<PAGE> 1
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED: JANUARY 29, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 33-22998
-----------
RALPHS GROCERY COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-----------
<TABLE>
<S> <C>
DELAWARE 31-1241926
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1100 WEST ARTESIA BOULEVARD, COMPTON, CALIFORNIA, 90220
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
-----------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 884-9000
-----------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
-----------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. /X/
No voting stock of the registrant is held by non-affiliates of the registrant.
Number of shares of the registrant's Common Stock, $1.00 per value, outstanding
as of January 29, 1995--100.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Registration Statement on Form S-1, Registration
No. 33-47634, as amended, portions of Registration Statement on Form S-4,
Registration No. 33-61812, portions of Annual Report on Form 10-K dated April
29, 1993, portions of Annual Report on Form 10-K dated May 2, 1994, Current
Report on Form 8-K dated September 14, 1994 and portions of the Quarterly
Report on Form 10-Q dated September 1, 1992, are incorporated by
reference into Part IV.
===============================================================================
<PAGE> 2
PART 1
ITEM 1. BUSINESS
GENERAL
Founded in 1873, Ralphs Grocery Company ("Ralphs", "RGC" or the "Company")
is one of the leading supermarket chains in Southern California. Ralphs
operates 173 stores supported by its centrally located and efficient
warehousing, distribution and manufacturing facilities. Ralphs is a wholly
owned subsidiary of Ralphs Supermarkets, Inc. ("Holding Company"), a Delaware
Corporation. The common stock of the Holding Company is held by The Edward J.
DeBartolo Corporation - 60.34%; Camdev Properties, Inc. - 12.81%; Bank of
Montreal - 10.13%; Banque Paribas - 10.13%; and Federated Department Stores,
Inc. - 6.59%.
THE MERGER
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 (as
amended from time to time, the "Merger Agreement") with Ralphs Supermarkets,
Inc. (the "Holding Company") and its stockholders. Pursuant to the terms of the
Merger Agreement, Food 4 Less will be merged with and into Holding Company (the
"RSI Merger") and Holding Company will continue as the surviving corporation.
Food 4 Less is a multiple format supermarket operator that operates in three
geographic areas: Southern California, Northern California and certain areas of
the Midwest. Immediately following the RSI Merger, Ralphs, which is currently
a wholly-owned subsidiary of Holding Company, will merge with and into Holding
Company (the "RGC Merger", and together with the RSI Merger, the "Merger"), and
Holding Company will change its name to Ralphs Grocery Company (the "New
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
with 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 New Company will become a
wholly-owned subsidiary of New Holdings. Agreement has been reached with each
of the California Attorney General and the Federal Trade Commission for
approval of the Merger. Food 4 Less and Ralphs agreed in a settlement
agreement with the Attorney General to divest 27 specific stores in Southern
California. Under the agreement, the Company must divest 14 stores by June 30,
1995, and the balance of 13 stores by December 31, 1995.
In order to consummate the Merger, Food 4 Less has made an Offer to
Exchange and Offer to Purchase and Solicit Consents with respect to the holders
of the 9% Senior Subordinated Notes ("Old RGC 9% Notes") due April 1, 2003
of Ralphs and the 10 1/4% Senior Subordinated Notes due July 15, 2002 of RGC
("Old RGC 10 1/4% Notes" and together with the Old RGC 9% Notes, the "Old
RGC Notes") (i) to exchange (as so amended and restated, the "Exchange Offers")
such Old RGC Notes for New Senior Subordinated Notes due 2005 (the "New Notes")
plus a cash payment of $20.00 in cash for each $1,000 principal amount of Old
RGC Notes tendered for exchange or (ii) to purchase for cash (the "Cash Offers",
and together with the Exchange Offers, the "Offers") Old RGC Notes, for
$1,010 in cash per $1,000 principal amount of Old RGC Notes accepted for
purchase, in each case, plus accrued and unpaid interest to the date of
exchange or purchase. The Offers are subject to the terms and conditions set
forth in the Amended and Restated Prospectus and Solicitation Statement
filed by Food 4 Less with the Securities and Exchange Commission (the
"Prospectus") and which is subject to further changes, including: (1)
satisfaction of a minimum tender amount (i.e., at least a majority of the
aggregate principal amount of the outstanding Old RGC Notes being validly
tendered for exchange for New Notes and not withdrawn pursuant to the Offers
prior to the date of expiration); (2) the receipt of the requisite consents to
certain amendments to the indentures (the "Indentures") under which the Old RGC
Notes were issued (i.e., consents from holders of Old RGC Notes representing at
least a majority in aggregate principal amount of each issue of Old RGC Notes
held by persons other than Ralphs and its affiliates) on or prior to the date
of expiration; (3) the satisfaction or waiver, in Food 4 Less' sole discretion,
of all conditions precedent to the Merger; (4) the prior or contemporaneous
consummation of other exchange offers, consent solicitations and public
offerings contemplated by the Prospectus; and (5) the prior or contemporaneous
consummation of the bank financing and the equity investment described in the
Prospectus. As a result of the RSI Merger and the RGC Merger, the New Notes and
any outstanding Old RGC Notes not tendered in the Offers will be the
obligations of the New Company.
Conditions to the consummation of the RSI Merger include the receipt of
necessary consents and the completion of financing of the transaction. The
purchase price for Holding Company is approximately $1.5 billion, including the
assumption or repayment of debt. The consideration payable to the stockholders
of Holding Company consist of $375 million in cash, $131.5 million principal
amount of 13 5/8% Senior Subordinated Pay-in-Kind Debentures due 2007 to be
issued to the selling shareholders of Holding Company (the "Seller Debentures")
by New Holdings and $18.5 million initial accreted value of 13 5/8% Senior
Discount Debentures due 2005 (the "New Discount Debentures"). New Holdings will
use the $100 million of cash received from a new equity investment (the "New
Equity Investment"), together with the Seller Debentures and the New Discount
Debentures, to acquire approximately 48% of the capital stock of Holding Company
immediately prior to consummation of the RSI Merger. New Holdings will then
contribute the $250 million of purchased shares of Holding Company stock to Food
4 Less, and pursuant to the RSI Merger the remaining shares of Holding Company
stock will be acquired for $275 million in cash.
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 pursuant to the
Indentures. The consummation of the Merger 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
Indentures. Although RGC does not anticipate that there will be a significant
amount of Old RGC Notes outstanding following consummation of the Exchange
Offers, upon such a Change of Control Triggering Event, the New 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 plus accrued
and unpaid interest to the date of repurchase.
Due to the increased size, dual format strategy and integration related
costs, after giving effect to or in connection with the Merger, RGC believes
that its future operating results will not be directly comparable to the
historical operating results of RGC. 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. The
consolidation may result in a restructuring charge for the merged entity. The
amount of the restructuring charge is not 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 and the merged entity.
Following the consummation of the Merger, the New Company will be highly
leveraged.
BUSINESS OF THE COMPANY
New Stores and Remodeling
During the last five fiscal years, Ralphs has opened 46 new stores and
remodeled 54 stores at a cost of approximately $277.2 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
1
<PAGE> 3
provide a quality shopping experience. At the end of the year ended January
29, 1995 ("Fiscal 1994"), 92% of Ralphs' stores were newly built or remodeled
within the past seven years.
The history of store openings, closings and remodelings since 1989 is set
forth below:
<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Beginning store count . . . . . 142 150 158 159 165
Stores opened . . . . . . . . . 13 9 6 8 10
Stores closed or sold . . . . . 5 1 5 2 2
Ending store count . . . . . . 150 158 159 165 173
Stores remodeled . . . . . . . 13 7 23 6 5
</TABLE>
Ralphs selects most new store sites from developers' proposals. The sites,
some of which are in high growth areas and others of which are in established
areas, are researched and analyzed by Ralphs' personnel. Each site is
monitored for population shifts, zoning changes, traffic patterns, nearby new
construction and competitors' stores, in an effort to determine sales potential.
Ralphs actively participates with developers in order to obtain Ralphs'
objectives for the site, including adequate parking and complementary co-tenant
mix.
Remodeling usually 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 are
kept open during the remodeling period. The primary objectives of remodeling
are to improve the attractiveness of stores, increase sales of higher margin
product categories and, where feasible, to increase selling area.
Since it has operated in Southern California for 122 years, Ralphs has many
well-established store locations in highly populated metropolitan areas.
Ralphs has pursued a strategy in recent years of acquiring strategic locations
in high-growth master-planned communities. In response to the negative impact
of the current economic climate on new home sales in Southern California,
Ralphs' current new store development program reflects an increased emphasis on
attractive development opportunities in more mature, highly populated areas.
The Company currently plans to open 5 to 7 new stores and remodel 2 stores
in fiscal 1995. Most of the new stores anticipated for fiscal 1995 are
expected to open in the Fall. Management believes that operating cash flow,
supplemented by capital and operating leases, should be sufficient to meet
Ralphs' operating needs and scheduled capital expenditures.
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 Ralphs' control. Accordingly, there can be no
assurance that the schedule will be met. Further, Ralphs 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.
Merchandising and Marketing
Management operates its stores under a single format which allows it to
achieve operating economies. Every store uses the Ralphs name, however, each
store is merchandised to appeal to the local community which it serves.
Ralphs stocks between 20,000 and 30,000 merchandise items in its stores.
Management believes that Ralphs offers a substantial supermarket product
selection and that this is a significant aspect of its marketing offering.
Ralphs emphasizes name-brand grocery products; quality and freshness in its
produce, meat, seafood, delicatessen and bakery products; and broad selection
in all departments. Service delicatessen departments are present in 172,
on-premises bakery facilities are present in 161, floral departments are
present in 173 and European-style seafood departments are present in 157 of
Ralphs' stores.
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.
Everytime You Shop". In addition, 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.
2
<PAGE> 4
In February 1994, Ralphs launched the Ralphs Savings Plan, a new marketing
campaign specifically 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 over 2,800 products provides value to the customer. Private label
sales represented 18.5% of sales (excluding meat, service delicatessen and
produce items) at fiscal year-end.
As part of Ralphs' effort to keep pace with its changing marketplace,
customers are invited to comment on Ralphs' operations through "We'd Like to
Know" cards available at each store. Several hundred cards are received each
month. The cards are analyzed on an individual basis by store and district by
senior management, enabling Ralphs to respond promptly to customer observations
and suggestions.
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.
3
<PAGE> 5
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 1993, 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 quantitative
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.
Distribution and Warehouse Operations
Ralphs' distribution and warehouse facilities are all located in Southern
California. In Fiscal 1994, approximately 82% of goods supplied to Ralphs'
stores were provided through its own warehouse and distribution facilities; the
remaining 18% were delivered directly by vendors to the stores. In November
1987, Ralphs opened a 17 million cubic foot highrise automated storage and
retrieval system ("ASRS") warehouse for non-perishable items, at a cost of
approximately $50.0 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 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." 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.
In mid-1992, Ralphs opened a 5.4 million cubic foot facility designed to
process and store all perishable products (the "Perishables Service Center" or
"PSC"). This facility cost approximately $35.0 million and has enabled Ralphs
to have 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.
All Ralphs' stores are within a three hour drive from the 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.
As part of its distribution operations Ralphs operates a modern fleet of
191 tractors and 531 trailers, of which 181 tractors and 226 trailers are
leased, with the remainder being owned by Ralphs.
Manufacturing
Food products manufactured or processed by Ralphs accounted for estimated
sales of $322.3 million (11.8% of total sales) during Fiscal 1994. Wholesale
sales to third parties of manufactured or processed products were approximately
$2.1 million for the same period. By manufacturing or processing certain
products, Ralphs is able to improve its merchandising mix, resulting in higher
operating margins and enhanced quality control.
4
<PAGE> 6
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 whole and prefabricated cuts. Ralphs
ceased operating its bakery operations during the second quarter of Fiscal 1993
at its 102,000 square foot facility in Los Angeles in conjunction with an
increased emphasis on in-store bakeries. The Company provided a restructuring
charge of approximately $7.1 million and $2.4 million during the year ended
January 31, 1993 ("Fiscal 1992") and the year ended January 30, 1994 ("Fiscal
1993"), respectively, to record the costs of closing the bakery operation. The
following table sets forth information concerning Ralphs' other manufacturing
and processing facilities, all of which are owned:
<TABLE>
<CAPTION>
FACILITY BUILDING SQ. FEET LOCATION
======== ================= ========
<S> <C> <C>
Milk processing . . . . 28,000 Compton
Ice cream processing . . 9,000 Compton
Delicatessen kitchen . . 23,000 Compton
</TABLE>
Competition
The supermarket business is characterized by high sales volume, high
inventory turnover and low gross profit margins. The business is highly
competitive in Southern California. Principal competitive factors in the
supermarket business include store locations, the combination of price and
quality that give the consumer the greatest perceived value, availability and
breadth of selection, quality of products and service, store environment,
including cleanliness, and promotions. Ralphs' management believes, based on
its marketing research, that consumers perceive Ralphs as offering a
combination of convenience, competitive prices and a wide variety of quality
products and services in a pleasant shopping environment. Ralphs' management
believes that its competitive strengths are its desirable store locations and
sites in combination with a strong consumer franchise, its commitment and
ability to adapt new and existing technology to the supermarket business, its
efficient manufacturing, warehousing and distribution facilities, its
experienced management team and its well-trained employees.
Ralphs competes with several large supermarket chains, including Vons,
Lucky Stores, Alpha Beta Markets, Hughes and Stater Brothers, and with other
smaller supermarket chains, as well as independent grocery stores and warehouse
club/discount merchandisers. Certain of Ralphs' competitors are larger in
terms of capital and sales volume and may have greater financial resources and
access to capital than does Ralphs.
Employees
At January 29, 1995, Ralphs had 6,213 full-time and 8,940 part-time
employees as follows:
<TABLE>
<CAPTION>
UNION NONUNION TOTAL
====== ======== ======
<S> <C> <C> <C>
Hourly . . . . . . . . . . . . 13,854 245 14,099
Salaried . . . . . . . . . . . -- 1,054 1,054
------ ----- ------
Total employees . . . . . 13,854 1,299 15,153
====== ===== ======
</TABLE>
Of Ralphs' 15,153 total employees at January 29, 1995, 13,854 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 10,723 clerks and meatcutters October 6, 1996
International Brotherhood of
Teamsters 1,675 drivers and warehousemen September 13, 1998
Hotel Employees and Restaurant
Employees 977 September 10, 1995
Hospital and Service
Employees 328 Los Angeles January 19, 1997
67 San Diego April 20, 1997
</TABLE>
5
<PAGE> 7
Ralphs believes it has good relations with its employees. Pursuant to its
collective bargaining agreements, Ralphs contributes to various
union-sponsored, multi-employer pension plans.
Government Regulation
Ralphs is 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.
ITEM 2. PROPERTIES
Ralphs owns the locations of 45 and leases the locations of 128 of its 173
supermarkets. It owns 11 and leases five of its 16 distribution, warehouse and
administrative facilities. Ralphs owns its three manufacturing and processing
facilities. Ralphs' properties are located in six Southern California counties
(Los Angeles, Orange, Ventura, San Bernardino, Riverside and San Diego). See
Note 6 of the Notes to Consolidated Financial Statements of Ralphs included
elsewhere in this Form 10-K. Ralphs believes that its properties are
adequately maintained and are adequate for its business needs.
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 completely shutdown on
the morning of January 17th. Thirty-four stores reopened within one day and an
additional 17 stores reopened within three days. Suffering major structural
damage were three stores in the San Fernando Valley area of Los Angeles. 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
from the temporary disruption of business resulting from the earthquake.
Ralphs is insured for earthquake losses. The pre-tax financial impact, net
of insurance claims, is expected to be approximately $11 million and the
Company has reserved for this loss in Fiscal 1993.
The number of stores and facilities operated and the square feet of space at
January 29, 1995 consisted of:
<TABLE>
<CAPTION>
UNITS GROSS SPACE SELLING SPACE
===== =========== =============
(IN THOUSANDS)
<S> <C> <C> <C>
Stores . . . . . . . . . . . . . . . . . . . . . . . . 173 7,057.9 5,109.8
Distribution, warehouse and administrative facilities . 16 1,693.0 --
Manufacturing and processing facilities . . . . . . . . 3 60.0 --
--- ------- -------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . 192 8,810.9 5,109.8
=== ======= =======
</TABLE>
The number of stores by size classification as of January 29, 1995 is as
follows:
<TABLE>
<CAPTION>
AVERAGE AVERAGE
NO. OF GROSS SELLING
STORES GROSS SQUARE FEET SQUARE FEET SQUARE FEET
------ ----------------- ----------- -----------
<S> <C> <C> <C>
3 20,300 -- 25,000 21,867 16,709
15 25,001 -- 30,000 27,926 19,725
31 30,001 -- 35,000 32,958 24,191
32 35,001 -- 40,000 37,254 27,053
61 40,001 -- 45,000 43,237 31,424
18 45,001 -- 50,000 46,271 33,404
13 50,001 -- 84,280 68,400 48,466
</TABLE>
6
<PAGE> 8
ITEM 3. LEGAL PROCEEDINGS
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 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 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. Notwithstanding that it believes there is no merit to these cases,
Ralphs had reached an agreement in principle to settle them. However, no
settlement agreement has been signed. 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 Ralphs 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. Ralphs has appealed the judgment and fully reserved in Fiscal 1992
against an adverse ruling by the appellate courts.
In April 1994, Ralphs 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 Ralphs 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 Ralphs 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 Ralphs 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, Ralphs is a defendant 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 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 New Company must
divest 14 stores by June 30, 1995, and the balance of 13 stores by December 31,
1995. The New 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 New Company
fails to divest the required stores by the two dates set forth in the
Settlement Agreement, the New Company has agreed not to object to the
appointment of a trustee to effect the required sales. The Settlement
Agreement also requires the New Company to pay the reasonable fees and costs of
attorneys and experts of the State of California associated with its review.
7
<PAGE> 9
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 underground storage tanks and remediated soil
contamination at the Atwater property. In some instances the removals and the
contamination were associated with grocery business operations; in others they
were associated with prior property users. Although the possibility of other
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 its 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 conversion of refrigerants during 1994. Other than these
expenditures, Ralphs has not 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.
Ralphs is 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information.
There is no established public trading market for the Company's common
equity.
(b) Holders.
The Company is a wholly owned subsidiary of the Holding Company.
(c) Dividends.
8
<PAGE> 10
In February 1994, the Board of Directors of the Company authorized a
dividend of $10.0 million to be paid to the Holding Company and the Board of
Directors of the Holding Company authorized distribution of this dividend to
its shareholders subject to certain restrictive covenants in the instruments
governing certain of Ralphs' indebtedness that impose limitation on the
declarations or payment of dividends. Ralphs' credit agreement, entered into
in 1992 (the "1992 Credit Agreement") was amended to allow the payment of the
dividend to the Holding Company for distribution to the Holding Company's
shareholders. The fee for the amendment was approximately $500,000. The
dividend was distributed to the shareholders of the Holding Company in the
second quarter of 1994.
The Holding Company and the stockholders of the Holding Company entered
into a Registration Rights and Corporate Governance Agreement (the
"Registration Rights Agreement") which provides for certain aspects of
corporate governance of the Company and the Holding Company. Pursuant to the
terms of the Registration Rights Agreement, Ralphs is obligated to provide the
Holding Company, by dividend, pursuant to a services agreement or otherwise,
with funds sufficient to enable the Holding Company to perform its duties as
the holding company of Ralphs' stock and to perform its obligations set forth
in the Registration Rights Agreement.
9
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
The following table presents historical selected financial data derived
from the audited financial statements of the Company for the fiscal years ended
February 3, 1991, February 2, 1992, January 31, 1993, January 30, 1994 and
January 29, 1995. The information set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations," the Financial Statements and related notes thereto, included
elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
FEB. 3, FEB. 2, JAN. 31, JAN. 30, JAN. 29,
1991(A) 1992 1993 1994 1995
======== ======== ======== ======== ========
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales . . . . . . . . . . . . . . . . . . . $2,799.1 $2,889.2 $2,843.8 $2,730.2 $2,724.6
Cost of sales . . . . . . . . . . . . . . . 2,225.4 2,275.2 2,217.2 2,093.7 2,101.0
-------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . 573.7 614.0 626.6 636.5 623.6
Selling, general & administrative
expenses . . . . . . . . . . . . . . . . . 438.0 459.2 470.0 471.0 467.0
Provision for equity appreciation
rights . . . . . . . . . . . . . . . . . . 15.3 18.3 -- -- --
Amortization of excess of cost over net
assets acquired . . . . . . . . . . . . . 11.0 11.0 11.0 11.0 11.0
Provision for restructuring(b) . . . . . . -- -- 7.1 2.4 --
Provision for tax indemnification payments
to Federated . . . . . . . . . . . . . . . -- 10.0 -- -- --
-------- -------- -------- -------- --------
Operating income(loss) . . . . . . . . . . 109.4 115.5 138.5 152.1 145.6
Other (income) expenses:
Interest . . . . . . . . . . . . . . . . 128.5 130.2 125.6 108.8 112.7
(Gain)loss on disposal of assets . . . . 6.4 13.0(c) 2.6 1.9 0.8
Provision for legal settlement . . . . . -- -- 7.5 -- --
Provision for earthquake
losses (d) . . . . . . . . . . . . . . . -- -- -- 11.0 --
-------- -------- -------- -------- --------
Earnings(loss) before income taxes,
cumulative effect of change in accounting
and extraordinary item . . . . . . . . . . (25.5) (27.7) 2.8 30.4 32.1
Income tax expense (benefit) . . . . . . . . 12.8 13.5 8.3 (108.0)(e) --
-------- -------- -------- -------- --------
Earnings(loss) before cumulative effect of
change in accounting and extraordinary
item . . . . . . . . . . . . . . . . . . . (38.3) (41.2) (5.5) 138.4 32.1
Cumulative effect of change in accounting
for postretirement benefits other than
pensions . . . . . . . . . . . . . . . . . (13.1) -- -- -- --
-------- -------- -------- -------- --------
Earnings(loss) before extraordinary
item . . . . . . . . . . . . . . . . . . . (51.4) (41.2) (5.5) 138.4 32.1
Extraordinary item--debt refinancing, net
of tax benefit of $4.2 . . . . . . . . . . -- -- (70.6) -- --
-------- -------- -------- -------- --------
Net earnings (loss) . . . . . . . . . . . . $ (51.4) $ (41.2) $ (76.1) $ 138.4 $ 32.1
======== ======== ======== ======== ========
Ratio of earnings to fixed charges (f) . . . --(g) --(g) 1.02 1.24 1.24
======== ======== ======== ======== ========
OPERATING AND OTHER DATA:
EBITDA (as defined) (h) . . . . . . . . . . $ 207.0 $ 225.8 $ 227.3 $ 230.2 $ 230.2
EBITDA margin (i) . . . . . . . . . . . . . 7.4% 7.8% 8.0% 8.4% 8.4%
Depreciation and amortization (j) . . . . . $ 75.2 $ 76.6 $ 76.9 $ 74.5 $ 76.0
Capital expenditures . . . . . . . . . . . . $ 87.6 $ 50.4 $ 102.7 $ 62.2 $ 64.0
Ratio of EBITDA (as defined) to interest
expense . . . . . . . . . . . . . . . . . 1.61 1.73 1.81 2.12 2.04
Ratio of EBITDA (as defined) to cash
interest expense(k) . . . . . . . . . . . . 1.76 1.95 2.15 2.48 2.36
Ratio of total debt to EBITDA (as defined) . 4.78 4.18 4.53 4.34 4.42
STORE DATA:
Stores open at end of period (l) . . . . . . 150 158 159 165 173
Number of remodels (l) . . . . . . . . . . . 13 7 23 6 5
Sales per selling square foot (l)(m) . . . . $ 649 $ 628 $ 617 $ 567 $ 533
BALANCE SHEET DATA (END OF PERIOD):
Total assets . . . . . . . . . . . . . . . . $1,406.4 $1,357.6 $1,388.5 $1,483.7 $1,509.9
Total debt (n) . . . . . . . . . . . . . . . 989.1 944.9 1,029.8 998.9 1,018.5
Stockholder's equity (deficit) . . . . . . . $ (16.0) $ (57.2) $ (133.3) $ 5.1 $ 27.2
</TABLE>
10
<PAGE> 12
(a) The fiscal year was comprised of 53 weeks as compared to 52 weeks with
respect to the other fiscal years presented.
(b) Charge for expenses relating to closing of central bakery operations.
(c) Includes approximately $12.2 million representing a reserve against losses
related to the closing of three stores.
(d) Represents reserve for losses, net of insurance claims, resulting from
January 17, 1994 Southern California earthquake.
(e) 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
the Notes to Consolidated Financial Statements).
(f) For purposes of computing this ratio, earnings consist of earnings before
income taxes, cumulative effect of change in accounting, extraordinary
item and fixed charges. 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).
(g) Earnings before income taxes, cumulative effect of change in accounting,
extraordinary item and fixed charges were insufficient to cover fixed
charges for fiscal 1990 and 1991 by $25.5 million and $27.7 million,
respectively.
(h) "EBITDA", as defined and presented historically, represents net earnings
before taking into consideration interest expense, income tax expense,
depreciation expense, amortization expense, provisions for equity
appreciation rights, tax indemnification payments to Federated Department
Stores, Inc. (See Item 13. "Certain Relationships and Related
Transactions"), postretirement benefits, the LIFO provision, extraordinary
item relating to debt refinancing, provision for legal settlement,
provision for restructuring, reserves for earthquake losses , a one-time
charge for Teamsters Union sick pay benefits, transition expense 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 (as defined) margin represents EBITDA as a percentage of sales.
(j) For fiscal 1990, 1991, 1992, 1993 and 1994 the amount includes
amortization of the excess of cost over net assets acquired of $11.0
million, $11.0 million, $11.0 million, $11.0 million and $11.0 million,
respectively.
(k) Excludes charges relating to amortization of debt issuance costs,
self-insurance discount, lease valuation reserves and other miscellaneous
charges which are categorized by Ralphs as non-cash interest expense.
(l) Data relating to stores is expressed in actual numbers.
