Person") shall be a corpora-
tion organized and validly existing under the laws of the
United States, any State thereof or the District of Colum
bia, and shall expressly assume, by an indenture supple-
ment, all the obligations of the Company under the Securi-
ties and this Indenture;
(2) immediately after and giving effect to such
transaction and the assumption contemplated by clause
(1) above and the incurrence or anticipated incurrence of
any Indebtedness to be incurred in connection therewith,
(A) the Surviving Person shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth
of the Company immediately preceding the transaction and
(B) the Surviving Person could incur at least $1 of addi-
tional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 5.12;
(3) immediately before and immediately after and
giving effect to such transaction and the assumption of
the obligations as set forth in clause (1) above and the
incurrence or anticipated incurrence of any Indebtedness
to be incurred in connection therewith, no Default or
Event of Default shall have occurred and be continuing;
and
(4) each Subsidiary Guarantor, unless it is the
other party to the transaction, shall have by supplemental
indenture confirmed that its Guarantee of the obligations
of the Company under the Securities and this Indenture
shall apply, without alteration or amendment as such Guar-
antee applies on the date it was granted under this Inden-
ture to the obligations of the Company under this Inden-
ture and the Securities to the obligations of the Company
or such Person as the case may be, under this Indenture
and the Securities, after consummation of such
transaction.
(b) Notwithstanding the foregoing, the consummation
of the Merger on the Issue Date need only comply with clauses
(1) and (3) of the foregoing paragraph.
(c) For purposes of the foregoing, the transfer (by
lease, assignment, sale or otherwise, in a single transaction
<PAGE> 76
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or series of transactions) of all or substantially all of the
properties and assets of one or more direct or indirect Subsid-
iaries, the Capital Stock of which constitutes all or substan-
tially all of the properties and assets of the Company shall be
deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
SECTION 6.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any transfer of
assets in accordance with Section 6.01, the successor person
formed by such consolidation or into which the Company is
merged or to which such transfer is made shall succeed to, and
be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if
such successor person had been named as the Company herein;
provided, however, that solely for purposes of computing
amounts described in subclause (c) of the first paragraph of
Section 5.03, any such successor person shall only be deemed to
have succeeded to and be substituted for the Company with
respect to periods subsequent to the effective time of such
merger, consolidation or transfer of assets. When a successor
corporation assumes all of the obligations of the Company here-
under and under the Securities and agrees to be bound hereby
and thereby, the predecessor shall be released from such
obligations.
ARTICLE SEVEN
DEFAULT AND REMEDIES
SECTION 7.01. Events of Default.
An "Event of Default" occurs if:
(i) the Company defaults in the payment of
interest on any Securities when the same becomes due and
payable and the Default continues for a period of 30 days,
whether or not such payment shall be prohibited by the
provisions of Article Four hereof;
(ii) the Company defaults in the payment of the
principal of, or premium, if any, on the Securities when
due whether at maturity, upon acceleration, redemption,
required repurchase or otherwise, whether or not such
<PAGE> 77
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payment shall be prohibited by the provisions of Article
Four hereof;
(iii) the Company fails to comply with any of its
agreements contained in the Securities or this Indenture
(other than a default specified in clause (i) or (ii)
above), if such failure continues for the period and after
the notice specified below;
(iv) there shall be a default under any
Indebtedness of the Company or any of its Subsidiaries,
whether such Indebtedness now exists or shall hereafter be
created, if both (A) such default either (1) results from
the failure to pay any such Indebtedness at its stated
final maturity or (2) relates to an obligation other than
the obligation to pay such Indebtedness at its stated
final maturity and results in the holder or holders of
such Indebtedness causing such Indebtedness to become due
prior to its stated final maturity and (B) the principal
amount of such Indebtedness, together with the principal
amount of any other such Indebtedness in default for
failure to pay principal at stated final maturity or the
maturity of which has been so accelerated, aggregates $20
million or more at any one time outstanding;
(v) one or more judgments, orders or decrees of
any court or regulatory or administrative agency of
competent jurisdiction for the payment of money in excess
of $20 million, either individually or in the aggregate,
shall be entered against the Company or any Subsidiary of
the Company or any of their respective properties and
shall not be discharged and there shall have been a period
of 60 days after the date on which any period for appeal
has expired and during which a stay of enforcement of such
judgment, order or decree shall not be in effect;
(vi) either the Company or any Significant
Subsidiary pursuant to or within the meaning of any
Bankruptcy Law: (a) commences a voluntary case or
proceeding; (b) consents to the entry of a Bankruptcy
Order for relief against it in an involuntary case or
proceeding or the commencement of any case or proceeding
against it; (c) consents to the appointment of a custodian
of it or for substantially all of its property; or
(d) makes a general assignment for the benefit of its
creditors;
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(vii) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that: (a) is for
relief against the Company or any Significant Subsidiary,
in an involuntary case or proceeding; (b) appoints a cus-
todian of the Company or any Significant Subsidiary, or
for all or any substantial part of their respective prop-
erties; or (c) orders the liquidation of the Company or
any Significant Subsidiary and in each case the order or
decree remains unstayed and in effect for 60 days;
(viii) the lenders under the Credit Agreement
shall commence judicial proceedings to foreclose upon any
material portion of the assets of the Company and its
Subsidiaries or shall have exercised any right under
applicable law or applicable security documents to take
ownership of any such assets in lieu of foreclosure; or
(ix) any of the Guarantees shall be declared or
adjudged invalid in a final judgment or order issued by
any court or governmental authority.
A Default under clause (iii) above (other than in the
case of any Default under Section 5.03, 5.15, 5.16 or 6.01,
which Defaults shall be Events of Default with the notice spec-
ified in this paragraph but without the passage of time speci-
fied in this paragraph) is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in
principal amount of the outstanding Securities notify the Com-
pany and the Trustee of the Default, and the Company does not
cure the Default within 30 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied
and state that the notice is a "Notice of Default." Such
notice shall be given by the Trustee if so requested by the
Holders of at least 25% in principal amount of the Securities
then outstanding. When a Default is cured, it ceases.
SECTION 7.02. Acceleration.
(a) If an Event of Default (other than an Event of
Default specified in Section 7.01(vi) or (vii) with respect to
the Company or a Subsidiary Guarantor) occurs and is continu-
ing, the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Securities may, and the Trustee
upon the request of the Holders of not less than 25% in aggre-
gate principal amount of the then outstanding Securities shall,
declare due and payable all unpaid principal and interest
accrued and unpaid on the then outstanding Securities by
<PAGE> 79
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written notice to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of accel-
eration" (the "Acceleration Notice"), and the same (i) shall
become immediately due and payable or (ii) if there are any
amounts outstanding under the Credit Agreement, shall become
due and payable upon the first to occur of an acceleration
under the Credit Agreement, or five business days after receipt
by the Company and the Credit Agent of such Acceleration
Notice. If an Event of Default specified in Section 7.01(vi)
or (vii) occurs with respect to the Company or a Subsidiary
Guarantor, all unpaid principal of and accrued interest on all
then outstanding Securities shall be immediately due and pay-
able without any declaration or other act on the part of the
Trustee or any of the Holders. Upon payment of such principal
amount, interest, and premium, if any, all of the Company's
obligations under the Securities and this Indenture, other than
obligations under Section 8.07, shall terminate. After a dec-
laration of acceleration, the Holders of a majority in princi-
pal amount of the Securities then outstanding, by notice to the
Trustee, may rescind an acceleration and its consequences if
(i) all existing Events of Default, other than the non-payment
of the principal of the Securities which has become due solely
by such declaration of acceleration, have been cured or waived,
(ii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue prin-
cipal, which has become due otherwise than by such declaration
of acceleration, has been paid, (iii) the rescission would not
conflict with any judgment or decree of a court of competent
jurisdiction and (iv) the Company has paid or deposited with
the Trustee a sum sufficient to pay all sums paid or advanced
by the Trustee under this Indenture and the compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel.
(b) In the event of a declaration of acceleration
under this Indenture because an Event of Default set forth in
Section 7.01(iv) has occurred and is continuing, such declara-
tion of acceleration shall be automatically rescinded and
annulled if either (i) the holders of the Indebtedness which is
the subject of such Event of Default have waived such failure
to pay at maturity or have rescinded the acceleration in
respect of such Indebtedness within 90 days of such maturity or
declaration of acceleration, as the case may be, and no other
Event of Default has occurred during such 90-day period which
has not been cured or waived, or (ii) such Indebtedness shall
have been discharged or the maturity thereof shall have been
extended such that it is not then due and payable, or the
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underlying default has been cured, within 90 days of such
maturity or declaration of acceleration, as the case may be.
SECTION 7.03. Other Remedies.
If an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of or interest on
the Securities or to enforce the performance of any provision
of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does
not possess any of the Securities or does not produce any of
them in the proceeding. A delay or omission by the Trustee or
any Securityholder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of
Default. No remedy is exclusive of any other remedy. All
available remedies are cumulative to the extent permitted by
law.
SECTION 7.04. Waiver of Past Defaults.
Subject to Sections 7.07 and 10.02, the Holders of a
majority in principal amount of the outstanding Securities by
notice to the Trustee may waive an existing Default or Event of
Default and its consequences, except a Default in the payment
of principal of or interest on any Security as specified in
clauses (i) and (ii) of Section 7.01. When a Default or Event
of Default is waived, it is cured and ceases.
SECTION 7.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in
principal amount of the outstanding Securities may direct the
time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or
power conferred on it, including, without limitation, any reme-
dies provided for in Section 7.03. Subject to Section 8.01,
however, the Trustee may refuse to follow any direction that
conflicts with any law or this Indenture, that the Trustee
determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal
liability; provided that the Trustee may take any other action
deemed proper by the Trustee which is not inconsistent with
such direction.
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SECTION 7.06. Limitation on Suits.
A Securityholder may not pursue any remedy with
respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice
of a continuing Event of Default;
(2) the Holder or Holders of at least 25% in princi-
pal amount of the outstanding Securities make a written
request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee
indemnity satisfactory to the Trustee against any loss,
liability or expense to be incurred in compliance with
such request;
(4) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer
of indemnity; and
(5) during such 60-day period the Holder or Holders
of a majority in principal amount of the outstanding Secu-
rities do not give the Trustee a direction which, in the
opinion of the Trustee, is inconsistent with the request.
A Securityholder may not use this Indenture to preju-
dice the rights of another Securityholder or to obtain a pref-
erence or priority over such other Securityholder.
SECTION 7.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Inden-
ture, the right of any Holder to receive payment of principal
of and interest on a Security, on or after the respective due
dates expressed in such Security, or to bring suit for the
enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of
the Holder.
SECTION 7.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or
interest specified in clause (i) or (ii) of Section 7.01 occurs
and is continuing, the Trustee may recover judgment in its own
name and as trustee of an express trust against the Company or
any other obligor on the Securities for the whole amount of
<PAGE> 82
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principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment
of such interest is lawful, interest on overdue installments of
interest, in each case at the rate per annum borne by the Secu-
rities and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trus-
tee, its agents and counsel.
SECTION 7.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other
papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and the Securityholders
allowed in any judicial proceedings relating to the Company or
any other obligor upon the Securities, any of their respective
creditors or any of their respective property and shall be
entitled and empowered to collect and receive any monies or
other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial
proceedings is hereby authorized by each Securityholder to make
such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 8.07. Nothing herein
contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Security
holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Securityholder in any such proceeding.
SECTION 7.10. Priorities.
If the Trustee collects any money pursuant to this
Article Seven, it shall pay out the money in the following
order:
First: to the Trustee for amounts due under
Section 8.07;
Second: subject to Article Four and Article Twelve,
to Holders for interest accrued on the Securities,
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ratably, without preference or priority of any kind, accord-
ing to the amounts due and payable on the Securities for
interest;
Third: subject to Article Four and Article Twelve,
to Holders for principal amounts due and unpaid on the
Securities, ratably, without preference or priority of any
kind, according to the amounts due and payable on the
Securities for principal; and
Fourth: subject to Article Four and Article Twelve,
to the Company or the Subsidiary Guarantors, as their
respective interests may appear.
The Trustee, upon prior notice to the Company, may
fix a record date and payment date for any payment to
Securityholders pursuant to this Section 7.10.
SECTION 7.11. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or here-
after existing at law or in equity or otherwise. The assertion
or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
SECTION 7.12. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder
of any Security to exercise any right or remedy accruing upon
any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquies-
cence therein. Every right and remedy given by this Article
Seven or by law to the Trustee or to the Holders may be exer-
cised from time to time, and as often as may be deemed expe-
dient, by the Trustee or by the Holders, as the case may be.
SECTION 7.13. Undertaking for Costs.
In any suit for the enforcement of any right or rem-
edy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the
<PAGE> 84
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suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This
Section 7.13 does not apply to a suit by the Trustee, a suit by
a Holder pursuant to Section 7.07, or a suit by a Holder or
Holders of more than 10% in principal amount of the outstanding
Securities.
ARTICLE EIGHT
TRUSTEE
The Trustee hereby accepts the trust imposed upon it
by this Indenture and covenants and agrees to perform the same,
as herein expressed.
SECTION 8.01. Duties of Trustee.
(a) If a Default or an Event of Default has occurred
and is continuing, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture and use the
same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in
the conduct of his own affairs.
(b) Except during the continuance of a Default or an
Event of Default:
(1) The Trustee need perform only those duties as
are specifically set forth in this Indenture and no cove-
nants or obligations shall be implied in this Indenture
that are adverse to the Trustee.
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Inden-
ture. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to
the requirements of this Indenture.
<PAGE> 85
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(c) The Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act,
or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of
paragraph (b) of this Section 8.01.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it
is proved that the Trustee was negligent in ascertaining
the pertinent facts.
(3) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 7.05.
(d) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers if
it shall have reasonable grounds for believing that repayment
of such funds or adequate indemnity against such risk or lia-
bility is not reasonably assured to it.
(e) Every provision of this Indenture that in any
way relates to the Trustee is subject to paragraphs (a), (b),
(c) and (d) of this Section 8.01.
(f) The Trustee shall not be liable for interest on
any assets received by it except as the Trustee may agree with
the Company. Assets held in trust by the Trustee need not be
segregated from other assets except to the extent required by
law.
SECTION 8.02. Rights of Trustee.
Subject to Section 8.01:
(a) The Trustee may rely on any document believed by
it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting,
it may consult with counsel and may require an Officers'
Certificate or an Opinion of Counsel, which shall conform
<PAGE> 86
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to Sections 13.04 and 13.05. The Trustee shall not be
liable for any action it takes or omits to take in good
faith in reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys and
agents and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action
that it takes or omits to take in good faith which it
believes to be authorized or within its rights or powers.
(e) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any res-
olution, certificate, statement, instrument, opinion,
notice, request, direction, consent, order, bond, deben-
ture, or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit.
(f) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request, order or direction of any of the
Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or
thereby.
SECTION 8.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity
may become the owner or pledgee of Securities and may otherwise
deal with the Company, its Subsidiaries, or their respective
Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However,
the Trustee must comply with Sections 8.10 and 8.11.
SECTION 8.04. Trustee's Disclaimer.
The Trustee makes no representation as to the valid-
ity or adequacy of this Indenture or the Securities, it shall
not be accountable for the Company's use of the proceeds from
the Securities, and it shall not be responsible for any state-
ment in the Securities other than the Trustee's certificate of
authentication.
<PAGE> 87
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SECTION 8.05. Notice of Default.
If a Default or an Event of Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall
mail to each Holder of Securities notice of the Default or
Event of Default within 90 days after such Default or Event of
Default occurs; provided, however, that, except in the case of
a Default or Event of Default in the payment of the principal
of or interest on any Security, including the failure to make
payment on a Change of Control Payment Date pursuant to a
Change of Control Offer or payment when due pursuant to a Net
Proceeds Offer the Trustee may withhold such notice if it in
good faith determines that withholding such notice is in the
interest of the Holders.
SECTION 8.06. Reports by Trustee to Holders.
Within 60 days after each beginning with the
following the date of this Indenture, the Trustee shall,
to the extent that any of the events described in TIA Sec. 313(a)
occurred within the previous twelve months, but not otherwise,
mail to each Securityholder a brief report dated as of such
that complies with TIA Sec. 313(a). The Trustee also shall
comply with TIA Secs. 313(b) and 313(c).
A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with
the Commission and each stock exchange, if any, on which the
Securities are listed.
The Company shall notify the Trustee if the Securi-
ties become listed on any stock exchange.
SECTION 8.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to
time reasonable compensation for its services. The Trustee's
compensation shall not be limited by any law on compensation of
a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it. Such expenses shall
include the reasonable compensation, disbursements and expenses
of the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold
it harmless against, any loss or liability incurred by it
except for such actions to the extent caused by any negligence
<PAGE> 88
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or bad faith on its part, arising out of or in connection with
the administration of this trust and its rights or duties here-
under. The Trustee shall notify the Company promptly of any
claim asserted against the Trustee for which it may seek indem-
nity. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate coun-
sel and the Company shall pay the reasonable fees and expenses
of such counsel; provided that the Company will not be required
to pay such fees and expenses if it assumes the Trustee's
defense and there is no conflict of interest between the Com-
pany and the Trustee in connection with such defense as reason-
ably determined by the Trustee. The Company need not pay for
any settlement made without its written consent. The Company
need not reimburse any expense or indemnify against any loss or
liability to the extent incurred by the Trustee through its
negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this
Section 8.07, the Trustee shall have a lien prior to the Secu-
rities on all assets held or collected by the Trustee, in its
capacity as Trustee, except assets held in trust to pay princi-
pal of or interest on particular Securities.
When the Trustee incurs expenses or renders services
after an Event of Default specified in Section 7.01(vi) or
(vii) occurs, the expenses and the compensation for the ser-
vices are intended to constitute expenses of administration
under any Bankruptcy Law.
SECTION 8.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company.
The Holders of a majority in principal amount of the outstand-
ing Securities may remove the Trustee and appoint a successor
trustee with the Company's consent, by so notifying the Company
and the Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 8.10;
(2) the Trustee is adjudged a bankrupt or an
insolvent;
(3) a receiver or other public officer takes charge
of the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
<PAGE> 89
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If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the Company
shall notify each Holder of such event and shall promptly
appoint a successor Trustee. Within one year after the succes-
sor Trustee takes office, the Holders of a majority in princi-
pal amount of the Securities may appoint a successor Trustee to
replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written accep-
tance of its appointment to the retiring Trustee and to the
Company. Immediately after that, the retiring Trustee shall
transfer all property held by it as Trustee to the successor
Trustee, subject to the lien provided in Section 8.07, the res-
ignation or removal of the retiring Trustee shall become effec-
tive, and the successor Trustee shall have all the rights, pow-
ers and duties of the Trustee under this Indenture. A succes-
sor Trustee shall mail notice of its succession to each
Securityholder.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Company or the Holders of at least 10% in
principal amount of the outstanding Securities may petition any
court of competent jurisdiction for the appointment of a suc
cessor Trustee.
If the Trustee fails to comply with Section 8.10, any
Securityholder may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a succes-
sor Trustee.
Notwithstanding replacement of the Trustee pursuant
to this Section 8.08, the Company's obligations under
Section 8.07 shall continue for the benefit of the retiring
Trustee.
SECTION 8.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts
into, or transfers all or substantially all of its corporate
trust business to, another corporation, the resulting, surviv-
ing or transferee corporation without any further act shall, if
such resulting, surviving or transferee corporation is other
wise eligible hereunder, be the successor Trustee.
<PAGE> 90
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SECTION 8.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satis-
fies the requirement of TIA {{ 310(a)(1) and 310(a)(5). The
Trustee shall have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual
report of condition. The Trustee shall comply with TIA
{ 310(b); provided, however, that there shall be excluded from
the operation of TIA { 310(b)(1) any indenture or indentures
under which other securities, or certificates of interest or
participation in other securities, of the Company are outstand-
ing, if the requirements for such exclusion set forth in TIA
{ 310(b)(1) are met.
SECTION 8.11. Preferential Collection of Claims Against
Company.
The Trustee shall comply with TIA { 311(a), excluding
any creditor relationship listed in TIA { 311(b). A Trustee
who has resigned or been removed shall be subject to TIA
{ 311(a) to the extent indicated.
ARTICLE NINE
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 9.01. Termination of the Company's
Obligations.
The Company may terminate its obligations under the
Securities and this Indenture, and the obligations of any Sub-
sidiary Guarantor shall terminate, except those obligations
referred to in the penultimate paragraph of this Section 9.01,
if all Securities previously authenticated and delivered (other
than destroyed, lost or stolen Securities which have been
replaced or paid or Securities for whose payment money has
theretofore been deposited with the Trustee or the Paying Agent
in trust or segregated and held in trust by the Company and
thereafter repaid to the Company, as provided in Section 9.04)
have been delivered to the Trustee for cancellation and the
Company has paid all sums payable by it hereunder, or if:
(1) either (i) pursuant to Article Three, the Com-
pany shall have given notice to the Trustee and mailed a
notice of redemption to each Holder of the redemption of
<PAGE> 91
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all of the Securities under arrangements satisfactory to
the Trustee for the giving of such notice or (ii) all
Securities have otherwise become due and payable
hereunder;
(2) the Company shall have irrevocably deposited or
caused to be deposited with the Trustee or a trustee sat-
isfactory to the Trustee, under the terms of an irrevo-
cable trust agreement in form and substance satisfactory
to the Trustee, as trust funds in trust solely for the
benefit of the Holders for that purpose, money in such
amount as is sufficient without consideration of reinvest-
ment of such interest, to pay principal of, premium, if
any, and interest on the outstanding Securities to matur-
ity or redemption; provided that the Trustee shall have
been irrevocably instructed to apply such money to the
payment of said principal, premium, if any, and interest
with respect to the Securities and, provided, further,
that from and after the time of deposit, the money depos-
ited shall not be subject to the rights of holders of
Senior Indebtedness pursuant to the provisions of
Article Four and Article Twelve;
(3) no Default or Event of Default with respect to
this Indenture or the Securities shall have occurred and
be continuing on the date of such deposit or shall occur
as a result of such deposit and such deposit will not
result in a breach or violation of, or constitute a
default under, any other instrument to which the Company
is a party or by which it is bound;
(4) the Company shall have paid all other sums pay-
able by it hereunder; and
(5) the Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent providing for the
termination of the Company's and any Subsidiary Guaran-
tor's obligation under the Securities and this Indenture
have been complied with. Such Opinion of Counsel shall
also state that such satisfaction and discharge does not
result in a default under the Credit Agreement (if then in
effect) or any other agreement or instrument then known to
such counsel that binds or affects the Company.
Notwithstanding the foregoing paragraph, the Compa-
ny's obligations in Sections 2.05, 2.06, 2.07, 2.08, 5.01, 5.02
<PAGE> 92
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and 8.07 and any Subsidiary Guarantor's obligations in respect
thereof shall survive until the Securities are no longer out-
standing pursuant to the last paragraph of Section 2.08. After
the Securities are no longer outstanding, the Company's obliga-
tions in Sections 8.07, 9.04 and 9.05 and any Subsidiary Guar-
antor's obligations in respect thereof shall survive.
After such delivery or irrevocable deposit the Trus-
tee upon request shall acknowledge in writing the discharge of
the Company's and any Subsidiary Guarantor's obligations under
the Securities and this Indenture except for those surviving
obligations specified above.
SECTION 9.02. Legal Defeasance and Covenant
Defeasance.
(a) The Company may, at its option by Board Resolu-
tion of the Board of Directors of the Company, at any time,
with respect to the Securities, elect to have either
paragraph (b) or paragraph (c) below be applied to the out-
standing Securities upon compliance with the conditions set
forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a)
of the option applicable to this paragraph (b), the Company and
any Subsidiary Guarantor shall be deemed to have been released
and discharged from its obligations with respect to the out-
standing Securities on the date the conditions set forth below
are satisfied (hereinafter, "legal defeasance"). For this pur-
pose, such legal defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness rep-
resented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of
paragraph (e) below and the other Sections of and matters under
this Indenture referred to in (i) and (ii) below, and to have
satisfied all its other obligations under such Securities and
this Indenture insofar as such Securities are concerned (and
the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), and Holders of the
Securities and the Guarantees and any amounts deposited under
paragraph (d) below shall cease to be subject to any obliga-
tions to, or the rights of, any holder of Senior Indebtedness
or Guarantor Senior Indebtedness under Article Four, Article
Twelve or otherwise, except for the following which shall sur-
vive until otherwise terminated or discharged hereunder:
(i) the rights of Holders of outstanding Securities to receive
solely from the trust fund described in paragraph (d) below and
<PAGE> 93
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as more fully set forth in such paragraph, payments in respect
of the principal of, premium, if any, and interest on such
Securities when such payments are due, (ii) the Company's obli-
gations with respect to such Securities under Sections 2.06,
2.07 and 5.02, and, with respect to the Trustee, under
Section 8.07 and any Subsidiary Guarantor's obligations in
respect thereof, (iii) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and (iv) this Section 9.02
and Section 9.05. Subject to compliance with this
Section 9.02, the Company may exercise its option under this
paragraph (b) notwithstanding the prior exercise of its option
under paragraph (c) below with respect to the Securities.
(c) Upon the Company's exercise under paragraph (a)
of the option applicable to this paragraph (c), the Company
shall be released and discharged from its obligations under any
covenant contained in Article Four and Article Six and in Sec-
tions 5.03, 5.05 through 5.09 and 5.11 through 5.19 with
respect to the outstanding Securities on and after the date the
conditions set forth below are satisfied (hereinafter, "cove-
nant defeasance"), and the Securities shall thereafter be
deemed to be not "outstanding" for the purpose of any direc-
tion, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants,
but shall continue to be deemed "outstanding" for all other
purposes hereunder and Holders of the Securities and the Guar-
antees and any amounts deposited under paragraph (d) below
shall cease to be subject to any obligations to, or the rights
of, any holder of Senior Indebtedness or Guarantor Senior
Indebtedness under Article Four, Article Twelve or otherwise.