(m) Sales per selling square foot are based on total store selling square
footage at the end of the fiscal year.
(n) Total debt includes long-term debt, current maturities of long-term debt,
capital lease obligations, short-term debt and redeemable preferred
stock.
11
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
MERGER
On September 14, 1994, Food 4 Less Holdings, and FFL, entered into a
Merger Agreement with Holding Company and its stockholders. Pursuant to the
terms of the Merger Agreement, and the RSI Merger Food 4 Less will be merged
with and into Holding Company and Holding Company will continue as the
surviving corporation. Food 4 Less is a multiple format supermarket operator
that operates in three geographic areas: Southern California, Northern
California and certain areas of the Midwest. Immediately following the RSI
Merger, the RGC Merger will occur and Ralphs, which is currently a wholly-owned
subsidiary of Holding Company, will merge with and into Holding Company, and
Holding Company 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. Immediately following the FFL Merger, Holdings will change its
jurisdiction of incorporation by merging with New Holdings, a newly-formed,
wholly-owned subsidiary, incorporated in Delaware. As a result of the Merger,
the FFL Merger and the Reincorporation Merger the New Company will become a
wholly-owned subsidiary of New Holdings. Agreement has been reached with each
of the California Attorney General and the Federal Trade Commission for
approval of the Merger. Food 4 Less and Ralphs agreed in a settlement agreement
with the Attorney General to divest 27 specific stores in Southern California.
Under the agreement, the Company must divest 14 stores by June 30, 1995, and
the balance of 13 stores by December 31, 1995.
The aggregate purchase price, payable to the stockholders of the Holding
Company in connection with the Merger, consists of $375 million in cash, $131.5
million initial principal amount of Seller Debentures due 2007 issued by FFL
Holdings and $18.5 million initial accreted value of New Discount Debentures
due 2005.
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 pursuant to the
Indentures. The consummation of the Merger 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
Indentures. Although RGC does not anticipate that there will be a significant
amount of Old RGC Notes outstanding following consummation of the Exchange
Offers, upon such a Change of Control Triggering Event, the New 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 plus accrued
and unpaid interest to the date of repurchase.
Due to the increased size, dual format strategy and integration related
costs, after giving effect to or in connection with the Merger, RGC believes
that its future operating results will not be directly comparable to the
historical operating results of RGC. 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 determinable due to various factors,
including uncertainties inherent in the completion of the Merger, however, the
restructuring charge may be material in relationship to the stockholders'
equity and financial position of Ralphs and the merged entity.
Following the consummation of the Merger, the New Company will be highly
weighted.
REGIONAL ECONOMIC CONDITIONS
In recent periods Ralphs has 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 has experienced declining comparable
store sales in recent periods. Over the last three fiscal years Ralphs' total
sales declined by 4.2%. Despite these adverse sales trends, however, the
Company has improved its profitability over the same period. 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 it is well positioned to take advantage of
improvements in the regional economy and growing population and to compete
effectively in the Southern California marketplace.
12
<PAGE> 14
The following discussion of Ralphs' financial condition and results of
operations should be read in conjunction with the Consolidated Financial
Statements and notes thereto included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, 1993 JANUARY 30, 1994 JANUARY 29, 1995
$(000) % $(000) % $(000) %
======== ===== ======== ===== ======== =====
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales . . . . . . . . . . . . . . . . . . . . . $2,843.8 100.0 $2,730.2 100.0 $2,724.6 100.0
Cost of sales . . . . . . . . . . . . . . . . . 2,217.2 78.0 2,093.7 76.7 2,101.0 77.1
-------- ----- -------- ----- -------- -----
Gross profit . . . . . . . . . . . . . . . 626.6 22.0 636.5 23.3 623.6 22.9
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . 470.0 16.5 471.0 17.2 467.0 17.2
Amortization of excess of cost over net
assets acquired . . . . . . . . . . . . . . . 11.0 0.4 11.0 0.4 11.0 0.4
Provision for restructuring (a) . . . . . . . . 7.1 0.2 2.4 0.1 -- --
-------- ----- -------- ----- -------- -----
Operating Income . . . . . . . . . . . . . 138.5 4.9 152.1 5.6 145.6 5.3
Other expenses:
Interest . . . . . . . . . . . . . . . . . . 125.6 4.4 108.8 4.0 112.7 4.1
Loss on disposal of assets . . . . . . . . . 2.6 0.1 1.9 0.1 0.8 0.0
Provision for legal settlement . . . . . . . 7.5 0.3 -- -- -- --
Provision for earthquake losses (b) . . . . . -- -- 11.0 0.4 -- --
-------- ----- -------- ----- -------- -----
Earnings(loss) before
income taxes, and extraordinary item . . . . . 2.8 0.1 30.4 1.1 32.1 1.2
Income tax expense (benefit) . . . . . . . . . 8.3 0.3 (108.0) (4.0) -- --
-------- ----- -------- ----- -------- -----
Earnings(loss) before extraordinary item . . . (5.5) (0.2) 138.4 5.1 32.1 1.2
Extraordinary item--debt refinancing, net
of tax benefit of $4.2 . . . . . . . . . . . . (70.6) (2.5) -- -- -- --
-------- ----- -------- ----- -------- -----
Net earnings(loss) . . . . . . . . . . . . . $ (76.1) (2.7) $ 138.4 5.1 $ 32.1 1.2
======== ===== ======== ===== ======== =====
OTHER DATA:
EBITDA (as defined) (c) . . . . . . . . . . . . $ 227.3 8.0 $ 230.2 8.4 $ 230.2 8.4
Depreciation and amortization(d) . . . . . . . 76.9 2.7 74.5 2.7 76.0 2.8
LIFO charge . . . . . . . . . . . . . . . . . . 1.1 0.0 (2.1) (0.1) 2.1 0.1
</TABLE>
(a) Charge for expenses relating to closing of central bakery operation.
(b) Represents reserve for losses, net of insurance claims, resulting from
January 17, 1994 Southern California earthquake.
(c) "EBITDA", as defined and presented historically, represents net earnings
before taking into consideration interest expense, income tax expense,
depreciation expense, amortization expense, postretirement benefits, the
LIFO provision, extraordinary item relating to debt refinancing, provision
for legal settlement, provision for restructuring, reserves for earthquake
losses , a one-time charge for Teamsters Union sick pay benefits,
transition expense 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."
(d) For the fiscal years ended 1992, 1993 and 1994 the amount includes
amortization of excess cost over net assets acquired of $11.0 million,
$11.0 million and $11.0 million, respectively.
13
<PAGE> 15
RESULTS OF OPERATIONS
COMPARISON OF RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED JANUARY 29, 1995
WITH RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED JANUARY 30, 1994.
Sales
For the fifty-two weeks ended January 29, 1995, ("Fiscal 1994"), sales were
$2,724.6 million, a decrease of $5.6 million or 0.2% from the fifty-two weeks
ended January 30, 1994 ("Fiscal 1993"). During Fiscal 1994, Ralphs opened ten
new stores (four in Los Angeles County, three in Orange County, one in San
Diego County and two in Riverside County), closed two stores (in conjunction
with new stores opening in the same areas), and completed five store remodels.
Comparable store sales decreased 3.7%, which included an increase of 0.3% for
replacement store sales, from $2,707.9 million in Fiscal 1993 to $2,606.4
million in 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.
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.
Cost of Sales
Cost of sales increased $7.3 million or 0.3% from $2,093.7 million in
Fiscal 1993 to $2,101.0 million in Fiscal 1994. As a percentage of sales, cost
of sales increased to 77.1% in Fiscal 1994 from 76.7% in 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 along with the ongoing implementation of new
computer-controlled programs and labor standards that improved distribution
productivity. 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.
14
<PAGE> 16
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 Fiscal 1994 resulting in a reduction
of approximately $18.9 million. Of the total $18.9 million reduction in
self-insurance costs, $7.5 million is included in cost of sales and $11.4
million is included in selling, general and administrative expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") decreased $4.0
million or 0.8% from $471.0 million in Fiscal 1993 to $467.0 million in Fiscal
1994. As a percentage of sales, SG&A was 17.2% in Fiscal 1993 and 17.2% in
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, as discussed above, transition expense relating to the
Merger ($1.4 million) 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
received a prorata share of 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, $12.7 million, was 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.
Operating Income
Operating income in Fiscal 1994 decreased 4.3% to $145.6 million from
$152.1 million in Fiscal 1993. Operating margin, defined as operating income
as a percentage of sales, was 5.3% in Fiscal 1994 compared to 5.6% in Fiscal
1993. EBITDA, defined as net earnings before interest expense, income tax
expense (benefit), depreciation and amortization expense, provision for
postretirement benefits, provision for LIFO expense, gain or loss on disposal
of assets, transition expense and a one-time charge for Teamsters Union sick
pay benefits, was 8.4% of sales or $230.2 million in Fiscal 1994 and 8.4% of
sales or $230.2 million in Fiscal 1993.
Net Interest Expense
Net interest expense for Fiscal 1994 was $112.7 million versus $108.8
million for Fiscal 1993. Net interest expense increased primarily as a result
of increases in interest rates. Included as interest expense during Fiscal
1994 was $97.4 million, representing interest expense on existing debt
obligations, capitalized leases and a swap agreement. Comparable interest
expense for Fiscal 1993 was $92.8 million. Also included in net interest
expense for Fiscal 1994 was $15.3 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 $16.0 million for Fiscal 1993.
Investment income, which is immaterial, has been offset against interest
expense. The continuation of higher interest rates subsequent to the end of
Fiscal 1994 has continued to increase interest expense and adversely affect
Ralphs' net income.
15
<PAGE> 17
Net Earnings
For Fiscal 1994, Ralphs reported net earnings of $32.1 million compared to
net earnings of $138.4 million for Fiscal 1993. The decrease in net earnings
is primarily the result of decreased operating income, higher interest expense
due to increased interest rates, the recognition of $109.1 million of deferred
income tax benefit in Fiscal 1993 partially offset by $11.0 million recorded
for earthquake losses in Fiscal 1993.
Other
In February 1994, the Board of Directors of Ralphs authorized a dividend of
$10.0 million to be paid to the Holding Company, and the Board of Directors of
the Holding Company authorized distribution of this dividend to its
shareholders subject to certain restrictive covenants in the instruments
governing certain of Ralphs' indebtedness that impose limitations on the
declaration or payment of dividends. The 1992 Credit Agreement was amended to
allow for the payment of the dividend to the Holding Company for distribution
to the Holding Company'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 the Holding Company in the
second quarter of Fiscal 1994.
COMPARISON OF RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED JANUARY 30, 1994
WITH 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 the fifty-two weeks ended January 31, 1993 ("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 remodeling activity and pricing and promotion changes by competitors.
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 $1.0 million or 0.2% from $470.0 million in Fiscal 1992 to
$471.0 million in Fiscal 1993. As a percentage of sales, SG&A increased from
16.5% in Fiscal 1992 to 17.2 % 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 prorata share of the excess reserve in these
health care benefit plans through a reduction in current maintenance
16
<PAGE> 18
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 expense, postretirement 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
issuance of the Old Ralphs 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.
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.
17
<PAGE> 19
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.
LIQUIDITY AND CAPITAL RESOURCES
The Merger, which is subject to, among other things, the completion of
the financing for the transaction and the receipt of necessary consents, will
require the issuance of significant additional equity by New Holdings, the
issuance of new debt securities by the merged company and Holdings and the
incurrence of additional bank financing by the merged 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 $140 million in New Holdings equity. The
issuance of new debt securities would be in the form of senior notes of the
merged company up to $295 million and subordinated notes up to $200 million,
and a bank financing to be made pursuant to a commitment by Bankers Trust
Company to provide up to $1,075 million in such financing. In connection with
the receipt of new financing, the merged company and New Holdings will be
required to complete certain exchange offers, consent solicitations and/or
other transactions with the holders of the currently outstanding debt
securities. The transaction will also require the assumption of approximately
$160 million of other existing indebtedness of the Food 4 Less and Ralphs. The
proceeds of the foregoing financings will be used to acquire the outstanding
stock of Ralphs, to repay certain existing indebtedness, and to pay fees and
expenses in connection with the Merger and related transactions. The Holding
Company purchase price is approximately $1.5 billion, including the assumption
or repayment of debt. The consideration payable to the stockholders of Ralphs
consists of $375 million in cash, $131.5 million initial principal amount of 13
5/8% Senior Subordinated Pay-in-Kind Debentures due 2007 to be issued by
Holdings and $18.5 million initial accreted value of 13 5/8% Senior Discount
Debentures due 2005. In addition, the merged company will enter into an
agreement with a stockholder of Ralphs pursuant to which such stockholder will
act as a consultant to the merged company with respect to certain real estate
and general commercial matters for a period of five years from the closing of
the Merger in exchange for the payment of a consulting fee.
Ralphs' total long-term debt (including current maturities) at January 29,
1995 was $967.0 million. All mandatory principal reductions required by the
various agreements were satisfied during Fiscal 1994. Management believes that
operating cash flow, supplemented by capital and operating leases, should be
sufficient to meet Ralphs' operating needs and scheduled capital expenditures
and will enable Ralphs to service its debt in accordance with its terms;
provided, however, that as more fully described below the Company currently
anticipates that at the end of the second quarter of 1995 it may be out of
compliance with certain maintenance covenants contained in the 1992 Credit
Agreement. The Company intends to seek the necessary waivers from its lenders
should these events of non-compliance ultimately occur but there is no
assurance that such waivers will be granted, or, if granted, will be on terms
acceptable to the Company. Furthermore, it is possible that additional
financing may be required and there is no assurance that such financing will be
available, or, if available, will be on terms acceptable to the Company.
Working capital was a deficit of $119.5 million at January 29, 1995.
Supermarket operators typically require small amounts of working capital since
inventory is generally sold prior to the time that payments to suppliers are
due. Therefore, cash provided from operations is frequently used for
non-current purposes such as investing and financing activities. Included in
working capital was $84.0 million in current maturities on long-term debt and
$51.5 million in short-term debt. Ralphs' primary sources of liquidity during
Fiscal 1994 were cash flow from operations and borrowings under the 1992 Credit
Agreement. Cash flow provided from operating activities after payment of
interest expense and before capital expenditures was $55.4 million for Fiscal
1994. Capital expenditures for Fiscal 1994 were $64.0 million.
In Fiscal 1993, the Company recorded the incremental impact of The Omnibus
Budget Reconciliation Act of 1993 on deductible temporary differences and
increased its deferred income tax assets by a net amount of $109.1 million. In
Fiscal 1994, an additional $3.4 million was recorded to reflect deductible
temporary differences. The Company believes it is more likely than not that
the recorded net deferred tax asset will be realized (see Note 11 of the Notes
to Consolidated Financial Statements).
18
<PAGE> 20
The 1992 Working Capital Facility is a $120.0 million credit line which is
available for working capital requirements and general corporate purposes. Up
to $60.0 million of the 1992 Working Capital Facility may be used to support
standby letters of credit and up to $10.0 million in the aggregate may be
borrowed on same-day notice as swing-line loans. The letters of credit may be
used to cover workers' compensation contingencies and for such other purposes
as are permitted under the 1992 Credit Agreement. The 1992 Working Capital
Facility is a non-amortizing line of credit available through the earlier of
June 30, 1998 or the date the 1992 Credit Agreement is paid in full. As of
January 29, 1995, $52.4 million of letters of credit and $51.5 million in
borrowings were outstanding, with $16.1 million available under the working
capital credit line. The 1992 Credit Agreement requires Ralphs to reduce its
working capital credit line to zero for 30 consecutive days annually. The
current annual period extends from July 1 to June 30. The Company has not yet
complied with this annual covenant. The Company intends to either satisfy
this covenant by June 30, 1995 or seek to obtain the necessary waiver
from its lenders, if such event of non-compliance ultimately occurs but there
is no assurance that such waiver will be granted, or, if granted, will be on
terms acceptable to the Company. At January 29, 1995, Ralphs is in compliance
with all its 1992 Credit Agreement restrictive covenants. The Company
currently anticipates that it may be out of compliance with certain other
maintenance covenants at the end of the second quarter of 1995. The Company
intends to seek the necessary waivers from its lenders should these events of
non-compliance ultimately occur, but there is no assurance that such waivers
will be granted, or, if granted, will be on terms acceptable to the Company.
The Company anticipates that its fiscal 1995 working capital and capital
expenditure requirements will be fulfilled through either existing credit
agreements or through obtaining additional working capital or permanent
financing. However, if the Merger is not consummated there is no assurance
that such financing will be available, or, if available, will be on terms
acceptable to the Company.
During Fiscal 1994 cash used in investing activities was $50.8 million.
This amount reflects 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.
Cash used in financing activities was approximately $24.6 million for
Fiscal 1994. Reductions of capital lease obligations of $12.2 million and the
payment of a $10.0 million dividend reduced cash flow.
During Fiscal 1994 cash provided from operating activities of $55.4
million, cash used in investing activities of $50.8 million and cash used in
financing activities of $24.6 million, resulted in a net decrease in cash and
cash equivalents of $20.0 million at January 29, 1995 as compared to January
30, 1994.
In recent years, Ralphs has utilized capital leases and off-balance sheet
financing to fund a portion of its capital expenditures. Cash used in
investing activities was $45.5 million for Fiscal 1993 and $102.5 million for
Fiscal 1992. Cash provided from operating activities amounted to $104.0
million for Fiscal 1993 and $53.7 million for Fiscal 1992.
Annual principal payments and maturities are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL FISCAL FISCAL THERE-
1995 1996 1997 1998 1999 AFTER
======== ======== ======== ======== ======== ========
<S> <C> <C> <C> <C> <C> <C>
1992 Credit Agreement . . . . . . . . . $ 65,000 $ 70,000 $ 70,000 $ 40,000 $ 0 $ 0
Mortgage Notes . . . . . . . . . . . . 2,075 2,353 2,421 2,415 167,370 0
9% Senior Subrodinated Notes . . . . . 0 0 0 0 0 150,000
10 1/4% Senior Subordinated Notes . . . 0 0 0 0 0 300,000
Capitalized leases . . . . . . . . . . 13,151 11,911 12,350 11,190 8,030 32,452
Other senior debt . . . . . . . . . . . 3,763 2,528 0 0 0 0
-------- -------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . . $ 83,989 $ 86,792 $ 84,771 $ 53,605 $175,400 $482,452
======== ======== ======== ======== ======== ========
</TABLE>
EFFECT OF INFLATION
Inflation has not had a major impact on the operations of Ralphs during the
past three years. As is typical of the supermarket industry, Ralphs has
generally been able to maintain margins by adjusting its retail prices, but
competitive conditions may from time to time render it unable to do so while
maintaining its market share.
19
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Information called for by this item is set forth in the Company's financial
statements and supplementary data contained in this report. Specific financial
statements and supplementary data can be found at the pages listed in the
following index.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets at January 30, 1994 and
January 29, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Years ended January 31, 1993, January 30, 1994 and
January 29, 1995:
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's
accountants on accounting and financial disclosure during the applicable
periods.
20
<PAGE> 22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is provided with respect to the directors and
executive officers of Ralphs as of May 1, 1995.
<TABLE>
<CAPTION>
YEARS OF RALPHS SERVICE
===============================
NAME AGE POSITION MANAGERIAL POSITIONS TOTAL
============================== === ============================ ==================== =====
<S> <C> <C> <C> <C>
Byron E. Allumbaugh 63 Chairman, Chief Executive 36 36
Officer and Director
Alfred A. Marasca 53 President, Chief Operating 30 38
Officer and Director
Terry Peets 50 Executive Vice President 18 18
Edmund Kevin Davis 41 Senior Vice President, Marketing 14 20
R. Alexander Detrick 53 Senior Vice President, 20 20
Corporate Strategy and
Development
Alan G. Gray 58 Senior Vice President, 34 44
Administration
Jan Charles Gray 47 Senior Vice President, 20 31
General Counsel and Secretary
Lee R. Mueller 54 Senior Vice President, 33 39
Store Operations
Alan J. Reed 48 Senior Vice President & Chief 22 22
Financial Officer
Jane Rice 53 Senior Vice President & Chief 11 11
Information Officer
Mary Louise Wakefield 53 Senior Vice President, Human 20 35
Resources and EEO Officer
James A. Warren 60 Senior Vice President, 33 39
Distribution & Manufacturing
Lynn Davenport 54 Director
Edward J. DeBartolo, Jr. 48 Director
Anthony W. Liberati 62 Director
G.William Miller 70 Director
Edward W. Muransky 35 Director
David M. Petrone 50 Director
Richard S. Sokolov 45 Director
Marie Denise DeBartolo York 44 Director
</TABLE>
The Board of Directors is classified into three classes, each class to have
as equal a number of directors as possible. The Class A directors, Messrs.
DeBartolo, Jr., Liberati, Sokolov and Mrs. DeBartolo York have been elected for
a term that expires at the annual meeting of stockholders in 1995, the Class B
directors, Messrs. Miller and Petrone, have been elected for a term that
expires at the annual meeting of stockholders in 1996, and the Class C
directors, Messrs. Allumbaugh, Davenport, Marasca and Muransky have been
elected for a term that expires at the annual meeting of stockholders in 1997.
At each annual meeting of stockholders, successors to the class of directors
whose term expires at that annual meeting will be elected for a three-year
term.
21
<PAGE> 23
Composition of the Board of Directors of Ralphs and the Holding Company is
identical at the present time, as are the officers of the two companies.
Officers are elected annually and are subject to removal at any time, with or
without cause, by the Board of Directors of the Holding Company or Ralphs, as
the case may be.
Mr. Allumbaugh has been Chairman and Chief Executive Officer 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.
Mr. Marasca has been President, Chief Operating Officer and a Director
since February 1994. 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.
Mr. Peets has been Executive Vice President 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.
Mr. Davis has been Senior Vice President, Marketing since September 1994.
He was Senior Vice President, Sales and Merchandising from February 1994 to
September 1994, Group Vice President, Sales and Merchandising from 1992 to
February 1994 and Vice President of Sales and Advertising from 1988 to 1992.
Mr. Detrick has been Senior Vice President, Corporate Strategy and
Development, since 1982.
Mr. Alan G. Gray has been Senior Vice President, Administration since 1993.
He was Group Vice President, Store Operations from 1985 to 1992 and Group Vice
President, Administration from 1992 to 1993.
Mr. Jan Charles Gray has been Senior Vice President, General Counsel and
Secretary since 1988. He was Senior Vice President and General Counsel from
1985 to 1988 and Vice President and General Counsel from 1978 to 1985.
Mr. Mueller has been Senior Vice President, Store Operations since 1993.
He was Group Vice President, Store Operations from 1985 to 1993.
Mr. Reed has been Senior Vice President and Chief Financial Officer since
1988. He was Senior Vice President, Finance from 1985 to 1988 and Vice
President, Finance from 1983 to 1985.
Ms. Rice has been Senior Vice President and Chief Information Officer since
February 1994. She was Group Vice President, Management Information Systems
from 1993 to February 1994, Vice President, Management Information Services
from 1992 to 1993 and Vice President, Information Services from 1988 to 1992.
Ms. Wakefield has been Senior Vice President, Human Resources and EEO
Officer since August 1994. She was Group Vice President, Human Resources and
EEO Officer from February 1994 to August 1994 and Vice President, Human
Resources from 1987 to 1994.
Mr. Warren has been Senior Vice President, Distribution and Manufacturing
since 1993. He was Group Vice President, Distribution from 1986 to 1993.
Mr. Davenport has been a Director since June 1994. Since January 1995 he
has been a Director and since 1994 has been Senior Vice President and Chief
Financial Officer of The Edward J. DeBartolo Corporation. Mr. Davenport serves
as a Director of J.W. O'Connor & Co., Inc.
Mr. DeBartolo, Jr., has been a Director since 1992. Since April 1994 he
has been Chairman of the Board and a Director of the DeBartolo Realty
Corporation. Since 1994 he has been President and Chief Executive Officer, from
1979 to 1994 he was President and Chief Administrative Officer and since 1973
he has been a Director of The Edward J. DeBartolo Corporation.
Mr. Liberati has been a Director since 1992. Since April 1994 he has been a
Director of the DeBartolo Realty Corporation. Since December 1994 he has been
the Executive Vice President, Chief Operating Officer, from 1982 to 1994 he was
the Executive Vice President, Corporate Planning/Finance and since 1982 he has
been a Director of The Edward J. DeBartolo Corporation. Mr. Liberati serves as
a Director of Pennsylvania Capital Bank.
22
<PAGE> 24
Mr. Miller has been a Director since 1990. Since 1983 he has been Chairman
of G. William Miller & Co., Inc., a merchant banking firm. He is a former
Secretary of the U.S. Treasury and a former Chairman of the Federal Reserve
Board, and has served as Chairman and Chief Executive Officer of Federated
Stores, Inc. from January 1990 to February 1992. Mr. Miller serves as a
Director of the DeBartolo Realty Corporation, Federated Department Stores,
Inc., Klienwort Benson Australian Income Fund, Inc., Repligen Corporation,
Georgetown Industries, Inc. and Waccamaw Corporation.
Mr. Muransky has been a Director since June 1994. Mr. Muransky is the Chief
Executive Officer and Chairman of Gallagher Pipino, Inc.
Mr. Petrone has been a Director since 1992. Mr. Petrone served as Vice
Chairman of Wells Fargo & Co. from October 1986 to March 1992. Since March
1993, Mr. Petrone has been a principal in Petrone, Petri & Company, a firm
engaged in real estate finance and investments. Mr. Petrone serves as a
Director of Health Science Properties and Jacobs Engineering Group, Inc.
Mr. Sokolov has been a Director since 1992. Since April 1994 he has been
President and Chief Executive Officer and a Director of the DeBartolo Realty
Corporation. From 1986 to March 1994 he was Senior Vice President and General
Counsel of The Edward J. DeBartolo Corporation. In connection with the
proceeding brought by the Securities and Exchange Commission in the United
States District Court for the District of Columbia entitled SEC v. Paul A.
Bilzerian et al., Mr. Sokolov, without admitting or denying any allegations,
consented to the entry of a permanent injunction on June 29, 1989 enjoining him
from engaging in any transactions or courses of business which would constitute
or would aid and abet violations of certain specified federal securities laws
and rules.
Mrs. DeBartolo York has been a Director since February 1994. Since December
1994 she has been the Chairman of the Board and a Director of The Edward J.
DeBartolo Corporation. Since December 1994 she has been a Director of the
DeBartolo Realty Corporation.
The Board of Directors of Ralphs has an Executive Committee, and Audit
Committee and a Compensation Committee. The current members of the Executive
Committee are Messrs. Allumbaugh, Liberati and Marasca. The current members
of the Audit Committee are Messrs. Liberati, Miller and Petrone. The current
members of the Compensation Committee are Messrs. DeBartolo, Jr., Miller and
Petrone.
The Certificate of Incorporation, as amended, of Ralphs (the
"Certificate") provides that the Directors of Ralphs are protected to the
fullest extent permitted by Delaware law against monetary damages for breach of
the directors' fiduciary duty of care to Ralphs and its stockholder, the
Holding Company. This provision in the Certificate does not eliminate the duty
of care, and in appropriate circumstances equitable remedies such as
injunction, rescission or other forms of non-monetary relief would remain
available under Delaware law. In addition, each Director will continue to be
subject to liability for breach of the director's duty of loyalty to the
Holding Company, for acts or omissions not taken or made in good faith or
involving intentional misconduct, for knowing violations of law, for actions
leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware law. The provision also does not affect a director's
responsibilities under any other laws, such as federal securities laws. Ralphs
is insured for certain losses incurred in connection with Ralphs' indemnifying
its directors and officers.
23
<PAGE> 25
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes the compensation for services rendered
during the prior three fiscal years paid to the CEO and the four most highly
compensated executive officers other than the CEO of Ralphs.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
==================================
AWARDS PAYOUTS
ANNUAL COMPENSATION ======================= =======
================================== RESTRICTED
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND SALARY BONUSES COMPENSATION AWARDS SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (1) ($) ($) (#) ($) ($) (2)
============================= ==== ====== ======= ============ ========== ======== ======= ============
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Byron E. Allumbaugh, Chairman &
Chief Executive Officer . . . . 1994 650,000 0 N/A N/A N/A N/A 25,580
1993 645,000 387,000 N/A N/A N/A N/A 20,075
1992 620,000 372,000 N/A N/A 587,753 N/A 21,897
Alfred A. Marasca, President
and Chief Operating Officer . . 1994 400,000 0 N/A N/A N/A N/A 10,580
1993 340,000 204,000 N/A N/A N/A N/A 7,187
1992 296,260 148,125 N/A N/A 308,812 N/A 8,206
Alan J. Reed, Senior Vice
President, Finance and Chief
Financial Officer . . . . . . . 1994 225,000 0 N/A N/A N/A N/A 6,248
1993 222,500 111,250 N/A N/A N/A N/A 8,879
1992 211,250 105,625 N/A N/A 154,406 N/A 6,125
Terry Peets, Executive Vice
President . . . . . . . . . . . 1994 215,000 0 N/A N/A N/A N/A 7,562
1993 192,500 96,250 N/A N/A N/A N/A 6,127
1992 182,500 91,250 N/A N/A 154,406 N/A 6,027
Jan Charles Gray, Senior Vice
President, General Counsel
and Secretary . . . . . . . . . 1994 213,750 0 N/A N/A N/A N/A 9,047
1993 207,500 103,750 N/A N/A N/A N/A 9,084
1992 196,250 98,125 N/A N/A 154,406 N/A 6,605
</TABLE>
(1) Bonuses for services performed in Fiscal Year 1994 were paid in Fiscal
Year 1995. Bonus amounts for Messrs. Allumbaugh, Marasca, Reed, Peets and J.
Gray were $390,000, $240,000, $112,500, $107,500 and $106,875 respectively.
(2) Represents (i) insurance premiums and the dollar value of the remainder of
premiums paid under the Senior Executive Supplemental Benefit Plan, and (ii)
Ralphs' contributions under the Ralphs Thrift Incentive Plan. The respective
amount paid for Messrs. Allumbaugh, Marasca, Reed, Peets and Gray are as
follows: (A) Insurance premiums; $18,500, $6,600, $4,025, $5,460 and $4,500
(B) dollar value of remainder of premiums; $5,232, $2,702, $0, $0, and $2,699;
(C) incentive plan contributions; $1,848, $1,278, $2,223, $2,102 and
$1,848.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no grants of stock options or SARs in Fiscal 1994.
24
<PAGE> 26
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1994 AND FISCAL YEAR-END OPTION/SAR
VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
VALUE FY-END (#) FY-END ($)
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#)(1) ($) UNEXERCISABLE(2) UNEXERCISABLE(3)
============================ ================== ========= ================ ================
<S> <C> <C> <C> <C>
Byron E. Allumbaugh . . . . . . . 70,000 1,961,646 352,652/ 0/
375,101 3,923,290
Alfred A. Marasca . . . . . . . . 13,500 378,317 108,084/ 0/
259,228 1,639,375
Alan J. Reed . . . . . . . . . . 10,500 294,247 54,042/ 0/
145,864 1,275,069
Terry Peets . . . . . . . . . . 7,500 210,176 54,042/ 0/
132,864 910,764
Jan Charles Gray . . . . . . . . 0 0 54,042/ 0/
132,864 1,120,940
</TABLE>
(1) Represents SARs exercised under the Ralphs 1988 Equity Appreciation Rights
Plan.
(2) Each number represents the aggregate number of Options and SARs
outstanding, as currently exercisable/Unexercisable. Options and SARs
were granted under different plans, not in tandem. All SARs are free
standing.
(3) Represents value of SARs, based on a value of $28.0235 per SAR 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.
EXECUTIVE EMPLOYMENT CONTRACTS
Ralphs has entered into employment contracts with Messrs. Allumbaugh,
Marasca, Reed, Peets and J. Gray currently providing for their employment at
annual base salaries of $650,000, $400,000, $225,000, $215,000 and $215,000
respectively. These employment contracts expire on April 30, 1996. Ralphs has
also entered into employment contracts providing for aggregate base salaries of
$748,500 with Messrs. Detrick, A. Gray, Mueller and Warren. Each contract
provides that the employee's employment and remuneration may be terminated by
Ralphs (i) for cause based upon the employee's gross misconduct, felony
conviction (other than a traffic or moving violation), serious breach of Ralphs
policy or similar transgression; (ii) for failure to render services for a
continuous period of 12 months due to disability; or (iii) for a material
breach of the contract. An employee's remuneration under an employment
contract will also be terminated upon the employee's voluntary resignation or
retirement. Ralphs can advise an employee in writing that his services will no
longer be required, which will be treated as a suspension of services. If a
suspension of service occurs, the employee continues to be treated as an
employee for all purposes for the term of the agreement. The employee is
entitled to continued compensation until termination of the contract, subject
to an offset equal to 50% of any compensation received from another business
(except from businesses or investments previously owned by the employee before
the date the suspension of services or termination for which there will be no
deduction) or 100% if such business is a competing business (as defined in the
employment contract).
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").
25
<PAGE> 27
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 Supplemental 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.
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, 1995 for the specified final average salaries and
years of credited service.
<TABLE>
<CAPTION>
YEARS OF CREDIT 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 90,000 120,000 150,000 180,000 180,000
400,000 120,000 160,000 200,000 240,000 240,000
600,000 180,000 240,000 300,000 360,000 360,000
800,000 240,000 320,000 400,000 480,000 480,000
1,000,000 300,000 400,000 500,000 600,000 600,000
1,200,000 360,000 480,000 600,000 720,000 720,000
</TABLE>
Messrs. Allumbaugh, Marasca, Reed, Peets and J. Gray have completed 36, 38,
22, 18 and 31 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following persons served as members of the Compensation Committee of
the Board during Fiscal 1994: Edward J. DeBartolo, Jr., G. William Miller,
Peter J. Solomon and David M. Petrone, who replaced Mr. Solomon on the
Committee in June 1994. Edward J. DeBartolo, Jr. is the President and a
director of EJDC. In connection with the acquisition of a majority of the
Holding Company's Common Stock on February 3, 1992, EJDC agreed to the EJDC
Guaranty. See Item 13. "Certain Relationships and Related Transactions".
The foregoing summaries of the various benefit plans and agreements
described above are qualified by reference to such plans and agreements, copies
of which have been filed as exhibits to this Annual Report on Form 10-K.
DIRECTOR COMPENSATION
Directors who are not employees of the Holding Company or of Ralphs are
paid a fee of $15,000 per year for serving on the Board of Directors and $2,500
for each Board meeting attended. All directors are also reimbursed for their
out-of-pocket travel and related expenses incurred in attending all Board and
committee meetings.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
a) Security Ownership of Certain Beneficial Owners
26
<PAGE> 28
As of the date hereof, 100% of the outstanding capital stock of the Company
is owned by the Holding Company and approximately 60.3% of the outstanding
shares of Common Stock of the Holding Company (the "EJDC Holding Company Common
Stock") are owned beneficially by EJDC. Consequently, EJDC will have the
ability to exercise control over the business and affairs of the Holding
Company by virtue of its continuing ability to elect a majority of the Holding
Company's Board of Directors and its voting power with respect to actions
requiring stockholder approval. By virtue of its ownership of the Common Stock
of the Holding Company, EJDC will have the ability to exercise similar control
over the business and affairs of Ralphs. EJDC, a corporation controlled by Mr.
Edward J. DeBartolo, Jr. and Mrs. Marie Denise DeBartolo York, is primarily
engaged in shopping mall and other real estate development activities.
27
<PAGE> 29
The following table sets forth certain information regarding the
beneficial ownership of the Holding Company Common Stock as of the date hereof.
By virtue of their ownership of the Holding Company Common Stock, the following
entities may be deemed to own a corresponding percentage of the Common Stock.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED (1)
NAME ADDRESS NUMBER PERCENT
=================================================================================== ========== =======
<S> <C> <C>
The Edward J. DeBartolo Corporation (2)(3) . . . . . . . . . . . . . . . . . . . . 15,440,600 60.34
7620 Market Street
Youngstown, Ohio 44512
Camdev Properties Inc. (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,276,681 12.81
400 King Street West
Suite 5800
Toronto, Ontario M5H 3Y8
Bank of Montreal (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,591,815 10.13
700 Louisiana, Suite 4400
Houston, Texas 77002
Banque Paribas (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,591,815 10.13
757 Seventh Avenue
New York, New York 10019
Federated Department Stores, Inc. (2) . . . . . . . . . . . . . . . . . . . . . . . 1,686,369 6.59
7 West Seventh Street
Cincinnati, Ohio 45202
</TABLE>
(1) Unless otherwise indicated in the footnotes to this table, each of the
stockholders named in this table has sole voting and investment owner with
respect to the shares shown as beneficially owned by it.
(2) The principal stockholders have certain registration rights pursuant to the
Registration Rights Agreement.
(3) All shares indicated are owned of record by EJDC, which is indirectly
controlled by Edward J. DeBartolo, Jr. and Marie Denise DeBartolo York,
who would be deemed to beneficially own the shares of Common Stock owned
by EJDC.
b) Security Ownership of Management
As of the date hereof, no officer or director of the Company beneficially
owns any equity securities of the Company.
c) Changes in Control
None.
28
<PAGE> 30
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EJDC guarantees Ralphs' obligations as a self-insurer of worker's
compensation liabilities in the State of California (the "EJDC Guaranty"). In
connection with the EJDC Guaranty, Ralphs 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, Ralphs agreed to pay EJDC a guarantee fee of $33,500 for
each month the EJDC Guaranty is in effect ($402,000 was paid in Fiscal 1994).
In connection with the bankruptcy reorganization of Federated Department
Stores, Inc. and its affiliates, Federated Department Stores, Inc.
("Federated") agreed to pay certain potential tax liabilities relating to
Ralphs previously being a member of the affiliated group of companies
comprising Federated and its subsidiaries. In consideration thereof, the
Holding Company and Ralphs agreed to pay Federated Department Stores, Inc. a
total of $10.0 million, payable $1.0 million on each of February 3, 1992,
1993, 1994, 1995 and 1996 and $5.0 million on February 3, 1997. The five $1.0
million installments are to be paid by Ralphs and the $5.0 million payments is
the joint obligation of the Holding Company and Ralphs. In the event
Federated Department Stores, Inc. is required to pay certain tax liabilities,
the Holding Company and Ralphs have agreed to reimburse Federated Department
Stores, Inc. up to an additional $10.0 million, subject to certain adjustments.
This additional obligation, if any, is the joint and several obligation of the
Holding Company and Ralphs. The $5.0 million payment and the potential $10.0
million payment will be paid in cash or stock of the Holding Company. See
Note 1 of the Notes to Financial Statements.
In addition, EJDC and the other current holders of Common Stock are parties
to an agreement providing for various aspects of corporate governance (the
"Registration Rights Agreement") relating to the Holding Company and Ralphs.
Pursuant to the Registration Rights Agreement, Ralphs is obligated to provide
the Holding Company, by dividend, pursuant to a services agreement or
otherwise, with funds sufficient to enable the Holding Company to perform its
duties as the holding company of Ralphs' stock and to perform its obligations
set forth in the Registration Rights Agreement.
Moreover, pursuant to a service agreement, dated February 3, 1992 (the
"Service Agreement"), between Ralphs and the Holding Company, the Holding
Company agreed to perform certain accounting, advisory, capital raising and
other services for Ralphs and Ralphs agreed to pay to the Holding Company an
amount equal to the Holding Company's direct and indirect costs of performing
such services. Management believes that amounts to be paid under the Service
Agreement will not be material to the business or financial condition of
Ralphs.
29
<PAGE> 31
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K.
(A) Documents filed as part of this report:
(1) Financial Statements.
See Financial Statements Index included in Item 8 of Part II of this
form 10-K.
(2) Financial Statement Schedules:
<TABLE>
<CAPTION>
LOCATION IN
THIS REPORT
===========
<S> <C>
Schedule VIII-Valuation and Qualifying
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
</TABLE>
(3) Exhibits
See Index to Exhibits following signature page.
A copy of the exhibits listed herein can be obtained by writing:
Jan Charles Gray
Senior Vice President,
General Counsel & Secretary
Ralphs Grocery Company
P.O. Box 54143
Los Angeles, CA 90054
(B) Reports on Form 8-K
Not applicable.
30
<PAGE> 32
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Date: April 27, 1995 RALPHS GROCERY COMPANY
BY: /S/ JAN CHARLES GRAY
-------------------------------
Jan Charles Gray
Senior Vice President,
General Counsel and Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
========== ===== ====
<S> <C> <C>
/s/ BYRON E. ALLUMBAUGH Chairman of the Board April 27, 1995
- ------------------------------------------ Chief Executive Officer
Byron E. Allumbaugh and Director (Principal
Executive Officer)
/s/ ALFRED A. MARASCA President, Chief Operating April 27, 1995
- ------------------------------------------ Officer and Director
Alfred A. Marasca
/s/ JAN CHARLES GRAY Senior Vice President and April 27, 1995
- ------------------------------------------ General Counsel and
Jan Charles Gray Secretary
/s/ ALAN J. REED Senior Vice President April 27, 1995
- --------------------------------------------- and Chief Financial Officer
Alan J. Reed (Principal Financial Officer)
/s/ ROBERT W. GOSSMAN Group Vice President and April 27, 1995
- ------------------------------------------ Controller (Principal
Robert W. Gossman Accounting Officer
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
========== ===== ====
<S> <C> <C>
/s/ LYNN DAVENPORT Director April 27, 1995
- ---------------------------------------------
Lynn Davenport
/s/ EDWARD J. DEBARTOLO JR. Director April 27, 1995
- ---------------------------------------------
Edward J. DeBartolo Jr.
/s/ ANTHONY W. LIBERATI Director April 27, 1995
- -----------------------------------------------
Anthony W. Liberati
/s/ G. WILLIAM MILLER Director April 27, 1995
- -----------------------------------------------
G. William Miller
/s/ EDWARD W. MURANSKY Director April 27, 1995
- ----------------------------------------------
Edward W. Muransky
/s/ DAVID M. PETRONE Director April 27, 1995
- --------------------------------------------------
David M. Petrone
/s/ RICHARD S. SOKOLOV Director April 27, 1995
--------------------------------------------
Richard S. Sokolov
/s/ MARIE DENISE DEBARTOLO YORK Director April 27, 1995
- ----------------------------------------
Marie Denise DeBartolo York
</TABLE>
32
<PAGE> 34
RALPHS GROCERY COMPANY
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
The following exhibits are filed as a separate section of the report:
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBERED PAGE
=========== ============================================= =============
<S> <C> <C>
10.29 Amendment No. 1, dated as of January 12, 1995
to the Agreement and Plan of Merger dated as
of September 14, 1994
10.30 Amendment No. 2, dated as of February 24,
1995 to the Agreement and Plan of Merger
dated as of September 14, 1994
10.31 Amendment No. 3, dated as of April 26, 1995
to the Amendment and Plan of Merger dated as
of September 14, 1994
The following exhibits are incorporated herein by reference:
EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE TO
=========== ============================================= ============
<S> <C> <C>
3.1 Restated Certificate of Incorporation Exhibit 3.1 to
Registration State-
ment No. 33-47634
on Form S-1.
3.2 By-Laws Exhibit 3.2 to
Registration State-
ment No. 33-47634
on Form S-1.
10.1 Ralphs Grocery Company Retirement Plan Exhibit 10.1 to
Plan, as amended
Registration State-
ment No. 33-47634
on Form S-1.
10.2 Ralphs Grocery Company Supplemental Exhibit 10.2 to
Retirement Plan, as amended Registration State-
ment No. 33-47634
on Form S-1.
10.3 Outline of Benefits under the Ralphs Exhibit 10.3 to
Grocery Company Senior Executive Registration State-
Medical Plan ment No. 33-47634
on Form S-1.
10.4 Guidelines for the Ralphs Grocery Exhibit 10.4 to
Company Management Incentive Plan Registration State-
ment No. 33-47634
on Form S-1.
10.5 Ralphs Grocery Company Savings Plan Exhibit 10.5 to
Plus Primary Registration State-
ment No. 33-47634
on Form S-1.
10.6 Ralphs Grocery Company Savings Plan Exhibit 10.6 to
Plus Basic Registration State-
ment No. 33-47634
on Form S-1.
</TABLE>
33
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE TO
=========== ============================================= ============
<S> <C> <C>
10.7 Tax Indemnification Agreement Exhibit 10.7 to
Registration State-
ment No. 33-47634
on Form S-1.
10.8 Comprehensive Settlement Agreement Exhibit 10.8 to
Registration State-
ment No. 33-47634
on Form S-1.
10.9 Tax Election Agreement Exhibit 10.9 to
Registration State-
ment No. 33-47634
on Form S-1.
10.10 Indenture between Ralphs Grocery Company Exhibit 10.10 to
and United States Trust Company, as Registration State-
Trustee, dated as of August 26, 1988, ment No. 33-47634
including form of 14% Senior on Form S-1.
Subordinated Debentures due 2000
attached as Exhibit A thereto, with
respect to the 14% Senior Subordinated
Debentures due 2000
10.11 Supplemental Indenture between Ralphs Exhibit 4.2 to
Grocery Company and United States Registrant's Quart-
Trust Company of New York, as Trustee, erly Report on Form
dated as of May 29, 1992, with respect 10-Q dated September
to the 14% Senior Subordinated 1, 1992 and filed on
Debentures due 2000 September 2, 1992
10.12 Amended and Restated Ralphs Grocery Company Exhibit 10.11 to
1988 Equity Appreciation Rights Plan Registration State-
and Equity Appreciation Rights ment No. 33-47634
Agreement on Form S-1.
10.13 Ralphs Supermarkets, Inc. Non-qualified Exhibit 10.12 to
Stock Option Plan Registration State-
ment No. 33-47634
on Form S-1.
10.14 Registration Rights and Corporate Exhibit 10.13 to
Governance Agreement, as amended Registration State-
ment No. 33-47634
on Form S-1.
10.15 Agreement of Assumption and Guarantee Exhibit 10.14 to
of Workers' Compensation Liabilities Registration State-
ment No. 33-47634
on Form S-1.
</TABLE>
34
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE TO
=========== ============================================= ============
<S> <C> <C>
10.16 Reimbursement Agreement Exhibit 10.15 to
Registration State-
ment No. 33-47634
on Form S-1.
10.17 Ralphs Grocery Company 1988 Credit Exhibit 10.16 to
Agreement Registration State-
ment No. 33-47634
on Form S-1.
10.18 Commitment Letter relating to 1992 Exhibit 10.17 to
Credit Agreement Registration State-
ment No. 33-47634
on Form S-1.
10.19 Credit Agreement, dated as of July 22, Exhibit 10.19 to
1992 (the "1992 Credit Agreement"), Registrant's Annual
among Ralphs Grocery Company, Bankers Report on Form 10-K
Trust Company and the Lenders named filed on April 29,1993
therein
10.20 First Amendment and Limited Waiver, Exhibit 10.20 to
dated as of March 19, 1993, to the Registrant's Annual
1992 Credit Agreement Report on Form 10-K
filed on April 29,1993
10.21 Ralphs Grocery Company Promissory Notes, Exhibit 10.18 to
Deeds of Trust and Security Agreements Registration State-
with Metropolitan Life Insurance ment No. 33-47634
Company, as amended on or prior to on Form S-1.
May 1, 1992
10.22 Amendments dated as of July 30, 1992 and Exhibit 10.22 to
March 30, 1993, to Ralphs Grocery Company Registrant's Annual
Promissory Notes, Deeds of Trust and Report on Form 10-K
Security Agreements with Metropolitan filed on April 29,1993
Life Insurance Company, as amended
10.23 Employment Agreements between Ralphs Exhibit 10.19 to
Grocery Company and each of Byron Registration State-
Allumbaugh, Patrick Collins, Alfred ment No. 33-47634
Marasca and Ralph Liebman on Form S-1.
10.23(a) Employment Agreement between Ralphs Exhibit 10.23(a) to
Grocery Company and Alan Reed, as Registrant's Annual
amended Report on Form 10-K
filed on April 29,1993
</TABLE>
35
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE TO
=========== ============================================= ============
<S> <C> <C>
10.24 Indenture between Ralphs Grocery Exhibit 4.3 to
Grocery Company and United States Trust Registrant's Quarterly
Company, as Trustee, dated as of July Report on Form 10-Q
29, 1992, with respect to the 10 1/4% dated September 1,
Senior Subordinated Notes due 2002 1992 and filed on
September 2, 1992
10.25 Indenture between Ralphs Grocery Company Exhibit 4.1 to
and United States Trust Company, as Registration Statement
Trustee dated as of March 30, 1993 No. 33-61812 on
(the "1993 Indenture") with respect to Form S-4
the Initial Notes and the Exchange Notes
10.26 Supplemental Indenture dated as of Exhibit 4.2 to
June 23, 1993, to the 1993 Indenture Registration Statement
No. 33-61812 on Form S-4
10.27 Employment Agreements between Exhibit 10.27 to
Ralphs Grocery Company and each of Registrant's Annual
Jan Charles Gray and Terry Peets Report on Form 10-K
filed on May 2, 1994
10.28 Agreement and Plan of Merger, dated as Exhibit 99.1 to
of September 14, 1994, by and among Registrant's Current
Food 4 Less, Inc., Food 4 Less Holdings, Report on Form 8-K,
Inc., Food 4 Less Supermarkets, Inc., dated September 14,
Ralphs Supermarkets, Inc. and the 1994
stockholders of Ralphs Supermarkets, Inc.
</TABLE>
36
<PAGE> 38
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets at January 30, 1994
and January 29, 1995 . . . . . . . . . . . . . . . . . . . F-3
Years ended January 31, 1993, January 30, 1994
and January 29, 1995:
Consolidated Statements of Operations . . . . . . . . . . F-4
Consolidated Statements of Cash Flows . . . . . . . . . . F-5
Consolidated Statements of Stockholder's Equity . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . F-7
Financial Statement Schedules
Schedule VIII - Valuation and Qualifying Accounts . . . . S-1
</TABLE>
F-1
<PAGE> 39
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders Ralphs Grocery Company:
We have audited the consolidated financial statements of Ralphs Grocery
Company and subsidiary as listed in the accompanying index. In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedules as listed in the accompanying index. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedules 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
Grocery Company and subsidiary as of January 30, 1994 and January 29, 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended January 29, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule, 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.