For this purpose, such covenant defeasance means that, with
respect to the outstanding Securities, the Company and any Sub-
sidiary Guarantor may omit to comply with and shall have no
liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default
under Section 7.01(iii), but, except as specified above, the
remainder of this Indenture and such Securities shall be unaf-
fected thereby.
(d) The following shall be the conditions to appli-
cation of either paragraph (b) or paragraph (c) above to the
outstanding Securities:
<PAGE> 94
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(i) the Company shall irrevocably have
deposited or caused to be deposited with the Trustee (or
another trustee satisfying the requirements of
Section 8.10 who shall agree to comply with the provisions
of this Section 9.02 applicable to it) as trust funds in
trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities,
(x) money in an amount or (y) direct non-callable
obligations of, or non-callable obligations guaranteed by,
the United States of America for the payment of which
guarantee or obligation the full faith and credit of the
United States is pledged ("U.S. Government Obligations")
maturing as to principal, premium, if any, and interest
in such amounts of money and at such times as are
sufficient without consideration of any reinvestment of
such interest, to pay principal of and interest on the
outstanding Securities not later than one day before the
due date of any payment, or (z) a combination thereof,
sufficient, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and
discharge and which shall be applied by the Trustee (or
other qualifying trustee) to pay and discharge principal
of, premium, if any, and interest on the outstanding
Securities on the Maturity Date or otherwise in accordance
with the terms of this Indenture and of such Securities;
provided, however, that the Trustee (or other qualifying
trustee) shall have received an irrevocable written order
from the Company instructing the Trustee (or other
qualifying trustee) to apply such money or the proceeds of
such U.S. Government Obligations to said payments with
respect to the Securities;
(ii) no Default or Event of Default or event
which with notice or lapse of time or both would become a
Default or an Event of Default with respect to the Securi-
ties shall have occurred and be continuing on the date of
such deposit or, insofar as Section 7.01(vi) or (vii) is
concerned, at any time during the period ending on the
91st day after the date of such deposit (it being under-
stood that this condition shall not be deemed satisfied
until the expiration of such period);
(iii) such legal defeasance or covenant
defeasance shall not cause the Trustee to have a
conflicting interest
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with respect to any Securities of the Company or any
Subsidiary Guarantor;
(iv) such legal defeasance or covenant
defeasance shall not result in a breach or violation of,
or constitute a Default or Event of Default under, this
Indenture or any other material agreement or instrument to
which the Company or any Subsidiary Guarantor is a party
or by which it is bound (and in that connection, the
Trustee shall have received a certificate from the Credit
Agent to that effect with respect to such Credit Agreement
if then in effect);
(v) in the case of an election under
paragraph (b) above, the Company shall have delivered to
the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by,
the Internal Revenue Service a ruling or (y) since the
Issue Date, there has been a change in the applicable
Federal income tax law, in either case to the effect that,
and based thereon such opinion shall confirm that, the
Holders of the outstanding Securities will not recognize
income, gain or loss for Federal income tax purposes as a
result of such legal defeasance and will be subject to
Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such
legal defeasance had not occurred;
(vi) in the case of an election under
paragraph (c) above, the Company shall have delivered to
the Trustee an Opinion of Counsel to the effect that the
Holders of the outstanding Securities will not recognize
income, gain or loss for Federal income tax purposes as a
result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such
covenant defeasance had not occurred;
(vii) in the case of an election under either
paragraph (b) or (c) above, an Opinion of Counsel to the
effect that, (x) the trust funds will not be subject to
any rights of any other holders of Senior Indebtedness or
Guarantor Senior Indebtedness, including, without limita-
tion, those arising under this Indenture, after the 91st
day following the deposit, and (y) after the 91st day fol-
lowing the deposit, the trust funds will not be subject to
the effect of any applicable Bankruptcy Law;
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(viii) the Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent
provided for relating to either the legal defeasance
under paragraph (b) above or the covenant defeasance under
paragraph (c) above, as the case may be, have been
complied with; and
(ix) the Company shall have delivered to the
Trustee an Officer's Certificate stating that the deposit
was not made by the Company with the intent of preferring
the Holders of the Securities over other creditors of the
Company or any Subsidiary Guarantor or with the intent of
defeating, hindering, delaying or defrauding creditors of
the Company, any Subsidiary Guarantor or others.
(e) All money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this
paragraph (e), the "Trustee") pursuant to paragraph (d) above
in respect of the outstanding Securities shall be held in trust
and applied by the Trustee, in accordance with the provisions
of such Securities and this Indenture, to the payment, either
directly or through any Paying Agent (other than the Company or
any Affiliate of the Company) as the Trustee may determine, to
the Holders of such Securities of all sums due and to become
due thereon in respect of principal, premium and interest, but
such money need not be segregated from other funds except to
the extent required by law.
The Company shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed
against the U.S. Government Obligations deposited pursuant to
paragraph (d) above or the principal, premium, if any, and
interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the
Holders of the outstanding Securities.
Anything in this Section 9.02 to the contrary not-
withstanding, the Trustee shall deliver or pay to the Company
from time to time upon the request, in writing, by the Company
any money or U.S. Government Obligations held by it as provided
in paragraph (d) above which, in the opinion of a nationally
recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee, are
in excess of the amount thereof which would then be required to
be deposited to effect an equivalent legal defeasance or cove-
nant defeasance.
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SECTION 9.03. Application of Trust Money.
The Trustee shall hold in trust money or U.S. Govern-
ment Obligations deposited with it pursuant to Sections 9.01
and 9.02, and shall apply the deposited money and the money
from U.S. Government Obligations in accordance with this Inden-
ture to the payment of principal of, premium, if any, and
interest on the Securities.
SECTION 9.04. Repayment to Company or Subsidiary
Guarantors.
Subject to Sections 8.07, 9.01 and 9.02, the Trustee
shall promptly pay to the Company, or if deposited with the
Trustee by any Subsidiary Guarantor, to such Guarantor, upon
receipt by the Trustee of an Officers' Certificate, any excess
money, determined in accordance with Section 9.02, held by it
at any time. The Trustee and the Paying Agent shall pay to the
Company or any Subsidiary Guarantor, as the case may be, upon
receipt by the Trustee or the Paying Agent, as the case may be,
of an Officers' Certificate, any money held by it for the pay-
ment of principal, premium, if any, or interest that remains
unclaimed for two years after payment to the Holders is
required; provided, however, that the Trustee and the Paying
Agent before being required to make any payment may, but need
not, at the expense of the Company cause to be published once
in a newspaper of general circulation in The City of New York
or mail to each Holder entitled to such money notice that such
money remains unclaimed and that after a date specified
therein, which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money
then remaining will be repaid to the Company. After payment to
the Company or any Subsidiary Guarantor, as the case may be,
Securityholders entitled to money must look solely to the Com-
pany for payment as general creditors unless an applicable
abandoned property law designates another person, and all lia-
bility of the Trustee or Paying Agent with respect to such
money shall thereupon cease.
SECTION 9.05. Reinstatement.
If the Trustee or Paying Agent is unable to apply any
money or U.S. Government Obligations in accordance with this
Indenture by reason of any legal proceeding or by reason of any
order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such applica-
tion, then and only then the Company's and each Subsidiary
<PAGE> 98
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Guarantor's, if any, obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit
had been made pursuant to this Indenture until such time as the
Trustee is permitted to apply all such money or U.S. Government
Obligations in accordance with this Indenture; provided, how-
ever, that if the Company or the Subsidiary Guarantors, as the
case may be, has made any payment of principal of, premium, if
any, or interest on any Securities because of the reinstatement
of its obligations, the Company or the Subsidiary Guarantors,
as the case may be, shall be, subrogated to the rights of the
holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
The Company and the Subsidiary Guarantors, when
authorized by a Board Resolution, and the Trustee, together,
may amend or supplement this Indenture or the Securities with
out notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
provided that such amendment or supplement does not
adversely affect the rights of any Holder;
(2) to comply with Article Six and Section 11.06;
(3) to provide for uncertificated Securities in
addition to or in place of certificated Securities;
(4) to make any other change that does not adversely
affect the rights of any Securityholder; or
(5) to comply with any requirements of the Commis-
sion in connection with the qualification of this Inden-
ture under the TIA;
provided that the Company has delivered to the Trustee an Opin-
ion of Counsel stating that such amendment or supplement com-
plies with the provisions of this Section 10.01.
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SECTION 10.02. With Consent of Holders.
Subject to Section 7.07, the Company and each Subsid-
iary Guarantor, when authorized by a Board Resolution, and the
Trustee, together with the written consent of the Holder or
Holders of at least a majority in aggregate principal amount of
the outstanding Securities, may amend or supplement, or waive
compliance with any provision of, this Indenture, the Securi-
ties or any Guarantee without notice to any other
Securityholders; provided that without the consent of Holders
of not less than two thirds in aggregate principal amount of
Securities then outstanding, no such amendment, supplement or
waiver may release any Subsidiary Guarantor from any of its
obligations under its Guarantee or this Indenture other than in
accordance with the terms of such Guarantee and this Indenture.
Without the consent of each Securityholder affected, however,
no amendment, supplement or waiver, including a waiver pursuant
to Section 7.04, may:
(1) change the principal amount of Securities whose
Holders must consent to an amendment, supplement or waiver
of any provision of this Indenture, the Securities or the
Guarantees;
(2) reduce the rate or extend the time for payment
of interest on any Security;
(3) reduce the principal amount of any Security;
(4) change the Maturity Date of any Security or the
Change of Control Payment Date, or alter the redemption
provisions in this Indenture or the Securities or the pur-
chase price in connection with any repurchase of Securi-
ties pursuant to Section 5.15 in a manner adverse to any
Holder;
(5) make any changes in the provisions concerning
waivers of Defaults or Events of Default by Holders of the
Securities or the rights of Holders to recover the princi-
pal of, interest on, or redemption payment with respect
to, any Security;
(6) make any changes in Section 7.04, 7.07 or this
Section 10.02;
(7) make the principal of, or the interest on any
Security payable with anything or in any manner other than
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as provided for in this Indenture, the Securities and the
Guarantees as in effect on the date hereof;
(8) waive a Default or Event of Default resulting
from failure to comply with the provisions of Section
5.15; or
(9) modify the subordination provisions of this
Indenture (including the related definitions) so as to
adversely affect the ranking of any Security or Guarantee.
It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of
any proposed amendment, supplement or waiver, but it shall be
sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this
Section becomes effective, the Company shall mail to the Hold-
ers affected thereby a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental
indenture.
In connection with any amendment, supplement or
waiver under this Article Ten, the Company may, but shall not
be obligated to, offer to any Holder who consents to such
amendment, supplement or waiver, or to all Holders, considera-
tion for such Holder's consent to such amendment, supplement or
waiver.
SECTION 10.03. Compliance with TIA.
From the date on which the Indenture is qualified
under the TIA, every amendment, waiver or supplement of this
Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 10.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes
effective, a consent to it by a Holder is a continuing consent
by the Holder and every subsequent Holder of a Security or por-
tion of a Security that evidences the same debt as the consent-
ing Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent
Holder may revoke the consent as to his Security or portion of
<PAGE> 101
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his Security by notice to the Trustee or the Company received
before the date on which the Trustee receives an Officers' Cer-
tificate certifying that the Holders of the requisite principal
amount of Securities have consented (and not theretofore
revoked such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled
to consent to any amendment, supplement or waiver, which record
date shall be at least 30 days prior to the first solicitation
of such consent. If a record date is fixed, then notwithstand-
ing the last sentence of the immediately preceding paragraph,
those persons who were Holders at such record date (or their
duly designated proxies), and only those persons, shall be
entitled to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date. No
such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes
effective, it shall bind every Securityholder, unless it makes
a change described in any of clauses (1) through (9) of Section
10.02, in which case, the amendment, supplement or waiver shall
bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security
that evidences the same debt as the consenting Holder's Secu-
rity; provided that any such waiver shall not impair or affect
the right of any Holder to receive payment of principal of and
interest on a Security, on or after the respective due dates
expressed in such Security, or to bring suit for the enforce-
ment of any such payment on or after such respective dates
without the consent of such Holder.
SECTION 10.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the
terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place
an appropriate notation on the Security about the changed terms
and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new
Security that reflects the changed terms.
<PAGE> 102
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SECTION 10.06. Trustee to Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement
or waiver authorized pursuant to this Article Ten; provided
that the Trustee may, but shall not be obligated to, execute
any such amendment, supplement or waiver which affects the
Trustee's own rights, duties or immunities under this Inden-
ture. The Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an Opinion of Counsel stating
that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Ten is authorized or per-
mitted by this Indenture.
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee.
Each Subsidiary Guarantor hereby unconditionally,
jointly and severally, guarantees (such guarantee to be
referred to herein as the "Guarantee"), subject to Article
Twelve, to each Holder of a Security authenticated and deliv-
ered by the Trustee and to the Trustee and its successors and
assigns, the Securities or the Obligations of the Company here
under or thereunder, that: (i) the principal of and interest
on the Securities will be promptly paid in full when due, sub-
ject to any applicable grace period, whether at maturity, by
acceleration or otherwise and interest on the overdue princi-
pal, if any, and interest on any interest, to the extent law-
ful, of the Securities and all other obligations of the Company
to the Holders or the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in accordance with the
terms hereof and thereof; and (ii) in case of any extension of
time of payment or renewal of any Securities or of any such
other obligations, the same will be promptly paid in full when
due or performed in accordance with the terms of the extension
or renewal, subject to any applicable grace period, whether at
stated maturity, by acceleration or otherwise, subject, how-
ever, in the case of clauses (i) and (ii) above, to the limita-
tions set forth in Section 11.05. Each Subsidiary Guarantor
hereby agrees that its obligations hereunder shall be uncondi-
tional, irrespective of the validity, regularity or enforce-
ability of the Securities or this Indenture, the absence of any
action to enforce the same, any waiver or consent by any Holder
<PAGE> 103
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of the Securities with respect to any provisions hereof or
thereof, the recovery of any judgment against the Company, any
action to enforce the same or any other circumstance which
might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each Subsidiary Guarantor hereby
waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of
the Company, any right to require a proceeding first against
the Company, protest, notice and all demands whatsoever and
covenants that this Guarantee will not be discharged except by
complete performance of the obligations contained in the Secu-
rities, this Indenture and in this Guarantee. If any
Securityholder or the Trustee is required by any court or
otherwise to return to the Company, any Subsidiary Guarantor,
or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or any Subsidiary Guarantor,
any amount paid by the Company or any Subsidiary Guarantor to
the Trustee or such Securityholder, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full
force and effect. Each Subsidiary Guarantor further agrees
that, as between each Subsidiary Guarantor, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be acceler-
ated as provided in Article Seven for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohi-
bition preventing such acceleration in respect of the obliga-
tions guaranteed hereby, and (y) in the event of any accelera-
tion of such obligations as provided in Article Seven, such
obligations (whether or not due and payable) shall forthwith
become due and payable by each Subsidiary Guarantor for the
purpose of this Guarantee.
SECTION 11.02. Subordination of Guarantee.
The obligations of each Subsidiary Guarantor to the
Holders of Securities and to the Trustee pursuant to the Guar-
antee and this Indenture are expressly subordinate and subject
in right of payment to the prior payment in full of all Guaran-
tor Senior Indebtedness of such Subsidiary Guarantor, to the
extent and in the manner provided in Article Twelve.
SECTION 11.03. Severability.
In case any provision of this Guarantee shall be
invalid, illegal or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
<PAGE> 104
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SECTION 11.04. Release of a Subsidiary Guarantor.
Upon (i) the release by the lenders under the Term
Loans, related documents and future refinancings thereof of all
guarantees of a Subsidiary Guarantor and all Liens on the prop-
erty and assets of such Subsidiary Guarantor relating to such
Indebtedness, or (ii) the sale or disposition (whether by
merger, stock purchase, asset sale or otherwise) of a Subsid-
iary Guarantor (or all or substantially all its assets) to an
entity which is not a Subsidiary of the Company and which sale
or disposition is otherwise in compliance with the terms of
this Indenture, such Subsidiary Guarantor shall be deemed
released from all obligations under this Article Eleven without
any further action required on the part of the Trustee or any
Holder; provided, however, that any such termination shall
occur only to the extent that all obligations of such Subsid-
iary Guarantor under all of its guarantees of, and under all of
its pledges of assets or other security interests which secure,
such Indebtedness of the Company shall also terminate upon such
release, sale or transfer.
The Trustee shall deliver an appropriate instrument
evidencing such release upon receipt of a request by the Com-
pany accompanied by an Officers' Certificate certifying as to
the compliance with this Section 11.04. Any Subsidiary Guaran-
tor not so released remains liable for the full amount of prin-
cipal of and interest on the Securities as provided in this
Article Eleven.
SECTION 11.05. Limitation of Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor and by its acceptance
hereof each Holder hereby confirms that it is the intention of
all such parties that the guarantee by such Subsidiary Guaran-
tor pursuant to its Guarantee not constitute a fraudulent
transfer or conveyance for purposes of the Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar Federal or state law. To effec-
tuate the foregoing intention, the Holders and such Subsidiary
Guarantor hereby irrevocably agree that the obligations of such
Subsidiary Guarantor under the Guarantee shall be limited to
the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor
(including, but not limited to, the Guarantor Senior Indebted-
ness of such Subsidiary Guarantor) and after giving effect to
any collections from or payments made by or on behalf of any
other Subsidiary Guarantor in respect of the obligations of
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such other Subsidiary Guarantor under its Guarantee or pursuant
to Section 11.07, result in the obligations of such Subsidiary
Guarantor under the Guarantee not constituting such fraudulent
transfer or conveyance.
SECTION 11.06. Subsidiary Guarantors May Consolidate,
etc., on Certain Terms.
(a) Nothing contained in this Indenture or in any of
the Securities shall prevent any consolidation or merger of a
Subsidiary Guarantor with or into the Company or another Sub-
sidiary Guarantor or shall prevent any sale or conveyance of
the property of a Subsidiary Guarantor as an entirety or
substantially as an entirety, to the Company or another Subsid-
iary Guarantor. Upon any such consolidation, merger, sale or
conveyance, the Guarantee given by such Subsidiary Guarantor
shall no longer have any force or effect.
(b) Except as set forth in Article Five and Article
Six hereof, nothing contained in this Indenture or in any of
the Securities shall prevent any consolidation or merger of a
Subsidiary Guarantor with or into a corporation or corporations
other than the Company or another Subsidiary Guarantor (whether
or not affiliated with the Subsidiary Guarantor); provided,
however, that, subject to Sections 11.04 and 11.06(a),
(i) immediately after such transaction, and giving effect
thereto, no Default or Event of Default shall have occurred as
a result of such transaction and be continuing, and (ii) upon
any such consolidation, merger, sale or conveyance, the Subsid-
iary Guarantee set forth in this Article Eleven, and the due
and punctual performance and observance of all of the covenants
and conditions of this Indenture to be performed by such Sub-
sidiary Guarantor, shall be expressly assumed (in the event
that the Subsidiary Guarantor is not the surviving corporation
in the merger), by supplemental indenture satisfactory in form
to the Trustee, executed and delivered to the Trustee, by the
corporation formed by such consolidation, or into which the
Subsidiary Guarantor shall have merged, or by the corporation
that shall have acquired such property. In the case of any
such consolidation, merger, sale or conveyance and upon the
assumption by the successor corporation, by supplemental inden-
ture executed and delivered to the Trustee and satisfactory in
form to the Trustee of the due and punctual performance of all
of the covenants and conditions of this Indenture to be per-
formed by the Subsidiary Guarantor, such successor corporation
shall succeed to and be substituted for the Subsidiary Guaran-
tor with the same effect as if it had been named herein as a
<PAGE> 106
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Subsidiary Guarantor; provided, however, that solely for pur-
poses of computing amounts described in subclause (c) of the
first paragraph of Section 5.03, any such successor corporation
shall only be deemed to have succeeded to and be substituted
for any Subsidiary Guarantor with respect to periods subsequent
to the effective time of such merger, consolidation or transfer
of assets.
SECTION 11.07. Contribution.
In order to provide for just and equitable contribu-
tion among the Subsidiary Guarantors, the Subsidiary Guarantors
agree, inter se, that in the event any payment or distribution
is made by any Subsidiary Guarantor (a "Funding Guarantor")
under the Guarantee, such Funding Guarantor shall be entitled
to a contribution from all other Subsidiary Guarantors in a pro
rata amount based on the Adjusted Net Assets of each Subsidiary
Guarantor (including the Funding Guarantor) for all payments,
damages and expenses incurred by that Funding Guarantor in dis-
charging the Company's obligations with respect to the Securi-
ties or any other Subsidiary Guarantor's obligations with
respect to the Guarantee. "Adjusted Net Assets" of such Sub-
sidiary Guarantor at any date shall mean the lesser of the
amount by which (x) the fair value of the property of such Sub-
sidiary Guarantor exceeds the total amount of liabilities,
including, without limitation, contingent liabilities (after
giving effect to all other fixed and contingent liabilities
incurred or assumed on such date (other than liabilities of
such Subsidiary Guarantor under Subordinated Indebtedness)),
but excluding liabilities under the Guarantee, of such Subsid-
iary Guarantor at such date and (y) the present fair salable
value of the assets of such Subsidiary Guarantor at such date
exceeds the amount that will be required to pay the probable
liability of such Subsidiary Guarantor on its debts (after giv-
ing effect to all other fixed and contingent liabilities
incurred or assumed on such date and after giving effect to any
collection from any Subsidiary of such Subsidiary Guarantor in
respect of the obligations of such Subsidiary under the Guaran-
tee), excluding debt in respect of the Guarantee of such Sub-
sidiary Guarantor, as they become absolute and matured.
SECTION 11.08. Waiver of Subrogation.
Each Subsidiary Guarantor hereby irrevocably waives
any claim or other rights which it may now or hereafter acquire
against the Company that arise from the existence, payment,
performance or enforcement of such Subsidiary Guarantor's
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obligations under the Guarantee and this Indenture, including,
without limitation, any right of subrogation, reimbursement,
exoneration, indemnification, and any right to participate in
any claim or remedy of any Holder of Securities against the
Company, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law, including,
without limitation, the right to take or receive from the Com-
pany, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment or security on account
of such claim or other rights. If any amount shall be paid to
any Subsidiary Guarantor in violation of the preceding sentence
and the Securities shall not have been paid in full, such
amount shall have been deemed to have been paid to such
Subsidiary Guarantor for the benefit of, and held in trust for
the benefit of, the Holders of the Securities, and shall, sub-
ject to the provisions of Section 11.02, Article Four and
Article Twelve, forthwith be paid to the Trustee for the bene-
fit of such Holders to be credited and applied upon the Securi-
ties, whether matured or unmatured, in accordance with the
terms of this Indenture. Each Subsidiary Guarantor acknowl-
edges that it will receive direct and indirect benefits from
the financing arrangements contemplated by this Indenture and
that the waiver set forth in this Section 11.08 is knowingly
made in contemplation of such benefits.
SECTION 11.09. Execution of Guarantee.
To evidence their guarantee to the Securityholders
set forth in this Article Eleven, the Subsidiary Guarantors
hereby agree to execute the Guarantee in substantially the form
included in Exhibit A, which shall be endorsed on each Security
ordered to be authenticated and delivered by the Trustee. Each
Subsidiary Guarantor hereby agrees that its Guarantee set forth
in this Article Eleven shall remain in full force and effect
notwithstanding any failure to endorse on each Security a nota-
tion of such Guarantee. Each such Guarantee shall be signed on
behalf of each Subsidiary Guarantor by two Officers, or an
Officer and an Assistant Secretary or one Officer shall sign
and one Officer or an Assistant Secretary (each of whom shall,
in each case, have been duly authorized by all requisite corpo-
rate actions) shall attest to such Guarantee prior to the
authentication of the Security on which it is endorsed, and the
delivery of such Security by the Trustee, after the authentica-
tion thereof hereunder, shall constitute due delivery of such
Guarantee on behalf of such Subsidiary Guarantor. Such signa-
tures upon the Guarantee may be by manual or facsimile signa-
ture of such officers and may be imprinted or otherwise
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reproduced on the Guarantee, and in case any such officer who
shall have signed the Guarantee shall cease to be such officer
before the Security on which such Guarantee is endorsed shall
have been authenticated and delivered by the Trustee or disposed
of by the Company, such Security nevertheless may be authenticated
and delivered or disposed of as though the person who signed the
Guarantee had not ceased to be such officer of the Subsidiary
Guarantor.
SECTION 11.10. Waiver of Stay, Extension or Usury Laws.
Each Subsidiary Guarantor covenants (to the extent
that it may lawfully do so) that it will not at any time insist
upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury
law or other law that would prohibit or forgive each such Sub-
sidiary Guarantor from performing its Guarantee as contemplated
herein, wherever enacted, now or at any time hereafter in
force, or which may affect the covenants or the performance of
this Indenture; and (to the extent that it may lawfully do so)
each such Subsidiary Guarantor hereby expressly waives all
benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been
enacted.
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE OBLIGATIONS
SECTION 12.01. Guarantee Obligations Subordinated
to Guarantor Senior Indebtedness.
Anything herein to the contrary notwithstanding, each
of the Subsidiary Guarantors, for itself and its successors,
and each Holder, by his acceptance of Guarantees, agrees, that
any payment of obligations by a Subsidiary Guarantor in respect
of its Guarantee (collectively, as to any Subsidiary Guarantor,
its "Guarantee Obligations") is subordinated, to the extent and
in the manner provided in this Article Twelve, to the prior
payment in full in cash or Cash Equivalents of all Guarantor
Senior Indebtedness of such Subsidiary Guarantor.
<PAGE> 109
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This Article Twelve shall constitute a continuing
offer to all persons who become holders of, or continue to
hold, Guarantor Senior Indebtedness, and such provisions are
made for the benefit of the holders of Guarantor Senior Indebt-
edness and such holders are made obligees hereunder and any one
or more of them may enforce such provisions.
SECTION 12.02. Suspension of Guarantee Obligations When
Guarantor Senior Indebtedness in Default.