KPMG Peat Marwick LLP
Los Angeles, California
March 9, 1995
F-2
<PAGE> 40
RALPHS GROCERY COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JANUARY 30, JANUARY 29,
1994 1995
========== ==========
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . $ 55,080 $ 35,125
Accounts receivable . . . . . . . . . . . . . . . . . 30,420 43,597
Inventories . . . . . . . . . . . . . . . . . . . . . 202,354 221,388
Prepaid expenses and other current assets . . . . . . 18,111 19,793
---------- ----------
Total current assets . . . . . . . . . . . . . . . . 305,965 319,903
Property, plant and equipment, net . . . . . . . . . . 601,897 624,724
Excess of cost over net assets acquired, net . . . . . 376,414 365,418
Beneficial lease rights, net . . . . . . . . . . . . . 55,553 49,164
Deferred debt issuance costs, net . . . . . . . . . . 26,583 23,011
Deferred income taxes . . . . . . . . . . . . . . . . 109,125 112,491
Other assets . . . . . . . . . . . . . . . . . . . . . 8,113 15,203
---------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . $1,483,650 $1,509,914
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt . . . . . . . . . $ 70,975 $ 83,989
Short-term debt . . . . . . . . . . . . . . . . . . . -- 51,500
Bank overdrafts . . . . . . . . . . . . . . . . . . . 37,716 45,669
Accounts payable . . . . . . . . . . . . . . . . . . . 138,554 130,889
Accrued expenses . . . . . . . . . . . . . . . . . . . 101,543 99,804
Current portion of self-insurance reserves . . . . . . 30,138 27,552
---------- ----------
Total current liabilities . . . . . . . . . . . . . 378,926 439,403
Long-term debt . . . . . . . . . . . . . . . . . . . . 927,909 883,020
Self-insurance reserves . . . . . . . . . . . . . . . 49,872 44,954
Lease valuation reserve . . . . . . . . . . . . . . . 32,575 28,957
Other non-current liabilities . . . . . . . . . . . . 89,299 86,393
---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . 1,478,581 1,482,727
Stockholder's equity:
Common stock, $1 par value per share Authorized 1,000 shares;
issued and outstanding, 100 shares at January 30, 1994 and
January 29, 1995 . . . . . . . . . . . . . . . . . . -- --
Additional paid-in capital . . . . . . . . . . . . . . 175,548 175,548
Accumulated deficit . . . . . . . . . . . . . . . . . (170,479) (148,361)
---------- ----------
Total stockholder's equity . . . . . . . . . . . . . 5,069 27,187
---------- ----------
Commitments and contingencies (See Notes 2 and 8)
Total liabilities and stockholder's equity . . . . $1,483,650 $1,509,914
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 41
RALPHS GROCERY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, 1993 JANUARY 30, 1994 JANUARY 29, 1995
=================== ================== =====================
<S> <C> <C> <C> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . $2,843,816 100.0% $2,730,157 100.0% $2,724,604 100.0%
Cost of sales . . . . . . . . . . . . . . . . 2,217,197 78.0 2,093,727 76.7 2,101,033 77.1
Gross profit . . . . . . . . . . . . . . . 626,619 22.0 636,430 23.3 623,571 22.9
Selling, general and administrative expenses 470,012 16.5 471,000 17.2 467,022 17.2
Amortization of excess of cost over net assets
acquired . . . . . . . . . . . . . . . . . . 10,997 0.4 10,996 0.4 10,996 0.4
Provision for restructuring . . . . . . . . . 7,100 0.2 2,374 0.1 -- --
---------- ----- ---------- ----- ---------- -----
Operating income . . . . . . . . . . . . . 138,510 4.9 152,060 5.6 145,553 5.3
Other expenses:
Interest . . . . . . . . . . . . . . . . . 125,611 4.4 108,755 4.0 112,651 4.1
Loss on disposal of assets . . . . . . . . 2,607 0.1 1,940 0.1 784 0.0
Provision for legal settlement . . . . . . 7,500 0.3 -- -- -- --
Provision for earthquake losses . . . . . . -- -- 11,048 0.4 -- --
---------- ----- ---------- ----- ---------- -----
Earnings before income taxes and
extraordinary item . . . . . . . . . . . . . 2,792 0.1 30,317 1.1 32,118 1.2
Income tax expense (benefit) . . . . . . . . 8,346 0.3 (108,049) (4.0) -- --
---------- ----- ---------- ----- ---------- -----
Earnings (loss) before extraordinary item . . (5,554) (0.2) 138,366 5.1 32,118 1.2
Extraordinary item-debt refinancing, net of tax
benefit of $4,173 . . . . . . . . . . . . . . (70,538) (2.5) -- -- -- --
---------- ----- ---------- ----- ---------- -----
Net earnings (loss) . . . . . . . . . . . . . $(76,092) (2.7)% $138,366 5.1% $ 32,118 1.2%
========== ===== ========== ===== ========== =====
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 42
RALPHS GROCERY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 30, JANUARY 29,
1993 1994 1995
========== ========== ==========
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . $ (76,092) $ 138,366 $32,118
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . 76,873 74,452 76,043
Amortization of discounts and deferred debt
issuance costs . . . . . . . . . . . . . . . . . 20,978 9,768 9,032
LIFO charge (credit) . . . . . . . . . . . . . . 1,115 (2,054) 2,085
Loss on sale of assets . . . . . . . . . . . . . 6,841 4,314 784
Provision for postretirement benefits . . . . . . 3,275 3,370 2,555
Provision for legal settlement . . . . . . . . . 7,500 -- --
Other changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . 6,376 326 (13,177)
Inventories at replacement cost . . . . . . . . . (13,682) 6,724 (21,120)
Prepaid expenses and other current assets . . . . 3,703 (1,658) (1,682)
Other assets . . . . . . . . . . . . . . . . . . (616) 4,449 (7,287)
Interest payable . . . . . . . . . . . . . . . . (13,393) (4,822) (2,419)
Accounts payable and accrued liabilities . . . . 23,054 (1,622) (1,047)
Income taxes payable . . . . . . . . . . . . . . (527) (1,480) (2,906)
Deferred tax asset . . . . . . . . . . . . . . . -- (109,125) (3,366)
Business interruption credit . . . . . . . . . . -- (581) --
Earthquake losses . . . . . . . . . . . . . . . . -- (11,048) --
Self insurance reserves . . . . . . . . . . . . . 8,456 7,031 (7,503)
Other liabilities . . . . . . . . . . . . . . . . (170) (12,407) (6,692)
----- --------- -------
Cash provided by operating
activities . . . . . . . . . . . . . . . . . . . 53,691 104,003 55,418
------- -------- ------
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . (102,697) (62,181) (64,018)
Proceeds from sale of property, plant and
equipment . . . . . . . . . . . . . . . . . . . 219 16,700 13,257
-------- ------ ------
Cash used in investing activities . . . . . . . . (102,478) (45,481) (50,761)
--------- -------- --------
Cash flows from financing activities:
Net borrowings under lines of credit . . . . . . 2,100 (31,100) 51,500
Redemption of preferred stock . . . . . . . . . . (3,000) -- --
Capitalized financing and acquisition costs . . . (22,426) (5,108) (2,496)
Increase (decrease) in bank overdrafts . . . . . (8,865) 655 7,952
Proceeds from issuance of long-term debt . . . . 668,269 150,000 --
Dividends paid . . . . . . . . . . . . . . . . . -- -- (10,000)
Principal payments on long-term debt . . . . . . . (577,902) (164,081) (71,568)
--------- --------- --------
Cash provided by (used in)
financing activities . . . . . . . . . . . . . . 58,176 (49,634) (24,612)
------ --------- --------
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . 9,389 8,888 (19,955)
Cash and cash equivalents at beginning of period . 36,803 46,192 55,080
-------- -------- ------
Cash and cash equivalents at end of period . . . . $ 46,192 $ 55,080 $35,125
======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 43
RALPHS GROCERY COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
==========================
ADDITIONAL
OUTSTANDING PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
=========== ========= =========== =========== ==========
<S> <C> <C> <C> <C> <C>
Balances at February 2, 1992 . . . . 100 $ -- $175,548 $(232,753) $ (57,205)
Net Loss . . . . . . . . . . . . . . -- -- -- (76,092) (76,092)
--- ------- -------- ---------- ---------
Balances at January 31, 1993 . . . . 100 -- 175,548 (308,845) (133,297)
Net Earnings . . . . . . . . . . . . -- -- -- 138,366 138,366
--- ------- -------- --------- ---------
Balances at January 30, 1994 . . . . 100 -- 175,548 (170,479) 5,069
Net Earnings . . . . . . . . . . . . -- -- -- 32,118 32,118
Dividends paid . . . . . . . . . . . -- -- -- (10,000) (10,000)
--- ------- -------- ---------- ----------
Balances at January 29, 1995 . . . . 100 $ -- $175,548 $(148,361) $ 27,187
=== ======= ======== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 44
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION
At February 2, 1992, Ralphs Grocery Company, ("Ralphs") 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, 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. (the "Holding Company") was formed to
hold the outstanding shares of common stock of Ralphs. On February 3, 1992,
Holdings III and Allied contributed their shares of Ralphs to the Holding
Company in exchange for the issuance by the Holding Company of Holding Company
shares in the same proportion in Ralphs shares were owned ("Internal
Reorganization"). For financial reporting purposes, this transition was
recorded at predecessor cost. For Federal tax purposes, a new basis was
established at the Holding Company 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 Holding Company 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 Holding
Company held by Federated Stores, Inc. to Camdev, Ralphs is a wholly owned
subsidiary of the Holding Company which in turn is owned by the following
entities:
<TABLE>
<CAPTION>
APPROXIMATE PERCENT
OWNERSHIP OF
HOLDING COMPANY
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, Federated, Allied, Federated Department Stores, Inc. and
other affiliates have been settled with the Internal Revenue Service. In
addition, Ralphs 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 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 would be obligated to pay the Affiliated Group. However, such
additional liability, if any, is limited to $10 million subject to certain
adjustments.
F-7
<PAGE> 45
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
Under the Tax Indemnity agreement, the Holding Company and Ralphs have
agreed to pay Federated Department Stores, Inc. $1.0 million each year for five
years starting on February 3, 1992, and an additional $5.0 million on February
3, 1997. The total payments of $10.0 have been recorded in Ralphs' financial
statements at February 2, 1992. The five $1.0 million installments are to be
paid by Ralphs and the $5.0 million is the joint obligation of the Holding
Company and Ralphs. Also, in the event Federated Department Stores, Inc. is
required to pay certain tax liabilities on behalf of Ralphs, the Holding
Company and Ralphs have agreed to reimburse Federated Department Stores, Inc.
up to an additional $10.0 million, subject to certain adjustments. This
additional obligation is the joint and several obligation of the Holding
Company and Ralphs. The $5.0 million payment and the potential $10.0 million
payment may be paid, at the option of the Holding Company and Ralphs, in cash
or newly issued Holding Company Common Stock.
In connection with the consummation of the FSI Plan and the
Allied-Federated Plan, Ralphs 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 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) Reporting Period
Ralphs' fiscal year ends on the Sunday closest to January 31. Fiscal
year-ends are as follows:
January 31, 1993 (Fiscal 1992)
January 30, 1994 (Fiscal 1993)
January 29, 1995 (Fiscal 1994)
(b) 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.
(c) 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 $15.5 million and $17.6 million
at January 30, 1994 and January 29, 1995, respectively.
F-8
<PAGE> 46
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
(d) 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 1992, 1993 and 1994 was $1.074 million, $.740
million, and $.324 million, respectively.
(e) 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.
(f) 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.
(g) 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.
(h) 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 $63.4
million and $74.4 million at January 30, 1994 and January 29, 1995,
respectively.
(i) 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.
F-9
<PAGE> 47
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
(j) 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.
(k) 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, the Holding Company is responsible for filing
tax returns with the Internal Revenue Service and state taxing authorities.
Ralphs is included in the tax filings of the Holding Company. 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.
(l) Reclassification
Certain amounts in the accompanying financial statements have been
reclassified to conform to the current year's presentation.
(m) Consolidation Policy
The consolidated financial statements include the accounts of Ralphs
Grocery Company and its wholly owned subsidiary, collectively referred to as
the Company. All material intercompany balances and transactions are
eliminated in consolidation.
(n) 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.
(o) Advertising
The Company expenses the production costs of advertising the first time
the advertising takes place. Advertising expense was $17.5 million, $16.4
million and $18.2 million in fiscal 1992, 1993 and 1994, respectively.
F-10
<PAGE> 48
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
(p) Transaction Costs
In connection with the proposed merger, Ralphs has capitalized in other
assets approximately $2.3 million of transaction costs, principally attorney
and accounting fees. Upon completion of the merger these amounts will be
reclassified to excess of cost of net assets acquired and amortized
accordingly.
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows:
<TABLE>
<CAPTION>
JANUARY 30, JANUARY 29,
1994 1995
========== ==========
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . $ 159,904 $ 161,725
Buildings and improvements . . . . . . . . . . . . 191,179 199,133
Leasehold improvements . . . . . . . . . . . . . . 161,341 170,430
Fixtures and equipment . . . . . . . . . . . . . . 354,626 372,077
Capital leases . . . . . . . . . . . . . . . . . . 86,964 124,861
--------- ----------
954,014 1,028,226
Less: Accumulated depreciation . . . . . . . . . . (312,746 ) (354,539)
Less: Accumulated capital lease amortization . . . (39,371) (48,963)
---------- -----------
Property, plant and equipment, net . . . . . . . . $ 601,897 $ 624,724
========= ==========
</TABLE>
(4) ACCRUED EXPENSES
Accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
JANUARY 30, JANUARY 29,
1994 1995
========== ==========
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accrued wages, vacation and sick leave . . . . . . $ 34,763 $ 43,766
Taxes other than income tax . . . . . . . . . . . 11,084 10,055
Interest . . . . . . . . . . . . . . . . . . . . . 11,090 8,670
Other . . . . . . . . . . . . . . . . . . . . . . 44,606 37,313
--------- ---------
$ 101,543 $ 99,804
========== =========
</TABLE>
F-11
<PAGE> 49
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
5) LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
JANUARY 30, JANUARY 29,
1994 1995
========== ==========
(DOLLARS IN THOUSANDS)
<S> <C> <C>
First mortgage notes payable in monthly installments,
commencing June 1, 1994 of $1.6 million 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 $188.8 million . . . . . . . . . . . . . . . . $178,013 $176,634
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 $28.5 million . . . . . . . . . . . 9,721 6,291
Capitalized lease obligations at interest rates ranging
from 7.25% to 14.0% maturing at various dates through
2019 (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . 61,150 89,084
Note payable to bank . . . . . . . . . . . . . . . . . . . . . 300,000 245,000
Initial Notes and Exchange Notes, 9.0%, due 2003 . . . . . . . 150,000 150,000
Senior Subordinated Debentures, 10 1/4%, due 2002 . . . . . . 300,000 300,000
-------- --------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . 998,884 967,009
Less current maturities . . . . . . . . . . . . . . . . . . . (70,975) (83,989)
-------- --------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . $927,909 $883,020
======== ========
</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 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).
F-12
<PAGE> 50
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
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 29, 1995, interest rates under these borrowings ranged from
5.9375% to 10.25%. 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 29, 1995, $52.4 million of letters of credit and $51.5
million in borrowings were outstanding, with $16.1 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>
1992 . . . . . . . . . . . . . . . . . . . 10.52% 10.22%
1993 . . . . . . . . . . . . . . . . . . . 8.96% 8.96%
1994 . . . . . . . . . . . . . . . . . . . 9.37% 9.18%
</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.
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 1992 Credit
Agreement requires Ralphs to reduce its working capital credit line to zero for
30 consecutive days annually. The current annual period extends from July 1
to June 30. The Company has not yet complied with this annual covenant.
The Company intends to either satisfy this covenant by June 30, 1995 or seek
to obtain the necessary waiver from its lenders, if such event of
non-compliance ultimately occurs but there is no assurance that such waiver
will be granted, or, if granted, will be on terms acceptable to the Company.
At January 29, 1995, Ralphs is in compliance with all its 1992 Credit Agreement
restrictive covenants. The Company currently anticipates that it may be out of
compliance with certain other maintenance covenants at the end of the second
quarter of 1995. The Company intends to seek the necessary waivers from its
lenders should these events of non-compliance ultimately occur, but there is no
assurance that such waivers will be granted or, if granted, will be on terms
acceptable to the Company.
F-13
<PAGE> 51
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
The aggregate maturities on long-term debt for each of the five years
subsequent to fiscal 1994 as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . . $ 83,989
1996 . . . . . . . . . . . . . . . . . . . . 86,792
1997 . . . . . . . . . . . . . . . . . . . . 84,771
1998 . . . . . . . . . . . . . . . . . . . . 53,605
1999 . . . . . . . . . . . . . . . . . . . . 175,400
2000 and thereafter . . . . . . . . . . . . 482,452
--------
$967,009
========
</TABLE>
The unaudited fair value of each class of financial instruments (where
practical), all held for non-trading purposes, is as follows in (000's):
<TABLE>
<S> <C>
Long-term debt . . . . . . . . . . . . . . . . . . . . . $953,883
Interest rate swap agreement . . . . . . . . . . . . . . $ 1,252
Interest rate cap agreement . . . . . . . . . . . . . . $ (366)
</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.
Minimum rental payments due under capital leases and operating leases
subsequent to fiscal 1994 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES TOTAL
======== ========= ========
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . . . $ 21,640 $ 61,324 $ 82,964
1996 . . . . . . . . . . . . . . . . . . . . . . . . 19,093 60,847 79,940
1997 . . . . . . . . . . . . . . . . . . . . . . . . 18,288 58,182 76,470
1998 . . . . . . . . . . . . . . . . . . . . . . . . 15,901 53,321 69,222
1999 . . . . . . . . . . . . . . . . . . . . . . . . 11,784 52,839 64,623
2000 and thereafter . . . . . . . . . . . . . . . . 53,959 373,021 426,980
------- -------- --------
Total minimum lease payments . . . . . . . . . . . . $140,665 $659,534 $800,199
======== ========
Less amounts representing interest . . . . . . . . . (51,581)
---------
Present value of net minimum lease payments . . . . 89,084
Less current portion of lease obligations . . . . . (13,151)
---------
Long-term capital lease obligations . . . . . . . . $ 75,933
========
</TABLE>
F-14
<PAGE> 52
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
Total rent expense is summarized as follows:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 31, JANUARY 30, JANUARY 29,
1993 1994 1995
========== ========== ==========
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Capital Leases
Contingent rental . . . . . . . . . . . . . $ 2,443 $ 2,241 $ 2,256
Rentals from subleases . . . . . . . . . . . (2,144) (2,048) (1,734)
Operating Leases
Minimum rentals . . . . . . . . . . . . . . 49,001 54,965 55,906
Contingent rentals . . . . . . . . . . . . . 5,058 3,645 3,763
Rentals from subleases . . . . . . . . . . . (1,123) (1,150) (1,791)
------- ------- -------
$53,235 $57,653 $58,400
======= ======= =======
</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 1992, 1993 and 1994 self
insurance loss provisions amounted to (in thousands) $25,950, $30,323 and
$14,003, respectively. Ralphs discounts self-insurance liabilities using an
8% discount rate for all years presented. Management believes that this rate
approximates the time value of money over the anticipated payout period
(approximately 8 years) for essentially risk free investments.
Based on a review of modifications in its workers compensation and general
liability insurance programs, Ralphs adjusted its self- insurance costs during
Fiscal 1994, resulting in a reduction in the loss provision in fiscal 1994 of
approximately $18.9 million.
Ralphs' historical self-insurance liability for the previous two fiscal
years is as follows:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS
ENDED ENDED
JANUARY 30, JANUARY 29,
1994 1995
========== ==========
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Self Insurance liability . . . . . . . . . . . . . . . . . . . . . . $ 97,864 $ 87,830
Less : Discount . . . . . . . . . . . . . . . . . . . . . . . . . . (17,854) (15,324)
--------- --------
Net Self Insurance Liability . . . . . . . . . . . . . . . . . . . . $ 80,010 $ 72,506
========= ========
</TABLE>
The Company expects that cash payments for claims over the next 5 years
will aggregate approximately $28 million (unaudited) in fiscal year 1995, $19
million (unaudited) in fiscal year 1996, $13 million (unaudited) in fiscal year
1997, $8 million (unaudited) in fiscal year 1998 and $7 million (unaudited) in
fiscal year 1999.
(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 the retail market for fluid milk and to fix the
retail price of fluid milk above competitive prices. Specifically, class
F-15
<PAGE> 53
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
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. The
Court has yet to certify any of these classes. A demurrer to the complaints
was denied. Notwithstanding that it believes there is no merit to these cases,
Ralphs had reached an agreement in principle to settle them. However, no
settlement agreement has been signed. 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, In. ("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 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. Ralphs has appealed the judgment and fully reserved in Fiscal 1992
against an adverse ruling by the appellate courts.
In April 1994, Ralphs 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 Ralphs 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 Ralphs 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 Ralphs 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, Ralphs is a defendant 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 Ralphs'
financial position or results of operations.
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 investigation 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 the 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 underground storage tanks and remediated soil
contamination at the Atwater property. In some instances the removals and the
contamination were associated with grocery business operations; in others they
were associated with prior property users. Although the possibility of other
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.
F-16
<PAGE> 54
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
Apart from the Atwater property, the Company has recently had
environmental assessments performed on a significant portion of its 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 conversion of refrigerants during 1994. Other than these
expenditures, Ralphs has not 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.
Ralphs is 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.
(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,
19892, 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 ("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 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, fiscal 1993 and
fiscal 1994.
The amount of Equity Rights redeemable for each of the four years
subsequent to fiscal 1994 are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . . $ 6,669
1996 . . . . . . . . . . . . . . . . . . . . 12,389
1997 . . . . . . . . . . . . . . . . . . . . 3,636
1998 . . . . . . . . . . . . . . . . . . . . 10,150
-------
$32,844
=======
</TABLE>
F-17
<PAGE> 55
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
(11) INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 31, JANUARY 30, JANUARY 29,
1993 1994 1995
========== ========== ==========
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal . . . . . . . . . . . . . . . . . . $ 4,173 $ (2,424) $ 713
State . . . . . . . . . . . . . . . . . . . -- 3,500 2,653
------- ---------- --------
$ 4,173 $ 1,076 $ 3,366
------- ---------- --------
Deferred
Federal . . . . . . . . . . . . . . . . . . $ -- $ (109,125) $ (3,366)
State . . . . . . . . . . . . . . . . . . . -- -- --
------- ---------- --------
$ -- $ (109,125) $ (3,366)
------- ----------- ---------
Total income tax expense (benefit) . . . . . $ 4,173 $ (108,049) $ --
======= =========== ========
</TABLE>
Income tax expense (benefit) has been classified in the accompanying
statements of operations as follows:
<TABLE>
<CAPTION>
1993 1994 1995
========= ========== =========
<S> <C> <C> <C>
Earnings before extraordinary items . . . . . . . . $ 8,346 $ (108,049) $ --
Extraordinary item . . . . . . . . . . . . . . . . (4,173) -- --
--------- ---------- --------
Net tax expense (benefit) . . . . . . . . . . . . . $ 4,173 $ (108,049) $ --
======== =========== ========
</TABLE>
F-18
<PAGE> 56
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
The differences between income tax expense and income taxes computed using
the top marginal U.S. Federal income tax rate of 34% for Fiscal 1992 and, of
35% for Fiscal 1993 and Fiscal 1994 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 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 31, JANUARY 30, JANUARY 29,
1993 1994 1995
========== ========== ==========
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Amount of expected expense (benefit) computed
using the statutory Federal rate . . . . . . $(24,450) $ 10,611 $ 11,241
Utilization of financial operating loss . . -- (10,611) (11,241)
Amortization of excess cost over net assets
acquired . . . . . . . . . . . . . . . . . 3,356 -- --
State income taxes, net of Federal income
tax benefit . . . . . . . . . . . . . . . . -- 3,500 2,653
Accounting limitation (recognition) of deferred
tax benefit . . . . . . . . . . . . . . . . 20,041 (109,125) (3,366)
Alternative minimum tax . . . . . . . . . . 4,173 625 --
Other, net . . . . . . . . . . . . . . . . . 1,053 (3,049) 713
-------- ----------- --------
Total income tax expense (benefit) . . . $ 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 30, JANUARY 29,
1994 1995
========== ==========
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deductible intangible assets . . . . . . . . . . . . . . . . . . . . . $ 56,000 $ 43,000
Net operating loss carryforward and tax credit . . . . . . . . . . . . 40,125 55,000
Self insurance accrual . . . . . . . . . . . . . . . . . . . . . . . . 43,000 25,000
Software basis difference and amortization . . . . . . . . . . . . . . -- --
Fees collected in advance . . . . . . . . . . . . . . . . . . . . . . -- 2,600
Property, plant and equipment basis difference and
depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,000 16,000
Equity appreciation rights . . . . . . . . . . . . . . . . . . . . . . 16,000 11,000
Favorable lease basis differences . . . . . . . . . . . . . . . . . . 16,000 16,000
State deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . 17,000 19,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 51,103
--------- ---------
249,125 238,703
Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . (140,000) (126,212)
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 109,125 $ 112,491
========= =========
</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.
F-19
<PAGE> 57
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
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 29, 1995. 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 and
financial statement basis of excess of cost over net assets acquired aggregated
$123.0 million at January 29, 1995.
During the year ended January 30, 1994, Ralphs 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 $320.0
million.
At January 29, 1995, the Company has Federal net operating loss (NOL)
carryforwards of approximately $162.0 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.
During the past three fiscal years, the Company has generated Federal
taxable losses of approximately $162.0 million versus financial pre-tax
earnings of approximately $65.2 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 credited service (defined at 1,000 hours). Ralphs' policy is to
fund pension costs at or above the minimum annual requirement.
On February 23, 1990, the Company adopted a Supplemental Executive
Retirement Plan covering certain key officers of Ralphs. The Company has
purchased split dollar life insurance policies for participants under this
plan. Under certain circumstances, the cash surrender value of certain split
dollar life insurance policies will offset Ralphs obligations under the
Supplemental Executive Retirement Plan.
During the second quarter of 1994, the Company approved and adopted a new
non-qualified retirement plan, the Ralphs Grocery Company Retirement
Supplemental Plan ("Retirement Supplement Plan") effective January 1, 1994 and
amended the existing Supplemental Executive Retirement Plan effective April 9,
1994. These changes to the retirement plans were made pursuant to the enactment
of the 1993 Omnibus Budget Reconciliation Act.
F-20
<PAGE> 58
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
At January 29, 1995, the Company recorded a $4.0 million additional
minimum liability in offsetting intangible asset to reflect the changes in the
new and amended plans.
Under the provisions of the Retirement Supplement Plan, participants are
entitled to receive benefits based on earnings over the indexed amount of
$150,000.
The following actuarially determined components were included in the net
pension expense:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 31, JANUARY 30, JANUARY 29,
1993 1994 1995
========== ========== ==========
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost . . . . . . . . . . . . . . . . . $ 2,076 $ 2,228 $ 2,901
Interest cost on projected benefit obligation 2,471 2,838 3,821
Actual return on assets . . . . . . . . . . . (2,794) (2,695) (1,447)
Net amortization and deferral . . . . . . . . 237 (46) (1,100)
------- ------ - -------
Net pension expense . . . . . . . . . . . . $ 1,990 $ 2,325 $ 4,175
======= ======= =======
</TABLE>
The funded status of Ralphs, pension plan, (based on December 31, 1993 and
1994 asset values), is as follows:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS
ENDED ENDED
JANUARY 30, JANUARY 29,
1994 1995
========== ==========
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets Exceed Accumulated Benefits:
Actuarial present value of benefit obligations:
Vested benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . $29,659 $31,621
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . 29,950 31,856
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . 42,690 45,246
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . 32,968 38,179
------- -------
Projected benefit obligation in excess of Plan Assets . . . . . . . . . . . (9,722) (7,067)
Unrecognized net gain . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,567 3,611
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . . (1,778) (1,659)
Unrecognized net asset . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
------- -------
Accrued pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . $(6,933) $(5,115)
======= =======
</TABLE>
F-21
<PAGE> 59
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
<TABLE>
<CAPTION>
JANUARY 29,
1995
===========
(000'S)
<S> <C>
Accumulated Benefits Exceed Assets:
Actuarial present value of benefit obligations:
Vested benefit obligation . . . . . . . . . . . . . . . . $ 2,982
Accumulated benefit obligation . . . . . . . . . . . . . 2,982
Projected benefit obligation . . . . . . . . . . . . . . 7,102
Plan assets at fair value . . . . . . . . . . . . . . . . --
-------
Projected benefit obligation in excess of Plan Assets . . . (7,102)
Unrecognized net gain . . . . . . . . . . . . . . . . . . . (229)
Unrecognized prior service cost . . . . . . . . . . . . . . 8,354
Unrecognized net asset . . . . . . . . . . . . . . . . . . (4,005)
-------
Accrued pension cost . . . . . . . . . . . . . . . . . . $(2,982)
=======
</TABLE>
The accrued pension cost for accumulated benefits that exceeded assets at
January 30, 1994 was immaterial to the consolidated financial statements.
Service costs for fiscal 1992 and 1993 were calculated using a discount
rate of 8.5% and a rate of increase in future compensation levels of 6.0%. The
1994 discount rate and the rate of increase in future compensation levels were
reduced to 7.75% and 5.0% respectively to reflect the decline in interest rates
in 1994. The discount rate will be increased to 8.25% in 1995 in order to
reflect the increase in the current long-term interest rate. A long-term rate
of return on assets of 9.0% was used for fiscal 1992, 1993 and 1994.
The pension plan assets consist primarily of common stocks, bonds, debt
securities, and a money market fund. Plan benefits are based primarily on
years of service and on average compensation during the last years of
employment.
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
received a prorata share of 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, $12.7 million, was 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.
F-22
<PAGE> 60
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
The expense related to these plans is summarized as follows:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 31, JANUARY 30, JANUARY 29,
1993 1994 1995
========== ========== ==========
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Multi-employer pension plans . . . . . . . . . . . $ 7,973 $17,687 $ 8,897
======= ======= =======
Multi-employer health and welfare . . . . . . . . . $71,183 $45,235 $66,351
======= ======= =======
</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 12% 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 1992, 1993 and 1994 were $407,961, $431,774 and $446,826,
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 1992, 1993 and 1994 was $2.5
million, $2.6 million and $2.4 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 1992, 1993
and 1994 was $2.8 million, $3.0 million and $3.1 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 $1,270 per individual, indexed to the Medical Consumer Price Index.
F-23
<PAGE> 61
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
The net periodic cost of the Postretirement Medical Plan includes the
following components:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 31, JANUARY 30, JANUARY 29,
1993 1994 1995
========== ========== ==========
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost . . . . . . . . . . . . . . . . . . . $1,908 $1,767 $1,396
Interest cost . . . . . . . . . . . . . . . . . . . 1,367 1,603 1,387
Return on plan assets . . . . . . . . . . . . . . . -- -- --
Net amortization and deferral . . . . . . . . . . . -- -- (228)
------ ------ -------
Net postretirement benefit cost . . . . . . . . . $3,275 $3,370 $2,555
====== ====== ======
</TABLE>
The funded status of the postretirement benefit plan is as follows:
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS
ENDED ENDED
JANUARY 30, JANUARY 29,
1994 1995
========== ==========
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,237 $ 1,303
Fully eligible plan participants . . . . . . . . . . . . . . . . . . . . . 357 1,499
Other active plan participants . . . . . . . . . . . . . . . . . . . . . . 16,062 10,289
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . -- --
-------- --------
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,656) (13,091)
Plan assets in excess of projected obligations . . . . . . . . . . . . . . -- --
Unrecognized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . 6,302 13,676
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . . -- (358)
-------- ---------
Accrued postretirement benefit obligation . . . . . . . . . . . . . . . . . $(23,958) $(26,409)
========= =========
</TABLE>
Service cost was calculated using a medical cost trend of 10.5% for fiscal
1992. Service cost was calculated using a medical cost trend of 10.5% and a
decreasing medical cost trend rate of 14% - 8% for 1993 and 1994 respectively.
The discount rate for 1993 was 8.5% and was reduced to 7.75% in 1994 to reflect
the decline in interest rates in 1994. In 1995, the discount rate will
increase to 8.25% in order to reflect the increase in the current long-term
interest rate. The long term rate of return of plan assets is not applicable as
the plan is not funded.
The effect of a one-percent increase in the medical cost trend would
increase the fiscal 1994 service and interest cost to 18%. The accumulated
postretirement benefit obligation at January 29, 1995 would also increase by
27%.
F-24
<PAGE> 62
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
(13) QUARTERLY RESULTS (UNAUDITED)
Quarterly results for fiscal 1993 and 1994 are as follows:
<TABLE>
<CAPTION>
GROSS OPERATING INCOME NET
SALES PROFIT INCOME TAXES EARNINGS
===== ====== ====== ===== ========
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
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
======== ====== ====== ======== ======
FY 1994 Quarters
12 weeks ended 04/24/94 . . . . . . . . . . . $ 616.0 $141.7 $ 34.1 $ -- $ 8.4
12 weeks ended 07/17/94 . . . . . . . . . . . 625.0 142.9 32.9 -- 7.2
12 weeks ended 10/09/94 . . . . . . . . . . . 615.4 138.8 30.8 -- 4.3
16 weeks ended 01/29/95 . . . . . . . . . . . 868.2 200.2 47.8 -- 12.2
-------- ------ ------ ------ ------
Total . . . . . . . . . . . . . . . . . $2,724.6 $623.6 $145.6 $ -- $ 32.1
======== ====== ====== ====== ======
</TABLE>
(14) SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 31, JANUARY 30, JANUARY 29,
1993 1994 1995
========== ========== ==========
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Supplemental cash flow disclosures:
Interest paid, net of amounts capitalized . . . . $ 118,391 $ 93,738 $ 99,067
Income taxes paid . . . . . . . . . . . . . . . . $ 7,169 $ 2,423 $ 6,270
Capital lease assets and obligations assumed . . $ -- $ 15,395 $ 41,131
</TABLE>
F-25
<PAGE> 63
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
(15) STOCK OPTION PLAN
On February 3, 1992, 3,162,235 options for Common Stock of the Holding
Company were granted under the Ralphs Nonqualified 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.
The following table summarizes the Ralphs Non- qualified Stock Option Plan.
<TABLE>
<S> <C> <C>
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 -- --
--------- ------
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 -- --
--------- ------
</TABLE>
The option price for outstanding options at January 29, 1995 assumes a
grant date fair market value of Common Stock of the Holding Company equal to
$20.21 per share, which represents the high end of a range of estimated values
of the Common Stock of the Holding Company on February 3, 1992, the date of the
grant.
F-26
<PAGE> 64
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
(16) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The methods and assumptions used to estimate the fair value of each class
of financial instruments for which it is practicable to estimate that value is
discussed in Note 2.
The unaudited fair value of each class of financial instruments (where
practical), all held for non-trading purposes, is as follows in (000's):
<TABLE>
<CAPTION>
JANUARY 30, 1994 JANUARY 29, 1995
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Long term debt . . . . . . . . . . . $ 998,884 $ 1,014,634 $967,009 $953,883
Interest rate swap agreements . . . n/a 1,153 n/a 1,252
Interest rate cap agreements . . . . n/a (19) n/a (366)
</TABLE>
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>
1992 . . . . . . . . . . . . . . 10.52% 10.22%
1993 . . . . . . . . . . . . . . 8.96% 8.96%
1994 . . . . . . . . . . . . . . 9.37% 9.18%
</TABLE>
(17) THE MERGER (UNAUDITED)
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 (as
amended from time to time, the "Merger Agreement") with Ralphs Supermarkets,
Inc. (the "Holding Company") and its stockholders. Pursuant to the terms of the
Merger Agreement, Food 4 Less will be merged with and into Holding Company (the
"RSI Merger") and Holding Company will continue as the surviving corporation.
Food 4 Less is a multiple format supermarket operator that operates in three
geographic areas: Southern California, Northern California and certain areas of
the Midwest.
Immediately following the RSI Merger, Ralphs Grocery Company ("RGC"), which
is currently a wholly-owned subsidiary of Holding Company, will merge with and
into Holding Company (the "RGC Merger", and together with the RSI Merger, the
"Merger"), and Holding Company will change its name to Ralphs Grocery Company
(the "New 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 with 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 New Company will
become a wholly-owned subsidiary of New Holdings. Agreement has been reached
with each of the California Attorney General and the Federal Trade Commission
for approval of the Merger. Food 4 Less and Ralphs have agreed in a settlement
agreement with the Attorney General to divest 27 specific stores in Southern
California. Under the agreement, the Company must divest 14 stores by June 30,
1995, and the balance of 13 stores by December 31, 1995.
F-27
<PAGE> 65
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS---(CONTINUED)
In order to consummate the Merger, Food 4 Less has made an Offer to
Exchange and Offer to Purchase and Solicit Consents with respect to the holders
of the 9% Senior Subordinated Notes (the "Old RGC 9% Notes") due April 1, 2003
of Ralphs and the 10 1/4% Senior Subordinated Notes due July 15, 2002 of RGC
(the "Old RGC 10 1/4% Notes" and together with the Old RGC 9% Notes, the "Old
RGC Notes") (i) to exchange (as so amended and restated, the "Exchange Offers")
such Old RGC Notes for New Senior Subordinated Notes due 2005 (the "New Notes")
plus a cash payment of $20.00 in cash for each $1,000 principal amount of Old
RGC Notes tendered for exchange or (ii) to purchase (the "Cash Offers", and
together with the Exchange Offers, the "Offers") Old RGC Notes, for $1,010 in
cash per $1,000 principal amount of Old RGC Notes accepted for purchase, in each
case, plus accrued and unpaid interest to the date of exchange or purchase. The
Offers are subject to the terms and conditions set forth in an Amended and
Restated Prospectus and Solicitation Statement filed by Food 4 Less
with the Securities and Exchange Commission (the "Prospectus") and which is
subject to further changes, including: (1) satisfaction of a minimum tender
amount (i.e., at least a majority of the aggregate principal amount of the
outstanding Old RGC Notes being validly tendered for exchange for New Notes and
not withdrawn pursuant to the Offers prior to the date of expiration); (2) the
receipt of the requisite consents to certain amendments to the indentures (the
"Indentures") under which the Old RGC Notes were issued (i.e., consents from
holders of Old RGC Notes representing at least a majority in aggregate
principal amount of each issue of Old RGC Notes held by persons other than
Ralphs and its affiliates) on or prior to the date of expiration; (3) the
satisfaction or waiver, in Food 4 Less' sole discretion, of all conditions
precedent to the Merger; (4) the prior or contemporaneous consummation of other
exchange offers, consent solicitations and public offerings contemplated by the
Prospectus; and (5) the prior or contemporaneous consummation of the bank
financing and the equity investment described in the Prospectus. As a result of
the RSI Merger and the RGC Merger, the New Notes and any outstanding Old RGC
Notes not tendered in the Offers will be the obligations of the New Company.
Conditions to the consummation of the RSI Merger include the receipt of
necessary consents and the completion of financing of the transaction. The
purchase price for Holding Company is approximately $1.5 billion, including the
assumption or repayment of debt. The consideration payable to the stockholders
of Holding Company consist of $375 million in cash, $131.5 million principal
amount of 13 5/8% Senior Subordinated Pay-in-Kind Debentures due 2007 to be
issued to the selling shareholders of Holding Company (the "Seller Debentures")
by New Holdings and $18.5 million initial accreted value of 13 5/8% Senior
Discount Debentures due 2005 (the "New Discount Debentures"). New Holdings will
use $100 million of cash received from a new equity investment (the "New
Equity Investment"), together with the Seller Debentures and the New Discount
Debentures, to acquire approximately 48% of the capital stock of Holding Company
immediately prior to consummation of the RSI Merger. New Holdings will then
contribute the $250 million of purchased shares of Holding Company stock to Food
4 Less, and pursuant to the RSI Merger the remaining shares of Holding Company
stock will be acquired for $275 million in cash.
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 pursuant to the
Indentures. The consummation of the Merger 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
Indentures. Although RGC does not anticipate that there will be a significant
amount of Old RGC Notes outstanding following consummation of the Exchange
Offers, upon such a Change of Control Triggering Event, the New 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 plus accrued
and unpaid interest to the date of repurchase.
Due to the increased size, dual format strategy and integration related
costs, after giving effect to or in connection with the Merger, RGC believes
that its future operating results will not be directly comparable to the
historical operating results of RGC. Upon consummation of the Merger, the
operations and activities of RGC 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. The
consolidation may result in a restructuring charge for the New Company. The
amount of the restructuring charge is not 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 RGC and the New Company.
Following the consummation of the Merger, the New Company will be highly
leveraged.
F-28
<PAGE> 66
RALPHS GROCERY COMPANY
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER DEDUCTIONS AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(2) (PAYMENTS) OF PERIOD
========================= ========= ========== =========== ========== =========
<S> <C> <C> <C> <C> <C>
January 29, 1995:
Self-Insurance
Reserves (1) . . . . . . . . $80,010 $18,149 $ 2,530 $(27,483) $73,206
Store Closure Reserves . . . $ 9,514 $ -- $ -- $ (764) $ 8,750
January 30, 1994:
Self-Insurance
Reserves (1) . . . . . . . . $72,979 $30,323 $ 5,953 $(29,245) $80,010
Store Closure Reserves . . . $10,277 $ -- $ -- $ (763) $ 9,514
January 31, 1993:
Self-Insurance
Reserves (1) . . . . . . . . $64,523 $25,950 $ 10,902 $(28,396) $72,979
Store Closure Reserves . . . $14,244 $ 1,838 $ -- $ (5,805) $10,277
</TABLE>
(1) Includes short term portion.
(2) Amortization of discount on self-insurance reserves to interest expense.
S-1
<PAGE> 1
EXHIBIT 10.29
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 (this "Amendment"), dated as of January
12, 1995, to the Agreement and Plan of Merger, dated as of September 14, 1994
(the "Merger Agreement"), is by and among Food 4 Less, Inc., a Delaware
corporation ("F4L"), Food 4 Less Holdings, Inc., a California corporation ("F4L
Holdings"), Food 4 Less Holdings, Inc., a Delaware corporation ("F4L Holdings
Delaware"), Food 4 Less Supermarkets, Inc., a Delaware corporation ("F4L
Supermarkets"), Ralphs Supermarkets, Inc., a Delaware corporation ("Ralphs
Supermarkets"), and The Edward J. DeBartolo Corporation ("EJDC") and the other
stockholders of Ralphs Supermarkets (each a "Selling Stockholder").
Capitalized terms not otherwise defined herein have the meanings given to them
in the Merger Agreement.
WHEREAS, F4L, F4L Holdings, F4L Supermarkets, Ralphs
Supermarkets and the Selling Stockholders previously have entered into the
Merger Agreement, by which the parties agreed to merge F4L Supermarkets with
and into Ralphs Supermarkets (the "Merger") in accordance with the terms and
conditions of the Merger Agreement and Section 251 of the General Corporation
Law of the State of Delaware (the "GCL");
WHEREAS, the parties desire to amend certain provisions of
the Merger Agreement as more fully set forth herein;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto agree as follows:
1. Mergers of F4L into F4L Holdings and F4L Holdings
into F4L Holdings Delaware. Notwithstanding anything to the contrary contained
in the Merger Agreement, the parties acknowledge that on or prior to the
Closing Date, (a) F4L will be merged with and into F4L Holdings, the separate
existence of F4L (except as may be continued by operation of law) shall cease,
and F4L Holdings shall be the surviving corporation in such merger; and (b) F4L
Holdings thereupon will be merged with and into F4L Holdings Delaware, the
separate existence of F4L Holdings (except as may be continued by operation of
law) shall cease, and F4L Holdings Delaware shall continue as the surviving
corporation following such merger. F4L, F4L Holdings and F4L Supermarkets
represent and warrant that F4L Holdings Delaware is a wholly-owned subsidiary
of F4L Holdings having no assets and liabilities, and that the sole purpose of
the merger of F4L Holdings into F4L Holdings Delaware is to change the
jurisdiction of incorporation of F4L Holdings from California to Delaware. By
operation of the foregoing mergers, F4L Holdings Delaware shall assume all
liabilities and obligations of F4L and F4L Holdings under the Merger Agreement,
the Indenture and the Registration Rights Agreement, including without
limitation the obligation to issue the Debentures and to file with the SEC the
Shelf Registration Statement. From and after the merger of F4L Holdings into
F4L Holdings Delaware, all references in the Merger Agreement to "F4L Holdings"
shall be deemed to be references to F4L Holdings Delaware, and all
representations, warranties and covenants of F4L Holdings shall be
representations, warranties and covenants of F4L Holdings Delaware, as fully as
if they originally had been made by F4L Holdings Delaware.
<PAGE> 2
2. Additional Defined Terms.
(a) The definition of "Closing Date" in Section 1.1 of
the Merger Agreement is hereby amended to read as follows:
"Closing Date" shall mean March 15, 1995 or such
other date as promptly thereafter as of which all of the conditions
set forth in Articles VIII and IX shall have been satisfied or duly
waived or, if F4L and Ralphs Supermarkets shall mutually agree upon a
different date, the date upon which they, with the consent of EJDC,
shall have mutually agreed upon in writing.
(b) Section 1.2 of the Merger Agreement is hereby amended
to include the following terms defined in the amended Sections set forth
opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Accrued Interest Amounts 2.6(e)
Acquisition Consideration 2.6(a)
Constituent Corporations 2.3
EAR 2.7
EAR Plan 2.7
Effective Date 2.4
Fractional Amounts 2.1(b)
Merger Consideration 2.6(a)
Option 2.7
Purchase Consideration 2.1(a)
Share Purchase 2.1(a)
Surviving Corporation 2.2
</TABLE>
(c) All references in Articles III through XII of the
Merger Agreement to the "Merger Consideration" are hereby amended to read
"Acquisition Consideration."
(d) All references in the Merger Agreement to the
"Merger" are hereby deemed to incorporate by reference the "Share Purchase"
except where the context otherwise requires.
(e) All references in the Merger Agreement to the
"Agreement" and all references in this Amendment to the "Merger Agreement" are
hereby deemed to incorporate by reference this Amendment.
3. Amendment of Article II. Article II of the Merger
Agreement is hereby amended to read in full as follows:
"ARTICLE II
The Share Purchase and Merger
Section 2.1 The Share Purchase. On the Closing Date,
immediately prior to the filing of the certificate of merger with the Delaware
Secretary of State in accordance with Section 2.4 below:
2
<PAGE> 3
(a) F4L Holdings Delaware will purchase 12,184,418.99116
Shares (the "Share Purchase"), pro rata from the Selling Stockholders in
proportion to their respective holdings, for per Share consideration consisting
of $12.31060748 in cash and $8.2074 principal amount of Debentures (or the pro
rata portion of such cash and Debentures, in the case of fractional shares)
(collectively, and together with the cash amounts referred to in Section 2.1(b)
below, the "Purchase Consideration"). The Purchase Consideration payable to
each Selling Stockholder, and the number of shares to be sold by each of them
in the Share Purchase, is set forth in Schedule 2.1.
(b) Debentures will be issued only in denominations of
$1000 and integral multiples of $1000. A Selling Stockholder will not be
entitled to receive Debentures in principal amounts less than $1000, or in
principal amounts in excess of $1000 (or an integral multiple thereof) but less
than the next highest integral multiple ("Fractional Amounts"), but instead
will be entitled to receive cash in lieu of any such Fractional Amount.
(c) F4L Holdings Delaware will immediately contribute the
12,184,418.99116 Shares acquired in the Share Purchase to the capital of F4L
Supermarkets.
Section 2.2 The Merger. At the Effective Date,
immediately following the Share Purchase and in accordance with this Agreement
and the GCL (and subject to the provisions of Section 2.10 hereof), F4L
Supermarkets shall be merged with and into Ralphs Supermarkets, the separate
existence of F4L Supermarkets (except as may be continued by operation of law)
shall cease, and Ralphs Supermarkets shall continue as the surviving
corporation. As constituted from and after the Effective Date, Ralphs
Supermarkets hereinafter sometimes is referred to as the "Surviving
Corporation."
Section 2.3 Effect of the Merger. When the Merger has
been effected, the Surviving Corporation shall thereupon and thereafter possess
all the rights, privileges, immunities and franchises, of a public as well as
of a private nature, of F4L Supermarkets and Ralphs Supermarkets (the
"Constituent Corporations"); all property, real, personal and mixed, and all
debts due on whatever account and all choses in action, and all and every other
interest, of or belonging to or due each of the Constituent Corporations shall
be vested in the Surviving Corporation without further act or deed; and the
title to any real estate, or any interest therein, vested in F4L Supermarkets,
Ralphs Supermarkets or the Surviving Corporation shall not revert or be in any
way impaired by reason of the Merger. The Surviving Corporation shall
thenceforth be responsible and liable for all the liabilities and obligations
of each of the Constituent Corporations so merged; any claim existing or action
or proceeding pending by or against any of the Constituent Corporations may be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in its place. The Surviving Corporation shall have all the
rights, privileges, immunities and powers and shall be subject to all the
duties and liabilities of a corporation organized under the GCL, and neither
the rights of creditors nor any liens upon the respective properties of the
Constituent Corporations and the Surviving Corporation shall be impaired by the
Merger; all with the effect set forth in the GCL.
Section 2.4 Consummation of the Merger. As soon as is
practicable after the satisfaction or waiver of the conditions hereinafter set
forth, the parties hereto will cause the Merger to be consummated by filing
with the Secretary of State of Delaware a certificate of merger in such form as
required by, and executed in accordance with, the relevant provisions of the
GCL (the time of such filing being the "Effective Date").
Section 2.5 Restated Certificate of Incorporation;
Bylaws; Directors and Officers. The Restated Certificate of Incorporation and
Bylaws of the Surviving Corporation shall be the Certificate
3
<PAGE> 4
of Incorporation and Bylaws of Ralphs Supermarkets, as in effect immediately
prior to the Effective Date, until thereafter amended as provided therein and
under the GCL, except that the Restated Certificate of Incorporation of the
Surviving Corporation shall provide for the authorized capitalization and for
the number of directors set forth in the certificate of merger filed with the
Delaware Secretary of State.
Section 2.6 Conversion of Securities. At the Effective
Date, by virtue of the Merger and without any action on the part of F4L
Supermarkets, Ralphs Supermarkets, the Surviving Corporation or the holder of
any of the following securities:
(a) Each Share (or fractional Share) issued and
outstanding immediately prior to the Effective Date, except for the Shares held
by F4L Supermarkets, shall be cancelled and extinguished and be converted into
and become a right to receive $20.51800748 in cash (or the pro rata portion of
such cash, in the case of fractional Shares) (collectively, the "Merger
Consideration," and together with the Purchase Consideration and the Accrued
Interest Amounts (as defined in Section 2.6(e) below), the "Acquisition
Consideration"). Each Selling Stockholder hereby waives all dissenters',
appraisal and other rights arising under Section 262 of the GCL (or comparable
provisions of any applicable laws of other jurisdictions) with respect to its
Shares in the Merger. The Merger Consideration payable to each Selling
Stockholder is set forth in Schedule 2.1. At the Effective Date, each Share
(or fractional Share) held by F4L Supermarkets shall be cancelled and
extinguished without payment of consideration.
(b) Each share of Common Stock, par value $0.01 per
share, of F4L Supermarkets issued and outstanding immediately prior to the
Effective Date shall be converted into and become one validly issued, fully
paid and nonassessable share of Common Stock of the Surviving Corporation.
Each share of Preferred Stock, par value $0.01 per share, of F4L Supermarkets
issued and outstanding immediately prior to the Effective Date shall be
cancelled and extinguished without payment of consideration.
(c) All notes and other debt instruments of the
Constituent Corporations which are outstanding at the Effective Date shall
continue to be outstanding subsequent to the Effective Date as debt instruments
of the Surviving Corporation, if permitted by their respective terms and
provisions.
(d) There shall be withheld from the cash consideration
set forth in Sections 2.1(a) and 2.6(a) any amounts lawfully required to be
withheld and paid over to any taxing authority with respect to any Selling
Stockholder (whether by reason of receipt of the Acquisition Consideration or
any other consideration received in, or in connection with, the transactions
contemplated by the Merger Agreement); it being agreed, however, that except as
otherwise required as a result of a change after the date hereof in law
(including court decisions), regulations or administrative interpretation
thereof: (i) if the Company provides a FIRPTA certificate as set forth in
Section 7.1(h) hereof (and F4L Supermarkets has no reason to believe that such
certificate is not true and complete), no portion of the cash consideration
shall be withheld pursuant to sections 897 and 1445 of the Code, and (ii) if
such Selling Stockholder provides an opinion of counsel in form and substance
reasonably satisfactory to F4L Supermarkets and to F4L Supermarkets' counsel to
the effect that no portion of the Acquisition Consideration to be received by
such Selling Stockholder is subject to withholding under sections 1441 or 1442
of the Code, no amount of the cash consideration shall be withheld pursuant to
sections 1441 or 1442 of the Code.