(a) Unless Section 12.03 shall be applicable, upon
(1) the occurrence of a Payment Default with respect to any
Designated Senior Indebtedness guaranteed by a Subsidiary
Guarnator (which guarantee consititutes Guarantor Senior
Indebtedness of such Subsidiary Guarantor) and (2) receipt by
the Trustee, the Company and such Subsidiary Guarantor from the
Representatives of written notice of such occurrence, then no
payment (other than payments previously made pursuant to
Article Nine hereof) or distribution of any assets of such Sub-
sidiary Guarantor of any kind or character shall be made by
such Subsidiary Guarantor on account of principal of, premium,
if any, or interest on the Securities or on account of the pur-
chase, redemption or other acquisition of Securities or any of
the obligations of such Subsidiary Guarantor under this Guaran-
tee unless and until such Payment Default shall have been cured
or waived or shall have ceased to exist or such Guarantor
Senior Indebtedness shall have been discharged or paid in full,
after which such Guarantor shall resume making any and all
required payments in respect of its obligations under this
Guarantee.
(b) Unless Section 12.03 shall be applicable upon
(1) the occurrence of a Non-payment Default with respect to any
Designated Senior Indebtedness guaranteed by a Subsidiary Guar-
antor (which guarantee constitutes Guarantor Senior Indebted-
ness of such Subsidiary Guarantor) and (2) the earlier of
(i) receipt by the Trustee, the Company and such Subsidiary
Guarantor from the Representatives of written notice of such
occurrence stating that such notice in a "Payment Blockage
Notice" pursuant to Sections 4.02(b) and 12.02(b) of this
Indenture or (ii) if such Non-payment Default results from the
acceleration of the Securities, the date of the acceleration of
the Securities, no payment (other than payments previously made
pursuant to Article Nine hereof) or distribution of any assets
of such Subsidiary Guarantor of any kind or character shall be
made by such Guarantor on account of principal, premium, if
any, or interest on the Securities or on account of the
<PAGE> 110
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purchase, redemption or other acquisition of Securities or on
account of any of the other obligations of such Subsidiary
Guarantor under this Guarantee for a period ("Guarantor Payment
Blockage Period") commencing on the date of receipt by the
Trustee of such notice or the date of the acceleration referred
to in clause (ii) above, as the case may be, unless and until
the earlier to occur of the following events: (w) 179 days
shall have elapsed since receipt of such written notice by the
Trustee or the date of the acceleration of the Securities, as
the case may be (provided such Guarantor Senior Indebtedness
shall theretofore not have been accelerated), (x) such Non-pay-
ment Default shall have been cured or waived or shall have
ceased to exist, (y) such Guarantor Senior Indebtedness shall
have been discharged or paid in full or (z) such Guarantor
Payment Blockage Period shall have been terminated by written
notice to the Guarantor or the Trustee from the Representative
initiating such Guarantor Payment Blockage Period, or the hold-
ers of at least a majority in principal amount of such issue of
such Guarantor Senior Indebtedness, after which, in the case of
clause (w), (x), (y) or (z), the Subsidiary Guarantor shall
resume making any and all required payments in respect of its
obligations under this Guarantee. Notwithstanding any other
provisions of this Indenture, only one Guarantor Payment Block-
age Period may be commenced within any consecutive 365 day
period and no Non-payment Default with respect to Guarantor
Senior Indebtedness guaranteed by any Subsidiary Guarantor
(which guarantee constitutes Guarantor Senior Indebtedness of
such Subsidiary Guarantor) which existed or was continuing on
the date of the commencement of any Guarantor Payment Blockage
Period shall be, or be made, the basis for the commencement of
a second Guarantor Payment Blockage Period, whether or not
within a period of 365 consecutive days, unless such event of
default shall have been cured or waived for a period of not
less than 90 consecutive days. In no event shall a Guarantor
Payment Blockage Period extend beyond 179 days from the date of
the receipt of the notice or the date of the acceleration of
the Securities referred to in clause (2) hereof and there must
be a 186 consecutive day period in any 365 consecutive day
period during which no Guarantor Payment Blockage Period is in
effect.
(c) In the event that, notwithstanding the fore-
going, the Trustee or the Holder of any Security shall have
received any payment prohibited by the foregoing provisions of
this Section 12.02, then and in such event such payment shall
be paid over and delivered forthwith to the Representatives or
as a court of competent jurisdiction shall direct.
<PAGE> 111
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SECTION 12.03. Guarantee Obligations Subordinated to Prior
Payment of All Guarantor Senior Indebtedness
on Dissolution, Liquidation or Reorganization
of Such Subsidiary Guarantor.
Upon any payment or distribution of assets of any
Subsidiary Guarantor of any kind or character, whether in cash,
property or securities upon any dissolution, winding up, total
or partial liquidation or reorganization of such Subsidiary
Guarantor and whether voluntary or involuntary (including,
without limitation, in bankruptcy, insolvency or receivership
proceedings or upon any assignment for the benefit of creditors
or any other marshalling of assets and liabilities of such Sub-
sidiary Guarantor and whether voluntary or involuntary):
(a) the holders of all Guarantor Senior Indebtedness
of such Subsidiary Guarantor shall first be entitled to
receive payments in full in cash or Cash Equivalents of
all amounts payable under Guarantor Senior Indebtedness
(including, with respect to Designated Senior Indebtedness
guaranteed by such Subsidiary Guarantor, any interest
accruing after the commencement of any such proceeding at
the rate specified in the applicable Designated Senior
Indebtedness whether or not interest is an allowed claim
enforceable against the Company in any such proceeding)
before the Holders will be entitled to receive any payment
with respect to the Guarantee (excluding Permitted Subor-
dinated Reorganization Securities), and until all Obliga-
tions with respect to the Guarantor Senior Indebtedness
are paid in full in cash or Cash Equivalents, any distri-
bution to which the Holders would be entitled (excluding
Permitted Subordinated Reorganization Securities) shall be
made to the holders of Guarantor Senior Indebtedness; pro-
vided, however, that no payment by any other Subsidiary
Guarantor or the Company shall constitute payment on
behalf of such Subsidiary Guaranty for purposes of this
Section 12.03(a);
(b) any payment or distribution of assets of such
Subsidiary Guarantor of any kind or character, whether in
cash, property or securities, to which the Holders or the
Trustee on behalf of the Holders would be entitled
(excluding Permitted Subordinated Indebtedness) except for
the provisions of this Article Twelve, shall be paid by
the liquidating trustee or agent or other person making
such a payment or distribution, directly to the holders of
Guarantor Senior Indebtedness of such Subsidiary Guarantor
<PAGE> 112
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or their Representative, ratably according to the respec-
tive amounts of such Guarantor Senior Indebtedness remain-
ing unpaid held or represented by each, until all such
Guarantor Senior Indebtedness remaining unpaid shall have
been paid in full in cash or Cash Equivalents after giving
effect to any concurrent payment or distribution to the
holders of such Guarantor Senior Indebtedness;
(c) in the event that, notwithstanding the fore-
going, any payment or distribution of assets of such Sub-
sidiary Guarantor of any kind or character, whether in
cash, property or securities, shall be received by the
Trustee or the Holders or any Paying Agent in respect of
payment of the Guarantee before all Guarantor Senior
Indebtedness of such Subsidiary Guarantor is paid in full
in cash or Cash Equivalents, such payment or distribution
(subject to the provisions of Sections 12.06 and 12.07)
shall be received, segregated from other funds, and held
in trust by the Trustee or such Holder or Paying Agent for
the benefit of, and shall immediately be paid over to, the
holders of such Guarantor Senior Indebtedness or their
Representative, ratably according to the respective
amounts of such Guarantor Senior Indebtedness held or rep-
resented by each, until all such Guarantor Senior Indebt-
edness remaining unpaid shall have been paid in full in
cash or Cash Equivalents, after giving effect to any con-
current payment or distribution to the holders of Guaran-
tor Senior Indebtedness. Notwithstanding anything to the
contrary contained herein, in the absence of its gross
negligence or wilful misconduct, the Trustee shall have no
duty to collect or retrieve monies previously paid by it
in good faith; provided that this sentence shall not
affect the obligation of any other party receiving such
payment to hold such payment for the benefit of, and to
pay over such payment over to, the holders of such Guaran-
tor Senior Indebtedness or their Representative.
Each Subsidiary Guarantor shall give prompt notice to
the Trustee prior to any dissolution, winding up, total or par-
tial liquidation or total or reorganization (including, without
limitation, in bankruptcy, insolvency, or receivership proceed-
ings or upon any assignment for the benefit of creditors or any
other marshalling of such Subsidiary Guarantor's assets and
liabilities).
<PAGE> 113
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SECTION 12.04. Holders of Guarantee Obligations To Be
Subrogated to Rights of Holders of
Guarantor Senior Indebtedness.
Subject to the payment in full in cash or Cash Equiv-
alents of all Guarantor Senior Indebtedness, the Holders of
Guarantee Obligations of a Subsidiary Guarantor shall be
subrogated to the rights of the holders of Guarantor Senior
Indebtedness of such Subsidiary Guarantor to receive payments
or distributions of assets of such Subsidiary Guarantor appli-
cable to such Guarantor Senior Indebtedness until all amounts
owing on or in respect of the Guarantee Obligations shall be
paid in full in cash, and for the purpose of such subrogation
no payments or distributions to the holders of such Guarantor
Senior Indebtedness by or on behalf of such Subsidiary Guaran-
tor, or by or on behalf of the Holders by virtue of this
Article Twelve, which otherwise would have been made to the
Holders, shall, as between such Subsidiary Guarantor and the
Holders, be deemed to be payment by such Subsidiary Guarantor
to or on account of such Guarantor Senior Indebtedness, it
being understood that the provisions of this Article Twelve are
and are intended solely for the purpose of defining the rela-
tive rights of the Holders, on the one hand, and the holders of
such Guarantor Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders
would otherwise have been entitled but for the provisions of
this Article Twelve shall have been applied, pursuant to the
provisions of this Article Twelve, to the payment of all
amounts payable under such Guarantor Senior Indebtedness, then
the Holders shall be entitled to receive from the holders of
such Guarantor Senior Indebtedness any payments or distribu-
tions received by such holders of such Guarantor Senior Indebt-
edness in excess of the amount sufficient to pay all amounts
payable under or in respect of such Guarantor Senior Indebted-
ness in full in cash or Cash Equivalents.
SECTION 12.05. Obligations of the Subsidiary
Guarantors Unconditional.
Nothing contained in this Article Twelve or elsewhere
in this Indenture or in the Guarantees is intended to or shall
impair, as between the Subsidiary Guarantors and the Holders,
the obligation of the Subsidiary Guarantors, which is absolute
and unconditional, to pay to the Holders all amounts due and
payable under the Guarantees as and when the same shall become
due and payable in accordance with their terms, or is intended
<PAGE> 114
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to or shall affect the relative rights of the Holders and cred-
itors of the Subsidiary Guarantors other than the holders of
the Guarantor Senior Indebtedness, nor shall anything herein or
therein prevent the Trustee or any Holder from exercising all
remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this
Article Twelve, of the holders of Guarantor Senior Indebtedness
in respect of cash, property or securities of the Subsidiary
Guarantors received upon the exercise of any such remedy. Upon
any payment or distribution of assets of any Subsidiary Guaran-
tor referred to in this Article Twelve, the Trustee, subject to
the provisions of Sections 8.01 and 8.02, and the Holders shall
be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which any dissolution, winding up,
liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating
trustee or agent or other person making any payment or distri-
bution to the Trustee or to the Holders for the purpose of
ascertaining the persons entitled to participate in such pay-
ment or distribution, the holders of Guarantor Senior Indebted-
ness and other Indebtedness of any Subsidiary Guarantor, the
amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or
to this Article Twelve. Nothing in this Section 12.05 shall
apply to the claims of, or payments to, the Trustee under or
pursuant to Section 8.07.
SECTION 12.06. Trustee Entitled to Assume Payments
Not Prohibited in Absence of Notice.
The Trustee shall not at any time be charged with
knowledge of the existence of any facts that would prohibit the
making of any payment to or by the Trustee unless and until the
Trustee or any Paying Agent shall have received notice thereof
from the Company or any Subsidiary Guarantor or from one or
more holders of Guarantor Senior Indebtedness or from any Rep-
resentative therefor and, prior to the receipt of any such
notice, the Trustee, subject to the provisions of Sections 8.01
and 8.02, shall be entitled in all respects conclusively to
assume that no such fact exists.
SECTION 12.07. Application by Trustee of Assets Deposited
with It.
U.S. Legal Tender or U.S. Government Obligations
deposited in trust with the Trustee pursuant to and in accor-
dance with Sections 9.01 and 9.02 shall be for the sole benefit
<PAGE> 115
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of Securityholders and, to the extent allocated for the payment
of Securities, shall not be subject to the subordination provi-
sions of this Article Twelve. Otherwise, any deposit of assets
or securities by or on behalf of a Subsidiary Guarantor with
the Trustee or any Paying Agent (whether or not in trust) for
payment of the Guarantee shall be subject to the provisions of
this Article Twelve; provided that if prior to the second Busi-
ness Day preceding the date on which by the terms of this
Indenture any such assets may become distributable for any pur-
pose (including, without limitation, the payment of either
principal of or interest on any Security) the Trustee or such
Paying Agent shall not have received with respect to such
assets the notice provided for in Section 12.06, then the Trus-
tee or such Paying Agent shall have full power and authority to
receive such assets and to apply the same to the purpose for
which they were received, and shall not be affected by any
notice to the contrary received by it on or after such date.
The foregoing shall not apply to the Paying Agent if the Com-
pany or any Subsidiary or Affiliate of the Company is acting as
Paying Agent. Nothing contained in this Section 12.07 shall
limit the right of the holders of Guarantor Senior Indebtedness
to recover payments as contemplated by this Article Twelve.
SECTION 12.08. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any
Guarantor Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of any Sub-
sidiary Guarantor or by any act or failure to act, in good
faith, by any such holder, or by any non-compliance by any Sub-
sidiary Guarantor with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
(b) Without limiting the generality of subsection
(a) of this Section 12.08, the holders of Guarantor Senior
Indebtedness may, at any time and from time to time, without
the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of
the Securities and without impairing or releasing the subordi-
nation provided in this Article Twelve or the obligations here-
under of the Holders of the Securities to the holders of Guar-
antor Senior Indebtedness, do any one or more of the following:
(1) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Guarantor Senior Indebt-
edness or any instrument evidencing the same or any agreement
<PAGE> 116
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under which Guarantor Senior Indebtedness is outstanding;
(2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Guarantor Senior
Indebtedness; (3) release any person liable in any manner for
the collection or payment of Guarantor Senior Indebtedness; and
(4) exercise or refrain from exercising any rights against the
Company and any other person; provided, however, that in no
event shall any such actions limit the right of the Holders of
the Securities to take any action to accelerate the maturity of
the Securities pursuant to Article Seven hereof or to pursue
any rights or remedies hereunder or under applicable laws if
the taking of such action does not otherwise violate the terms
of this Indenture.
SECTION 12.09. Holders Authorize Trustee to Effectuate
Subordination of Guarantee Obligations.
Each Holder of the Guarantee Obligations by his
acceptance thereof authorizes and expressly directs the Trustee
on his behalf to take such action as may be necessary or appro-
priate to effect the subordination provisions contained in this
Article Twelve, and appoints the Trustee his attorney-in-fact
for such purpose, including, in the event of any dissolution,
winding up, liquidation or reorganization of any Subsidiary
Guarantor (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors
or any other marshalling of assets and liabilities of any Sub-
sidiary Guarantor) tending towards liquidation or reorganiza-
tion of the business and assets of any Subsidiary Guarantor,
the immediate filing of a claim for the unpaid balance under
its or his Guarantee Obligations in the form required in said
proceedings and cause said claim to be approved. If the Trus-
tee does not file a proper claim or proof of debt in the form
required in such proceeding prior to 30 days before the expira-
tion of the time to file such claim or claims, then the holders
of the Guarantor Senior Indebtedness or their Representative is
hereby authorized to file an appropriate claim for and on
behalf of the Holders of said Guarantee Obligations. Nothing
herein contained shall be deemed to authorize the Trustee or
the holders of Guarantor Senior Indebtedness or their Represen-
tative to authorize or consent to or accept or adopt on behalf
of any holder of Guarantee Obligations any plan of reorganiza-
tion, arrangement, adjustment or composition affecting the
Guarantee Obligations or the rights of any Holder thereof, or
to authorize the Trustee or the holders of Guarantor Senior
Indebtedness or their Representative to vote in respect of the
<PAGE> 117
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claim of any holder of Guarantee Obligations in any such
proceeding.
SECTION 12.10. Right of Trustee to Hold Guarantor
Senior Indebtedness.
The Trustee shall be entitled to all of the rights
set forth in this Article Twelve in respect of any Guarantor
Senior Indebtedness at any time held by it to the same extent
as any other holder of Guarantor Senior Indebtedness, and noth-
ing in this Indenture shall be construed to deprive the Trustee
of any of its rights as such holder.
SECTION 12.11. No Suspension of Remedies.
The failure to make a payment in respect of the Guar-
antees by reason of any provision of this Article Twelve shall
not be construed as preventing the occurrence of a Default or
an Event of Default under Section 7.01.
Nothing contained in this Article Twelve shall limit
the right of the Trustee or the Holders of Securities to take
any action to accelerate the maturity of the Securities pursu-
ant to Article Seven or to pursue any rights or remedies here-
under or under applicable law, subject to the rights, if any,
under this Article Twelve of the holders, from time to time, of
Guarantor Senior Indebtedness.
SECTION 12.12. No Fiduciary Duty of Trustee to Holders
of Guarantor Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary
duty to the holders of Guarantor Senior Indebtedness, and shall
not be liable to any such holders (other than for its willful
misconduct or gross negligence) if it shall in good faith mis-
takenly pay over or deliver to the holders of Guarantee Obliga-
tions or the Company or any other person, money or assets to
which any holders of Guarantor Senior Indebtedness shall be
entitled by virtue of this Article Twelve or otherwise. Noth-
ing in this Section 12.12 shall affect the obligation of any
person other than the Trustee to hold such payment for the
benefit of, and to pay such payment over to, the holders of
Guarantor Senior Indebtedness or their Representative.
<PAGE> 118
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ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. TIA Controls.
If any provision of this Indenture limits, qualifies,
or conflicts with the duties imposed by operation of Section
3.18(c) of the TIA, the imposed duties shall control.
SECTION 13.02. Notices.
Any notices or other communications required or per-
mitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery, by telex, by telecopier or reg-
istered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Company or any Subsidiary Guarantor:
c/o The Yucaipa Companies
10000 Santa Monica Boulevard
Fifth Floor
Los Angeles, California 90067
Attention: Mark A. Resnik
if to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Division
if to the Credit Agent:
Bankers Trust Company
Attention: [ ]
Each of the Company, the Trustee, the Subsidiary
Guarantors and the Credit Agent by written notice to each other
such person may designate additional or different addresses for
notices to such person. Any notice or communication to the
Company, the Trustee, the Subsidiary Guarantors and the Credit
<PAGE> 119
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Agent shall be deemed to have been given or made as of the date
so delivered if personally delivered; when answered back, if
telexed; when receipt is acknowledged, if telecopied; and five
(5) calendar days after mailing if sent by registered or certi-
fied mail, postage prepaid (except that a notice of change of
address shall not be deemed to have been given until actually
received by the addressee).
Any notice or communication mailed to a Security
holder shall be mailed to him by first class mail or other
equivalent means at his address as it appears on the registra-
tion books of the Registrar and shall be sufficiently given to
him if so mailed within the time prescribed.
Failure to mail a notice or communication to a
Securityholder or any defect in it shall not affect its suffi-
ciency with respect to other Securityholders. If a notice or
communication is mailed in the manner provided above, it is
duly given, whether or not the addressee receives it.
SECTION 13.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA
{ 312(b) with other Securityholders with respect to their
rights under this Indenture or the Securities. The Company,
the Subsidiary Guarantors, the Trustee, the Registrar and any
other person shall have the protection of TIA { 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company to the
Trustee to take any action under this Indenture, the Company
shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the
opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel stating that, in the opin-
ion of such counsel, all such conditions precedent have
been complied with.
<PAGE> 120
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SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compli-
ance with a condition or covenant provided for in this Inden-
ture, other than the Officers' Certificate required by
Section 5.07, shall include:
(1) a statement that the person making such certifi-
cate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such person,
he has made such examination or investigation as is
necessary to enable him to express an informed opinion as
to whether or not such convenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion
of each such person, such condition or covenant has been
complied with; provided, however, that with respect to
matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by
or at a meeting of Securityholders. The Paying Agent or Regis-
trar may make reasonable rules for its functions.
SECTION 13.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular
place of payment is a Saturday, a Sunday or a day on which
banking institutions in New York, New York, Los Angeles, Cali-
fornia or at such place of payment are not required to be open.
If a payment date is a Legal Holiday at such place, payment may
be made at such place on the next succeeding day that is not a
Legal Holiday, and no interest shall accrue for the intervening
period.
<PAGE> 121
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SECTION 13.08. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW. Each of the parties hereto agrees to submit to the juris-
diction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Indenture.
SECTION 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of any of the Company or any
of its Subsidiaries. Any such indenture, loan or debt agree-
ment may not be used to interpret this Indenture.
SECTION 13.10. No Recourse Against Others.
A director, officer, employee, stockholder or incor-
porator, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason
of such obligations or their creations. Each Securityholder by
accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the
issuance of the Securities.
SECTION 13.11. Successors.
All agreements of the Company and each Subsidiary
Guarantor in this Indenture and the Securities shall bind their
respective successors. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 13.12. Duplicate Originals.
All parties may sign any number of copies of this
Indenture. Each signed copy shall be an original, but all of
them together shall represent the same agreement.
SECTION 13.13. Severability.
In case any one or more of the provisions in this
Indenture or in the Securities shall be held invalid, illegal
or unenforceable, in any respect for any reason, the validity,
legality and enforceability of any such provision in every
<PAGE> 122
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other respect and of the remaining provisions shall not in any
way be affected or impaired thereby, it being intended that all
of the provisions hereof shall be enforceable to the full
extent permitted by law.
SECTION 13.14. No Violation.
Notwithstanding the provisions of this Indenture, in
no event shall any transaction, agreement, payment or other
event to be consummated, entered into or made in connection
with the Acquisition or any financing thereof (including with
out limitation the transaction referred to in Section 6.01(c))
be considered a violation of any provision of this Indenture or
constitute a Change of Control hereunder.
<PAGE> 123
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed, and their respective corpo-
rate seals to be hereunto affixed and attested, all as of the
date first written above.
Dated: January , 1995
FOOD 4 LESS SUPERMARKETS, INC.
By: ____________________________
Name:
Title:
Attest: ___________________
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee
By: ____________________________
Name:
Title:
Attest: ____________________
SUBSIDIARY GUARANTORS:
CALA CO.
CALA FOODS, INC.
BELL MARKETS, INC.
FOOD 4 LESS OF SOUTHERN
CALIFORNIA, INC.
ALPHA BETA COMPANY
FOOD 4 LESS OF CALIFORNIA, INC.
FALLEY'S, INC.
BAY AREA WAREHOUSE STORES, INC.
FOOD 4 LESS MERCHANDISING, INC.
FOOD 4 LESS GM, INC.
<PAGE> 124
-115-
By: ____________________________
Name:
(for each of the above-
listed Subsidiary Guarantors)
Attest: _____________________
(for each of the
above-listed
Subsidiary Guarantors)
<PAGE> 125
EXHIBIT A
[FORM OF NOTE]
FOOD 4 LESS SUPERMARKETS, INC.
13.75% Senior Subordinated Notes
due 2005
No. $
FOOD 4 LESS SUPERMARKETS, INC., a Delaware corpora-
tion (the "Company", which term includes any successor corpora-
tion), for value received promises to pay to
or registered assigns, the principal sum of Dollars, on
, 2005.
Interest Payment Dates: and .
Record Dates: and .
Reference is made to the further provisions of this
Security contained herein, which will for all purposes have the
same effect as if set forth at this place.
A-1
<PAGE> 126
IN WITNESS WHEREOF, the Company has caused this Secu-
rity to be signed manually or by facsimile by its duly autho-
rized officers.
Dated:
Attest: FOOD 4 LESS SUPERMARKETS, INC.
__________________________ By: ___________________________
Name: Name:
Title: Title:
A-2
<PAGE> 127
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the
within-mentioned Indenture.
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee
By_______________________________
Authorized Signatory
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<PAGE> 128
FOOD 4 LESS SUPERMARKETS, INC.
13.75% Senior Subordinated Notes
due 2005
1. Interest.
FOOD 4 LESS SUPERMARKETS, INC., a Delaware corpora-
tion (the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The
Company will pay interest semi-annually on and
of each year (the "Interest Payment Date"), commencing
, 1995. Interest on the Securities will accrue from the
most recent date to which interest has been paid or, if no
interest has been paid, from the date of issuance of the Secu-
rities. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
The Company shall pay interest on overdue principal
and interest on overdue installments of interest, to the extent
lawful, at a rate equal to the rate of interest otherwise pay
able on the Securities.
2. Method of Payment.
The Company shall pay interest on the Securities
(except defaulted interest) to the persons who are the regis-
tered Holders at the close of business on the Record Date imme-
diately preceding the Interest Payment Date even if the Securi-
ties are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments.
The Company shall pay principal and interest in money of the
United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and interest by wire
transfer of Federal funds, or interest by its check payable in
such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the
Holder's registered address. Notwithstanding the foregoing,
the Company shall pay or cause to be paid all amounts payable
with respect to non-DTC eligible Securities by wire transfer of
Federal funds to the account of the Holders of such Securities.
3. Paying Agent and Registrar.
Initially, United States Trust Company of New York
(the "Trustee") will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders. The Company or any of its
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<PAGE> 129
Subsidiaries may, subject to certain exceptions, act as Paying
Agent, Registrar or co-Registrar.