(e) If the Closing shall occur on or after March 16,
1995, the Acquisition Consideration payable to each Selling Stockholder shall
include an additional cash amount equal to the amount of simple interest
accrued on the Purchase Consideration (including the principal amount of Seller
4
<PAGE> 5
Debentures) and the Merger Consideration payable to such Selling Stockholder,
calculated on the basis of the number of full days elapsed from 8:00 a.m. (New
York time) March 16, 1995 to the Closing and prorated based on a 360-day year
(collectively, the "Accrued Interest Amounts"). The rate of interest
applicable to the Accrued Interest Amounts shall be (i) the rate announced from
time to time by Bankers Trust Company as then being its prime rate of interest
plus (ii) 1%.
Section 2.7 Ralphs Supermarkets Stock Options and Related
Matters. At or immediately prior to the Effective Date, each then outstanding
stock option (an "Option") to purchase Shares, heretofore granted under the
Ralphs Holding Company Nonqualified Stock Option Plan dated February 3, 1992
(whether or not such Option is then exercisable) shall be cancelled, exercised
or surrendered by the holder thereof, without payment of consideration for such
cancellation or surrender (or payment of Acquisition Consideration with respect
to any Shares acquired upon exercise thereof) in excess of $880,000 (including
the principal amount of any Debentures issued as Acquisition Consideration with
respect to Shares acquired upon exercise thereof). At or immediately prior to
the Effective Date, each then outstanding equity appreciation right (an "EAR")
heretofore granted pursuant to the Company's Equity Appreciation Plan, as
amended through the date hereof (the "EAR Plan"), will be paid in accordance
with its terms. In the event that F4L (or any of its subsidiaries) and the
holders of such options or EARs enter into any agreement to modify or cancel a
portion of the options or EARs held by such person in connection with the
consummation of the Merger, the Company will execute such documentation as may
be reasonably requested by F4L (or any of its subsidiaries) to reflect such
modification or cancellation.
Section 2.8 Closing. The Closing shall take place on the
Closing Date at 10:00 A.M., Los Angeles time, at the offices of Latham &
Watkins, 633 West Fifth Street, Los Angeles, California 90071, or at such other
time and place as shall be agreed upon by the parties. At the Closing (a) the
Selling Stockholders and Ralphs Supermarkets, as applicable, will deliver to
F4L Supermarkets (i) certificates representing 100% of the issued and
outstanding Shares, in accordance with the provisions of Section 2.9, (ii)
corporate minute books, stock transfer books and Bylaws of Ralphs Supermarkets,
(iii) certificates of each Selling Stockholder and of Ralphs Supermarkets
(signed on behalf of such Selling Stockholder or Ralphs Supermarkets, as
applicable, by the Chairman, the President or a Vice President of each of them)
to the effect that the conditions set forth in Article VIII hereof (but only
insofar as such conditions relate to such Selling Stockholder or Ralphs
Supermarkets, as applicable) have been satisfied (except as waived by F4L
Supermarkets), (iv) an opinion of Willkie Farr & Gallagher, counsel to Ralphs
Supermarkets and EJDC, who may rely, as to matters of California and Ohio law,
on an opinion of Troy & Gould, counsel to Ralphs Supermarkets and an opinion of
Squire, Sanders & Dempsey, counsel to EJDC, and an opinion of Milbank, Tweed,
Hadley & McCloy, special tax counsel to Ralphs Supermarkets, relating to the
matters set forth in Exhibit B, and opinions of counsel to each Selling
Stockholder other than EJDC, relating to the matters set forth in Exhibit C,
(v) the certificate of incorporation of Ralphs Supermarkets certified by the
Secretary of State of Delaware and certificates of good standing of Ralphs
Supermarkets in Delaware and California, (vi) incumbency certificates with
respect to the officers of Ralphs Supermarkets and of each Selling Stockholder,
(vii) the resignation of such members of the Board of Directors of Ralphs
Supermarkets and Ralphs Grocery as shall be specified by F4L Supermarkets in
writing at least ten days prior to the Closing Date and (viii) such other
certificates, instruments or other documents as F4L Supermarkets may reasonably
request, in each case in form and substance reasonably satisfactory to F4L
Supermarkets; and (b) F4L Holdings Delaware and F4L Supermarkets, as
applicable, will cause to be delivered to each Selling Stockholder (i) the cash
portion of the Acquisition Consideration due to it by wire transfer in
immediately available funds to an account specified by such Selling
Stockholder, (ii) the Debenture portion of the Acquisition Consideration due to
it by delivery of one or more Debentures in appropriate principal amount, (iii)
certificates of F4L
5
<PAGE> 6
Holdings Delaware and F4L Supermarkets (signed on behalf of each of them by the
President or a Vice President of each of them) to the effect that the
conditions set forth in Article IX hereof have been satisfied (except as waived
by Ralphs Supermarkets and the Selling Stockholders), (iv) an opinion of Latham
& Watkins, counsel to F4L Holdings Delaware and F4L Supermarkets relating to
the matters set forth in Exhibit D, (v) the certificates of incorporation of
F4L Holdings Delaware and F4L Supermarkets certified by the Secretary of State
of Delaware and certificates of good standing of F4L Holdings Delaware in
Delaware and F4L Supermarkets in Delaware and California, (vi) incumbency
certificates with respect to the officers of F4L Holdings Delaware and F4L
Supermarkets, (vii) the solvency opinion referred to in Section 9.8, and (viii)
such other certificates, instruments or other documents as Ralphs Supermarkets
or any Selling Stockholder may reasonably request, in each case in form and
substance reasonably satisfactory to Ralphs Supermarkets or such Selling
Stockholder.
Section 2.9 Exchange of Certificates.
(a) From and after the Effective Date, each holder of a
certificate or certificates representing Shares shall surrender such
certificate or certificates to the Surviving Corporation, duly endorsed without
recourse except as provided herein, as the Surviving Corporation may require,
and shall receive in exchange therefor the Acquisition Consideration. At the
Effective Date, the holder of a certificate or certificates representing Shares
shall have no rights with respect to such Shares other than to surrender such
certificate or certificates pursuant to this Section 2.9. No interest shall
accrue on the Acquisition Consideration. If the Acquisition Consideration (or
any portion thereof) is to be delivered to any person other than the person in
whose name the certificate or certificates representing Shares surrendered in
exchange therefor is registered, it shall be a condition to such exchange that
the person requesting such exchange shall pay to the Surviving Corporation any
transfer or other taxes required by reason of the payment of the Acquisition
Consideration to a person other than the registered holder of the certificate
or certificates so surrendered, or shall establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Surviving Corporation nor any other
party hereto shall be liable to a holder of Shares for any Acquisition
Consideration delivered to a public official pursuant to applicable abandoned
property, escheat and similar laws.
(b) After the Effective Date, there shall be no transfers
of any Shares on the stock transfer books of the Surviving Corporation. If,
after the Effective Date, certificates formerly representing Shares are
presented to the Surviving Corporation, they shall be cancelled and exchanged
for the Acquisition Consideration in accordance with this Section 2.9.
Section 2.10 Alternative Transaction Structure. At the
election of F4L, the transactions contemplated by this Agreement may be
effected through a merger of a newly-formed shell subsidiary of F4L
Supermarkets with and into Ralphs Supermarkets in lieu of the Merger of F4L
Supermarkets with and into Ralphs Supermarkets, or through such other form of
transaction as F4L may determine to be appropriate, provided that such merger
or other form does not result in any consequences to any Selling Stockholder
which are less favorable to such Selling Stockholder than the consequences
which would have resulted from the Merger, and appropriate conforming changes
to this Agreement satisfactory to the Selling Stockholders are made."
4. Amendment of Section 6.14. Section 6.14 of the
Merger Agreement is hereby amended by deleting the last sentence of the first
paragraph hereof and inserting the following two sentences: "F4L Holdings
agrees that it will, or that it will cause F4L Supermarkets or another
Affiliate to, effective as of the Closing Date, execute a guarantee of the
obligations of Ralphs Supermarkets and
6
<PAGE> 7
its subsidiaries in favor of the DIR, which guarantee shall be similar to the
EJDC Guarantee and shall cover the period from and after the Closing Date.
EJDC agrees that it will, immediately prior to the Closing Date, notify the DIR
that the EJDC Guarantee will be terminated as of the Closing Date with respect
to periods on or after the Closing Date, and F4L Holdings agrees that it will,
or that it will cause F4L Supermarkets or another Affiliate to, execute on or
prior to the Closing Date such documents as are reasonably necessary to
effectuate such termination, all in accordance with DIR procedures."
5. Amendment of Article IX. Article IX of the Merger
Agreement is hereby amended to add the following new Section 9.13 at the end
thereof:
"Section 9.13 Ralphs Grocery Merger. The Selling
Stockholders shall have received evidence reasonably satisfactory to them that
all of the conditions precedent to the consummation of the merger of Ralphs
Grocery with and into the Surviving Corporation have been satisfied or waived
and that such merger will be consummated immediately following the
effectiveness of the Merger on the Closing Date."
6. Amendment of Section 11.1(b). Section 11.1(b) of the
Merger Agreement is hereby amended (i) to delete the date "January 16, 1995"
appearing in the second line thereof and to substitute in its place the date
"March 31, 1995" and (ii) to delete the date "March 31, 1995" appearing in the
third line thereof and to substitute in its place the date "April 30, 1995."
7. Schedules. Schedule 2.5(a) of the Merger Agreement
is hereby deleted and the attached Schedule 2.1 is hereby substituted in its
place and incorporated herein by reference.
8. Exhibit A. Exhibit A (Form of Indenture) of the
Merger Agreement is hereby deleted and the attached Exhibit A (Form of
Indenture) is hereby substituted in its place and incorporated herein by
reference.
9. Exhibit G. Exhibit G (Form of Registration Rights
Agreement) of the Merger Agreement is hereby amended as more fully described
below.
(a) The following sentence is hereby added at the end of
Section 2 of the Registration Rights Agreement: "It is understood that a
pledge to an institution or to an agent for one or more institutions made at
any time while the Shelf Registration Statement is effective shall be deemed to
be a pledge pursuant to an effective Registration Statement."
(b) Section 7(l) is hereby amended to read as follows:
"(l) cause all Registrable Securities covered by the Shelf Registration
Statement to be listed on each securities exchange on which similar securities
issued by the Company or any of its subsidiaries are then listed;"
10. Terms and Conditions. Except as specifically
modified herein, all other terms and conditions of the Merger Agreement shall
remain in full force and effect.
7
<PAGE> 8
IN WITNESS WHEREOF, this Amendment has been signed by or on
behalf of each of the parties as of the day first above written.
"F4L": FOOD 4 LESS, INC.
By: _________________________
Name:
Title:
"F4L HOLDINGS": FOOD 4 LESS HOLDINGS, INC.
By: _________________________
Name:
Title:
"F4L HOLDINGS DELAWARE": FOOD 4 LESS HOLDINGS, INC.
By: _________________________
Name:
Title:
"F4L SUPERMARKETS": FOOD 4 LESS SUPERMARKETS, INC.
By: _________________________
Name:
Title:
"RALPHS SUPERMARKETS": RALPHS SUPERMARKETS, INC.
By: _________________________
Name:
Title:
"SELLING
STOCKHOLDERS": THE EDWARD J. DEBARTOLO CORPORATION
By: _________________________
Name:
Title:
S-1
<PAGE> 9
CAMDEV PROPERTIES INC.
By: _________________________
Name:
Title:
BANK OF MONTREAL
By: _________________________
Name:
Title:
BANQUE PARIBAS
By: _________________________
Name:
Title:
FEDERATED DEPARTMENT STORES, INC.
By: _________________________
Name:
Title:
S-2
<PAGE> 10
SCHEDULE 2.1
CONSIDERATION TO RSI SHAREHOLDERS
<TABLE>
<CAPTION>
# shares purchased # shares convt'd mrgr cash purch price debentures
# RSI shares owned (Section 2.1) (Section 2.6) (Section 2.1(a)) (Section 2.1(a))
------------------ ------------------ --------------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
EJDC 15,440,600.00000 7,352,666.66429 8,087,933.33571 $ 90,515,793.24 $ 60,346,000
Camdev Properties, Inc. 3,276,681.37923 1,560,324.46579 1,716,356.91344 $ 19,208,542.04 $ 12,806,000
Bank of Montreal 2,591,815.11029 1,234,197.67117 1,357,617.43912 $ 15,193,723.08 $ 10,129,000
Banque Paribas 2,591,815.11029 1,234,197.67117 1,357,617.43912 $ 15,193,723.08 $ 10,129,000
Federated Department Stores, Inc. 1,686,368.28990 803,032.51874 883,335.77116 $ 9,885,818.13 $ 6,590,000
---------------- ---------------- ---------------- --------------- ------------
Total 25,587,279.88971 12,184,418.99116 13,402,860.89855 $149,997,599.57 $100,000,000
</TABLE>
<TABLE>
<CAPTION>
cash in lieu of fract tot cash purch price cash payable in merger cash total
(Section 2.1(b)) (Section 2.1) (Section 2.6) (purch + mrgr)
--------------------- -------------------- ---------------------- ---------------
<S> <C> <C> <C> <C>
EJDC $ 276.38 $ 90,516,069.62 $165,948,276.68 $256,464,346.30
Camdev Properties, Inc. $ 207.02 $ 19,208,749.06 $ 35,216,223.99 $ 54,424,973.05
Bank of Montreal $ 553.97 $ 15,194,277.05 $ 27,855,604.77 $ 43,049,881.82
Banque Paribas $ 553.97 $ 15,194,277.05 $ 27,855,604.77 $ 43,049,881.82
Federated Department Stores, Inc. $ 809.09 $ 9,886,627.23 $ 18,124,289.96 $ 28,010,917.19
--------- --------------- --------------- ---------------
Total $2,400.43 $150,000,000.00 $275,000,000.17 $425,000,000.17
</TABLE>
<TABLE>
<CAPTION>
Per share amounts
Purchase price
(Section 2.1)
--------------
<S> <C> <C>
cash $12.3106074800
debentures $ 8.2074000000
--------------- --------------
Total $20.5180074800
Merger consideration
(Section 2.6)
--------------------
cash $20.5180074800
</TABLE>
<PAGE> 11
SCHEDULE 2.1
CONSIDERATION TO RSI SHAREHOLDERS
<TABLE>
<S> <C>
cash purch $150,000,000.00
deb purch $100,000,000.00
</TABLE>
<PAGE> 12
EXHIBIT A
- -------------------------------------------------------------------------------
FOOD 4 LESS HOLDINGS, INC.
AND
NORWEST BANK MINNESOTA, N.A.
AS TRUSTEE
________
INDENTURE
Dated as of ___________ __, 1995
________
$100,000,000
13% Senior Subordinated Pay-in-Kind Debentures due 2007
- -------------------------------------------------------------------------------
<PAGE> 13
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA INDENTURE
Section Section
- ------- ---------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8; 7.10; 13.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6; 13.2
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10; 13.2
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2; 13.4
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2; 13.4
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.5
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5; 13.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.1
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.1
- -----------------------
</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.
<PAGE> 14
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Incorporation by Reference of TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 1.3. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE II - THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.1. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.2. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.4. Paying Agent To Hold Assets in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.5. Securityholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.6. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.7. Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.8. Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.9. Treasury Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.10. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.13. CUSIP Number. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE III - REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.1. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.2. Selection of Securities To Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.3. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.4. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.5. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.6. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IV - COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.1. Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.2. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.3. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.4. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.5. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.6. Maintenance of Properties and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.7. Compliance Certificate; Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
i
<PAGE> 15
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.8. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.9. SEC Reports and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.10. Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.11. Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.12. Limitation on Incurrences of Additional Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.13. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.14. Limitation on Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.15. Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.16. Limitation on Senior Subordinated Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.17. Limitation on Preferred Stock of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.18. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries . . . . . . . . . . . . . 38
ARTICLE V - SUCCESSOR CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.1. When Holdings May Merge, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.2. Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VI - DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.2. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.4. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.5. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.6. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.7. Rights of Holders To Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.8. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.9. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VII - TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.1. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.2. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.3. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.5. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.6. Reports By Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.7. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.8. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
ii
<PAGE> 16
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 7.9. Successor Trustee by Merger, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.11. Preferential Collection of Claims Against Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VIII - LEGAL DEFEASANCE AND COVENANT DEFEASANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.1. Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.2. Legal Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.3. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.4. Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.5. Deposited Money and U.S. Government Obligations to be Held in Trust;
Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.6. Repayment to Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.7. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE IX - AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.1. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.2. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.3. Compliance with TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.4. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.5. Notation on or Exchange of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.6. Trustee To Sign Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE X - MEETINGS OF SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.1. Purposes for Which Meetings May Be Called . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.2. Manner of Calling Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.3. Call of Meetings by Holdings or Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.4. Who May Attend and Vote at Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.5. Regulations May Be Made by Trustee; Conduct of the Meeting; Voting Rights; Adjournment . . . . . . . . 59
Section 10.6. Voting at the Meeting and Record To Be Kept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.7. Exercise of Rights of Trustee or Holders May Not Be Hindered or Delayed by Call of Meeting . . . . . . 60
ARTICLE XI - SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 11.1. Securities Subordinated to Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 11.2. No Payment on Securities in Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 11.3. Securities Subordinated to Prior Payment of All Senior Indebtedness on Dissolution,
Liquidation or Reorganization of Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
iii
<PAGE> 17
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 11.4. Holders to Be Subrogated to Rights of Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . 63
Section 11.5. Obligations of Holdings Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 11.6. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice . . . . . . . . . . . . . . . 64
Section 11.7. Application by Trustee of Assets Deposited with It. . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11.8. Subordination Rights Not Impaired by Acts or Omissions of Holdings or
Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11.9. Holders Authorize Trustee to Effectuate Subordination of Securities . . . . . . . . . . . . . . . . . 66
Section 11.10. Right of Trustee to Hold Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 11.11. Article Eleven Not to Prevent Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 11.12. No Fiduciary Duty of Trustee to Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . . . 66
ARTICLE XII - SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.1. Satisfaction and Discharge of the Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.2. Conditions to Satisfaction and Discharge of the Indenture . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE XIII - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 13.1. TIA Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 13.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 13.3. Communications by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 13.4. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 13.5. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 13.6. Rules by Trustee, Paying Agent, Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 13.7. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 13.8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 13.9. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 13.10. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 13.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 13.12. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 13.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
iv
<PAGE> 18
INDENTURE dated as of ________ __, 1995, between FOOD 4 LESS HOLDINGS, INC., a
Delaware corporation ("Holdings"), and Norwest Bank Minnesota, N.A., a National
Banking Association, 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 13% Senior Subordinated
Pay-in-Kind Debentures due 2007:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
"Acquired Indebtedness" means Indebtedness of a person or any of its
subsidiaries existing at the time such person becomes a Subsidiary or assumed
in connection with the acquisition of assets from such person and not incurred
by such person in connection with, or in anticipation or contemplation of, such
person becoming a Subsidiary or such acquisition.
"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 this Indenture, neither BT Securities Corporation
nor any of its Affiliates shall be deemed to be an Affiliate of Holdings or any
of its Subsidiaries.
"Affiliate Obligation" means any contractual obligation (not
constituting Indebtedness) between Holdings and any Affiliate, other than
obligations relating to the purchase or sale of goods in the ordinary course of
business made in compliance with Section 4.11 hereof.
"Affiliate Transaction" shall have the meaning provided 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, 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 Holdings 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
1
<PAGE> 19
disposition, or series of related sales, transfers or other dispositions, (i)
involving only Excluded Assets, (ii) resulting in Net Proceeds to Holdings or
any Subsidiary of $500,000 or less or (iii) pursuant to any foreclosure of
assets or other remedy provided by applicable law to a creditor of Holdings or
any Subsidiary with a Lien on such assets, which Lien is permitted 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 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 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 of Directors" means, with respect to any person, 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 equivalents (however designated) of
corporate stock, including each class of common stock and preferred stock of
such person, including Preferred Stock.
"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 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
2
<PAGE> 20
highest rating categories obtainable from either Moody's Investors Service,
Inc. or Standard & Poor's Ratings Group.
"Change of Control" means (I) 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 Holdings
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
Holdings (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 Holdings' Board
of Directors or (II) Holdings ceasing to own 100% of the outstanding voting
securities entitled to vote on a regular basis to elect a majority of the Board
of Directors of the Company.
"Change of Control Date" shall have the meaning provided in Section 4.14.
"Change of Control Offer" shall have the meaning provided in Section
4.14.
"Change of Control Payment Date" shall have the meaning provided in
Section 4.14.
"Company" means Food 4 Less Supermarkets, Inc., a Delaware corporation,
and its successors, including, without limitation, Ralphs Supermarkets (to be
renamed Ralphs Grocery Company) following the Merger.
"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, provided, however, that with respect to
the net income of Holdings, the net income of the Company and its subsidiaries
shall not be so excluded, notwithstanding the existence of any such Payment
3
<PAGE> 21
Restriction, so long as the terms of any such consensual Payment Restriction
limiting the payment of dividends are not materially more restrictive at the
time of determination of Consolidated Net Income than the most restrictive
Payment Restriction limiting the payment of dividends in effect on the Issue
Date; 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
Holdings or any of its Subsidiaries in connection with the Merger, including,
without limitation, the divestiture of the Excluded Assets, (viii) losses
incurred by Holdings and its Subsidiaries resulting from earthquakes and (ix)
with respect to Holdings and its Subsidiaries, 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 Disqualified Capital Stock) of such
person and its subsidiaries determined on a consolidated basis in accordance
with GAAP.
"Covenant Defeasance" shall have the meaning provided in Section 8.3.
"Credit Agent" means, at any time, the then-acting Administrative Agent
as defined in and under the Credit Agreement, which initially shall be
____________________. Holdings 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 outstanding or permitted to be outstanding under such
Credit Agreement or such agreement. Holdings 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 Bankruptcy Law.
4
<PAGE> 22
"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, (i) with respect to any person, 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, 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 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 (a)
redeemable or repurchasable solely at the option of such person or (b) issued
to employees of Holdings 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; and (ii) with respect to any Subsidiary of
Holdings, any Preferred Stock issued by a Subsidiary of Holdings other than
Preferred Stock issued to Holdings.
"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 (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 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Excluded Assets" means assets of Holdings or any Subsidiary required to
be disposed of by applicable regulatory authorities in connection with the
Merger.
5
<PAGE> 23
"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 Holdings, any
original issue discount on the Senior Discount Notes and the Securities 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 Holdings 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.
"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.
"Forward Period" shall have the meaning set forth in the definition of
Operating Coverage Ratio contained in this Section 1.1.
"GAAP" means generally accepted accounting principles as in effect in
the United States of America as of the date of this Indenture.
"Holder" means the person in whose name a Security is registered on the
Registrar's books.
6
<PAGE> 24
"Holdings" means the party named as such above, until a successor
replaces it in accordance with the terms of this Indenture, and thereafter
means such successor.
"incur" shall have the meaning set forth in Section 4.12.
"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
or, if there is no such maximum fixed repurchase price, the liquidation
preference of such Disqualified Capital Stock, plus accrued but unpaid
dividends; (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 hereof, 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 Holdings, be unable to satisfy its
pro rata share of the liabilities of the partnership, in which case the pro
rata share of any
7
<PAGE> 25
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 supplemented from time
to time in accordance with the terms hereof.
"Independent Financial Advisor" means a reputable accounting, appraisal
or a nationally recognized investment banking firm that is, in the reasonable
judgment of the Board of Directors of Holdings, qualified to perform the task
for which such firm has been engaged hereunder and disinterested and
independent with respect to Holdings and its Affiliates.
"Initial Public Offering" means an underwritten primary public offering
of common stock of Holdings at a time when Holdings has not previously issued
or sold any equity securities in an underwritten transaction pursuant to a
registration statement filed pursuant to the Securities Act.
"Initial Public Offering Consummation Date" means the first date on
which Holdings or the Company receives any proceeds from an Initial Public
Offering.
"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 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 Holdings or any Subsidiary 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 first issuance of the Securities under
this Indenture.
"Legal Defeasance" shall have the meaning provided in Section 8.2.
8
<PAGE> 26
"Legal Holiday" shall have the meaning provided in Section 13.7.
"Letter of Credit Obligations" means Indebtedness of Subsidiaries with
respect to letters of credit issued pursuant to the Credit Agreement, and for
purposes of Section 4.12, 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, 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 hereunder.
"Loan Documents" means the Credit Agreement and all promissory notes,
guarantees, security agreements, pledge agreements, deeds of trust, mortgages,
letters of credit and other instruments, agreements and documents executed
pursuant thereto or in connection therewith, including all amendments,
supplements, extensions, renewals, restatements, replacements or refinancings
thereof, or other modifications (in whole or in part, and without limitation as
to amount, terms, conditions, covenants or other provisions) thereof from time
to time.
"Maturity Date" means ________ __, 2007.
"Merger" means (i) the merger of the Company into Ralphs Supermarkets
(with Ralphs Supermarkets surviving such merger) pursuant to the Merger
Agreement and (ii) immediately following the merger described in clause (i) of
this definition, the merger of RGC into Ralphs Supermarkets (with Ralphs
Supermarkets 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 as of
September 14, 1994, by and among Food 4 Less, Inc., a Delaware corporation,
Holdings, Food 4 Less Holdings, Inc., a California corporation, Ralphs
Supermarkets, the Company and the stockholders of Ralphs Supermarkets, as such
agreement is in effect on the Issue Date.
"Net Cash Proceeds" means Net Proceeds of (i) the sale of Qualified
Capital Stock of Holdings or (ii) any Asset Sale, in each case, 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
9
<PAGE> 27
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 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 Holdings, the sum of (i) the fair
market value of the proceeds received by Holdings 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 Holdings upon
such conversion or exchange.
"New F4L Senior Notes" means the ___% Senior Notes due 2004 of the
Company, issued pursuant to an indenture dated as of the Issue Date, as the
same may be modified or amended from time to time and refinancings thereof, to
the extent such refinancings are permitted to be incurred under this Indenture.
"New F4L Subordinated Notes" means the 13.75% Senior Subordinated Notes
due 2005 of the Company, issued pursuant to an indenture dated as of the Issue
Date, as the same may be modified or amended from time to time and refinancings
thereof, to the extent such refinancings are permitted to be incurred under
this Indenture.
"New F4L Senior Note Indenture" means the indenture pursuant to which
the New F4L Senior Notes were issued, as amended or supplemented from time to
time in accordance with the terms thereof.
"New F4L Subordinated Note Indenture" means the indenture pursuant to
which the New F4L Subordinated Notes were issued, as amended or supplemented
from time to time in accordance with the terms thereof.
"New Notes" means the ___% Senior Subordinated Notes due 2005 of the
successor to the Company, issued pursuant to an indenture dated as of the Issue
Date, as the same may be modified or amended from time to time and refinancings
thereof, to the extent such refinancings are permitted to be incurred under
this Indenture.
"New Note Indenture" means the indenture pursuant to which the New Notes
were issued, as amended or supplemented from time to time in accordance with
the terms thereof.
"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 13.4 and 13.5.
10
<PAGE> 28
"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 Holdings, 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 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 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.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of
Sections 13.4 and 13.5. Unless otherwise required by the Trustee, the legal
counsel may be an employee of or counsel to Holdings or the Trustee.
"Other Obligations" has the meaning set forth in Section 11.1 hereof.
"Pari Passu Indebtedness" means, with respect to Holdings, Indebtedness
that ranks pari passu in right of payment to the Securities (whether or not
secured by any Lien).
"Paying Agent" shall have the meaning provided in Section 2.3, except
that, for the purposes of Articles Three and Eight and Section 4.14, the Paying
Agent shall not be Holdings or any Subsidiary.
11
<PAGE> 29
"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 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 Partners, 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 Holdings or any Subsidiary, or any participant therein, (iv) a trustee
or other fiduciary holding securities under an employee benefit plan of
Holdings or any Subsidiary 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 under the Credit Agreement 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 provisions of Section 4.15 subsequent to the Issue
Date, (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 provisions of Section 4.15, and (iii) any guarantee
by Holdings of the Indebtedness referred to in the foregoing clauses (i) and
(ii); (b) Indebtedness of Holdings or a Subsidiary owed to and held by Holdings
or a Subsidiary; (c) Indebtedness incurred by Holdings 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 Holdings 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 Holdings 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
Holdings 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
Ralphs Supermarkets, the Company, and their respective subsidiaries as
described in that certain Registration Statement of Holdings dated ______,
1995; (e) Indebtedness of Holdings or
12
<PAGE> 30
any Subsidiary incurred under Foreign Exchange Agreements and Interest Swap
Obligations; (f) guarantees incurred in the ordinary course of business, by
Holdings or a Subsidiary, of Indebtedness of any other person in aggregate not
to exceed $25 million at any time outstanding; (g) guarantees by Holdings or a
Subsidiary of Indebtedness incurred by a wholly-owned Subsidiary so long as the
incurrence of such Indebtedness incurred by such wholly-owned Subsidiary 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 Holdings
or any Subsidiary or other agreements of Holdings 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 business, assets or Subsidiary for
the purpose 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 Holdings and its Subsidiaries in connection with
such disposition; (l) obligations in respect of performance bonds and
completion guarantees provided by Holdings or any Subsidiary in the ordinary
course of business; (m) Indebtedness of Holdings with respect to the Senior
Discount Notes and the Securities as in effect on the Issue Date (including the
accretion of the Senior Discount Notes and the issuance of Secondary Securities
in lieu of cash interest payments pursuant to the terms of this Indenture as in
effect on the Issue Date); and (n) additional Indebtedness of Holdings or any
Subsidiary 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 connection with an Asset Sale 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 Sections 4.3 and 4.11, (vi)
Investments in any Subsidiary or by any Subsidiary in Holdings or any other
Subsidiary in other Subsidiaries, and (vii) additional Investments in an
aggregate amount not exceeding $5 million.
"Permitted Payments" means any (i) payment by Holdings or any Subsidiary
to The Yucaipa Companies or the principals or any Affiliates thereof for
consulting, management, investment banking or similar services during such
period pursuant to that certain Consulting Agreement, dated as of the Issue
Date, between Holdings, the Company 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, and (ii) any
payment by Holdings or any Subsidiary, (a) in connection with repurchases of
outstanding shares of Holdings' common stock following the death, disability or
termination of employment of management stockholders, and (b) of amounts
required to be paid by Holdings or any Subsidiaries to participants in employee
benefit plans upon any 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
13
<PAGE> 31
$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).
"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 Holdings, (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.
"Person" or "person" means any individual, corporation, partnership,
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 person, a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially 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, any and all shares,
interests, participations or other equivalents (however designated) of such
person's preferred or preference stock, whether outstanding on the date hereof
or issued after the Issue Date, and including, without limitation, all classes
and series of preferred or preference stock of such person.
"principal" of any Indebtedness (including the Securities) means the
principal of such Indebtedness plus the premium, 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 Regulation S-X under the Securities Act, as interpreted by
Holdings' chief financial officer or Board of Directors in consultation with
its independent certified public accountants.
"Pro Forma Period" shall have the meaning set forth in the definition of
Operating Coverage Ratio contained in this Section 1.1.
"Qualified Capital Stock" means, with respect to any person, any Capital
Stock of such person that is not Disqualified Capital Stock.
14
<PAGE> 32
"Ralphs Supermarkets" means Ralphs Supermarkets, Inc., a Delaware
corporation, until a successor replaces it and thereafter means such successor.
"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 redemption pursuant to this Indenture
and the Securities.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Securities.
"Reference Period" shall have the meaning provided in the definition of
"Operating Coverage Ratio" contained in this Section 1.1.
"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), (j) and (m) 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 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 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 2.3.
"Registration Rights Agreement" means the registration rights agreement
dated as of the Issue Date by and among Holdings, the Company and the
stockholders of Ralphs Supermarkets with respect to the Securities.
15
<PAGE> 33
"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 Holdings or any Subsidiary 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 Holdings and any Subsidiary 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 Holdings and any Subsidiary 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.
"Restricted Debt Prepayment" means the purchase, redemption, acquisition
or retirement for value by Holdings, prior to the scheduled maturity or prior
to any scheduled repayment of principal or any sinking fund payment in respect
of any Subordinated Indebtedness.
"Restricted Payment" means any (i) Stock Payment or (ii) Investment
(other than a Permitted Investment) or (iii) Restricted Debt Prepayment.
"RGC" means Ralphs Grocery Company, a Delaware corporation, until a
successor replaces it and thereafter means such successor.
"SEC" means the Securities and Exchange Commission.
"Secondary Securities" has the meaning set forth in Section 2.2.
"Securities" means the 13% Senior Subordinated Pay-in-Kind Debentures
due 2007 of Holdings, including any Secondary Securities issued in respect
thereof, 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 SEC promulgated thereunder.
"Senior Discount Notes" means the 15.25% Senior Discount Notes due 2004
of Food 4 Less Holdings, Inc., issued pursuant to an indenture dated as of
December 15, 1992, as the same may be modified or amended from time to time and
refinancings thereof, to the extent such refinancing indebtedness is permitted
to be incurred under this Indenture.
"Senior Discount Note Indenture" means the indenture pursuant to which
the Senior Discount Notes were issued, as amended or supplemented from time to
time in accordance with the terms thereof.
16
<PAGE> 34
"Senior Indebtedness" means the principal of, premium, if any, and
interest on (such Senior Indebtedness being deemed to include for all purposes
of Article XI of this Indenture the amount required to fully secure in cash
undrawn Letter of Credit Obligations under the Loan Documents and such interest
on Senior Indebtedness being deemed to include for all purposes of Article XI
interest accruing after the filing of a petition initiating any proceeding
pursuant to any Bankruptcy Law in accordance with and at the rate (including
any rate applicable upon any default, to the extent lawful) specified in any
document evidencing the Senior Indebtedness, whether or not the claim for such
interest is allowed as a claim after such filing in any proceeding under such
Bankruptcy Law) any Indebtedness of Holdings (and, in the case of the Loan
Documents, all obligations of Holdings for fees, expenses, indemnities and
other amounts payable thereunder or in connection therewith), whether
outstanding on the Issue Date or thereafter created, incurred, assumed or
guaranteed or in effect guaranteed by Holdings (including, without limitation,
Indebtedness under the Loan Documents), unless, in the case of any particular
Indebtedness, the instrument creating or evidencing such Indebtedness 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 the principal of, premium, if any, and interest on
all obligations of every nature of Holdings from time to time owed or
guaranteed by Holdings with respect to the Credit Agreement and the Senior
Discount Notes. Notwithstanding the foregoing, "Senior Indebtedness" shall not
include (i) any Pari Passu Indebtedness or any Subordinated Indebtedness, (ii)
any Indebtedness constituting Disqualified Capital Stock, (iii) Indebtedness of
Holdings to any Subsidiary, (iv) that portion of any Indebtedness which is
incurred in violation of Section 4.12 of this Indenture, (v) Indebtedness to,
or guaranteed on behalf of, any shareholder, director, officer or employee of
Holdings or of any Subsidiary (including, without limitation, amounts owed for
compensation), (vi) Indebtedness to trade creditors and other amounts incurred
in connection with obtaining goods, materials or services, and (vii) any
liability for federal, state, local or other taxes owed or owing by Holdings.
"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 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 Holdings 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 Holdings, dividends payable solely in Qualified Capital
Stock of Holdings), 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
17
<PAGE> 35
the case of a Subsidiary, Qualified Capital Stock of Holdings) 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 Holdings, through the issuance in exchange therefor
solely of Qualified Capital Stock of Holdings; 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 Holdings or a wholly-owned Subsidiary.
"Subordinated Indebtedness" means Indebtedness of Holdings that is
subordinated in right of payment to the Securities.
"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 50% 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 Holdings.
"The Yucaipa Companies" means The Yucaipa Companies, a California
general partnership.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb), as amended, as in effect on the date on which this Indenture
is qualified under the TIA, except as otherwise provided in Section 9.3.
"Transaction Date" shall have the meaning provided in the definition of
"Operating Coverage Ratio" contained in this Section 1.1.
"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
8.4.
18
<PAGE> 36
"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.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
principal amount of such Indebtedness.
"wholly-owned Subsidiary" means any Subsidiary all of the shares of
Capital Stock of which (other than permitted Preferred Stock and directors'
qualifying shares) are at the time directly or indirectly owned by Holdings.
"Yearly Period" means each fiscal year of Holdings; provided that the
first Yearly Period shall begin on the Issue Date and shall end on January 28,
1996.
Section 1.2. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in, and made a part of, this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means Holdings or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
19
<PAGE> 37
Section 1.3. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; 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 II
THE SECURITIES
Section 2.1. Form and Dating.
The Securities 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 or as
required by the Registration Rights Agreement. Holdings 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 shall constitute,
and are hereby expressly made, a part of this Indenture and, to the extent
applicable, Holdings and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound
thereby.
Section 2.2. Execution and Authentication.
An Officer or an Assistant Secretary, shall sign (either of whom shall,
in each case, have been duly authorized by all requisite corporate actions) the
Securities for Holdings by manual or facsimile signature.
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.
20
<PAGE> 38
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 conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate Securities, excluding Secondary
Securities, for original issue in the aggregate principal amount of up to
$100,000,000 upon a written order of Holdings 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 $100,000,000, except for any Securities that may be issued
pursuant to the immediately following paragraph and except as provided in
Section 2.7 and 2.8. Upon the written order of Holdings in the form of an
Officers' Certificate, the Trustee shall authenticate Securities in
substitution of Securities originally issued to reflect any name change of
Holdings.
Holdings may, on each Interest Payment Date prior to (and including)
[the Interest Payment Date five years after the Issue Date], at its option and
in its sole discretion, pay interest in additional Securities ("Secondary
Securities") in lieu of the payment in whole or in part of interest in cash on
the Securities as provided in paragraph 1 of the Securities. Holdings shall
give written notice to the Trustee of the amount of interest to be paid in
Secondary Securities not less than five Business Days prior to the relevant
Interest Payment Date, and the Trustee or an authenticating agent (upon written
order of Holdings signed by an Officer of Holdings given not less than five nor
more than 45 days prior to such Interest Payment Date) shall authenticate for
original issue (pro rata to each Holder of any Securities of such record date)
Secondary Securities in an aggregate principal amount equal to the amount of
cash interest not paid on such Interest Payment Date. Except as set forth in
the following paragraph each issuance of Secondary Securities in lieu of the
payment of interest in cash on the Securities shall be made pro rata with
respect to the outstanding Securities, and Holdings shall have the right to
aggregate amounts of interest payable in the form of Secondary Securities to a
Holder of outstanding Securities and issue to such Holder a single Secondary
Security in payment thereof. Any Secondary Securities may be denominated a
separate series if Holdings deems it necessary to do so in order to comply with
any law or other applicable regulation or requirement, with appropriate
distinguishing designations.
The Securities shall be issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof except that
Secondary Securities or Securities issued upon registration of transfer of such
Secondary Securities may be in denominations of other than $1,000; provided
that Holdings may at its option pay cash in lieu of issuing Secondary
Securities in any denominations of less than $1,000.
21
<PAGE> 39
The Trustee may appoint an authenticating agent reasonably acceptable to
Holdings 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 Holdings and Affiliates of Holdings.
Section 2.3. Registrar and Paying Agent.
Holdings shall maintain an office or agency in the Borough of Manhattan,
The City of New York, where (a) Securities 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 Holdings in respect of the Securities and this Indenture may
be served. Holdings may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve Holdings of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. Holdings may
act as its own Registrar or Paying Agent except that for the purposes of
Articles Three and Eight and Sections 4.4 and 4.14, neither Holdings nor any
Subsidiary shall act as Paying Agent. The Registrar shall keep a register of
the Securities and of their transfer and exchange. Holdings, upon notice to
the Trustee, may have one or more co-Registrars and one or more additional
paying agents reasonably acceptable to the Trustee. The term "Paying Agent"
includes any additional paying agent. Holdings initially appoints the Trustee
as Registrar and Paying Agent until such time as the Trustee has resigned or a
successor has been appointed.
Holdings 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. Holdings shall notify the
Trustee, in advance, of the name and address of any such Agent. If Holdings
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such.
Section 2.4. Paying Agent To Hold Assets in Trust.
Holdings 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 and/or Secondary Securities 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 Holdings or any other
obligor on the Securities), and shall notify the Trustee of any Default by
Holdings (or any other obligor on the Securities) in making any such payment.
If Holdings or a Subsidiary acts as Paying Agent, it shall segregate such
assets and/or Secondary Securities and hold them as a separate trust fund.
Holdings at any time may require a Paying Agent to distribute all assets and/or
Secondary Securities 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 written request to a Paying Agent, require such Paying Agent to
distribute all assets and/or Secondary Securities held by it to the Trustee and
to account for any assets so distributed. Upon
22
<PAGE> 40
distribution to the Trustee of all assets that shall have been delivered by
Holdings to the Paying Agent, the Paying Agent shall have no further liability
for such assets and/or Secondary Securities.
Section 2.5. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, Holdings 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 2.6. Transfer and Exchange.
When a Security is presented to the Registrar or a co-registrar with a
request to register a transfer, the Registrar shall register the transfer as
requested if the requirements of the Registrar are met. The Registrar need not
transfer or exchange any Securities selected for redemption. Also, it need not
transfer or exchange any Securities for a period of 30 days before a selection
of Securities to be redeemed. When Securities are presented to the Registrar
or a co-registrar with a request to exchange them for an equal principal amount
of Securities of other authorized denominations, the Registrar shall make the
exchange as requested if the requirements of the Registrar are met. Holdings
shall cooperate with the Registrar in meeting its requirements. To permit
transfers, registration and exchanges, the Trustee shall authenticate
Securities at the Registrar's request. No service charge shall be made for any
transfer, registration or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith, but not for any exchange pursuant to Section 2.10, 3.6 or
9.5.
Section 2.7. 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, Holdings shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. If required by the Trustee or
Holdings, such Holder must provide an indemnity bond or other indemnity,
sufficient in the judgment of both Holdings and the Trustee, to protect
Holdings, the Trustee or any Agent from any loss which any of them may suffer
if a Security is replaced. Holdings 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 shall constitute an additional
obligation of Holdings.
Section 2.8. Outstanding Securities.
Securities outstanding at any time are all the Securities that have been
authenticated by the Trustee, including the Secondary Securities, except those
cancelled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A
23
<PAGE> 41
Security does not cease to be outstanding because Holdings or any of its
Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof pursuant to
Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than Holdings or any 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 2.9. Treasury Securities.
In determining whether the Holders of the required aggregate principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by Holdings or any of its 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.
Notwithstanding the foregoing and except as otherwise provided by the TIA, a
majority of Securities not owned by Holdings or any of its Affiliates shall be
sufficient to approve any such direction, waiver or consent.
Section 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, Holdings may prepare
and the Trustee shall authenticate temporary Securities. Temporary Securities
shall be substantially in the form of definitive Securities but may have
variations that Holdings considers appropriate for temporary Securities.
Without unreasonable delay, Holdings shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities.
Section 2.11. Cancellation.
Holdings 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 Holdings or any Subsidiary), and no one else, shall cancel and, at
the written direction of Holdings, shall dispose of all Securities surrendered
for transfer, exchange, payment or cancellation. Subject to Section 2.7,
Holdings may not issue new Securities to replace Securities that it has paid or
delivered to the Trustee for cancellation. If Holdings or any Subsidiary shall
acquire any of the Securities, such acquisition shall not operate as a
redemption 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.
24
<PAGE> 42
Section 2.12. Defaulted Interest.
If Holdings 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 interest, plus (to the extent lawful) any interest payable on
the defaulted interest, to the persons who are Holders on a subsequent special
record date, which date shall be the fifteenth day next preceding the date
fixed by Holdings for the payment 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, Holdings 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.
Holdings in issuing the Securities may use a "CUSIP" number, and if so,
the Trustee shall use the CUSIP number in notices of redemption or exchange as
a convenience to Holders; provided that any such notice may state that no
representation 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 III
REDEMPTION
Section 3.1. Notices to Trustee.
If Holdings elects to redeem Securities pursuant to Paragraph 5 of the
Securities it shall notify the Trustee of the Redemption Date and aggregate
principal amount of the Securities to be redeemed and whether it wants the
Trustee to give notice of redemption to the Holders (at Holdings' expense) 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 notice given
pursuant to this Section 3.1 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 3.2. 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 such other
method as the Trustee considers to be fair and appropriate and in such manner
as complies with applicable legal and stock exchange requirements, if any.
Securities in denominations of less than $1,000 shall be redeemed first.
Thereafter the Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify Holdings in
writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the
25
<PAGE> 43
aggregate principal amount thereof to be redeemed. Securities in denominations
of $1,000 or less may be redeemed only in whole. The Trustee may select for
redemption portions (equal to $1,000 or any integral multiple thereof) of the
principal of Securities that have denominations larger than $1,000. Provisions
of this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption.
Section 3.3. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
Holdings 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 Trustee. At Holdings' request, the Trustee shall give the notice
of redemption in Holdings' name and at Holdings' 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 Holdings 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;
(6) if any Security is being redeemed in part, the portion of the
aggregate 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 portion
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 aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption.
Section 3.4. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.3,
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.
26
<PAGE> 44
Section 3.5. Deposit of Redemption Price.
On or before the Redemption Date, Holdings 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
Holdings to the Trustee for cancellation). The Paying Agent shall promptly
return to Holdings any U.S. Legal Tender so deposited which is not required for
that purpose upon the written request of Holdings, except with respect to
monies owed as obligations to the Trustee pursuant to Article Seven.
If Holdings complies with the preceding paragraph, then, unless
Holdings 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.
If a Security is redeemed on or after a Record Date but on or prior to
the related Interest Payment Date, then any accrued and unpaid interest shall
be paid to the Person in whose name such Security was registered at the close
of business on such Record Date. If any Security called for redemption shall
not be so paid upon surrender for redemption because of the failure of Holdings
to comply with the first paragraph of this Section 3.5, interest shall be paid
on the unpaid principal, from the redemption date until such principal is paid,
and, to the extent lawful, on any interest not paid on such unpaid principal,
in each case at the rate provided in the Securities and in Section 4.1 hereof.
Section 3.6. 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 IV
COVENANTS
Section 4.1. Payment of Securities.
Holdings shall pay the principal amount of, premium, if any, and
interest on, as the case may be, the Securities on the dates and in the manner
provided in the Securities. An installment shall be considered paid on the
date it is due if the Trustee or Paying Agent (other than Holdings or a
Subsidiary) holds on that date U.S. Legal Tender and/or, to the extent
permitted by Section 2.2, Secondary Securities designated for and sufficient to
pay the installment.
Holdings shall pay interest on overdue principal (including
post-petition interest in any proceeding under any Bankruptcy Law, to the
extent allowable as a claim in any such proceeding) at the same rate borne by
the Securities and it shall pay interest (including post-
27
<PAGE> 45
petition interest in any proceeding under any Bankruptcy Law, to the
extent allowable as a claim in any such proceeding) on overdue installments of
interest (without regard to any applicable grace period) at the same rate borne
by the Securities, to the extent lawful.
Section 4.2. Maintenance of Office or Agency.
Holdings shall maintain in the Borough of Manhattan, The City of New
York, the office or agency required under Section 2.3. Holdings 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 Holdings shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee set forth in Section 13.2.
Section 4.3. Limitation on Restricted Payments.
Holdings shall not, and shall cause each of its Subsidiaries not to,
directly or indirectly, make any Restricted Payment if, at the time of such
Restricted Payment, or after giving effect thereto, (a) a Default or an Event
of Default shall have occurred and be continuing, (b) Holdings or such
Subsidiary could not incur at least $1 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to Section 4.12, or (c) the aggregate amount
expended for all Restricted Payments, including such 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 Holdings, which determination shall be evidenced by a Board
Resolution), subsequent to the Issue Date, shall exceed the sum of (i) 50% of
the aggregate Consolidated Net Income (or if such Consolidated Net Income is a
loss, minus 100% of such loss) of Holdings earned subsequent to the Issue Date
and on or prior to the date the Restricted Payment occurs (the "Reference
Date") plus (ii) 100% of the aggregate Net Proceeds received by Holdings from
any person (other than a Subsidiary) from the issuance and sale (including upon
exchange or conversion for other securities of Holdings) 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 Holdings or any
Subsidiary, until and to the extent such borrowing is repaid) plus (iii) 100%
of the aggregate net cash proceeds received by Holdings as capital
contributions to Holdings after the Issue Date, plus (iv) $25,000,000.
Notwithstanding the foregoing, 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 Holdings 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 Holdings, (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 Holdings with an
Average Life
28
<PAGE> 46
equal to or greater than the then remaining Average Life of the Subordinated
Indebtedness repurchased, redeemed or repaid, and (4) Permitted Payments;
provided that (x) 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 (ii) of the definition of "Permitted Payments"
shall each be counted for purposes of computing amounts expended pursuant to
subclause (c) in the immediately preceding paragraph, and (y) no amounts paid
pursuant to clause (3) above or clause (i) of the definition of "Permitted
Payments" shall be so counted.
Prior to making any Restricted Payment under the first paragraph of this
Section 4.3, Holdings shall deliver to the Trustee an Officers' Certificate
setting forth the computation 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 4.4. Corporate Existence.
Except as otherwise permitted by Article Five, Holdings shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate or other existence of each of
its Significant Subsidiaries in accordance with the respective organizational
documents of each such Significant Subsidiary and the rights (charter and
statutory) and franchises of Holdings and each such Significant Subsidiary;
provided, however, that Holdings 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 franchise, if the Board
of Directors of Holdings or such Significant Subsidiary, as the case may be,
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of Holdings or any such Significant Subsidiary.
Section 4.5. Payment of Taxes and Other Claims.
Holdings 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 Subsidiaries; provided, however, that Holdings
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 material adverse effect on the
financial condition or results or operations of Holdings and its Subsidiaries
taken as a whole.
29
<PAGE> 47
Section 4.6. Maintenance of Properties and Insurance.
(a) Holdings shall cause all properties used or useful to the conduct
of its business or the business of any Subsidiaries to be maintained and kept
in good condition, repair and working order and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
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 Holdings and its Subsidiaries taken as a whole; provided, however, that
nothing in this Section 4.6 shall prevent Holdings or any Subsidiary from
discontinuing the operation or maintenance of any of such properties, 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 Holdings or the Subsidiary concerned, or of the senior officers
of Holdings or such Subsidiary, as the case may be, desirable in the conduct of
the business of Holdings or such Subsidiary, as the case may be, or (iii) is
otherwise permitted by this Indenture.
(b) Holdings shall provide or cause to be provided, 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 Holdings, are adequate and appropriate for the conduct of the business of
Holdings and such Subsidiaries in a prudent manner, 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 Holdings or
the applicable Subsidiary or (ii) customary, in the reasonable, good faith
opinion of Holdings, for corporations similarly situated in the industry,
unless the failure 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 Holdings and its Subsidiaries, taken as a whole.
Section 4.7. Compliance Certificate; Notice of Default.
(a) Holdings shall deliver to the Trustee within 120 days after the
end of Holdings' fiscal year an Officers' 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 Officers 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 certificate, that to the best of his knowledge Holdings during
such preceding fiscal year has kept, observed, performed and fulfilled each and
every such covenant and no Default or Event of Default occurred during such
year or, if such signers do know of such a Default or Event of Default, the
certificate shall describe the Default or Event of Default and its status with
particularity. The Officers' Certificate shall also notify the Trustee should
Holdings elect to change the manner in which it fixes its fiscal year end.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, Holdings shall deliver
to the Trustee within
30
<PAGE> 48
120 days after the end of each fiscal year a written statement by Holdings'
independent certified public accountants stating (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 attention and if
such a Default has come to their attention, specifying the nature and period of
existence thereof.
(c) Holdings shall, so long as the Securities are outstanding,
deliver to the Trustee, within five Business Days after any officer becomes
aware of any Default or Event of Default, an Officer's Certificate specifying
such Default or Event of Default and what action Holdings is taking or proposes
to take with respect thereto.
Section 4.8. Compliance with Laws.
Holdings 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 governmental 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 contested 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 Holdings and its Subsidiaries taken as a whole.
Section 4.9. SEC Reports and Other Information.