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture,
dated as of , 1995 (the "Indenture"), among the Com-
pany, the Subsidiary Guarantors and the Trustee. Capitalized
terms herein are used as defined in the Indenture unless other
wise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code
Secs. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture until such time as the Indenture is qualified under
the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything
to the contrary herein, the Securities are subject to all such
terms, and Holders of Securities are referred to the Indenture
and said Act for a statement of them. The Securities are gen-
eral unsecured obligations of the Company limited in aggregate
principal amount to $145,000,000. Payment on each Security is
guaranteed on a senior subordinated basis, jointly and sever-
ally, by the Subsidiary Guarantors pursuant to Article Eleven
of the Indenture.
5. Optional Redemption.
On or after June 15, 1996 the Securities may be
redeemed in whole at any time or in part from time to time, at
the option of the Company, at a redemption price equal to the
applicable percentage of the principal amount thereof set forth
below, together with accrued and unpaid interest to the Redemp-
tion Date, if redeemed during the 12 months commencing on
in the years set forth below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1996 ................. 106.111%
1997 ................. 104.583%
1998 ................. 103.056%
1999 ................. 101.528%
and thereafter ....... 100%
</TABLE>
The documents evidencing Senior Indebtedness will
restrict the Company's ability to optionally redeem the
Securities.
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<PAGE> 130
6. Notice of Redemption.
Notice of redemption will be mailed at least 30 days
but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at such Holder's registered
address. Securities in denominations larger than $1,000 may be
redeemed in part.
Except as set forth in the Indenture, from and after
any Redemption Date, if monies for the redemption of the Secu-
rities called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date and payment
of the Securities called for redemption is not prohibited under
Article Four or Article Twelve of the Indenture, then, unless
the Company defaults in the payment of such Redemption Price,
the Securities called for redemption will cease to bear inter-
est and the only right of the Holders of such Securities will
be to receive payment of the Redemption Price.
7. Change of Control Offer.
Upon the occurrence of a Change of Control, each
Holder shall have the right to require the repurchase of such
Holder's Securities pursuant to a Change of Control Offer at a
purchase price equal to 101% of the principal amount thereof
plus accrued interest, if any, to the date of purchase. The
Company shall not be required to repurchase Securities until it
has complied with its covenants to repay in full all Indebted-
ness of the Company and its Subsidiaries under the Credit
Agreement or offer to repay in full all such Indebtedness and
repay the Indebtedness of each lender who has accepted its
offer to repay such Indebtedness or to obtain the requisite
consent under the Credit Agreement to permit the repurchase of
the Securities pursuant to a Change of Control Offer. In addi-
tion, prior to purchasing the Securities tendered in a Change
of Control Offer, the Company shall purchase all Senior F4L
Notes (or permitted refinancings thereof) which it is required
to purchase by reason of such Change of Control.
8. Limitation on Asset Sales.
Under certain circumstances the Company is required
to apply the net proceeds from Asset Sales to the repayment of
Pari Passu Indebtedness or Senior Indebtedness, to make Related
Business Investments, an investment in properties and assets
that replace the properties and assets that are the subject of
such Asset Sale, an investment in properties and assets that
will be used in the business of the Company and its Subsidiar-
ies existing on the Issue Date or in a business reasonably
related thereto or to purchase in a Net Proceeds Offer (at a
A-6
<PAGE> 131
price equal to 100% of the aggregate principal amount thereof,
plus accrued interest to the date of purchase) such aggregate
principal amount of Securities which, when added to the accrued
interest thereon, shall be equal to the net proceeds required
to be applied thereto.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without cou-
pons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange
Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need
not register the transfer of or exchange any Securities or por-
tions thereof selected for redemption.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated
as the owner of it for all purposes.
11. Unclaimed Money.
If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying
Agents will pay the money back to the Company at its request.
After that, all liability of the Trustee and such Paying Agents
with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity.
If the Company at any time deposits with the Trustee
U.S. Legal Tender or U.S. Government Obligations sufficient to
pay the principal of and interest on the Securities to redemp-
tion or maturity and complies with the other provisions of the
Indenture relating thereto, the Company will be discharged from
certain provisions of the Indenture and the Securities (includ-
ing the financial covenants, but excluding its obligation to
pay the principal of and interest on the Securities).
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture, the
Securities and the Guarantees may be amended or supplemented
with the written consent of the Holders of at least a majority
in aggregate principal amount of the Securities then outstand-
ing, and any existing Default or Event of Default or compliance
A-7
<PAGE> 132
with any provision may be waived with the consent of the Hold-
ers of a majority in aggregate principal amount of the Securi-
ties then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Inden-
ture or the Securities to, among other things, cure any ambigu-
ity, defect or inconsistency, provide for uncertificated Secu-
rities in addition to or in place of certificated Securities,
comply with Article Six or Section 11.06 of the Indenture, or
comply with any requirements of the SEC in connection with the
qualification of the Indenture under the TIA, or make any other
change that does not adversely affect the rights of any Holder
of a Security.
14. Restrictive Covenants.
The Indenture imposes certain limitations on the
ability of the Company and its Subsidiaries to, among other
things, incur additional Indebtedness or Liens, make payments
in respect of its Capital Stock and merge or consolidate with
any other person and sell, lease, transfer or otherwise dispose
of substantially all of its properties or assets. The limita-
tions are subject to a number of important qualifications and
exceptions. The Company must annually report to the Trustee on
compliance with such limitations.
15. Subordination.
The Securities will be subordinated in right of pay
ment to the prior payment in full of all Senior Indebtedness
(as defined in the Indenture) of the Company. The Guarantees
are subordinated in right of payment, in the manner and to the
extent set forth in the Indenture, to the prior payment in full
of Guarantor Senior Indebtedness (as defined in the Indenture).
To the extent and in the manner provided in the Indenture,
Senior Indebtedness, and in the case of payment by a Subsidiary
Guarantor, Guarantor Senior Indebtedness, must be paid before
any payment may be made to any Holder of this Security. Any
Securityholder by accepting this Security agrees to the subor-
dination and authorizes the Trustee to give it effect.
16. Successors.
When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture, the prede-
cessor will be released from those obligations.
17. Defaults and Remedies.
If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal
A-8
<PAGE> 133
amount of Securities then outstanding may declare all the Secu-
rities to be due and payable immediately in the manner and with
the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as pro-
vided in the Indenture. The Trustee may require indemnity sat-
isfactory to it before it enforces the Indenture or the Securi-
ties. Subject to certain limitations, Holders of a majority in
aggregate principal amount of the Securities then outstanding
may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of Securities notice of
any continuing Default or Event of Default (except a Default in
payment of principal or interest, including an Accelerated Pay-
ment) if it determines that withholding notice is in their
interest.
18. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or
any other capacity, may become the owner or pledgee of Securi-
ties and may otherwise deal with the Company, its Subsidiaries
or their respective Affiliates as if it were not the Trustee.
19. No Recourse Against Others.
No stockholder, director, officer, employee or incor-
porator, as such, of the Company shall have any liability for
any obligation of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason
of, such obligations or their creation. Each Holder of a Secu-
rity by accepting a Security waives and releases all such lia-
bility. The waiver and release are part of the consideration
for the issuance of the Securities.
20. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authen-
tication on this Security.
21. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a
Holder of a Security or an assignee, such as: TEN COM (= ten-
ants in common), TEN ENT (= tenants by the entireties), JT TEN
(= joint tenants with right of survivorship and not as tenants
in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
A-9
<PAGE> 134
22. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Com-
mittee on Uniform Security Identification Procedures, the Com-
pany will cause CUSIP numbers to be printed on the Securities
immediately prior to the qualification of the Indenture under
the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on
the other identification numbers printed hereon.
The Company will furnish to any Holder of a Security
upon written request and without charge a copy of the Inden-
ture. Requests may be made to: Food 4 Less Supermarkets,
Inc., c/o The Yucaipa Companies, 10000 Santa Monica Boulevard,
Fifth Floor, Los Angeles, California 90067, Attn: Mark Resnik.
A-10
<PAGE> 135
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
The Subsidiary Guarantors (as defined in the Inden-
ture (the "Indenture") referred to in the Security upon which
this notation is endorsed and each hereinafter referred to as a
"Subsidiary Guarantor," which term includes any successor per
son under the Indenture) have unconditionally guaranteed on a
senior subordinated basis (such guarantee by each Subsidiary
Guarantor being referred to herein as the "Guarantee") (i) the
due and punctual payment of the principal of and interest on
the Securities, whether at maturity, by acceleration or other-
wise, the due and punctual payment of interest on the overdue
principal and interest, if any, on the Securities, to the
extent lawful, and the due and punctual performance of all
other obligations of the Company to the Holders or the Trustee
all in accordance with the terms set forth in Article Eleven
and Article Twelve of the Indenture and (ii) in case of any
extension of time of payment or renewal of any Securities or
any of such other obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of each Subsidiary Guarantor to the
Holders of Securities and to the Trustee pursuant to the Guar-
antee and the Indenture are expressly set forth and are
expressly subordinated and subject in right of payment to the
prior payment in full of all Guarantor Senior Indebtedness of
such Subsidiary Guarantor, to the extent and in the manner pro-
vided, in Article Eleven and Article Twelve of the Indenture,
and reference is hereby made to such Indenture for the precise
terms of the Guarantee therein made.
No stockholder, officer, director or incorporator, as
such, past, present or future, of any Subsidiary Guarantor
shall have any liability under the Guarantee by reason of his
or its status as such stockholder, officer, director or
incorporator.
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<PAGE> 136
The Guarantee shall not be valid or obligatory for
any purpose until the certificate of authentication on the
Securities upon which the Guarantee is noted shall have been
executed by the Trustee under the Indenture by the manual sig-
nature of one of its authorized officers.
SUBSIDIARY GUARANTORS:
CALA CO.
CALA FOODS, INC.
BELL MARKETS, INC.
FOOD 4 LESS OF SOUTHERN
CALIFORNIA, INC.
ALPHA BETA COMPANY
FOOD 4 LESS OF CALIFORNIA, INC.
FALLEY'S, INC.
FOOD 4 LESS MERCHANDISING, INC.
BAY AREA WAREHOUSE STORES, INC.
FOOD 4 LESS GM, INC.
By:______________________________
Name:
(for each of the above-listed
Subsidiary Guarantors)
By:______________________________
Name:
(for each of the above-listed
Subsidiary Guarantors)
A-12
<PAGE> 137
[FORM OF ASSIGNMENT]
I or we assign this Security to
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
_______________________________________
and irrevocably appoint _______________________ agent to trans-
fer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:____________________ Signed:____________________________
______________________________________________________________
(Sign exactly as your name appears on
the front of this Security)
Signature Guarantee:__________________________________________
A-13
<PAGE> 138
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased
by the Company pursuant to Section 5.15 or Section 5.16 of the
Indenture, check the appropriate box:
Section 5.15 [ ] Section 5.16 [ ]
If you want to elect to have only part of this Secu-
rity purchased by the Company pursuant to Section 5.15 or
Section 5.16 of the Indenture, state the amount:
$
Date:__________ Signature:____________________________
(Sign exactly as your name
appears on the front of
this Security)
Signature Guarantee:______________________________________
A-14
<PAGE> 1
EXHIBIT 4.6.2
$175,000,000
10.45% Senior Notes
due 2000
______________________
SECOND SUPPLEMENTAL INDENTURE
Dated as of ________, 1995
to
INDENTURE
Dated as of April 15, 1992
______________________
FOOD 4 LESS SUPERMARKETS, INC.
and
SUBSIDIARY GUARANTORS
and
NORWEST BANK MINNESOTA, N.A.
Trustee
<PAGE> 2
This SECOND SUPPLEMENTAL INDENTURE to the Indenture (as
defined below) (the "Second Supplemental Indenture") is dated as of _________,
1995, and is made by and among Food 4 Less Supermarkets, Inc., a Delaware
corporation (the "Company"), the Subsidiary Guarantors (as defined in the
Indenture), and Norwest Bank Minnesota, N.A. (the "Trustee").
RECITALS
A. Pursuant to an Indenture dated April 15, 1992 (the
"Indenture") between the Company, the Subsidiary Guarantors and the Trustee,
the Company issued $175,000,000 principal amount of its 10.45% Senior Notes due
2000.
B. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
C. The Company has entered into a definitive Agreement
and Plan of Merger whereby the Company will be merged with and into Ralphs
Supermarkets, Inc. ("RSI"), and immediately thereafter Ralphs Grocery Company
("RGC"), which is a wholly-owned subsidiary of RSI, will merge with and into
RSI and RSI will change its name to Ralphs Grocery Company (together, the
"Merger").
D. The Merger is a transaction subject to the
requirements of Section 5.01 of the Indenture. In order to permit the Merger
under the Indenture, the Company must amend or supplement Section 5.01 thereof
which limits the ability of the Company to consolidate or merge with any other
person unless certain conditions are satisfied. The primary purpose of this
Second Supplemental Indenture is to permit the Merger and to eliminate
substantially all of the restrictive covenants in the Indenture.
E. Section 9.02 of the Indenture provides that the
Company and each Subsidiary Guarantor, when authorized by a Board Resolution,
and the Trustee, upon receipt of the written consent of the Holder or Holders
of at least a majority in aggregate principal amount of the outstanding
Securities, may amend or supplement the Indenture.
F. The Company and each of the Subsidiary Guarantors
having been duly authorized by a Board Resolution, and the Trustee, having
received an Opinion of Counsel stating that the execution of this Second
Supplemental Indenture is authorized and permitted by the Indenture and having
received an Officer's Certificate of the Company certifying that Holders of a
majority in aggregate principal amount of the outstanding Securities have
consented (and not theretofore revoked) to the amendments set forth below,
execute and deliver this Second Supplemental Indenture pursuant to Article 9 of
the Indenture.
2
<PAGE> 3
G. All of the conditions and requirements necessary to
make this Second Supplemental Indenture, when duly executed and delivered, a
valid, binding agreement, enforceable in accordance with its terms, have been
performed and fulfilled.
NOW, THEREFORE, it is agreed as follows:
1. Pursuant to Section 9.02 of the Indenture and having
received the requisite consents required thereby, the Indenture is amended as
follows:
a. The covenant entitled "Limitation on
Restricted Payments", set forth in Section 4.03 of the Indenture, is hereby
deleted in its entirety.
b. The covenant entitled "Maintenance of Net
Worth", set forth in Section 4.04 of the Indenture, is hereby deleted in its
entirety.
c. The covenant entitled "Limitation on
Transactions with Affiliates", set forth in Section 4.12 of the Indenture, is
hereby deleted in its entirety.
d. The covenant entitled "Limitation on
Incurrences of Additional Indebtedness", set forth in Section 4.13 of the
Indenture, is hereby deleted in its entirety.
e. The covenant entitled "Limitation on Payment
Restrictions Affecting Subsidiaries", set forth in Section 4.14 of the
Indenture, is hereby deleted in its entirety.
f. The covenant entitled "Limitation on Liens",
set forth in Section 4.15 of the Indenture, is hereby deleted in its entirety.
g. The covenant entitled "Limitation on Change
of Control", set forth in Section 4.16 of the Indenture, is hereby deleted in
its entirety.
h. The covenant entitled "Limitation on
Disposition of Assets", set forth in Section 4.17 of the Indenture, is hereby
deleted in its entirety.
i. The covenant entitled "Guarantees of Certain
Indebtedness", set forth in Section 4.18 of the Indenture, is hereby deleted in
its entirety.
j. Section 5.01(a)(2) of the Indenture under the
covenant entitled "When Company May Merge, Etc." is hereby deleted in its
entirety.
k. The following definition is hereby added to
Section 1.01 of the Indenture:
3
<PAGE> 4
"New Credit Facility" means the senior bank facility pursuant
to which Bankers Trust Company has agreed, subject to certain conditions, to
provide up to $1,075 million of financing under the Loan Agreement dated
__________, 1995.
l. The following sentence is hereby added to the
definition of "Loan Documents", set forth in Section 1.01 of the Indenture:
"The New Credit Facility shall be deemed to constitute a
refinancing of the Loan Documents."
2. This Second Supplemental Indenture shall be effective
as of the date hereof upon consummation of the Merger.
3. This instrument may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute the instrument by signing
such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be signed and acknowledged by their respective
officers thereunto duly authorized and their respective corporate seals to be
hereunto duly affixed and attested, all as of the day and year first above
written.
FOOD 4 LESS SUPERMARKETS, INC.
[Seal]
Attest:
________________________ ______________________________
By:
Its:
SUBSIDIARY GUARANTORS:
CALA CO.
CALA FOODS, INC.
BELL MARKETS, INC.
FOOD 4 LESS OF SOUTHERN CALIFORNIA, INC.
ALPHA BETA COMPANY
FOOD 4 LESS OF CALIFORNIA, INC.
FALLEY'S, INC.
FOOD 4 LESS MERCHANDISING, INC.
FOOD 4 LESS GM, INC.
BAY AREA WAREHOUSE STORES, INC.
[Seal]
Attest:
4
<PAGE> 5
________________________ ______________________________
By:
Its:
NORWEST BANK MINNESOTA, N.A.
[Seal]
Attest:
________________________ ______________________________
By:
Its:
5
<PAGE> 1
EXHIBIT 4.6.3
$175,000,000
10.45% Senior Notes
due 2000
______________________
THIRD SUPPLEMENTAL INDENTURE
Dated as of ________, 1995
to
INDENTURE
Dated as of April 15, 1992
______________________
RALPHS GROCERY COMPANY;
as successor by merger to Food 4 Less Supermarkets, Inc.
and
SUBSIDIARY GUARANTORS
and
NORWEST BANK MINNESOTA, N.A.
Trustee
<PAGE> 2
This THIRD SUPPLEMENTAL INDENTURE to the Indenture (as defined
below) (the "Third Supplemental Indenture") is dated as of _________, 1995, and
is made by and among Ralphs Grocery Company, a Delaware corporation, as
successor by merger to Food 4 Less Supermarkets, Inc., a Delaware corporation
(the "Company"), the Subsidiary Guarantors (as defined in the Indenture), and
Norwest Bank Minnesota, N.A. (the "Trustee").
RECITALS
A. Pursuant to an Indenture dated April 15, 1992 (the
"Indenture") between the Company, the Subsidiary Guarantors and the Trustee,
the Company issued $175,000,000 principal amount of its 10.45% Senior Notes due
2000.
B. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
C. Pursuant to the Agreement and Plan of Merger dated
September 14, 1994, as amended, the Company merged with and into Ralphs
Supermarkets, Inc. ("RSI"), and immediately thereafter Ralphs Grocery Company
("RGC"), which was a wholly-owned subsidiary of RSI, merged with and into RSI
and RSI changed its name to Ralphs Grocery Company (together, the "Merger").
D. The Merger was a transaction subject to the
requirements of Section 5.01 of the Indenture. Section 5.02 of the Indenture
provides that upon any merger subject to Section 5.01 thereof, the successor
person into which the Company is merged shall succeed to and be substituted
for, and may exercise every right and power of the Company under the Indenture
with the same effect as if such successor person had been named as the Company
therein. Section 5.02 also provides that when a successor corporation assumes
all of the obligations of the Company under the Indenture and under the
Securities, and agrees to be bound thereby, the predecessor shall be released
from such obligations. The sole purpose of this Third Supplemental Indenture
is to allow Ralphs Grocery Company, as the successor person to the Company in
the Merger, to assume the obligations of the Company under the Indenture.
E. The Company and the Subsidiary Guarantors, being duly
authorized by a Board Resolution, and the Trustee are authorized to execute and
deliver this Third Supplemental Indenture.
F. All the conditions and requirements necessary to make
this Third Supplemental Indenture, when duly executed and delivered, a valid,
binding agreement, enforceable in accordance with its terms, have been
performed and fulfilled.
NOW, THEREFORE, it is agreed as follows:
2
<PAGE> 3
1. Pursuant to Section 5.02, Ralphs Grocery Company, as
the successor person into which the Company has been merged in the Merger
subject to Section 5.01, hereby succeeds to and is substituted for, and may
exercise every right and power of the Company under the Indenture with the same
effect as if Ralphs Grocery Company had been named as the Company therein.
Ralphs Grocery Company hereby assumes all of the obligations of the Company
under the Indenture and under the Securities and agrees to be bound thereby.
In accord with Section 5.02, the Company is released from such obligations.
2. This Third Supplemental Indenture shall be effective
as of the date hereof upon consummation of the Merger.
3. This instrument may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute the instrument by signing
such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be signed and acknowledged by their respective
officers thereunto duly authorized and their respective corporate seals to be
hereunto duly affixed and attested, all as of the day and year first above
written.
RALPHS GROCERY COMPANY
[Seal]
Attest:
________________________ ______________________________
By:
Its:
SUBSIDIARY GUARANTORS
CALA CO.
CALA FOODS, INC.
BELL MARKETS, INC.
FOOD 4 LESS OF SOUTHERN
CALIFORNIA, INC.
ALPHA BETA COMPANY
FOOD 4 LESS OF CALIFORNIA, INC.
FALLEY'S, INC.
FOOD 4 LESS MERCHANDISING, INC.
FOOD 4 LESS GM, INC.
BAY AREA WAREHOUSE STORES, INC.
[Seal]
Attest:
________________________ ______________________________
By:
Its:
3
<PAGE> 4
NORWEST BANK MINNESOTA, N.A.
[Seal]
Attest:
________________________ ______________________________
By:
Its:
4
<PAGE> 1
EXHIBIT 4.7.4
$145,000,000
13-3/4% Senior Subordinated Notes
due 2001
______________________
FOURTH SUPPLEMENTAL INDENTURE
Dated as of ________, 1995
to
INDENTURE
Dated as of June 15, 1991
______________________
FOOD 4 LESS SUPERMARKETS, INC.
and
SUBSIDIARY GUARANTORS
and
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
<PAGE> 2
This FOURTH SUPPLEMENTAL INDENTURE to the Indenture (as
defined below) (the "Fourth Supplemental Indenture") is dated as of _________,
1995, and is made by and among Food 4 Less Supermarkets, Inc., a Delaware
corporation (the "Company"), Subsidiary Guarantors (as defined in the
Indenture), and United States Trust Company of New York (the "Trustee").
RECITALS
A. Pursuant to an Indenture dated June 15, 1991 (the
"Indenture") between the Company, the Subsidiary Guarantors and the Trustee,
the Company issued $145,000,000 principal amount of its 13-3/4% Senior
Subordinated Notes due 2001.
B. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
C. The Company has entered into a definitive Agreement
and Plan of Merger whereby the Company will be merged with and into Ralphs
Supermarkets, Inc. ("RSI"), and immediately thereafter Ralphs Grocery Company
("RGC"), which is a wholly-owned subsidiary of RSI, will merge with and into
RSI and RSI will change its name to Ralphs Grocery Company (together, the
"Merger").
D. In order to permit the Merger under the Indenture,
the Company must amend or supplement Section 6.01 thereof which limits the
ability of the Company to consolidate or merge with any other person unless
certain conditions are satisfied. The primary purpose of this Fourth
Supplemental Indenture is to permit the Merger and to eliminate substantially
all of the restrictive covenants in the Indenture.
E. Section 10.02 of the Indenture provides that the
Company and each Subsidiary Guarantor, when authorized by a Board Resolution,
and the Trustee, together with the written consent of the Holder or Holders of
at least a majority in aggregate principal amount of the outstanding
Securities, may amend or supplement the Indenture, including Section 6.01
thereof, or the Securities.
F. The Company and each of the Subsidiary Guarantors
having been duly authorized by a Board Resolution, and the Trustee having
received an Opinion of Counsel that the execution of this Fourth Supplemental
Indenture is authorized and permitted by the Indenture and having received an
Officer's Certificate of the Company certifying that Holders of a majority in
aggregate principal amount of the outstanding Securities have consented (and
not theretofore revoked) to the amendments and supplements set forth below,
execute and deliver this Fourth Supplemental Indenture pursuant to Article 10
of the Indenture.
G. All the conditions and requirements necessary to make
this Fourth Supplemental Indenture, when duly executed and
2
<PAGE> 3
delivered, a valid, binding agreement, enforceable in accordance with its
terms, have been performed and fulfilled.
NOW, THEREFORE, it is agreed as follows:
1. Pursuant to Section 10.02 of the Indenture and having
received the requisite consents required thereby, the Indenture is amended as
follows:
a. The covenant entitled "Limitation on
Restricted Payments", set forth in Section 5.03 of the Indenture, is hereby
deleted in its entirety.
b. The covenant entitled "Maintenance of Net
Worth", set forth in Section 5.04 of the Indenture, is hereby deleted in its
entirety.
c. The covenant entitled "Limitation on
Transactions with Affiliates", set forth in Section 5.12 of the Indenture, is
hereby deleted in its entirety.
d. The covenant entitled "Limitation on
Incurrences of Additional Indebtedness", set forth in Section 5.13 of the
Indenture, is hereby deleted in its entirety.
e. The covenant entitled "Limitation on Payment
Restrictions Affecting Subsidiaries", set forth in Section 5.14 of the
Indenture, is hereby deleted in its entirety.
f. The covenant entitled "Limitation on Liens",
set forth in Section 5.15 of the Indenture, is hereby deleted in its entirety.
g. The covenant entitled "Limitation on Change
of Control", set forth in Section 5.16 of the Indenture, is hereby deleted in
its entirety.
h. The covenant entitled "Limitation on
Disposition of Assets", set forth in Section 5.17 of the Indenture, is hereby
deleted in its entirety.
i. The covenant entitled "Guarantees of Certain
Indebtedness", set forth in Section 5.18 of the Indenture, is hereby deleted in
its entirety.
j. Section 6.01(a)(2) of the Indenture under the
covenant entitled "When Company May Merge, Etc." is hereby deleted in its
entirety.
k. The following definition is hereby added to
Section 1.01 of the Indenture:
"The New Credit Facility" means the senior bank facility
pursuant to which Bankers Trust Company has agreed,
3
<PAGE> 4
subject to certain conditions, to provide up to $1,075 million of financing
under the Loan Agreement dated __________, 1995.
l. The following sentence is hereby added to the
definition of "Loan Documents", set forth in Section 1.01 of the Indenture:
"The New Credit Facility shall be deemed to constitute a
refinancing of the Loan Documents."
2. This Fourth Supplemental Indenture shall be effective
as of the date hereof upon consummation of the Merger.
3. This instrument may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute the instrument by signing
such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Supplemental Indenture to be signed and acknowledged by their respective
officers thereunto duly authorized and their respective corporate seals to be
hereunto duly affixed and attested, all as of the day and year first above
written.
FOOD 4 LESS SUPERMARKETS, INC.
[Seal]
Attest:
________________________ ______________________________
By:
Its:
SUBSIDIARY GUARANTORS
CALA CO.
CALA FOODS, INC.
BELL MARKETS, INC.
FOOD 4 LESS OF SOUTHERN
CALIFORNIA, INC.
ALPHA BETA COMPANY
FOOD 4 LESS OF CALIFORNIA, INC.
FALLEY'S, INC.
FOOD 4 LESS MERCHANDISING, INC.
FOOD 4 LESS GM, INC.
BAY AREA WAREHOUSE STORES, INC.
[Seal]
Attest:
________________________ ______________________________
By:
Its:
4
<PAGE> 5
UNITED STATES TRUST COMPANY
OF NEW YORK
[Seal]
Attest:
________________________ ______________________________
By:
Its:
5
<PAGE> 1
EXHIBIT 4.7.5
$145,000,000
13-3/4% Senior Subordinated Notes
due 2001
______________________
FIFTH SUPPLEMENTAL INDENTURE
Dated as of ________, 1995
to
INDENTURE
Dated as of June 15, 1991
______________________
RALPHS GROCERY COMPANY;
as successor by merger to Food 4 Less Supermarkets, Inc.
and
SUBSIDIARY GUARANTORS
and
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
<PAGE> 2
This FIFTH SUPPLEMENTAL INDENTURE to the Indenture (as defined
below) (the "Fifth Supplemental Indenture") is dated as of _________, 1995, and
is made by and among Ralphs Grocery Company, a Delaware corporation, as
successor by merger to Food 4 Less Supermarkets, Inc., a Delaware corporation
(the "Company"), the Subsidiary Guarantors (as defined in the Indenture), and
United States Trust Company of New York (the "Trustee").
RECITALS
A. Pursuant to an Indenture dated June 15, 1991 (the
"Indenture") between the Company, the Subsidiary Guarantors and the Trustee,
the Company issued $145,000,000 principal amount of its 13-3/4% Senior
Subordinated Notes due 2001.
B. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
C. Pursuant to the Agreement and Plan of Merger dated
September 14, 1994, as amended, the Company merged with and into Ralphs
Supermarkets, Inc. ("RSI"), and immediately thereafter Ralphs Grocery Company
("RGC"), which was a wholly-owned subsidiary of RSI, merged with and into RSI
and RSI changed its name to Ralphs Grocery Company (together, the "Merger").
D. The Merger was a transaction subject to the
requirements of Section 6.01 of the Indenture. Section 6.02 of the Indenture
provides that upon any merger subject to Section 6.01 thereof, the successor
person into which the Company is merged shall succeed to and be substituted
for, and may exercise every right and power of the Company under the Indenture
with the same effect as if such successor person had been named as the Company
therein. Section 6.02 also provides that when a successor corporation assumes
all of the obligations of the Company under the Indenture and under the
Securities, and agrees to be bound thereby, the predecessor shall be released
from such obligations. The sole purpose of this Fifth Supplemental Indenture
is to allow Ralphs Grocery Company, as the successor person to the Company in
the Merger, to assume the obligations of the Company under the Indenture.
E. The Company and the Subsidiary Guarantors, being duly
authorized by a Board Resolution, and the Trustee are authorized to execute and
deliver this Fifth Supplemental Indenture.
F. All the conditions and requirements necessary to make
this Fifth Supplemental Indenture, when duly executed and delivered, a valid,
binding agreement, enforceable in accordance with its terms, have been
performed and fulfilled.
NOW, THEREFORE, it is agreed as follows:
2
<PAGE> 3
1. Pursuant to Section 6.02, Ralphs Grocery Company, as
the successor person into which the Company has been merged in the Merger
subject to Section 6.01, hereby succeeds to and is substituted for, and may
exercise every right and power of the Company under the Indenture with the same
effect as if Ralphs Grocery Company had been named as the Company therein.
Ralphs Grocery Company hereby assumes all of the obligations of the Company
under the Indenture and under the Securities and agrees to be bound thereby.
In accord with Section 6.02, the Company is released from such obligations.
2. This Fifth Supplemental Indenture shall be effective
as of the date hereof upon consummation of the Merger.
3. This instrument may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute the instrument by signing
such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Supplemental Indenture to be signed and acknowledged by their respective
officers thereunto duly authorized and their respective corporate seals to be
hereunto duly affixed and attested, all as of the day and year first above
written.
RALPHS GROCERY COMPANY
[Seal]
Attest:
________________________ ______________________________
By:
Its:
SUBSIDIARY GUARANTORS
CALA CO.
CALA FOODS, INC.
BELL MARKETS, INC.
FOOD 4 LESS OF SOUTHERN
CALIFORNIA, INC.
ALPHA BETA COMPANY
FOOD 4 LESS OF CALIFORNIA, INC.
FALLEY'S, INC.
FOOD 4 LESS MERCHANDISING, INC.
FOOD 4 LESS GM, INC.
BAY AREA WAREHOUSE STORES, INC.
[Seal]
Attest:
________________________ ______________________________
By:
Its:
3
<PAGE> 4
UNITED STATES TRUST COMPANY
OF NEW YORK
[Seal]
Attest:
________________________ ______________________________
By:
Its:
4
<PAGE> 1
EXHIBIT 8.1
[LATHAM & WATKINS LETTERHEAD]
January , 1995
Food 4 Less Supermarkets, Inc.
777 South Harbor Boulevard
La Habra, CA 90631
Re: Food 4 Less Supermarkets, Inc.
Registration Statement on Form S-4 (File Number 33-56451)
Ladies/Gentlemen:
You have requested our opinion concerning the material federal income tax
consequences of (i) the offers to exchange (a) 10.45% Senior Notes due 2000 of
Food 4 Less Supermarkets, Inc. (the "Company") (the "Old F4L Senior Notes") for
new % Senior Notes due 2004 of the Company and cash, and (b) 13.75% Senior
Subordinated Notes due 2001 of the Company (the "Old F4L Senior Subordinated
Notes," and, together with the Old F4L Senior Notes, the "Old F4L Notes") for
new 13.75% Senior Subordinated Notes due 2005 of the Company and cash, and (ii)
the solicitation of consents to proposed amendments to the indentures under
which the Old F4L Notes were issued, in connection with the Registration
Statement on Form S-4 filed with the Securities and Exchange Commission (the
"Commission") on November 14, 1994 (File No. 33-56451), as amended by Amendment
No. 1 filed with the Commission on January 6, 1995 (collectively, the
"Registration Statement").
The facts, as we understand them, and upon which with your permission we
rely in rendering the opinion expressed herein, are set forth in the
Registration Statement. Based on such facts, it is our opinion that the material
federal income tax consequences are accurately set forth under the heading
"Certain Federal Income Tax Considerations" in the Registration Statement. No
opinion is expressed as to any matter not discussed therein.
This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation or
difference in the facts from those set forth in the Registration Statement may
affect the conclusion stated herein.
This opinion is rendered to you solely for use in connection with the
Registration Statement. We consent to your filing this opinion as an exhibit to
the Registration Statement and to the reference of our firm under the heading
"Certain Federal Income Tax Considerations."
Very truly yours,
<PAGE> 1
EXHIBIT 23.1
ACCOUNTANTS' CONSENT AND REPORT ON SCHEDULES
Board of Directors and Stockholders
Ralphs Supermarkets, Inc.:
The audits referred to in our report dated April 8, 1994 (except as to note 16,
which is as of September 14, 1994), included the related financial statement
schedules as of January 30, 1994 and January 31, 1993, and for each of the
fiscal years in the three-year period ended January 30, 1994, included in the
registration statement. These financial statement schedules are the
responsibility of Ralphs management. Our responsibility is to express an opinion
on these financial statement schedules based on our audits. In our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
We consent to the use of our reports included herein and to the reference to our
firm under the headings "Summary Historical Financial Data of Ralphs," "Selected
Historical Financial Data of Ralphs" and "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Los Angeles, California
January 4, 1995
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Los Angeles, California
January 4, 1995
<PAGE> 1
EXHIBIT 25.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(B)(2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
A NATIONAL BANKING ASSOCIATION 41-1592157
(JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER
ORGANIZATION IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
SIXTH STREET AND MARQUETTE AVENUE
MINNEAPOLIS, MINNESOTA 55479
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
<TABLE>
<S> <C> <C>
FOOD 4 LESS SUPERMARKETS, INC. DELAWARE 95-4222386
ALPHA BETA COMPANY CALIFORNIA 95-1456805
BAY AREA WAREHOUSE STORES, INC. CALIFORNIA 93-1087199
BELL MARKETS, INC. CALIFORNIA 94-1569281
CALA CO. DELAWARE 95-4200005
CALA FOODS, INC. CALIFORNIA 94-1342664
FALLEY'S INC. KANSAS 48-0605992
FOOD 4 LESS OF CALIFORNIA, INC. CALIFORNIA 33-0293011
FOOD 4 LESS GM, INC. CALIFORNIA 95-4390407
FOOD 4 LESS MERCHANDISING, INC. CALIFORNIA 33-0483193
FOOD 4 LESS OF SOUTHERN CALIFORNIA, INC. DELAWARE 33-0483203
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS (STATE OR OTHER
CHARTER) JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR
ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
FOOD 4 LESS SUPERMARKETS, INC.
777 SOUTH HARBOR BOULEVARD
LA HABRA, CALIFORNIA 90631
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
% SENIOR NOTES DUE 2004
(TITLE OF THE INDENTURE SECURITIES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None with respect to the trustee.
No responses are included for Items 3-15 of this Form T-1 because the
obligor is not in default as provided under Item 13.
ITEM 16. LIST OF EXHIBITS
List below all exhibits filed as a part of this Statement of Eligibility.
Norwest Bank incorporates by reference into this Form T-1 the exhibits attached
hereto.
<TABLE>
<S> <C> <C>
Exhibit 1. a. A copy of Articles of Association of the trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the trustee to commence business
issued June 28, 1872, by the Comptroller of the Currency to The
Northwestern National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller of the Currency dated January
2, 1934, approving the consolidation of the Northwestern National Bank of
Minneapolis and the Minnesota Loan and Trust Company of Minneapolis.*
c. A copy of the certificate of the Acting Comptroller of the Currency dated
January 12, 1943, as to change of corporate title of Northwestern National
Bank and Trust Company of Minneapolis to Northwestern National Bank of
Minneapolis.*
d. A copy of the certificate of the Comptroller of the Currency dated May 1,
1983, authorizing Norwest Bank Minneapolis, National Association, to act
as fiduciary.*
Exhibit 3. A copy of the authorization of the trustee to exercise corporate trust
powers issued January 2, 1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of the Act.*
Exhibit 7. A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority.**
Exhibit 8. A copy of the certificate dated May 10, 1983 of name change from
Northwestern National Bank Minneapolis to Norwest Bank Minneapolis,
National Association.*
Exhibit 9. A copy of the certificate dated January 11, 1988, of name change from
Norwest Bank Minneapolis, National Association to Norwest Bank Minnesota,
National Association.*
</TABLE>
- ---------------
* Incorporated by reference to the exhibit of the same number filed with the
registration statement number 33-66086.
** Incorporated by reference to the exhibit of the same number filed with the
registration statement number 22-25782.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Norwest Bank Minnesota, National Association, a national
banking association organized and existing under the laws of the United States
of America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 6th day of January 1995.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ RAYMOND S. HAVERSTOCK
--------------------------------------
Raymond S. Haverstock
Assistant Vice President
<PAGE> 1
EXHIBIT 25.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)___
------------------------
UNITED STATES TRUST COMPANY OF
NEW YORK
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
NEW YORK 13-5459866
(JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER
ORGANIZATION IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036-1532
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
FOOD 4 LESS HOLDINGS, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-4222386
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
777 SOUTH HARBOR BOULEVARD
LA HABRA, CALIFORNIA 90631
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
ALPHA BETA COMPANY
(EXACT NAME OF GUARANTOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-1456805
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
777 SOUTH HARBOR BOULEVARD
LA HABRA, CALIFORNIA 90631
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
<PAGE> 2
BAY AREA WAREHOUSE STORES, INC.
(EXACT NAME OF GUARANTOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 93-1087199
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
777 SOUTH HARBOR BOULEVARD
LA HABRA, CALIFORNIA 90631
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
BELL MARKETS, INC.
(EXACT NAME OF GUARANTOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 94-1569281
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
777 SOUTH HARBOR BOULEVARD
LA HABRA, CALIFORNIA 90631
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
CALA CO.
(EXACT NAME OF GUARANTOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-4200005
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
777 SOUTH HARBOR BOULEVARD
LA HABRA, CALIFORNIA 90631
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
CALA FOODS, INC.
(EXACT NAME OF GUARANTOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 94-1342664
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
777 SOUTH HARBOR BOULEVARD
LA HABRA, CALIFORNIA 90631
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
<PAGE> 3
FALLEY'S INC.
(EXACT NAME OF GUARANTOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
KANSAS 48-0605992
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
777 SOUTH HARBOR BOULEVARD
LA HABRA, CALIFORNIA 90631
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
FOOD 4 LESS OF CALIFORNIA, INC.
(EXACT NAME OF GUARANTOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 33-0293011
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
777 SOUTH HARBOR BOULEVARD
LA HABRA, CALIFORNIA 90631
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
FOOD 4 LESS GM, INC.
(EXACT NAME OF GUARANTOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-4390407
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
777 SOUTH HARBOR BOULEVARD
LA HABRA, CALIFORNIA 90631
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
FOOD 4 LESS MERCHANDISING, INC.
(EXACT NAME OF GUARANTOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 33-0483193
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
777 SOUTH HARBOR BOULEVARD
LA HABRA, CALIFORNIA 90631
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
<PAGE> 4
FOOD 4 LESS OF SOUTHERN CALIFORNIA, INC.
(EXACT NAME OF GUARANTOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 33-0483203
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
777 SOUTH HARBOR BOULEVARD
LA HABRA, CALIFORNIA 90631
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
13.75% SENIOR SUBORDINATED NOTES DUE 2005
(TITLE OF THE INDENTURE SECURITIES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 5
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System).
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15.
Food for Less Supermarkets, Inc. and each of the Guarantors are currently
not in default under any of its outstanding securities for which United
States Trust Company of New York is Trustee. Accordingly, responses to
Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not
required under General Instruction B.
16. LIST OF EXHIBITS
<TABLE>
<S> <C> <C>
T-1.1 -- "Chapter 204, Laws of 1853, An Act to Incorporate the United States Trust
Company of New York, as Amended", is incorporated by reference to Exhibit
T-1.1 to Form T-1 filed on September 20, 1991 with the Securities and Exchange
Commission (the "Commission") pursuant to the Trust Indenture Act of 1939
(Registration No. 2221291).
T-1.2 -- The trustee was organized by a special act of the New York Legislature in 1853
prior to the time that the New York Banking Law was revised to require a
Certificate of authority to commence business. Accordingly, under New York
Banking Law, the Charter (Exhibit T.1.1) constitutes an equivalent of a
certificate of authority to commence business.
T-1.3 -- The authorization of the trustee to exercise corporate trust powers is
contained in the Charter (Exhibit T-1.1).
</TABLE>
1
<PAGE> 6
<TABLE>
<S> <C> <C>
T-1.4 -- The By-laws of the United States Trust Company of New York, as amended to
date, are incorporated by reference to Exhibit T-1.4 to Form T-1 filed on
September 20, 1991 with the Commission pursuant to the Trust Indenture Act of
1939 (Registration No. 2221291).
T-1.6 -- The consent of the trustee required by Section 321(b) of the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee published pursuant to
law or the requirements of its supervising or examining authority.
</TABLE>
NOTE
As of December 16, 1994, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U.S. Trust Corporation.
In answering Item 2 in this statement of eligibility and qualification, as to
matters peculiarly within the knowledge of the obligor or its directors, the
trustee has relied upon information furnished to it by the obligor and will rely
on information to be furnished by the obligor and the trustee disclaims
responsibility for the accuracy or completeness of such information.
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 6th day of January, 1995.
UNITED SATES TRUST COMPANY OF
NEW YORK, Trustee
By: /s/ CHRISTINE C. COLLINS
-------------------------------
Christine C. Collins
Assistant Vice President
2
<PAGE> 7
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b)
of the Act.
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
March 31, 1992
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY OF
NEW YORK
By: /s/ GERARD F. GANEY
-------------------------------
Gerard F. Ganey
Senior Vice President
3
<PAGE> 8
CONSOLIDATED REPORT OF CONDITION OF
UNITED STATES TRUST COMPANY OF NEW YORK
and Foreign and Domestic Subsidiaries, a member of the Federal Reserve System,
at the close of business of September 30, 1994, published in accordance with a
call made by the Federal Reserve Bank of the District pursuant to the provisions
of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
--------------
<S> <C> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin......................... $ 356,398
Interest-bearing balances.................................................. 70,000
Held-to-maturity securities.................................................. 488,254
Available-for-sale Securities................................................ 1,021,191
Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreements subsidiaries,
and in IBFs:
Federal funds sold........................................................... 24,448
Securities purchased under agreements to resell.............................. 0
Loans and lease financing receivables:
Loans and leases, net of unearned income................................... 1,392,864
LESS: Allowance for loan and lease losses.................................. 12,619
LESS: Allocated transfer risk reserve...................................... 0
Loans and leases, net of unearned income, allowance and reserve............ 1,380,245
Assets held in trading accounts.............................................. 0
Premises and fixed assets (including capitalized leases)..................... 95,900
Other real estate owned...................................................... 11,418
Investments in unconsolidated subsidiaries and associated companies.......... 581
Customers' liability to this bank on acceptances outstanding................. 0
Intangible assets............................................................ 1,854
Other assets................................................................. 123,230
----------
TOTAL ASSETS........................................................ $3,533,519
==========
</TABLE>
4
<PAGE> 9
<TABLE>
<S> <C> <C>
LIABILITIES
Deposits:
In domestic offices.......................................................... $2,032,684
Noninterest-bearing........................................................ 898,457
Interest-bearing........................................................... 1,134,227
In foreign offices, Edge and Agreement subsidiaries, and IBs................. 7,611
Noninterest-bearing........................................................ 0
Interest-bearing........................................................... 7,611
Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs:
Federal funds purchased...................................................... 1,148,301
Securities sold under agreements to repurchase............................... 8,009
Demand notes issued to the U.S. Treasury..................................... 2,000
Trading Liabilities.......................................................... 0
Other borrowed money:
With original maturity of one year or less................................. 35,035
With original maturity of more than one year............................... 0
Mortgage indebtedness and obligations under capitalized leases............... 1,243
Bank's liability on acceptances executed and outstanding..................... 0
Subordinated notes and debentures............................................ 12,453
Other Liabilities............................................................ 84,934
----------
Total Liabilities............................................................ $3,332,360
Limited-life preferred stock and related surplus............................. 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................ 0
Common stock................................................................. $ 14,995
Surplus...................................................................... 41,500
Undivided profits and capital reserves....................................... 148,014
Net unrealized holding gains (losses) on available-for-sale securities....... (3,350)
Cumulative foreign currency translation adjustments.......................... 0
Total equity capital......................................................... $ 201,159
----------
Total Liabilities, limited-life preferred stock, and equity capital.......... $3,533,519
==========
</TABLE>
5
<PAGE> 10
I, RICHARD E. BRINKMANN, SENIOR VICE PRESIDENT & CONTROLLER, of the above-
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
RICHARD E. BRINKMANN,
SVP & CONTROLLER
October 31, 1994
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
H. MARSHALL SCHWARZ
JEFFERY S. MAURER
FREDERICK S. WONHAM
Directors
6
<PAGE> 1
EXHIBIT 99.1
CONSENT AND LETTER OF TRANSMITTAL
TO TENDER
AND
TO CONSENT TO CERTAIN INDENTURE AMENDMENTS
WITH RESPECT TO THE
10.45% SENIOR NOTES DUE 2000
AND THE
13.75% SENIOR SUBORDINATED NOTES DUE 2001
OF
FOOD 4 LESS SUPERMARKETS, INC.
PURSUANT TO THE
PROSPECTUS AND SOLICITATION STATEMENT DATED JANUARY , 1995
THE EXCHANGE OFFERS AND THE SOLICITATION WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON , 1995, UNLESS EXTENDED (THE "EXPIRATION
DATE"). TENDERS OF 10.45% SENIOR NOTES DUE 2000 AND 13 3/4% SENIOR SUBORDINATED
NOTES DUE 2001, MAY ONLY BE WITHDRAWN AND THE CORRESPONDING CONSENTS MAY ONLY BE
REVOKED UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND SOLICITATION
STATEMENT AND IN THIS CONSENT AND LETTER OF TRANSMITTAL.
TO THE EXCHANGE AGENT:
BANKERS TRUST COMPANY
<TABLE>
<S> <C>
By Hand Delivery or
Overnight Courier: By Mail:
Bankers Trust Company
Corporate Trust & Agency Group Bankers Trust Company
Reorganization Department Corporate Trust & Agency Group
Receipt & Delivery Window Reorganization Department
123 Washington St., First Floor P.O. Box 1458
New York, NY 10006 Church Street Station
New York, NY 10008-1458
</TABLE>
Facsimile Transmission:
(212) 250-6275
(212) 250-3290
Confirm by Telephone:
(212) 250-6270
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF THIS LETTER VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
CONSENT AND LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THE CONSENT
AND LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 2
The undersigned acknowledges receipt of the Prospectus and Solicitation
Statement dated January , 1995 (as the same may be amended or supplemented
from time to time, the "Prospectus"), of Food 4 Less Supermarkets, Inc. ("Food 4
Less"), relating to (a) the offer by Food 4 Less, upon the terms and subject to
the conditions set forth in the Prospectus and in this Consent and Letter of
Transmittal and the instructions hereto (the "Letter of Transmittal"), to (i)
holders of 10.45% Senior Notes due 2000 of Food 4 Less (the "Old F4L Senior
Notes") to exchange for each $1,000 principal amount of Old F4L Senior Notes
$1,000 principal amount of new Senior Notes due 2004 (the "New F4L Senior
Notes") plus $20.00 in cash (the "Senior Note Exchange Payment"), plus accrued
and unpaid interest to the date of the exchange (the "Senior Note Exchange
Offer") and (ii) holders of the 13.75% Senior Subordinated Notes due 2001 of
Food 4 Less (the "Old F4L Senior Subordinated Notes," and together with the Old
F4L Senior Notes, the "Old F4L Notes") to exchange for each $1,000 principal
amount of Old F4L Senior Subordinated Notes $1,000 principal amount of new
13.75% Senior Subordinated Notes due 2005 (the "New F4L Senior Subordinated
Notes, and together with the New F4L Senior Notes, the "New F4L Notes") plus
$20.00 in cash (the "Senior Subordinated Note Exchange Payment," and together
with the Senior Note Exchange Payment, the "Exchange Payment"), plus accrued and
unpaid interest to the date of the exchange (the "Senior Note Exchange Offer,"
and together with the Senior Subordinated Note Exchange Offer, the "Exchange
Offers" each of which is sometimes referred to herein individually as the
applicable "Exchange Offer") and (b) Food 4 Less' solicitation (the
"Solicitation") of consents (the "Consents") from holders of the Old F4L Notes
("Noteholders") to the proposed amendments (the "Proposed Amendments") to the
respective indentures under which the Old F4L Notes were issued (as described in
the Prospectus under the captions "The Proposed Amendments," "Appendix
A -- Comparison of Old F4L Senior Notes and New F4L Senior Notes" and "Appendix
B -- Comparison of Old F4L Senior Subordinated Notes and New F4L Senior
Subordinated Notes").
Holders of Old F4L Notes who desire to accept the applicable Exchange Offer
will be required to consent to the Proposed Amendments with respect to such Old
F4L Notes. The tender of Old F4L Notes under this Letter of Transmittal will
constitute such consent. Noteholders who do not tender Old F4L Notes pursuant to
the Exchange Offers will not be eligible to consent to the Proposed Amendments.
Each Noteholder who desires to accept the applicable Exchange Offer with respect
to any Old F4L Senior Notes or Old F4L Senior Subordinated Notes must tender all
of such Noteholders' Old F4L Senior Notes or Old F4L Senior Subordinated Notes,
as the case may be. Capitalized terms used in this Letter of Transmittal but not
defined herein have the respective meanings given them in the Prospectus. Unless
otherwise indicated, references herein to the Exchange Offers shall be deemed to
include the Solicitation.
THE EXCHANGE OFFERS AND THE SOLICITATION ARE NOT BEING MADE TO (NOR WILL
THE SURRENDER OF OLD F4L NOTES FOR EXCHANGE BE ACCEPTED FROM OR ON BEHALF OF)
NOTEHOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF SUCH
EXCHANGE OFFERS OR THE SOLICITATION WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF
SUCH JURISDICTION.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE
COMPLETING ANY BOX BELOW
This Letter of Transmittal is to be used (i) if Old F4L Notes are to be
physically delivered herewith or (ii) if delivery of Old F4L Notes is to be made
by book-entry transfer to the account maintained by the Exchange Agent at the
Depository Trust Company ("DTC"), the Midwest Securities Trust Company ("MSTC")
or the Philadelphia Securities Depository Trust Company ("PDTC") (collectively,
the "Book Entry Transfer Facilities") pursuant to the procedures set forth in
the Prospectus under the caption "The Exchange Offers and
Solicitation -- Procedures for Tendering and Consenting." Delivery of documents
to a Book Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
If certificates for Old F4L Notes are not immediately available or cannot
be delivered along with other required documents to the Exchange Agent or the
procedure for book-entry transfer cannot be completed on or prior to the
Expiration Date, the Noteholder may tender such Old F4L Notes according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offers and Solicitation -- Guaranteed Delivery Procedure." See
Instruction 2 herein.
Noteholders who wish to tender their Old F4L Notes pursuant to the
applicable Exchange Offer and consent to the Proposed Amendments must complete
the table herein entitled "DESCRIPTION OF OLD F4L NOTES" and sign below.
2
<PAGE> 3
DESCRIPTION OF OLD F4L NOTES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(1) CERTIFICATE(S) TENDERED
NAME(S) AND (ATTACH ADDITIONAL SCHEDULE IF NECESSARY)
ADDRESS(ES) OF -----------------------------------------------
REGISTERED HOLDER(S) (2) (3) (4)
(PLEASE FILL IN, IF
BLANK, INDICATE AGGREGATE
EXACTLY AS NAME(S) CLASS BEING PRINCIPAL
APPEAR(S) TENDERED CERTIFICATE AMOUNT
ON OLD F4L NOTES) 10.45% OR 13.75% NUMBER(S)(*) TENDERED(**)
---------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
---------------------- --------------------- --------------------- ---------------------
---------------------- --------------------- --------------------- ---------------------
---------------------- --------------------- --------------------- ---------------------
Total:
</TABLE>
* Need not be completed by Book-Entry Holders (see below).
** If you wish to accept the applicable Exchange Offer with respect to any
Old F4L Senior Notes or Old F4L Senior Subordinated Notes you must
tender all of such Old F4L Senior Notes or Old F4L Senior Subordinated
Notes beneficially owned by you, as the case may be.
You must consent to the Proposed Amendments with respect to the Old F4L
Notes tendered hereby under the Old Indentures under which the Old F4L
Notes were issued. The tender of Old F4L Notes pursuant to the applicable
Exchange Offer will constitute a Consent to the Proposed Amendments with
respect to such Old F4L Notes. If you are not the record holder of your
Old F4L Notes, you must either have the Old F4L Notes registered in your
name or obtain a consent from the record holder of such Old F4L Notes to
tender them.
- --------------------------------------------------------------------------------
METHOD OF DELIVERY
- --------------------------------------------------------------------------------
/ / CHECK HERE IF CERTIFICATES FOR TENDERED OLD F4L NOTES ARE ENCLOSED
HEREWITH.
/ / CHECK HERE IF TENDERED OLD F4L NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE
AGENT WITH A BOOK-ENTRY TRANSFER FACILITY SPECIFIED BELOW AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:
----------------------------------------------
Name of Book-Entry Transfer facility:
/ / DTC / / MSTC / / PDTC
Account Number:
------------------------------------------------------------
Transaction Code Number:
---------------------------------------------------
/ / CHECK HERE IF TENDERED OLD F4L NOTES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT
AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) of Old F4L Notes:
-----------------------------
Window Ticket Number (if any):
---------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------
Name of Eligible Institution which Guaranteed Delivery:
--------------------
If delivered by Book-Entry Transfer facility, check box of Book-Entry
Transfer facility:
/ / DTC / / MSTC / / PDTC
Account Number:
------------------------------------------------------------
Transaction Code Number:
---------------------------------------------------
- -------------------------------------------------------------------------------
3
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Consent and Tender of Old F4L Notes
Upon the terms and subject to the conditions of the Prospectus and this
Letter of Transmittal, the undersigned hereby Consents to the Proposed
Amendments with respect to the Old F4L Notes indicated above and tenders to the
Company the Old F4L Notes indicated above. Tendering Noteholders will be deemed
to have Consented to the Proposed Amendments with respect to all Old F4L Notes
tendered.
Subject to and effective upon acceptance for exchange of the Old F4L Notes
tendered herewith, the undersigned hereby sells, assigns and transfers to or
upon the order of Food 4 Less all right, title and interest in and to, and any
and all claims in respect of or arising or having arisen as a result of the
undersigned's status as a holder of, all Old F4L Notes tendered hereby. The
undersigned hereby appoints the Exchange Agent the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Old F4L Notes with full
power of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest) to (a) deliver certificates for such Old F4L
Notes, or transfer ownership of such Old F4L Notes on the account books
maintained by DTC, MSTC or PDTC, together, in any such case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
Food 4 Less, (b) present such Old F4L Notes for transfer on the register, (c)
deliver the Consent contained herein to Food 4 Less and the applicable Trustee
under the Old Indentures and (d) receive all benefits and otherwise exercise all
right of beneficial ownership of such Old F4L Notes all in accordance with the
terms of the Exchange Offers.
The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Prospectus and this Letter of Transmittal, owns
the Old F4L Notes tendered hereby within the meaning of Rule 10b-4 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), has full power
and authority to tender, sell, assign and transfer the Old F4L Notes tendered
hereby and that Food 4 Less will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or Food 4 Less to
be necessary or desirable to complete the sale, assignment and transfer of the
Old F4L Notes tendered.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tenders of Old F4L Notes pursuant to the
Exchange Offers may be withdrawn and Consents may be revoked, subject to the
procedures described in the Prospectus under "The Exchange Offers and
Solicitation -- Withdrawal of Tenders and Revocation of Consents," at any time
until the later of (a) such time as the Requisite Consents (as defined) with
respect to the applicable issue of Old F4L Notes have been received and the
Supplemental Indenture (as defined) for such issue has been executed and (b) [20
Business Days following commencement]. Thereafter, such tenders may be withdrawn
and Consents may be revoked if the applicable Exchange Offer with respect to
such Old F4L Notes is terminated without any Old F4L Notes being accepted for
exchange thereunder. Food 4 Less shall be deemed to have accepted for exchange,
and to have exchanged validly tendered and not properly withdrawn Old F4L Notes
in the Exchange Offers when, as and if Food 4 Less has given oral or written
notice thereof to the Exchange Agent.
Upon receipt of the Requisite Consents (as defined under Instruction 3
herein) from holders of Old F4L Senior Notes or holders of Old F4L Senior
Subordinated Notes, Food 4 Less will certify in writing to the Old F4L Senior
Note Trustee or the Old F4L Senior Subordinated Note Trustee (together, the "Old
Trustees"), as the case may be, that the Requisite Consents to the adoption of
the Proposed Amendments have been received with respect to such issue of Old F4L
Notes. Upon receipt of such certification, all Consents to the Proposed
Amendments theretofore received with respect to such issue of Old F4L Notes will
be irrevocable. Except as set forth under Instruction 2 herein and in the
Prospectus under "The Exchange Offers and Solicitation -- Guaranteed Delivery
Procedure," Consents from tendering holders of Old F4L Notes will not be counted
towards determining whether Food 4 Less has received the Requisite Consents
unless Food 4 Less is prepared to accept the tender of Old F4L Notes to which
such Consents relate. In addition, Consents with respect to any Old F4L Notes
will not be counted if the tender of such holders' Old F4L Notes is defective,
unless Food 4 Less waives such defect. After receipt by the Old F4L Senior Note
Trustee or the Old F4L Senior Subordinated Note Trustee of, among other things,
certification by Food 4 Less that the Requisite Consents with respect to the Old
F4L Senior Notes or the Old F4L Senior Subordinated Notes, as the case may be,
have been received, Food 4 Less and the applicable Old Trustee will execute a
supplemental indenture to evidence the adoption of the Proposed Amendments
relating to the applicable indenture under which such Old F4L Notes were issued
(each a "Supplemental Indenture"). Upon the acceptance by Food 4 Less of the
Requisite Consents from holders of Old F4L Senior Notes or Old F4L Senior
Subordinated Notes and the execution of the applicable Supplemental Indenture,
such
4
<PAGE> 5
Supplemental Indenture will immediately become effective. Although the Proposed
Amendments relating to an issue of Old F4L Notes will become effective upon
certification that the Requisite Consents from holders of the applicable Old F4L
Notes have been received, such Proposed Amendments will not be operative until
Food 4 Less has accepted for exchange all Old F4L Notes validly tendered and not
withdrawn. Food 4 Less will not be obligated to issue the New F4L Notes and pay
the Exchange Payment pursuant to the Exchange Offers unless, among other things,
the Requisite Consents to the adoption of the Proposed Amendments have been
received from both the Old F4L Senior Noteholders and the Old F4L Senior
Subordinated Noteholders. The withdrawal of Old F4L Notes in accordance with the
procedures set forth in the Prospectus under "The Exchange Offers and
Solicitation -- Withdrawals of Tenders and Revocation of Consents," and under
Instruction 3 herein, will effect a revocation of the related Consents. Any
valid revocation of Consents will automatically render the prior tender of the
Old F4L Notes to which such Consents relate defective and Food 4 Less will have
the right, which it may waive, to reject such tender as invalid and ineffective.
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus, Food 4 Less may not be required to accept any of the Old F4L
Notes tendered (as described in the Prospectus under the caption "The Exchange
Offers and Solicitation -- Conditions"). Old F4L Notes not accepted for tender
or that are withdrawn will be returned to the undersigned at the address set
forth above unless otherwise indicated under "SPECIAL DELIVERY INSTRUCTIONS"
below.
Unless otherwise indicated under "SPECIAL ISSUANCE AND PAYMENT
INSTRUCTIONS" or "SPECIAL DELIVERY INSTRUCTIONS" below, the Exchange Agent will
deliver the New F4L Notes and the Exchange Payment (and, if applicable, return
Old F4L Notes for any principal amount of Old F4L Notes not accepted for
exchange) to the undersigned at the address set forth above. The undersigned
understands that holders who tender Old F4L Notes by book entry transfer
("Book-Entry Holders") may request that any Old F4L Notes not accepted for
exchange be returned by crediting the account maintained by DTC, MSTC or PDTC as
such Book-Entry Holders may designate by ranking an appropriate entry under the
box entitled "SPECIAL ISSUANCE AND PAYMENT INSTRUCTIONS" below. The undersigned
recognizes that Food 4 Less has no obligation pursuant to "SPECIAL ISSUANCE AND
PAYMENT INSTRUCTIONS" to transfer any Old F4L Notes from the name of the
registered holder thereof if Food 4 Less does not accept for exchange any of
such Old F4L Notes. See Instruction 5.
The undersigned understands that tenders of Old F4L Notes pursuant to any
one of the procedures described under "The Exchange Offers and
Solicitation -- Procedures for Tendering and Consenting" in the Prospectus and
in the instructions hereto will constitute a binding agreement between the
undersigned and Food 4 Less in accordance with the terms and subject to the
conditions of the Prospectus and this Letter of Transmittal.
5
<PAGE> 6
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD F4L
NOTES" ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE
TENDERED SUCH OLD F4L NOTES, CONSENTED TO THE PROPOSED AMENDMENTS WITH RESPECT
TO SUCH OLD F4L NOTES AND MADE CERTAIN REPRESENTATIONS AS DESCRIBED HEREIN AND
IN THE PROSPECTUS. ONLY REGISTERED HOLDERS OF OLD F4L NOTES ARE ENTITLED TO
CONSENT TO THE PROPOSED AMENDMENTS. IF THE UNDERSIGNED IS NOT THE REGISTERED
HOLDER OF THE OLD F4L NOTES TENDERED PURSUANT HERETO, THE UNDERSIGNED MUST
EITHER HAVE THE OLD F4L NOTES REGISTERED IN THE UNDERSIGNED'S NAME OR HAVE THE
REGISTERED HOLDER SIGN THE FORM OF CONSENT APPEARING BELOW OR A VALID PROXY.
PLEASE SIGN HERE
(See Instructions 1 and 4 and the following paragraph)
X
------------------------------------------------------------------------
X
------------------------------------------------------------------------
Signature(s) of Owner(s) Date
Area Code and Telephone Number:
-----------------------------------------------
This Letter of Transmittal must be signed by the Registered Holder(s) of
Old F4L Notes as their name(s) appear(s) on certificates for Old F4L Notes or,
if tendered by a participant in one of the Book-Entry Transfer Facilities,
exactly as such participant's name appears on a security position listing as the
owner of Old F4L Notes, or by person(s) authorized to become Registered
Holder(s) by endorsement and documents transmitted herewith. If signature is by
a trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, please set forth full
title. See Instruction 4.
Name(s):
----------------------------------------------------------------
----------------------------------------------------------------
Please Type or Print
Capacity:
----------------------------------------------------------------
Address:
----------------------------------------------------------------
(Including Zip Code)
SIGNATURE GUARANTEE
(If required by Instruction 4)
Signature(s) Guaranteed
by an Eligible Institution:
----------------------------------------------
(Authorized Signature)
----------------------------------------------
(Title)
----------------------------------------------
(Name of Firm)
Dated:
-------------------------------------------------------------------
6
<PAGE> 7
IF THIS LETTER OF TRANSMITTAL IS SIGNED BY A HOLDER OF OLD F4L NOTES WHO IS
NOT THE REGISTERED HOLDER THEREOF, THEN THE REGISTERED HOLDER MUST SIGN THE
FOLLOWING CONSENT OR A VALID PROXY:
Pursuant to the Exchange Offers and the Solicitation of Consents to the
Proposed Amendments, the undersigned hereby consents to the Proposed Amendments
with respect to the Old F4L Notes tendered hereby and with respect to the
related indentures. This consent shall not be deemed to be effective if the
above-described Old F4L Notes are not accepted for tender pursuant to the
Exchange Offers.
X
------------------------------------------------------------------------
Signature of Registered Holder
X
------------------------------------------------------------------------
Signature of Registered Holder
(if more than one)
Dated:
-------------------------------------------------------------------
(Must be signed by the Registered Holder(s) as name(s) appear(s) on the
certificates for Old F4L Notes. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, please set forth full title. See
Instruction 4.)
Name(s):
-----------------------------------------------------------------
Please Type or Print
Capacity:
----------------------------------------------------------------
Address:
----------------------------------------------------------------
(Including Zip Code)
SIGNATURE GUARANTEE
(If required by Instruction 4)
Signature(s) Guaranteed
by an Eligible Institution:
----------------------------------------------
(Authorized Signature)
----------------------------------------------
(Title)
----------------------------------------------
(Name of Firm)
Dated:
-------------------------------------------------------------------
7
<PAGE> 8
SPECIAL ISSUANCE AND PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if certificates for New F4L Notes and the Exchange Payment
are to be issued in the name of, or paid to, someone other than the person who
submits this Letter of Transmittal or issued to an address different from that
shown in the box entitled "DESCRIPTION OF OLD F4L NOTES" above in this Letter of
Transmittal or if Old F4L Notes are to be returned by credit to an account
maintained by DTC, MSTC or PDTC.
ISSUE TO:
Name
--------------------------------------------------------------------------
(Please Print)
Address
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(Include Zip Code)
-----------------------------------------------------------------------
(Social Security Number or Employer Identification Number)
A correct taxpayer identification number must also be provided on the
Substitute Form W-9 included herein.
CREDIT UNACCEPTED OLD F4L NOTES TENDERED BY BOOK-ENTRY TRANSFER TO THE:
/ / DTC / / MSTC or / / PDTC (check one)
account set forth below:
- -------------------------------------------------------------------------------
(DTC, MSTC or PDTC Account Number)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if the Exchange Payment, certificates evidencing New F4L
Notes and/or certificates evidencing Old F4L Notes for amounts not accepted for
exchange are to be sent to someone other than the person who submits this Letter
of Transmittal or to an address other than that shown in the box entitled
"DESCRIPTION OF OLD F4L NOTES" above in this Letter of Transmittal.
MAIL TO:
Name
--------------------------------------------------------------------------
(Please Print)
Address
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(Include Zip Code)
8
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE
OFFERS AND THE SOLICITATION
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates for Old
F4L Notes, or any book-entry transfer into the Exchange Agent's account at DTC,
MSTC or PDTC of Old F4L Notes tendered electronically, as well as a properly
completed Letter of Transmittal, including a valid and unrevoked Consent or
facsimile(s) thereof, duly executed by the registered holder thereof with any
required signature guarantee(s), and any other documents required by this Letter
of Transmittal, must be received by the Exchange Agent at one of its addresses
set forth herein on or prior to 12:00 Midnight, New York City time, on the
Expiration Date of the Exchange Offers and the Solicitation, except as otherwise
provided in Instruction 2, "Guaranteed Delivery Procedures."
Tenders of Old F4L Notes into the Exchange Offers will be accepted only in
principal amounts equal to $1,000 or integral multiples thereof.
The method of delivery of this Letter of Transmittal, certificates for Old
F4L Notes and any other required documents is at the election and risk of the
tendering Noteholder, and except as otherwise provided below, the delivery will
be deemed made when actually received by the Exchange Agent. Instead of
effecting delivery by mail, it is recommended that tendering Noteholders use an
overnight or hand delivery service. If Old F4L Notes are sent by mail,
registered mail, with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to assure timely
delivery. No documents should be sent to Food 4 Less, the Information Agent, the
Dealer Managers, or the Old Trustees.
If the person signing this Letter of Transmittal is not the registered
Noteholder of the securities tendered hereby, then such person must either have
the securities hereby registered in such person's name or obtain from the
registered Noteholder and submit to the Exchange Agent the form of consent of
the registered holder to the Proposed Amendments appearing above or a valid
proxy.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, withdrawal and revocation of tendered Old F4L Notes and
delivered Consents to the Proposed Amendments will be resolved by Food 4 Less,
whose determination will be final and binding. Food 4 Less reserves the absolute
right to reject any or all tenders and withdrawals of Old F4L Notes and
deliveries and revocations of Consents to the Proposed Amendments that are not
in proper form or the acceptance of which would, in the opinion of Food 4 Less
or counsel for Food 4 Less, be unlawful. Food 4 Less also reserves the right to
waive any irregularities or conditions of tender, consent or proxy as to
particular Old F4L Notes. Food 4 Less' interpretation of the terms and
conditions of the Exchange Offers (including the instructions in this Letter of
Transmittal) will be final and binding. Unless waived, any irregularities in
connection with tenders and withdrawals of Old F4L Notes and revocations of
Consents to the Proposed Amendments must be cured within such time as Food 4
Less shall determine. Neither Food 4 Less nor the Exchange Agent shall be under
any duty to give notification of defects in such tenders, withdrawals,
deliveries or revocations or shall incur any liability for failure to give such
notification. Tenders and withdrawals of Old F4L Notes and deliveries and
revocations of Consents to the Proposed Amendments will not be deemed to have
been made until such irregularities have been cured or waived. Any Old F4L Notes
received by the Exchange Agent that are not properly tendered or delivered and
to which the irregularities have not been cured or waived will be returned by
the Exchange Agent to the tendering Noteholders unless otherwise provided in
this Letter of Transmittal as soon as practicable following the Expiration Date.
None of Food 4 Less, the Exchange Agent, the Information Agent, the Dealer
Managers or any other person shall be obligated to give notification of defects
or irregularities in any tender, or shall incur any liability for failure to
give any such notification.
2. GUARANTEED DELIVERY PROCEDURES. If a registered holder of Old F4L Notes
desires to tender such Old F4L Notes and consent to the Proposed Amendments, and
such holder's Old F4L Notes are not immediately available, or if time will not
permit such holder's Old F4L Notes or any other required documents to be
delivered to the Exchange Agent prior to 12:00 Midnight, New York City time, on
the Expiration Date, then such Old F4L Notes may nevertheless be tendered for
exchange and Consents may be effected if all of the following guaranteed
delivery procedure conditions are met:
(i) the tender for exchange and Consent is made by or through an
Eligible Institution;
(ii) prior to 12:00 Midnight, New York City time, on the Expiration
Date, the Exchange Agent receives from such Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by telegram,
telex, facsimile transmission, mail or hand delivery) substantially in the
form provided by Food 4 Less herewith, that
9
<PAGE> 10
contains a signature guaranteed by an Eligible Institution in the form set
forth in such Notice of Guaranteed Delivery, unless such tender is for the
account of an Eligible Institution (in which case no signature guarantee
shall be required), and sets forth the name and address of the holder of
Old F4L Notes and the principal amount of Old F4L Notes tendered for
exchange, states that the tender is being made thereby and guarantees that,
within five New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, together with
the Old F4L Notes and any required signature guarantees and any other
documents required by this Letter of Transmittal, will be deposited by the
Eligible Institution with the Exchange Agent; and
(iii) all tendered Old F4L Notes, or a confirmation of a book-entry
transfer of such Old F4L Notes into the Exchange Agent's applicable account
at a Book-Entry Transfer Facility, as well as the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and all other documents required by such Letter of
Transmittal, shall be received by the Exchange Agent within five NYSE
trading days after the date of execution of the Notice of Guaranteed
Delivery.
The PINK Notice of Guaranteed Delivery provided herewith shall be used in
connection with tenders of all Old F4L Notes.
Notwithstanding any other provision hereof, the exchange for Old F4L Notes
pursuant to the Exchange Offers will in all cases be made only after timely
receipt by the Exchange Agent of certificates for such Old F4L Notes and the
Letter of Transmittal (or facsimile thereof) in respect thereof, properly
completed and duly executed, together with any required signature guarantees and
any other documents required by the Prospectus and this Letter of Transmittal.
3. CONSENT TO PROPOSED AMENDMENTS; WITHDRAWAL OF TENDERS; REVOCATION OF
CONSENTS. A valid Consent to the adoption of the Proposed Amendments may be
given only by the registered holder of Old F4L Notes or his or her
attorney-in-fact. Noteholders will not be able to validly tender unless they
Consent to the Proposed Amendments. Noteholders not tendering Old F4L Notes
pursuant to the Exchange Offers will not be eligible to Consent to the Proposed
Amendments. Tendering holders who sign the Letter of Transmittal and tender any
Old F4L Notes shall be deemed to Consent to the Proposed Amendments with respect
to such Old F4L Notes tendered.
Tenders of Old F4L Notes pursuant to an Exchange Offer may be withdrawn and
Consents may be revoked at any time until the later of (a) such time as the
Requisite Consents (as defined) with respect to the applicable issue of Old F4L
Notes have been received and the Supplemental Indenture (as defined) for such
issue has been executed and (b) [20 Business Days following commencement].
Thereafter, such tenders may be withdrawn and Consents may be revoked if the
Exchange Offer with respect to such Old F4L Notes is terminated without any Old
F4L Notes being accepted for exchange thereunder.
The "Consent Date" for the Old F4L Senior Notes or the Old F4L Senior
Subordinated Notes, as the case may be, will be the date and time on which the
Requisite Consents (Consents of holders representing at least a majority in
aggregate principal amount of the outstanding Old F4L Senior Notes or Old F4L
Senior Subordinated Notes, as the case may be, held by persons other than Food 4
Less and its affiliates) to the Proposed Amendments are delivered by Food 4 Less
to the applicable Old Trustee. A different Consent Date may be established with
respect to Consents that are received and that relate to the Old F4L Senior
Notes and Consents that are received and that relate to the Old F4L Senior
Subordinated Notes. The withdrawal of Old F4L Notes prior to [20 Business Days
following commencement] in accordance with the procedures set forth hereunder
will effect a revocation of the related Consent. Any valid revocation of
Consents will automatically render the prior tender of the Old F4L Notes to
which such Consents relate defective and Food 4 Less will have the right, which
it may waive, to reject such tender as invalid and ineffective.
Any holder of Old F4L Notes who has tendered Old F4L Notes or who succeeds
to the record ownership of Old F4L Notes in respect of which such tenders or
Consents previously have been given may withdraw such Old F4L Notes or revoke
such Consents prior to the applicable Consent Date by delivery of a written
notice of withdrawal or revocation, subject to the limitations described herein.
To be effective, a written telegraphic, telex or facsimile transmission (or
delivered by hand or by mail) notice of withdrawal of a tender or revocation of
a Consent must (i) be timely received by the Exchange Agent at one of its
addresses set forth on the front cover hereof or prior to the applicable time
provided herein with respect to the applicable issue of Old F4L Notes, (ii)
specify the name of the person having tendered the Old F4L Notes to be withdrawn
or as to which Consents are revoked, the principal amount of such Old F4L Notes
to be withdrawn and, if certificates for Old F4L Notes have been tendered, the
name of the registered holder(s) of such Old F4L Notes as set forth in such
certificates, if different from that of the person who tendered such Old F4L
Notes, (iii) identify the Old F4L Notes to be withdrawn or to which the notice
of revocation relates and (iv)(a) be signed by the holder in the same manner as
the original signature on this Letter of Transmittal or Notice of Guaranteed
Delivery (as the case may be) by which such Old F4L Notes were tendered
(including any required signature guarantees) or (b) be
10
<PAGE> 11
accompanied by evidence satisfactory to Food 4 Less and the Exchange Agent that
the holder withdrawing such tender or revoking such Consents has succeeded to
beneficial ownership of such Old F4L Notes. If certificates representing Old F4L
Notes to be withdrawn or Consents to be revoked have been delivered or otherwise
identified to the Exchange Agent, then the name of the registered holder and the
serial numbers of the particular certificate evidencing the Old F4L Notes to be
withdrawn or Consents to be revoked and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution, except in the case of Old F4L
Notes tendered by an Eligible Institution (in which case no signature guarantee
shall be required), must also be so furnished to the Exchange Agent as aforesaid
prior to the physical release of the certificates for the withdrawn Old F4L
Notes. If Old F4L Notes have been tendered or if Consents have been delivered
pursuant to the procedures for book-entry transfer as set forth herein, any
notice of withdrawal or revocation of a Consent must also specify the name and
number of the account at the appropriate Book-Entry Transfer Facility to be
credited with the withdrawn Old F4L Notes. Food 4 Less reserves the right to
contest the validity of any revocation. A purported notice of revocation which
is not received by the Exchange Agent in a timely fashion will not be effective
to revoke a Consent previously given.
Any permitted withdrawals of tenders of Old F4L Notes and revocation of
Consents may not be rescinded, and any Old F4L Notes properly withdrawn will
thereafter be deemed not validly tendered and any Consents revoked will be
deemed not validly delivered for purposes of the Exchange Offers or the
Solicitation; provided, however, that withdrawn Old F4L Notes may be retendered
and revoked Consents may be redelivered by again following one of the
appropriate procedures described herein at any time prior to 12:00 Midnight, New
York City time, on the Expiration Date.
If Food 4 Less shall decide to decrease the amount of Old F4L Notes being
sought in either Exchange Offer or to increase or decrease the consideration
offered to the Old F4L Noteholders, and if, at the time that notice of such
increase or decrease is first published, sent or given to Old F4L Noteholders in
the manner specified in this Prospectus and Solicitation Statement, such
Exchange Offer is scheduled to expire at any time earlier than the expiration of
a period ending on the tenth Business Day from and including the date that such
notice is first so published, sent or given such Exchange Offer will be extended
for such purposes until the expiration of such period of ten Business Days. As
used in this Prospectus and Solicitation Statement, "Business Day" has the
meaning set forth in Rule 14d-1 (and applicable to Regulation 14E) under the
Exchange Act). In addition, if any Exchange Offer or the Solicitation is amended
in a manner determined by Food 4 Less to constitute a material adverse change to
the Old F4L Noteholders, Food 4 Less promptly will disclose such amendment in a
public announcement and will extend the relevant Exchange Offer or the
Solicitation for a period deemed by it to be adequate to permit the Old F4L
Noteholders to properly deliver or withdraw their Old F4L Notes and give or
revoke Consents.
If Food 4 Less extends an Exchange Offer, is delayed in its acceptance for
exchange of Old F4L Notes or is unable to exchange Old F4L Notes pursuant to an
Exchange Offer, for any reason, then, without prejudice to Food 4 Less' rights
under such Exchange Offer, the Exchange Agent may, subject to applicable law,
retain tendered Old F4L Notes on behalf of Food 4 Less, and such Old F4L Notes
may not be withdrawn (subject to Rule 14e-1 under the Exchange Act, which
requires that Food 4 Less deliver the consideration offered or return the Old
F4L Notes deposited by or on behalf of the Noteholders promptly after the
termination or withdrawal of an Exchange Offer), except to the extent that
tendering holders are entitled to withdrawal rights as described herein.
All questions as to the validity, form and eligibility (including the time
of receipt) of notices of withdrawal or revocations of Consents will be
determined by Food 4 Less, whose determination will be final and binding on all
parties. None of Food 4 Less, the Exchange Agent, the Dealer Managers or any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or revocation of Consent or incur any
liability for failure to give any such notification.
4. SIGNATURES ON THIS LETTER OF TRANSMITTAL, AND ENDORSEMENTS; GUARANTEE OF
SIGNATURE. If this Letter of Transmittal is signed by the registered holder(s)
of the Old F4L Notes tendered hereby, the signature must correspond with the
name(s) as written on the face of the certificate(s) without alteration or any
change whatsoever.
If any of the Old F4L Notes tendered hereby are registered in the names of
two or more joint owners, all owners must sign this Letter of Transmittal. If
any tendered Old F4L Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal and any other required documents as there are different
names in which the Old F4L Notes are registered.
If tendered Old F4L Notes are registered in the name of a person other than
the person signing this Letter of Transmittal, the tendered Old F4L Notes must
be endorsed or accompanied by appropriate bond powers, signed by the registered
holder or holders of the Old F4L Notes transmitted hereby or separate bond
powers are required, with signatures guaranteed in either case.
11
<PAGE> 12
If this Letter of Transmittal or any certificate or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to Food
4 Less of their authority so to act must be submitted.
Endorsements on certificates of Old F4L Notes or signatures on bond powers
required by this Instruction 4 must be guaranteed by an Eligible Institution.
All signatures on this Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution (as defined
below) unless the Old F4L Notes tendered or withdrawn, as the case may be,
pursuant thereto are tendered (i) by a registered Noteholder(s) (which term, for
purposes of this Letter of Transmittal, shall include any participant in DTC,
MSTC or PDTC whose name appears on a security position listing as the owner of
Old F4L Notes), of Old F4L Notes who has not completed the box entitled "SPECIAL
ISSUANCE AND PAYMENT INSTRUCTIONS" or "SPECIAL DELIVERY INSTRUCTIONS" on this
Letter of Transmittal or (ii) for the account of an Eligible Institution. If Old
F4L Notes are registered in the name of a person other than the signer of this
Letter of Transmittal or a notice of withdrawal, as the case may be, or if
payment is to be made or certificates for unexchanged Old F4L Notes are to be
issued or returned to a person other than the registered holder, then the Old
F4L Notes must be endorsed by the registered Noteholder(s), or be accompanied by
a written instrument or instruments of transfer or exchange in form satisfactory
to Food 4 Less duly executed by the registered Noteholder(s), with such
signatures guaranteed by an Eligible Institution. In the event that signatures
on this Letter of Transmittal (or other document) are required to be guaranteed,
such guarantee must be by a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. (the "NASD") or by a commercial bank or trust company having an
office in the United States (each of the foregoing being an "Eligible
Institution").
5. SPECIAL ISSUANCE, PAYMENT AND DELIVERY INSTRUCTIONS. Tendering
Noteholders should indicate, in the applicable box, the name and address to
which New F4L Notes, the Exchange Payment or Old F4L Notes for principal amounts
not accepted for exchange (each, as appropriate) are to be issued, sent or paid,
if different from the name and address of the person submitting this Letter of
Transmittal. In the case of issuance or payment in a different name, the tax
identification number of the person named must also be indicated and a
Substitute Form W-9 for such recipient must be completed. See Instruction 6. If
no such instructions are given, New F4L Notes, the Exchange Payment or Old F4L
Notes not accepted for exchange (each, as appropriate) will be sent to the name
and address of the person signing this Letter of Transmittal or, at Food 4 Less'
option, by crediting the account at DTC, MSTC or PDTC designated above in the
box entitled "SPECIAL ISSUANCE AND PAYMENT INSTRUCTIONS."
6. SUBSTITUTE FORM W-9. The tendering Noteholder is required to provide the
Exchange Agent (as payor) with his or her correct taxpayer identification number
("TIN") on the Substitute Form W-9 included in this Letter of Transmittal. In
the case of a tendering Noteholder who has completed the box entitled "SPECIAL
ISSUANCE AND PAYMENT INSTRUCTIONS" above, however, the correct TIN on Form W-9
should be provided for the recipient of the securities delivered pursuant to
such instructions. Failure to provide the information on the form will cause the
Exchange Agent to withhold 31% of any payments made to the tendering Noteholder
or such recipient, as the case may be, until such information is received. See
"IMPORTANT TAX INFORMATION" below.
7. TRANSFER TAXES. Food 4 Less will pay all transfer taxes, if any,
applicable to the exchange of Old F4L Notes pursuant to the Exchange Offers. If,
however, New F4L Notes, the Exchange Payment or Old F4L Notes not accepted for
exchange (each as appropriate), are to be delivered to, or are to be registered
or issued in the name of, any person other than the registered holder of the Old
F4L Notes, or if tendered Old F4L Notes are to be registered in the name of any
person other than the person signing the Letter of Transmittal, or if a transfer
tax is imposed for any reason other than the exchange of Old F4L Notes pursuant
to an Exchange Offer, then the amount of any such transfer tax (whether imposed
on the registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such tax or exemption therefrom
is not submitted, then the amount of such transfer tax will be deducted from the
Exchange Payment otherwise payable to such tendering holder. Any remaining
amount will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. WAIVER OF CONDITIONS. Food 4 Less reserves the absolute right to amend
in any respect or waive any of the specified conditions in either of the
Exchange Offers in the case of any Old F4L Notes tendered.
12
<PAGE> 13
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD F4L NOTES. If a Noteholder
desires to tender Old F4L Notes pursuant to an Exchange Offer, but any such Old
F4L Note has been mutilated, lost, stolen or destroyed, such holder should write
to or telephone the Old Trustee under the Old Indenture under which such Old F4L
Note was issued, at the address listed below, concerning the procedures for
obtaining replacement certificates for such Old F4L Note, arranging for
indemnification or any other matter that requires handling by such Old Trustee:
<TABLE>
<S> <C>
Old F4L Senior Note Trustee: Norwest Bank Minnesota, N.A.
Sixth & Marquette
Minneapolis, Minnesota 55479-0013
Attn: Corporate Trust Department
Old F4L Senior Subordinated Note United States Trust Company of New York
Trustee: 114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Department
</TABLE>
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Information
Agent, D.F. King & Co., Inc., (800) 669-5550.
13
<PAGE> 14
IMPORTANT TAX INFORMATION
GENERAL
Under federal income tax law, a holder whose tendered Old F4L Notes are
accepted for exchange is required to provide the Exchange Agent with such
holder's correct taxpayer identification number on the Substitute Form W-9
included in this Letter of Transmittal. If such holder is an individual, the
taxpayer identification number is his or her social security number. If the
Exchange Agent is not provided with the correct taxpayer identification number
or adequate basis for exemption, the holder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, payments that are made to
such holder in exchange for tendered Old F4L Notes or in respect of the New F4L
Notes may be subject to backup withholding.
Certain holders of Old F4L Notes (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that holder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements can be
obtained from the Depositary. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the holder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained.
WHAT NUMBER TO GIVE TO EXCHANGE AGENT
The holder is required to give the Exchange Agent the social security
number or employer identification number of the registered holder of the Old F4L
Notes. If the certificates for Old F4L Notes are registered in more than one
name or are not in the name of the actual owner, consult the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which number to report.
14
<PAGE> 15
TO BE COMPLETED BY ALL TENDERING
HOLDERS OF OLD F4L NOTES
(SEE INSTRUCTION 6)
- --------------------------------------------------------------------------------
PAYOR'S NAME: BANKERS TRUST COMPANY
- --------------------------------------------------------------------------------
SUBSTITUTE
Social Security Number
FORM W-9
DEPARTMENT OF THE TREASURY PART I -- PLEASE -------------------------
INTERNAL REVENUE SERVICE PROVIDE YOUR TAX OR
PAYER IDENTIFICATION
PAYOR'S REQUEST FOR TAXPAYER NUMBER IN THE BOX AT Employer Identification
IDENTIFICATION NUMBER (TIN) THE RIGHT AND CERTIFY Number
BY SIGNING AND DATING
BELOW. -------------------------
-----------------------------------------------------
PART II -- For Payees exempt from backup
withholding, see the Important Tax Information
above and Guidelines for Certification of
Taxpayer Identification Number on Substitute Form
W-9 enclosed herewith and complete as instructed
therein.
- --------------------------------------------------------------------------------
CERTIFICATIONS -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or a Taxpayer Identification Number has not been issued to me and either
(a) I have mailed or delivered an application to receive a Taxpayer
Identification Number to the appropriate Internal Revenue Service Center
or Social Security Administration office or (b) I intend to mail or
deliver an application in the near future). (I understand that if I do not
provide a Taxpayer Identification Number to the payer, 31% of all
reportable payments made to me thereafter will be withheld until I provide
a number to the payer and that, if I do not provide my Taxpayer
Identification Number within sixty (60) days, such retained amounts shall
be remitted to the Internal Revenue Service ("IRS") as backup withholding.
(2) I am not subject to backup withholding either because I have not been
notified by the IRS that I am subject to backup withholding as a result of
a failure to report all interest or dividends or the IRS has notified me
that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTION -- You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you were no longer subject to
backup withholding, do not cross out item (2). (Also see the IMPORTANT TAX
INFORMATION above.)
- --------------------------------------------------------------------------------
Name
-------------------------------------------------------------------------
(Please Print)
Address
----------------------------------------------------------------------
----------------------------------------------------------------------
(Including Zip Code)
Signature Date
---------------------------------------- ----------------------
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS.
PLEASE REVIEW ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
IMPORTANT: This Letter of Transmittal or a facsimile thereof (together with Old
F4L Notes and all other required documents) must be received by the Exchange
Agent on or prior to the Expiration Date (as defined in the Prospectus) of the
Exchange Offers.
Your bank or broker can assist you in completing this form. The
Instructions included in this Letter of Transmittal must be followed.
Requests for assistance or additional copies of the Prospectus or the
Letter of Transmittal may be obtained from the Information Agent at the address
or telephone numbers set forth below.
The Information Agent for the Exchange Offers and the Solicitation is:
D.F. KING & CO., INC.
Call Toll Free: (800) 669-5550
15
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
TO TENDER
AND
TO CONSENT TO CERTAIN INDENTURE AMENDMENTS
WITH RESPECT TO THE
10.45% SENIOR NOTES DUE 2000
AND THE
13.75% SENIOR SUBORDINATED NOTES DUE 2001
OF
FOOD 4 LESS SUPERMARKETS, INC.
PURSUANT TO THE
PROSPECTUS AND SOLICITATION STATEMENT DATED JANUARY , 1995
As set forth in the Prospectus and Solicitation Statement dated January ,
1995 (as the same may be amended from time to time, the "Prospectus") of Food 4
Less Supermarkets, Inc. ("Food 4 Less"), under the caption "The Exchange Offers
and Solicitation -- Guaranteed Delivery Procedure," and in the accompanying
Consent and Letter of Transmittal and Instruction 2 thereto (the "Letter of
Transmittal"), this form or one substantially equivalent hereto must be used to
(a) accept the Food 4 Less' offer, upon the terms and subject to the conditions
set forth in the Prospectus and Letter of Transmittal, to (i) holders of the
10.45% Senior Notes Due 2000 of Food 4 Less (the "Old F4L Senior Notes") to
exchange for each $1,000 principal amount of Old F4L Senior Notes $1,000
principal amount of new Senior Notes due 2004 (the "New F4L Senior Notes") plus
$5.00 in cash, plus accrued and unpaid interest to the date of the exchange (the
"F4L Senior Exchange Offer") and (ii) holders of the 13.75% Senior Subordinated
Notes Due 2001 of Food 4 Less (the "Old F4L Senior Subordinated Notes" and,
together with the Old F4L Senior Notes, the "Old F4L Notes") to exchange for
each $1,000 principal amount of Old F4L Senior Subordinated Notes $1,000
principal amount of new 13.75% Senior Subordinated Notes due 2001 (the "New F4L
Senior Subordinated Notes") plus $20.00 in cash, plus accrued and unpaid
interest to the date of the exchange (the "F4L Senior Subordinated Exchange
Offer," and together with the F4L Senior Exchange Offer, the "Exchange Offers,"
each of which is sometimes referred to herein individually as the applicable
"Exchange Offer") and (b) deliver consents pursuant to the Food 4 Less'
solicitation (the "Solicitation") of consents (the "Consents") from holders of
the Old F4L Notes ("Noteholders") to the proposed amendments (the "Proposed
Amendments") to the respective indentures under which the Old F4L Notes were
issued (as described in the Prospectus under the captions "The Proposed
Amendments," "Appendix A -- Comparison of Old F4L Senior Notes and New F4L
Senior Notes" and "Appendix B -- Comparison of Old F4L Senior Subordinated Notes
and New F4L Senior Subordinated Notes."), if (i) certificates representing the
Old F4L Notes to be tendered pursuant thereto and with respect to Consents to be
delivered are not lost but are not immediately available, (ii) the procedures
for book-entry transfer cannot be completed prior to the Expiration Date (as
defined below), or (iii) time will not permit all required documents to reach
the Exchange Agent prior to the Expiration Date. This form may be delivered by
an Eligible Institution by mail or hand delivery or transmitted, via facsimile,
to the Exchange Agent as set forth below. All capitalized terms used herein but
not defined herein shall have the meanings ascribed to them in the Prospectus.
Unless otherwise indicated, references herein to the Exchange Offers shall be
deemed to include the Solicitation.
The Exchange Offers and the Solicitation are not being made to (nor will
the surrender of Old F4L Notes for exchange be accepted from or on behalf of)
Noteholders in any jurisdiction in which the making or acceptance of such
Exchange Offers or the Solicitation would not be in compliance with the laws of
such jurisdiction.
THE EXCHANGE OFFERS AND THE SOLICITATION WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON 1995 UNLESS EXTENDED (THE "EXPIRATION
DATE"). TENDERED OLD F4L NOTES MAY ONLY BE WITHDRAWN AND THE CORRESPONDING
CONSENTS MAY ONLY BE REVOKED, UNDER THE CIRCUMSTANCES DESCRIBED IN THE
PROSPECTUS AND THE LETTER OF TRANSMITTAL.
<PAGE> 2
The Exchange Agent for the Exchange Offers is:
BANKERS TRUST COMPANY
<TABLE>
<S> <C> <C>
By Hand/Overnight Courier: Facsimile Transmission Number: By Mail:
Bankers Trust Company (212) 250-6275 Bankers Trust Company
Corporate Trust & Agency Group (212) 250-3290 Corporate Trust & Agency Department
Reorganization Department Reorganization Department
Receipt & Delivery Window Confirm by Telephone: P.O. Box 1458
123 Washington St., (212) 250-6270 Church Street Station
First Floor New York, NY 10008-1558
New York, NY 10006
For Information Call:
(800) 669-5550
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
2
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tender(s) to Food 4 Less and delivers to Food 4 Less
Consents with respect to, upon the terms and subject to the conditions set forth
in the Prospectus and the Letter of Transmittal, receipt of which is hereby
acknowledged, the principal amount of Old F4L Notes set forth below pursuant to
the guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offers and Solicitation -- Guaranteed Delivery Procedure."
Subject to and effective upon acceptance for exchange of the Old F4L Notes
tendered herewith, the undersigned hereby sells, assigns and transfers to or
upon the order of Food 4 Less all right, title and interest in and to, and any
and all claims in respect of or arising or having arisen as a result of the
undersigned's status as a holder of, all Old F4L Notes tendered hereby. The
undersigned authorizes the Exchange Agent to deliver this Notice of Guaranteed
Delivery to Food 4 Less and the applicable Old Trustee (as defined in the
Prospectus) as evidence of the undersigned's Consent to the Proposed Amendments
with respect to the Old F4L Notes tendered hereby and as certification that
Requisite Consents (as defined in the Prospectus) to the Proposed Amendments
with respect to such Old F4L Notes have been received. In the event of a
termination of either Exchange Offer the Old F4L Notes tendered pursuant thereto
will be returned to the tendering Noteholder promptly.
The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Prospectus and the Letter of Transmittal, owns
the Old F4L Notes tendered hereby within the meaning of Rule 10b-4 under the
Securities Exchange Act of 1934, as amended, has full power and authority to
tender, sell, assign and transfer the Old F4L Notes tendered hereby and that
Food 4 Less will acquire good and unencumbered title thereto, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or Food 4 Less to be necessary or
desirable to complete the sale, assignment and transfer of the Old F4L Notes
tendered.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
3
<PAGE> 4
<TABLE>
<CAPTION>
CERTIFICATE NUMBERS PRINCIPAL AMOUNT
CLASS BEING TENDERED (IF AVAILABLE) TO BE TENDERED*
------------------------------- ------------------------------ ------------------------------
<S> <C> <C>
Old F4L Senior Notes...........
------------------------------ ------------------------------
------------------------------ ------------------------------
------------------------------ ------------------------------
Old F4L Senior Subordinated
Notes........................
------------------------------ ------------------------------
------------------------------ ------------------------------
------------------------------ ------------------------------
</TABLE>
- ---------------
* Must be in principal amounts equal to $1,000 or integral multiples thereof.
PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s) or Authorized Signatory:
- ------------------------------------------------------------
- ------------------------------------------------------------
Name(s) of Registered Holder(s):
- ------------------------------------------------------------
- ------------------------------------------------------------
Date:
-------------------------------------------------------
Address:
----------------------------------------------------
- ------------------------------------------------------------
Area Code and Telephone No.:
--------------------------------
If Old F4L Notes will be delivered by book-entry transfer, check trust company
below:
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
Transaction Code No.:
---------------------------------------
Exchange Agent Account No.:
---------------------------------
4
<PAGE> 5
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or a correspondent in the United States,
hereby guarantees that, within five New York Stock Exchange trading days from
the date of this Notice of Guaranteed Delivery, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), together with
certificates representing the Old F4L Notes tendered hereby in proper form for
transfer (or confirmation of the book-entry transfer of such Old F4L Notes into
the Exchange Agent's account at a Book-Entry Transfer Facility, pursuant to the
procedure for book-entry transfer set forth in the Prospectus under the caption
"The Exchange Offers and Solicitation -- Procedures for Tendering and
Consenting"), and any other required documents will be deposited by the
undersigned with the Exchange Agent.
<TABLE>
<S> <C>
Name of Firm:____________________________________ _________________________________________
Authorized Signature
Address:_________________________________________ Name:_________________________________________
_________________________________________________ Title:________________________________________
Area Code and Telephone No.______________________ Date: ________________________________________
</TABLE>
DO NOT SEND OLD F4L NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD F4L NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND
VALIDLY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
This Notice of Guaranteed Delivery must be signed by the Noteholder(s)
exactly as their name(s) appear on certificates for Old F4L Notes or on a
security position listing as the owner of Old F4L Notes, or by person(s)
authorized to become Noteholder(s) by endorsements and documents transmitted
with this Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, agent or
other person acting in a fiduciary or representative capacity, such person must
provide the following information:
5
<PAGE> 1
EXHIBIT 99.3
<TABLE>
<S> <C>
BT SECURITIES CORPORATION CS FIRST BOSTON
ONE BANKERS TRUST PLAZA LEVERAGED FINANCE DEPARTMENT
130 LIBERTY STREET 55 E. 52ND STREET
NEW YORK, NEW YORK 10006 NEW YORK, NEW YORK 10055
</TABLE>
TO TENDER
AND
TO CONSENT TO CERTAIN INDENTURE AMENDMENTS
WITH RESPECT TO THE
10.45% SENIOR NOTES DUE 2000
AND THE
13.75% SENIOR SUBORDINATED NOTES DUE 2001
OF
FOOD 4 LESS SUPERMARKETS, INC.
PURSUANT TO THE
PROSPECTUS AND SOLICITATION STATEMENT DATED JANUARY , 1995
THE EXCHANGE OFFERS AND THE SOLICITATION WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON , 1995, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS OF 10.45% SENIOR NOTES DUE 2000 AND 13.75% SENIOR SUBORDINATED NOTES DUE
2001 MAY ONLY BE WITHDRAWN AND THE CORRESPONDING CONSENTS MAY ONLY BE REVOKED,
UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND SOLICITATION STATEMENT
AND THE CONSENT AND LETTER OF TRANSMITTAL.
, 1995
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Food 4 Less, Inc., Food 4 Less Holdings, Inc.,
Food 4 Less Supermarkets, Inc. (the "Food 4 Less") and its subsidiaries to act
as the Dealer Managers in connection with Food 4 Less' offer, upon the terms and
subject to the conditions set forth in the Prospectus and Solicitation Statement
dated January , 1995 (the "Prospectus") and in the related Consent and Letter
of Transmittal and instructions contained therein (the "Letter of Transmittal"),
to (i) holders of 10.45% Senior Notes Due 2000 of Food 4 Less (the "Old F4L
Senior Notes") to exchange for each $1,000 principal amount of Old F4L Senior
Notes $1,000 principal amount of new Senior Notes due 2004 (the "New F4L Senior
Notes") plus $5.00 in cash (the "F4L Senior Exchange Payment"), plus accrued and
unpaid interest to the date of the exchange (the "F4L Senior Exchange Offer")
and (ii) holders of the 13.75% Senior Subordinated Notes Due 2001 of Food 4 Less
(the "Old F4L Senior Subordinated Notes" and, together with the Old F4L Senior
Notes, the "Old F4L Notes") to exchange for each $1,000 principal amount of Old
F4L Senior Subordinated Notes $1,000 principal amount of New 13.75% Senior
Subordinated Notes due 2001 (the "New F4L Senior Subordinated Notes") plus
$20.00 in cash (the "F4L Senior Subordinated Exchange Payment," and, together
with the F4L Senior Exchange Payment, the "Exchange Payment"), plus accrued and
unpaid interest to the date of the exchange (the "F4L Senior Subordinated
Exchange Offer," and together with the F4L Senior Exchange Offer, the "Exchange
Offers" and referred to herein individually as the applicable "Exchange Offer,"
as the case may be). Food 4 Less is also soliciting (the "Solicitation")
consents (the "Consents") from holders of the Old F4L Notes ("Noteholders") to
certain proposed amendments (the "Proposed Amendments") to the respective
indentures under which the Old F4L Notes were issued (as described in the
Prospectus under the captions "The Proposed Amendments," "Appendix
A -- Comparison of Old F4L Senior Notes and New F4L Senior Notes" and "Appendix
B -- Comparison of Old F4L Senior Subordinated Notes and New F4L Senior
Subordinated Notes"). Upon consummation of the Exchange Offers and the
Solicitation, Food 4 Less will deliver New F4L Notes and make payments in cash
(including accrued interest in cash on the Old F4L Notes and the corresponding
Exchange Payment) to the holders of Old F4L Notes whose Old F4L Notes are
accepted by
<PAGE> 2
Food 4 Less pursuant to the applicable Exchange Offer. Unless otherwise
indicated, references herein to the Exchange Offers shall be deemed to include
the Solicitation.
The Exchange Offers and the Solicitation are not being made to (nor will
the surrender of Old F4L Notes for exchange be accepted from or on behalf of)
Noteholders in any jurisdiction in which the making or acceptance of such
Exchange Offers or the Solicitation would not be in compliance with the laws of
such jurisdiction.
Enclosed herewith are copies of the following documents:
1. The Prospectus and Solicitation Statement;
2. The Consent and Letter of Transmittal for your use and for the
information of your clients, together with guidelines of the Internal
Revenue Service for Certification of Taxpayer Identification Number on
Substitute Form W-9 providing information relating to backup federal income
tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the applicable
Exchange Offer and the Solicitation if the Old F4L Notes and all other
required documents cannot be delivered to the Exchange Agent on or prior to
the Expiration Date (as defined in the Prospectus);
4. A form of letter which may be sent to your clients for whose
account you hold the Old F4L Notes in your name or in the name of a
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offers and the Solicitation;
5. A return envelope addressed to the Exchange Agent; and
6. A letter from the Vice President and Secretary of Food 4 Less.
PLEASE NOTE THAT THE EXCHANGE OFFERS AND THE SOLICITATION WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON , 1995 UNLESS EXTENDED. WE
URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
Food 4 Less will not pay any fees or commissions to any broker or dealer or
other person (other than the Dealer Managers) for soliciting tenders of the Old
F4L Notes pursuant to the Exchange Offers and the Solicitation. You will be
reimbursed for customary mailing and handling expenses incurred by you in
forwarding the enclosed materials to your clients.
Additional copies of the enclosed documents may be obtained from the Dealer
Managers or the Information Agent, at their respective addresses and telephone
numbers set forth on the back cover of the enclosed Prospectus.
BT SECURITIES CORPORATION
CS FIRST BOSTON CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE COMPANY, THE EXCHANGE AGENT, THE
INFORMATION AGENT OR THE DEALER MANAGERS OR AUTHORIZE YOU OR ANY OTHER PERSON TO
GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH
RESPECT TO THE EXCHANGE OFFERS OR THE SOLICITATION NOT CONTAINED IN THE
PROSPECTUS OR THE LETTER OF TRANSMITTAL.
<PAGE> 1
EXHIBIT 99.4
TO TENDER
AND
TO CONSENT TO CERTAIN INDENTURE AMENDMENTS
WITH RESPECT TO THE
10.45% SENIOR NOTES DUE 2000
AND THE
13.75% SENIOR SUBORDINATED NOTES DUE 2001
OF
FOOD 4 LESS SUPERMARKETS, INC.
PURSUANT TO THE
PROSPECTUS AND SOLICITATION STATEMENT DATED JANUARY , 1995
THE EXCHANGE OFFERS AND THE SOLICITATION WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON _______________, 1995, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS OF 10.45% SENIOR NOTES DUE 2000 AND 13.75% SENIOR SUBORDINATED NOTES
DUE 2001, MAY ONLY BE WITHDRAWN AND THE CORRESPONDING CONSENTS MAY ONLY BE
REVOKED UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND SOLICITATION
STATEMENT AND THE CONSENT AND LETTER OF TRANSMITTAL.
TO OUR CLIENTS:
Enclosed for your consideration is the Prospectus and Solicitation
Statement dated January , 1995 (as the same may be amended or supplemented
from time to time, the "Prospectus") and a related form of Consent and Letter of
Transmittal and instructions thereto (the "Letter of Transmittal") relating to
the (a) offer by Food 4 Less Supermarkets, Inc. ("Food 4 Less"), to holders of
10.45% Senior Notes Due 2000 of Food 4 Less (the "Old F4L Senior Notes") to
exchange for each $1,000 principal amount of Old F4L Senior Notes $1,000
principal amount of new Senior Notes due 2004 (the "New F4L Senior Notes") plus
$5.00 in cash (the "F4L Senior Exchange Payment"), plus accrued and unpaid
interest to the date of the exchange (the "F4L Senior Exchange Offer") and (ii)
holders of the 13.75% Senior Subordinated Notes Due 2001 of Food 4 Less (the
"Old F4L Senior Subordinated Notes" and, together with the Old F4L Senior Notes,
the "Old F4L Notes") to exchange for each $1,000 principal amount of Old F4L
Senior Subordinated Notes $1,000 principal amount of new 13.75% Senior
Subordinated Notes due 2001 (the "New F4L Senior Subordinated Notes") plus
$20.00 in cash (the "F4L Senior Subordinated Exchange Payment," and together
with the F4L Senior Exchange Payment, the "Exchange Payment"), plus accrued and
unpaid interest to the date of the exchange (the "F4L Senior Subordinated
Exchange Offer," and together with the F4L Senior Exchange Offer, the "Exchange
Offers" each of which is sometimes referred to herein individually as the
applicable "Exchange Offer") and (b) Food 4 Less' solicitation (the
"Solicitation") of consents (the "Consents") from holders of the Old F4L Notes
("Noteholders") to certain proposed amendments (the "Proposed Amendments") to
the respective indentures under which the Old F4L Notes were issued (as
described in the Prospectus under the captions "The Proposed Amendments,"
"Appendix A -- Comparison of Old F4L Senior Notes and New F4L Senior Notes" and
"Appendix B -- Comparison of Old F4L Senior Subordinated Notes and New F4L
Senior Subordinated Notes.").
Consummation of the Exchange Offers and the Solicitation are subject to
certain conditions described in the Prospectus.
WE ARE THE REGISTERED HOLDER OF THE OLD F4L NOTES HELD BY US FOR YOUR
ACCOUNT. A TENDER OF ANY SUCH OLD F4L NOTES AND DELIVERY OF CONSENTS WITH
RESPECT THERETO CAN BE MADE ONLY BY US AS THE REGISTERED HOLDER AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER OLD F4L NOTES, OR DELIVER A
CONSENT WITH RESPECT TO SUCH OLD F4L NOTES, HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish us to tender
such Old F4L Notes held by us for your account, and deliver Consents with
respect to all of such Old F4L Notes so tendered, pursuant to the terms and
conditions
<PAGE> 2
set forth in the Prospectus and the Letter of Transmittal. We urge you to read
the Prospectus and the Letter of Transmittal carefully before instructing us to
tender your Old F4L Notes and to deliver Consents with respect to Old F4L Notes.
Unless otherwise indicated, references herein to the Exchange Offers shall be
deemed to include the Solicitation.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender Old F4L Notes and deliver Consents with respect to
Old F4L Notes on your behalf in accordance with the provisions of the Tender
Offer. The Exchange Offers and the Solicitation will expire at 12:00 Midnight,
New York City time, on _______________, 1995. Old F4L Notes tendered pursuant
to the applicable Exchange Offer may only be withdrawn and the corresponding
Consents delivered pursuant to the Solicitation may only be revoked, under the
circumstances and subject to the procedures described in the Prospectus and
the Letter of Transmittal. After receipt by the Old F4L Senior Note Trustee
(as defined in the Prospectus) or the Old F4L Senior Subordinated Note Trustee
(as defined in the Prospectus) of, among other things, certification by
Food 4 Less that the Requisite Consents (as defined in the Prospectus) with
respect to the Old F4L Senior Notes or the Old F4L Senior Subordinated Notes,
as the case may be, have been received, Food 4 Less and the applicable Old
Trustee will execute a supplemental indenture to evidence the adoption of the
Proposed Amendments relating to the applicable issue of Old F4L Notes (each a
"Supplemental Indenture"). Upon the acceptance by Food 4 Less of the Requisite
Consents from holders of Old F4L Senior Notes or Old F4L Senior Subordinated
Notes and the execution of the applicable Supplemental Indenture, such
Supplemental Indenture will immediately become effective. Although the
Proposed Amendments relating to an issue of Old F4L Notes will become
effective upon certification that the Requisite Consents from holders of the
applicable Old F4L Notes have been received, such Proposed Amendments will not
be operative until Food 4 Less has accepted for exchange all Old F4L Notes
validly tendered and not withdrawn.
Your attention is directed to the following:
1. The Exchange Offers are for all of the aggregate principal amount
of the outstanding Old F4L Notes.
2. The Exchange Offers and the Solicitation are not being made to (nor
will the surrender of Old F4L Notes for exchange be accepted from or on
behalf of) Noteholders in any jurisdiction in which the making or
acceptance of such Exchange Offers or the Solicitation would not be in
compliance with the laws of such jurisdiction.
3. A holder of Old F4L Notes who desires to tender into the applicable
Exchange Offer with respect to any Old F4L Senior Notes or Old F4L Senior
Subordinated Notes must tender all such Old F4L Senior Notes or Old F4L
Senior Subordinated Notes beneficially owned by such holder, as the case
may be. The tender of Old F4L Notes pursuant to the applicable Exchange
Offer will constitute the Consent of such tendering holder to the Proposed
Amendments with respect to such Old F4L Notes. Noteholders who desire to
accept the applicable Exchange Offer must consent to the Proposed
Amendments. Noteholders do not have the option to consent to the Proposed
Amendments without tendering into the applicable Exchange Offer.
4. The acceptance for exchange of Old F4L Notes validly tendered and
not validly withdrawn and the delivery of New F4L Notes and the payment of
the Exchange Payment will be made as promptly as practicable after the
Expiration Date. Subject to rules promulgated pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), Food 4 Less,
however, expressly reserves the right to delay acceptance of any of the Old
F4L Notes or to terminate either of the Exchange Offers or the Solicitation
and not accept for exchange any Old F4L Notes not theretofore accepted if
any of the conditions set forth in the Prospectus under the caption "The
Exchange Offers and the Solicitation -- Conditions" shall not have been
satisfied or waived by Food 4 Less. Food 4 Less will deliver New F4L Notes
and make payments in cash (including accrued interest in cash on the Old
F4L Notes and the Exchange Payment) in exchange for Old F4L Notes pursuant
to the Exchange Offers promptly following acceptance of the Old F4L Notes.
5. Consummation of the Exchange Offers and the Soliciation are subject
to, among other things, satisfaction or waiver of certain conditions,
including (i) satisfaction of the Minimum Tender (i.e., at least 80% of the
aggregate principal amount of the outstanding Old F4L Notes being validly
tendered and not withdrawn pursuant to the Exchange Offers) prior to the
Expiration Date, (ii) the receipt of the Requisite Consents (i.e., Consents
from Noteholders representing at least a majority in aggregate principal
amount of each of the outstanding Old F4L Senior Notes and Old F4L Senior
Subordinated Notes held by persons other than Food 4 Less and its
affiliates) on or prior to the Expiration Date, (iii) satisfaction or
waiver in Food 4 Less' sole discretion, of all conditions precedent to the
RSI Merger (as defined in the Prospectus), (iv) the prior or
contemporaneous successful completion of the Other Debt Financing
Transactions (including the Public Offering) (each defined in the
Prospectus), (v) the prior or contemporaneous consummation of the Bank
Financing and the New Equity Investment (each as defined in the Prospectus)
and (vi) certain other conditions. In addition, consummation of each
Exchange Offer is subject to the consummation of the other Exchange Offer.
There can be no assurance that such conditions will be satisfied or waived.
Food 4 Less reserves the right to waive certain limitations, to extend,
terminate, cancel or otherwise modify or amend each Exchange Offer in any
respect.
2
<PAGE> 3
6. Food 4 Less expressly reserves the right, subject to applicable law
and the terms of the Exchange Offers and to the extent not inconsistent
with the terms of the Merger (as defined in the Prospectus), the Other Debt
Financing Transactions, the Bank Financing or the New Equity Investment,
(i) to delay acceptance for exchange of any Old F4L Notes or, regardless of
whether such Old F4L Notes were theretofore accepted for exchange and
payment, to delay exchange and payment for any Old F4L Notes pursuant to
either Exchange Offer and to terminate such Exchange Offer and not accept
for exchange any Old F4L Notes not theretofore accepted for exchange and
paid for, upon the failure of any of the conditions to such Exchange Offer
specified herein to be satisfied, by giving oral or written notice of such
delay or termination to the Exchange Agent and (ii) at any time, or from
time to time, to amend either of the Exchange Offers in any respect. Except
as otherwise provided in the Prospectus, withdrawal rights with respect to
Old F4L Notes tendered pursuant to an Exchange Offer will not be extended
or reinstated as a result of an extension or amendment of such Exchange
Offer. The reservation by Food 4 Less of the right to delay acceptance for
exchange and payment of Old F4L Notes is subject to the provisions of Rule
14e-1(c) under the Exchange Act, which requires that Food 4 Less (or the
Company as successor by Merger) pay the consideration offered or return the
Old F4L Notes deposited by or on behalf of holders thereof promptly after
the termination or withdrawal of an Exchange Offer.
7. Consummation of the Exchange Offers and the effectiveness of the
Proposed Amendments may have adverse consequences to non-tendering
Noteholders, including that non-tendering Noteholders will no longer be
entitled to the benefit of certain of the restrictive covenants currently
contained in the Old F4L Indentures and that the reduced amount of
outstanding Old F4L Notes as a result of the Exchange Offers may adversely
affect the trading market, liquidity and market price of the Old F4L Notes.
If the Requisite Consents are received and accepted, the Proposed
Amendments will be binding on all non-tendering Noteholders.
8. Any transfer taxes incident to the transfer of Old F4L Notes from
the tendering holder to Food 4 Less will be paid by Food 4 Less, except as
provided in the Prospectus and the instructions to the Letter of
Transmittal.
If you wish to have us tender any Old F4L Notes held by us for your
account, and deliver your Consent to the Proposed Amendments with respect to all
of such Old F4L Notes, please so instruct us by completing, executing and
returning to us the instruction form that follows.
Any inquiries you may have with respect to the Exchange Offers and the
Solicitation or requests for additional copies of the Prospectus or any other
document should be addressed to D.F. King & Co., Inc., the Information Agent, at
one of the addresses or telephone numbers set forth on the back cover of the
enclosed Prospectus, or call toll free at 1-800-669-5550.
3
<PAGE> 4
INSTRUCTIONS REGARDING THE EXCHANGE OFFERS AND THE SOLICITATION
WITH RESPECT TO THE 10.45% SENIOR NOTES DUE 2000 AND
THE 13.75% SENIOR SUBORDINATED NOTES DUE 2001 OF FOOD 4 LESS SUPERMARKETS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offers and the
Solicitation by Food 4 Less Supermarkets, Inc.
This will instruct you whether to tender the principal amount of Old F4L
Notes indicated below held by you for the account of the undersigned, and to
deliver my Consent to the Proposed Amendments with respect to such Old F4L
Notes, pursuant to the terms and conditions set forth in the Prospectus and the
Letter of Transmittal.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
CLASS BEING TENDERED TO BE TENDERED*
- ----------------------------------- ----------------------
<S> <C>
Old F4L Senior Notes $
----------------------
(please fill in blank)
Old F4L Senior Subordinated Notes $
----------------------
(please fill in blank)
</TABLE>
* Must be in principal amounts equal to $1,000 or integral multiples thereof.
Date: , 1995
-----------------------------------------------------
-----------------------------------------------------
Signature(s)
-----------------------------------------------------
-----------------------------------------------------
Please print name(s) here
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
Please type or print address
-----------------------------------------------------
Area Code and Telephone Number
-----------------------------------------------------
Taxpayer Identification or Social Security Number
-----------------------------------------------------
My Account Number with You
4
<PAGE> 1
EXHIBIT 99.5
GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9
INSTRUCTIONS
(SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE)
Purpose of Form. -- A person who is required to file an information return with
the Internal Revenue Service (the IRS) must obtain your correct taxpayer
identification number (TIN) to report income paid to you, real-estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, or contributions you made to an individual retirement
arrangement (IRA). Use Form W-9 to furnish your correct TIN to the requester
(the person asking you to furnish your TIN), and, when applicable, (1) to
certify that the TIN you are furnishing is correct (or that you are waiting for
a number to be issued), (2) to certify that you are not subject to backup
withholding, and (3) to claim exemption from backup withholding if you are an
exempt payee. Furnishing your correct TIN and making the appropriate
certifications will prevent certain payments from being subject to backup
withholding.
NOTE: IF A REQUESTER GIVES YOU A FORM OTHER THAN A W-9 TO REQUEST YOUR TIN, YOU
MUST USE THE REQUESTER'S FORM.
How to Obtain a TIN. -- If you do not have a TIN, apply for one immediately. To
apply, get FORM SS-5, Application for a Social Security Card (SSN) (for
Individuals), from your local office of the Social Security Administration, or
FORM SS-4, Application for Employer Identification Number (EIN) (for businesses
and all other entities) from your local IRS office.
Generally, you will then have 60 days to obtain a TIN and furnish it to the
requester. If the requester does not receive your TIN within 60 days, backup
withholding, if applicable, will begin and continue until you furnish your TIN
to the requester. For reportable interest or dividend payments, the payer must
exercise one of the following options concerning backup withholding during this
60-day period. Under option (1), a payer must backup withhold on any withdrawals
you make from your account after 7 business days after the requester receives
this form back from you. Under option (2), the payer must backup withhold on any
reportable interest or dividend payments made to your account, regardless of
whether you make any withdrawals. The backup withholding under option (2) must
begin no later than 7 business days after the requester receives this form back.
Under option (2), the payer is required to refund the amounts withheld if your
certified TIN is received within the 60-day period and you were not subject to
backup withholding during the period.
Note: CHECKING THE BOX IN PART II ON THE SUBSTITUTE FORM W-9 MEANS THAT YOU HAVE
ALREADY APPLIED FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE IN THE NEAR
FUTURE.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date this form, and give it to the requester.
What is Backup Withholding? -- Persons making certain payments to you are
required to withhold and pay to the IRS 31% of such payments under certain
conditions. This is called "backup withholding." Payments that could be subject
to backup withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee compensation, and certain payments
from fishing boat operators, but do not include real estate transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
(1) You do not furnish your TIN to the requester, or
(2) The IRS notifies the requester that you furnished an incorrect TIN, or
(3) You are notified by the IRS that you are subject to backup withholding
because you failed to report all your interest and dividends on your tax return
(for reportable interest and dividends only), or
(4) You fail to certify to the requester that you are not subject to backup
withholding under (3) above (for reportable interest and dividend accounts
opened after 1983 only), or
(5) You fail to certify your TIN. This applies only to reportable interest,
dividend, broker, or barter exchange accounts opened after 1983, or broker
accounts considered inactive in 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies. Certain payees and payments
are exempt from backup withholding and information reporting. See PAYEES AND
PAYMENTS EXEMPT FROM BACKUP WITHHOLDING, BELOW, AND EXEMPT PAYEES AND PAYMENTS
UNDER SPECIFIC INSTRUCTIONS, on page 2, if you are an exempt payee.
Payees and Payments Exempt From Backup Withholding. -- The following is a
list of payees exempt from backup withholding and for which no information
reporting is required. For interest and dividends, all listed payees are exempt
except Item (9). For broker transactions, payees listed in (1) through (13) and
a person registered under the Investment Advisors Act of 1940 who regularly acts
as a broker are exempt. Payments subject to reporting under sections 6041 and
6041A are generally exempt from backup withholding only if made to payees
described in Items (1) through (7), except that a corporation that provides
medical and health care services or bills and collects payments for such
services is not exempt from backup withholding or information reporting. Only
payees described in Items (2) through (6) are exempt from backup withholding for
barter exchange transactions, patronage dividends, and payments by certain
fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an Individual
Retirement Plan (IRA), or a custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S.
or a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporation Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends generally not subject to
backup withholding include the following:
- Payments to nonresidential aliens subject to withholding under section
1441.
- Payments to partnerships not engaged in trade or business in the U.S. and
that have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
Note: YOU MAY BE SUBJECT TO BACKUP WITHHOLDING IF THIS INTEREST IS $600 OR MORE
AND IS PAID IN THE COURSE OF THE PAYER'S TRADE OR BUSINESS AND YOU HAVE NOT
PROVIDED YOUR CORRECT TIN TO THE PAYER.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid by you.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045,
6049, 6050A, AND 6050N, and their regulations.
<PAGE> 2
PENALTIES
Failure To Furnish TIN. -- If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
Civil Penalty for False Information With Respect to Withholding. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
Criminal Penalty for Falsifying Information. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
SPECIFIC INSTRUCTIONS
Name. -- If you are an individual, you must generally provide the name shown on
your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change please enter your first name, the last name shown on your
social security card and your new last name.
If you are a sole proprietor, you must furnish your individual name and
either your SSN or EIN. You may also enter your business name on the business
name line. Enter your name(s) as shown on your social security card and/or as it
was used to apply for your EIN on Form SS-4.
Signing the Certification. --
(1) Interest, Dividend, and Barter Exchange Accounts Opened Before 1984 and
Broker Accounts Considered Active During 1983. -- You are required to furnish
your correct TIN, but you are not required to sign the certification.
(2) Interest, Dividend, Broker and Barter Exchange Accounts Opened After
1983 and Broker Accounts Considered Inactive During 1983. -- You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out part (2) in the certification before signing the form.
(3) Real Estate Transactions. -- You must sign the certification. You may
cross out part (2) of the certification.
(4) Other Payments. -- You are required to furnish your correct TIN, but you
are not required to sign the certification unless you have been notified of an
incorrect TIN. Other payments include payments made in the course of the
requester's trade or business for rents, royalties, goods (other than bills for
merchandise), medical and health care services, payments to a nonemployee for
services (including attorney and accounting fees), and payments to certain
fishing boat crew members.
(5) Mortgage Interest Paid by You, Acquisition or Abandonment of Secured
Property, or IRA Contributions. -- You are required to furnish your correct TIN,
but you are not required to sign the certification.
(6) Exempt Payees and Payments. -- If you are exempt from backup
withholding, you should complete this form to avoid possible erroneous backup
withholding. Enter your correct TIN in Part 1, write "EXEMPT" in the block in
Part 2, sign and date the form. If you are a nonresident alien or foreign entity
not subject to backup withholding, give the requester a completed FORM
W-8, Certificate of Foreign Status.
(7) "Awaiting TIN". -- Follow the instructions under HOW TO OBTAIN A TIN, on
page 1, check the box in Part 3 of the Substitute Form W-9 and sign and date the
form.
Signature. -- For a joint account, only the person whose TIN is shown in
Part I should sign the form.
Privacy Act Notice. -- Section 6109 requires you to furnish your correct TIN
to persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, cancellation of debt or
contributions you made to an individual retirement arrangement (IRA). The IRS
uses the numbers for identification purposes and to help verify the accuracy of
your tax return. You must provide your TIN whether or not you are required to
file a tax return. Payers must generally withhold 31% of taxable interest,
dividend, and certain other payments to a payee who does not furnish a TIN to a
payer. Certain penalties may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
- ------------------------------------------------------------------
<TABLE>
<S> <C>
GIVE THE NAME AND
FOR THIS TYPE OF SOCIAL SECURITY
ACCOUNT: NUMBER OF:
- ------------------------------------------------------------------
1. Individual The individual
2. Two or more individuals The actual owner of the account
(joint account) or, if combined funds, the first
individual on the account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable The grantor-trustee(1)
savings trust (grantor is
also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under state law
5. Sole proprietorship The owner(3)
- ------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------
<TABLE>
<S> <C>
GIVE THE NAME AND
EMPLOYER
FOR THIS TYPE OF IDENTIFICATION
ACCOUNT: NUMBER OF:
- ------------------------------------------------------------------
6. Sole proprietorship The owner(3)
7. A valid trust, estate or Legal entity(4)
pension trust
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational, or
other tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the Department The public entity
of Agriculture, in the name
of a public entity (such as a
state or local government,
school district, or prison)
that receives agricultural
program payments
- ------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the individual's name. See Item 5 or 6. You may also enter your
business name.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the identification number of the personal representative or
trustee unless the legal entity itself is not designated in the account
title).
Note: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME LISTED, THE NUMBER
WILL BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
ii
<PAGE> 1
EXHIBIT 99.6
[Food 4 Less Logo/Letterhead]
January , 1995
To: The holders of the 10.45% Senior Notes due 2000 (the "Old F4L Senior
Notes") and 13.75% Senior Subordinated Notes due 2001 (the "Old F4L Senior
Subordinated Notes," and together with the Old F4L Senior Notes, the "Old
F4L Notes") of Food 4 Less Supermarkets, Inc.
Re: Offers to exchange Old F4L Senior Notes for new Senior Notes due
2004 (the "New F4L Senior Notes") and Old F4L Senior Subordinated
Notes for new 13.75% Senior Subordinated Notes due 2005 (the "New
F4L Senior Subordinated Notes," and together with the New F4L
Senior Notes, the "New F4L Notes") and solicitation of consents to
proposed amendments to the indentures governing the Old F4L Notes
(the "Old Indentures").
On September 14, 1994, Food 4 Less Supermarkets, Inc. ("Food 4 Less"), its
parent company Food 4 Less Holdings, Inc. ("Holdings"), and the parent company
of Holdings, Food 4 Less Inc., entered into a definitive Agreement and Plan of
Merger (the "Merger Agreement") with Ralphs Supermarkets, Inc. ("RSI") and its
stockholders. Pursuant to the terms of the Merger Agreement, Food 4 Less will be
merged with and into RSI (the "RSI Merger"). Immediately following the RSI
Merger, Ralphs Grocery Company ("RGC"), which is currently a wholly-owned
subsidiary of RSI, will merge with and into RSI (the "RGC Merger," and together
with the RSI Merger, the "Merger"), and RSI will change its name to Ralphs
Grocery Company.
In connection with the Merger, Food 4 Less is offering to exchange (the
"Exchange Offers") New F4L Notes for Old F4L Notes and is soliciting your
consents (the "Solicitation") to proposed amendments to certain provisions of
the Old Indentures pursuant to which the Old F4L Notes were issued, as such
Exchange Offers and Solicitation are described in the accompanying Prospectus
and Solicitation Statement. The primary reason for this request is to permit the
Merger and the related financing transactions described in the Prospectus and
Solicitation Statement. As described in more detail in the enclosed Prospectus
and Solicitation Statement, upon consummation of the Exchange Offers tendering
holders will receive the following consideration:
<TABLE>
<CAPTION>
FOR EACH $1,000 THE TENDERING HOLDER
PRINCIPAL AMOUNT OF: WILL RECEIVE
- --------------------------------- ----------------------------------------------------------
<S> <C>
Old F4L Senior Notes $1,000 principal amount of New F4L Senior Notes and $5.00
in cash, plus accrued and unpaid interest to the date of
exchange.
Old F4L Senior Subordinated Notes $1,000 principal amount of New F4L Senior Subordinated
Notes and $20.00 in cash, plus accrued and unpaid interest
to the date of exchange.
</TABLE>
The details of the proposed amendments to the Old Indentures, the terms and
conditions of the Exchange Offers and Solicitation, and background information
concerning the Merger and related transactions are contained in the enclosed
Prospectus and Solicitation Statement.
BT Securities Corporation, CS First Boston Corporation and Donaldson,
Lufkin & Jenrette Securities Corporation are serving as financial advisors to
the Company in connection with the Exchange Offers and related transactions. If
you have questions after reviewing the enclosed materials you can reach BT
Securities at (212) 775-2995, CS First Boston at (212) 909-4300, or Donaldson,
Lufkin & Jenrette at (212) 504-4753. In addition, D.F. King & Co., Inc. is
acting as Information Agent in connection with the Exchange Offers and
Solicitation and can be reached at (800) 669-5550.
Thank you for your time and effort in reviewing this request.
Sincerely,
Mark A. Resnik
Vice President and Secretary of
Food 4 Less Supermarkets, Inc.