(a) To the extent permitted by applicable law or regulation, whether
or not Holdings is subject to the requirements of Section 13 or 15(d) of the
Exchange Act, Holdings shall file with the SEC all quarterly and annual reports
and such other information, documents or other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) required to be filed pursuant to such provisions of the Exchange
Act. Holdings shall file with the Trustee, within 5 days after it files the
same with the SEC, copies of the quarterly and annual reports and the
information, documents, and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) that it is
required to file with the SEC pursuant to this Section 4.9. Holdings shall
also comply with the other provisions of TIA Section 314(a). If Holdings is
not permitted by applicable law or regulations to file the aforementioned
reports, Holdings (at its own expense) shall file with the Trustee and mail, or
cause the Trustee to mail, to Holders at their addresses appearing in the
register of Securities maintained by the Registrar at the time of such mailing
within 5 days after it would have been required to file such information with
the SEC, all information and financial statements, including any notes thereto
and with respect to annual reports, an auditors' report by an accounting firm
of established national reputation, and a "Management's Discussion and Analysis
of Financial Condition and Results of Operations," comparable to the disclosure
that Holdings would have been required to include in annual and quarterly
reports, information, documents or other reports, including, without
limitation, reports on Forms 10-K, 10-Q and 8-K, if Holdings was subject to the
requirements of such Section 13 or 15(d) of the Exchange Act.
31
<PAGE> 49
(b) At any time when Holdings is not permitted by applicable law or
regulations to file the aforementioned reports, upon the request of a Holder of
Securities, Holdings will promptly furnish or cause to be furnished such
information as is specified pursuant to Rule 144A(d)(4) under the Securities
Act (or any successor provision thereto) to such Holder or to a prospective
purchaser of such Securities designated by such Holder, as the case may be, in
order to permit compliance by such Holder with Rule 144A under the Securities
Act.
Section 4.10. Waiver of Stay, Extension or Usury Laws.
Holdings 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 Holdings from paying all or any
portion of the principal of or interest on the Securities 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) Holdings 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 Holdings 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 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
Holdings or any Subsidiary (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 Holdings 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, Holdings 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
complies with clause (y) above, (B) with respect to Affiliate Transactions
involving aggregate payments in excess of $5 million and less than $15 million,
Holdings or such Subsidiary, as the case may be, shall have delivered an
Officers' Certificate to the 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 Holdings 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
Holdings 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 Transaction are fair to Holdings 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
32
<PAGE> 50
written confirmation of such determination to the Board of Directors and (C)
with respect to Affiliates Transactions involving aggregate payments in excess
of $15 million, Holdings 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 Holdings 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 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 4.3, (iii) reasonable and customary fees and
compensation paid to, and indemnity provided on behalf of, officers, directors,
employees or consultants of Holdings or any Subsidiary, as determined by the
Board of Directors of Holdings or any Subsidiary or the senior management
thereof in good faith, (iv) transactions exclusively between or among Holdings
and any of its wholly-owned Subsidiaries or exclusively between or among such
wholly-owned Subsidiaries, provided such transactions 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 pursuant to any amendment thereto) so long as any such amendment is
not disadvantageous to the Holders in any material respect, (vi) the existence
of, or the performance by Holdings 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 is a party as of the Issue Date and any similar agreements which it may
enter into thereafter; provided, however, that the existence of, or the
performance by Holdings or any of its 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 in any material respect, (vii)
transactions permitted by, and complying with, the provisions of Section 5.1,
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 this Indenture which are fair to Holdings or any Subsidiary,
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.1/
Holdings will not, and will not permit any Subsidiary, 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 Securities or Event of Default shall have occurred and be
continuing at the time or as a consequence of the incurrence of such
Indebtedness, (i) Holdings
- --------------------
1. This Section 4.12 will conform to the covenant in the new public
securities, as appropriately modified to be applicable to Holdings and
its subsidiaries.
33
<PAGE> 51
may incur Indebtedness if immediately before and immediately after giving
effect to the incurrence of such Indebtedness the Operating Coverage Ratio of
Holdings would be greater than 2.0 to 1.0 and (ii) the Company or any
subsidiary of 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.
Section 4.13. Limitation on Liens.
Holdings will not create, incur, assume or suffer to exist any Lien of
any kind securing any Pari Passu Indebtedness, any Subordinated Indebtedness or
any Affiliate Obligation upon any property or assets of Holdings owned on the
Issue Date or acquired after the Issue Date, or any income or profits
therefrom, unless the Securities are secured equally and ratably with (or prior
to in the case of Subordinated Indebtedness) to the obligation or liability
secured by such Lien, and except for any Lien securing Acquired Indebtedness
created prior to the incurrence of such Indebtedness by Holdings, provided that
any such Lien only extends to the assets that were subject to such Lien
securing such Acquired Indebtedness prior to the related acquisition by
Holdings.
Section 4.14. Limitation on Change of Control.
(a) Upon the occurrence of a Change of Control (the "Change of
Control Date"), each Holder shall have the right to require the repurchase of
such Holder's Securities pursuant to the offer described in paragraph (b),
below (the "Change of Control Offer"), at a purchase price equal to 101% of the
aggregate principal amount thereof plus accrued interest, if any, to the date
of purchase. Prior to the mailing of the notice to Holders provided for in
paragraph (b) below, but in any event within 30 days following the Change of
Control Date, Holdings shall cause the Company to 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 such 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 Securities as provided for in this Section 4.14.
Holdings shall first comply with the covenant in the immediately preceding
sentence before Holdings shall be required to repurchase Securities pursuant to
this Section 4.14, and any failure to so comply shall constitute an Event of
Default under this Indenture. Within 10 days after any Change of Control Date
requiring Holdings to make a Change of Control Offer pursuant to this Section
4.14, Holdings shall so notify the Trustee.
(b) The Change of Control Offer shall be made to all Holders and the
notice to the Holders shall contain all instructions and materials necessary to
enable such Holders to tender Securities pursuant to the Change of Control
Offer. Within 30 days following any Change of Control Date, Holdings shall
send, by first class mail, a notice to each Holder, with copies to the Trustee,
which notice shall govern the terms of the Change of Control Offer. Such
notice shall state:
34
<PAGE> 52
(1) that the Change of Control Offer is being made pursuant to this
Section 4.14 and that all Securities tendered 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");
(3) that any Security not tendered will continue to accrue interest
if interest is then accruing;
(4) that, unless Holdings defaults in making payment 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 purchased 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
setting forth the name of the Holder, the aggregate 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 being purchased only in part
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; provided that each Holder shall tender
Securities, and each Security purchased and each such new Security issued by
Holdings shall be, in a principal amount of $1,000 or integral multiples
thereof (except for Secondary Securities that were issued in denominations
other than $1,000); and
(8) the circumstances and relevant facts regarding such Change of
Control, including information available to Holdings concerning the Person or
Persons acquiring control and such historical or pro forma financial
information as Holdings reasonably deems appropriate under the circumstances.
(c) On or before the Change of Control Payment Date, Holdings 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 portions thereof being purchased by
Holdings. The Paying Agent shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price; provided that each
such new Security shall be in the
35
<PAGE> 53
principal amount of $1,000 or integral multiples thereof. Holdings 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 4.14, the Trustee shall act as the Paying Agent.
(d) Holdings, to the extent applicable and if required by law, will
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.
Section 4.15. Limitation on Asset Sales.
(a) Neither Holdings nor any of its Subsidiaries will consummate an
Asset Sale, unless (a) Holdings 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, Holdings
or the applicable Subsidiary 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 Business 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 Holdings and its Subsidiaries
existing on the Issue Date or in a business reasonably related thereto; (ii)
apply or cause to be applied such Net Cash Proceeds to the repayment of Senior
Indebtedness or Pari Passu Indebtedness of Holdings or any Indebtedness of any
Subsidiary; (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 Notes tendered to Holdings for purchase at a
price equal to 100% of the aggregate principal amount thereof, plus accrued
interest to the date of purchase pursuant to an offer to purchase made by
Holdings as set forth below (a "Net Proceeds Offer"), provided, however, that
if at any time any noncash consideration received by Holdings or any Subsidiary
in connection with any Asset Sale is converted into or sold or otherwise
disposed of for cash, then such cash shall constitute Net Cash Proceeds for
purposes of this Section 4.15 and shall be applied in accordance with clause
(b) above within 365 days of the receipt of such cash; and provided further,
however, that if at any time any security deposits or other amounts used to
secure Letter of Credit Obligations pursuant to clause b(iii) above are
returned to Holdings or any Subsidiary, then such security deposits or other
amounts shall constitute Net Cash Proceeds for purposes of this Section 4.15
and shall be applied in accordance with clause (b) above within 365 days of the
receipt of such security deposits or other amounts. A Net Proceeds Offer as a
result of an Asset Sale made by the Company or one of its subsidiaries shall
not be required to be in excess of the Net Cash Proceeds of such Asset Sale
less the Net Cash Proceeds actually applied in accordance with clauses (b)(i),
(ii) or (iii) above; provided, however, that Holdings 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 Holdings 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.
36
<PAGE> 54
(b) Notice of a Net Proceeds Offer pursuant to this Section 4.15
shall be mailed, by first class mail, by Holdings not less than 305 days nor
more than 335 days after the relevant Asset Sale to all Holders at their last
registered addresses, 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 following
terms:
(1) that the Net Proceeds Offer is being made pursuant to Section
4.15 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 Proceeds Offer, Holdings shall select
the Securities to be purchased on a pro rata basis (with such adjustments as
may be deemed appropriate by Holdings so that only Securities in
denominations of $1,000 or multiples thereof shall be purchased, except for
Secondary Securities that were issued in denominations other than $1,000);
(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 Holdings defaults in making payment therefor, 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 purchased 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 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 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 telegram, 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 statement 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 principal amount to the unpurchased portion of
the Securities surrendered.
On or before the Proceeds Purchase Date, Holdings 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
37
<PAGE> 55
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 Holdings. The Paying Agent shall promptly mail to the Holders of
Securities so accepted payment in an amount equal to the purchase price.
Holdings 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 4.15, the Trustee shall act as the Paying Agent.
(c) Holdings 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 Securities pursuant to a Net Proceeds Offer.
Any amounts remaining after the purchase of Securities pursuant to a Net
Proceeds Offer shall be returned by the Trustee to Holdings.
Section 4.16. Limitation on Senior Subordinated Indebtedness.
Holdings will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Indebtedness and senior in right of payment to the
Securities.
Section 4.17. Limitation on Preferred Stock of Subsidiaries.
Holdings will not permit any of its Subsidiaries to issue any Preferred Stock
(other than to Holdings or a wholly-owned Subsidiary), or permit any person
(other than Holdings or a wholly-owned Subsidiary) to own or hold an interest
in any Preferred Stock of any such Subsidiary, unless such Subsidiary would be
entitled to incur Indebtedness in accordance with the provisions of Section
4.12 in the aggregate principal amount equal to the aggregate liquidation value
of such Preferred Stock.
Section 4.18. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
Holdings 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 Loan Documents as in effect
on the Issue Date, as any such Payment Restriction may apply to any present or
future Subsidiary, (ii) the Senior Discount Note Indenture, the New F4L Senior
Note Indenture, the New F4L Subordinated Note Indenture, the New Note Indenture
and any other 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 Section 4.12), (iv) secured Indebtedness otherwise
permitted to be incurred pursuant to Sections 4.12 and 4.13 that limit the
right of the debtor to dispose of the assets securing such
38
<PAGE> 56
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; (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 Section 4.12; 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 of the Issue Date.
ARTICLE V
SUCCESSOR CORPORATION
Section 5.1. When Holdings May Merge, Etc.
(a) Holdings, 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 Holdings shall be the continuing person, or the person (if
other than Holdings) formed by such consolidation or into which Holdings is
merged or to which all or substantially all of the properties and assets of
Holdings 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) (Holdings 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 Holdings under the Securities 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 Holdings immediately preceding the
transaction and (B) the Surviving Person could incur at least $1 of
Indebtedness other than Permitted Indebtedness pursuant to Section 4.12; and
39
<PAGE> 57
(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.
(b) 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 Subsidiaries, the Capital Stock of which constitutes all or
substantially all of the properties and assets of Holdings shall be deemed to
be the transfer of all or substantially all of the properties and assets of
Holdings.
Section 5.2. Successor Corporation Substituted.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of Holdings or any adoption of a Plan of Liquidation by
Holdings in accordance with Section 5.1, the surviving person formed by such
consolidation or into which Holdings 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, Holdings under this Indenture with the same effect as if
such surviving person had been named as Holdings herein; provided, however,
that solely for purposes of computing amounts described in subclause (c) of
Section 4.3, any such surviving person shall only be deemed to have succeeded
to and be substituted for Holdings 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 Holdings hereunder and
under the Securities and agrees to be bound hereby and thereby, the predecessor
shall be released from such obligations.
ARTICLE VI
DEFAULT AND REMEDIES
Section 6.1. Events of Default.
An "Event of Default" occurs if:
(1) Holdings defaults in the payment of interest on the Securities
when the same becomes due and payable and the default continues for a period
of 30 days;
(2) Holdings defaults in the payment of the principal of the
Securities when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise (including the failure to repurchase
Securities tendered pursuant to the requirements set forth in Sections 4.14
and 4.15), whether or not such payment shall be prohibited by the provisions
of Article Eleven hereof;
(3) Holdings fails to comply with any of its other agreements or
covenants in, or provisions of, the Securities or this Indenture and the
default continues for the period and after the notice specified below;
40
<PAGE> 58
(4) there shall be a default under any bond, debenture, or other
evidence of Indebtedness of Holdings or of any Significant Subsidiary or
under any mortgage, indenture or other instrument under which there may be
issued or by which there may be secured or evidenced any such Indebtedness,
whether such Indebtedness now exists or shall hereafter be created, if both
(A) such default either (i) results from the failure to pay such Indebtedness
at its stated final maturity (that is, the date of the last principal
installment of any installment Indebtedness under the instrument or agreement
pursuant to or under which such Indebtedness was created or is evidenced) or
(ii) relates to an obligation (including any obligation to pay interest, to
purchase such Indebtedness or to pay the principal of such Indebtedness,
other than the obligation to pay any principal of 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 the maturity of
which has been so accelerated, aggregates $25 million or more at any one
time;
(5) Holdings or any Significant Subsidiary (A) commences a voluntary
case or proceeding under any Bankruptcy Law with respect to itself, (B)
consents to the entry of a judgment, decree or order for relief against it in
an involuntary case or proceeding under any Bankruptcy Law, (C) consents to
the appointment of a Custodian of it or for substantially all of its
property, (D) consents to or acquiesces in the institution of a bankruptcy or
an insolvency proceeding against it, (E) makes a general assignment for the
benefit of its creditors, or (F) takes any corporate action to authorize or
effect any of the foregoing;
(6) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of Holdings or any Significant Subsidiary in an
involuntary case or proceeding under any Bankruptcy Law, which shall (A)
approve as properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect of Holdings or any Significant
Subsidiary, (B) appoint a Custodian of Holdings or any Significant Subsidiary
or for substantially all of its property or (C) order the winding-up or
liquidation of its affairs; and such judgment, decree or order shall remain
unstayed and in effect for a period of 60 consecutive days;
(7) the lenders under the Credit Agreement shall commence judicial
proceedings to foreclose upon any material portion of the assets of Holdings
and its Subsidiaries; or
(8) any final judgments or order for payment of money in excess of
$25 million shall be rendered against Holdings or any Significant Subsidiary
by a court of competent jurisdiction and shall remain undischarged for a
period of 60 days after such judgment becomes final and nonappealable.
A Default under clause (3) above (other than in the case of any Defaults
resulting from any Default under Section 4.3, 4.14 or 5.1, which Defaults shall
be Events of Default with the notice specified in this paragraph but without
the passage of time specified in this paragraph)
41
<PAGE> 59
is not an Event of Default until the Trustee notifies Holdings, or the Holders
of at least 25% in aggregate principal amount of the outstanding Securities
notify Holdings and the Trustee, of the Default, and Holdings 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 aggregate principal amount of the Securities then
outstanding. When a Default is cured, it ceases.
Section 6.2. Acceleration.
(a) If an Event of Default (other than an Event of Default specified
in Section 6.1(5) or (6) with respect to Holdings or any Significant
Subsidiary) occurs and is continuing, the Trustee may, by notice to Holdings
(and, if any Indebtedness is outstanding under the Credit Agreement or any Loan
Documents is otherwise in effect, to the Credit Agent), or the Holders of at
least 25% in aggregate principal amount of the Securities then outstanding may,
by written notice to Holdings and the Trustee, and the Trustee shall (with
notice to the Credit Agent if any Indebtedness is outstanding under the Credit
Agreement or any Loan Document is otherwise in effect), upon the request of
such Holders, declare the aggregate principal amount of the Securities
outstanding, together with accrued but unpaid interest thereon to the date of
payment, to be due and payable and, upon any such declaration, the same shall
become and be due and payable; provided, that so long as the Credit Agreement
shall be in force and effect, if any such Event of Default shall have occurred
and be continuing, any such acceleration shall not be effective until the
earlier of (a) five Business Days following a notice of acceleration given to
Holdings and the Credit Agent under the Credit Agreement and only if upon such
fifth Business Day such Event of Default shall be continuing or (b) the
acceleration of any Indebtedness under the Credit Agreement. If an Event of
Default specified in Section 6.1(5) or (6) occurs with respect to Holdings or
any Significant Subsidiary, all unpaid principal and accrued interest on the
Securities then outstanding shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. Upon payment of such principal amount, interest, and premium, if any,
all of Holdings' obligations under the Securities and this Indenture, other
than obligations under Section 7.7, shall terminate. The Holders of a majority
in aggregate principal 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 and
interest on the Securities which have 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
principal, which has become due otherwise than by such declaration of
acceleration, has been paid, and (iii) the rescission would not conflict with
any judgment or decree of a court of competent jurisdiction.
(b) In the event of a declaration of acceleration under this
Indenture because an Event of Default set forth in Section 6.1(4) 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
42
<PAGE> 60
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 underlying
default has been cured (and any acceleration based thereon of such other
Indebtedness has been rescinded), within 90 days of such maturity or
declaration of acceleration, as the case may be.
Section 6.3. 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 Holder 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 6.4. Waiver of Past Defaults.
Subject to Sections 6.7 and 9.2, the Holders of at least a majority in
aggregate 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 (1) and (2) of Section 6.1. When a Default or Event of
Default is waived, it is cured and ceases.
Section 6.5. Control by Majority.
The Holders of at least a majority in aggregate 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. Subject to Section 7.1, 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 Holder,
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.
Section 6.6. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee notice of a continuing Event of
Default;
43
<PAGE> 61
(2) the Holder or Holders of at least 25% in aggregate principal
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 at least 25%
in aggregate principal amount of the outstanding Securities do not give the
Trustee a direction which, in the opinion of the Trustee, is inconsistent
with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
Section 6.7. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, 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 6.8. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified in
clause (1) or (2) of Section 6.1 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against
Holdings or any other obligor on the Securities for the whole amount of
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 Securities 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 Trustee, its agents
and counsel.
Section 6.9. 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 Holders allowed in
any judicial proceedings relating to Holdings 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 Holder to make such payments to the Trustee
44
<PAGE> 62
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section
7.7. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 6.10. 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 7.7;
Second: if the Holders are forced to proceed against Holdings directly
without the Trustee, to the Holders for their collection costs;
Third: to the Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
interest, respectively; and
Fourth: to Holdings.
The Trustee, upon prior notice to Holdings, may fix a record date and
payment date for any payment to the Holders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken 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 suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7, or a suit by a Holder or Holders of more than 10% in
aggregate principal amount of the outstanding Securities.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
45
<PAGE> 63
Section 7.1. 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 could 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 covenants 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 Indenture. However,
the Trustee shall examine the certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.1.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by 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 6.5.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) 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 7.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree with Holdings. Assets held in
trust by the Trustee need not be segregated from other assets except to the
extent required by law.
46
<PAGE> 64
Section 7.2. Rights of Trustee.
Subject to Section 7.1:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 13.4 and 13.5. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such certificate or 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 resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as
it may see fit.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
Section 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with Holdings, 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 7.4. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for Holdings' use
of the proceeds from the Securities, and it shall not be responsible for any
statement in the Securities other than the Trustee's certificate of
authentication.
47
<PAGE> 65
Section 7.5. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default occurs. Except in the case of a Default or an Event of Default in
payment of principal of, premium, if any, or interest on, any Security,
including the failure to make payment on the Change of Control Payment Date
pursuant to a Change of Control Offer, the Trustee may withhold the notice if
and so long as its board of directors, the executive committee of its board of
directors or a committee of its directors and/or Trust Officers in good faith
determines that withholding the notice is in the interest of the Holders.
Section 7.6. Reports By Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, the Trustee shall, to the extent that any of the events
described in TIA Section 313(a) occurred within the previous twelve months,
but not otherwise, mail to each Holder a brief report dated as of such May 15
that complies with TIA Section 313(a). The Trustee also shall comply with TIA
Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
mailed to Holdings and filed with the SEC and each stock exchange, if any, on
which the Securities are listed.
Holdings shall notify the Trustee if the Securities become listed on any
stock exchange.
Section 7.7. Compensation and Indemnity.
Holdings 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. Holdings shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it including, without limitation, any taxes
imposed on the trust or on the income from the Securities. Such expenses shall
include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
Holdings 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
hereunder. The Trustee shall notify Holdings promptly of any claim asserted
against the Trustee for which it may seek indemnity. Holdings shall defend the
claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and Holdings shall pay the reasonable fees and expenses of
such counsel; provided that Holdings 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 Holdings and the Trustee in connection with such defense as
reasonably
48
<PAGE> 66
determined by the Trustee. Holdings need not pay for any settlement made
without its written consent. Holdings 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 Holdings' payment obligations in this Section 7.7, the Trustee
shall have a lien prior to the Securities on all assets held or collected by
the Trustee, in its capacity as Trustee, except assets held in trust to pay
principal of, premium, if any, or interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(5) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 7.8. Replacement of Trustee.
The Trustee may resign by so notifying Holdings. The Holders of a
majority in aggregate principal amount of the outstanding Securities may remove
the Trustee by so notifying Holdings and the Trustee may appoint a successor
Trustee with Holdings' consent. Holdings 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, Holdings shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after
the successor Trustee takes office, the Holders of a majority in aggregate
principal amount of the Securities may appoint a successor Trustee to replace
the successor Trustee appointed by Holdings.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to Holdings. 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 7.7, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, Holdings or the
Holders of at least 10% in aggregate principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
49
<PAGE> 67
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.8,
Holdings' obligations under Section 7.7 shall continue for the benefit of the
retiring Trustee.
Section 7.9. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Sections 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
Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of Holdings are outstanding, if the requirements for such exclusion
set forth in TIA Section 310(b)(1) are met.
Section 7.11. Preferential Collection of Claims Against Holdings.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1. Option to Effect Legal Defeasance or Covenant Defeasance.
Holdings may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.2 or 8.3 hereof be applied to all outstanding Securities upon
compliance with the conditions set forth below in this Article Eight.
Section 8.2. Legal Defeasance.
Upon Holdings' exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, Holdings shall, subject to the satisfaction of
the conditions set forth in Section 8.4 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding
50
<PAGE> 68
Securities on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means
that Holdings shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of Section 8.5 hereof and
the other Sections of this Indenture referred to in (a) and (b) below, and to
have satisfied all its other obligations under such Securities and this
Indenture (and the Trustee, on demand of and at the expense of Holdings, shall
execute proper instruments acknowledging the same), except for the following
provisions which shall survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of outstanding Securities to receive
solely from the trust fund described in Section 8.4 hereof, and as more fully
set forth in such Section, payments in respect of the principal, of, premium,
if any, and interest on such Securities when such payments are due, (b)
Holdings' obligations with respect to such Securities under Article Two and
Section 4.2 hereof and the rights, powers, trusts, duties and immunities of the
Trustee and Holdings' obligations in connection therewith, and (c) this Article
Eight. Subject to compliance with this Article Eight, Holdings may exercise
its option under this Section 8.2 notwithstanding the prior exercise of its
option under Section 8.3 hereof.
Section 8.3. Covenant Defeasance.
Upon Holdings' exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, Holdings shall, subject to the satisfaction of
the conditions set forth in Section 8.4 hereof, be released from its
obligations under the covenants contained in Sections 4.3 and 4.6 through 4.18
and Article V hereof with respect to the outstanding Securities on and after
the date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Securities shall thereafter be deemed not "outstanding"
for the purposes of any direction, waiver, consent or declaration or act of
Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Securities shall not be deemed
outstanding for accounting purposes). For this purpose, Covenant Defeasance
means that, with respect to the outstanding Securities, Holdings 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 6.1 hereof, but, except as specified above, the
remainder of this Indenture and such Securities shall be unaffected thereby.
In addition, upon Holdings' exercise under Section 8.1 hereof of the option
applicable to this Section 8.3 hereof, subject to the satisfaction of the
conditions set forth in Section 8.4 hereof, Sections 6.1(3) (but only to the
extent it relates to a breach of any of the covenants contained in Sections 4.3
and 4.6 through 4.18 and Article V hereof), 6.1(4) and 6.1(7) hereof shall not
constitute Events of Default.
Section 8.4. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.2 or 8.3 hereof to the outstanding Securities:
51
<PAGE> 69
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) Holdings must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders of the Securities, cash in
United States dollars, or direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for
the payment of which obligation or guarantee the full faith and credit
of the United States of America is pledged ("U.S. Government
Obligations"), or a combination thereof, in such amounts and at such
times as will be sufficient, without consideration of the reinvestment
of such interest and after payment of all federal, state and local taxes
or other charges or assessments in respect thereof payable by the
Trustee, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Securities to redemption or maturity
provided that the 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 Securities on the Maturity Date or
such redemption date, as the case may be;
(b) in the case of an election under Section 8.2 hereof,
Holdings shall have delivered to the Trustee an Opinion of Counsel
stating that (A) Holdings 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 the outstanding Securities
will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit and 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 deposit and Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.3 hereof,
Holdings shall have delivered to the Trustee an Opinion of Counsel
stating that the Holders of the outstanding Securities will not
recognize income, gain or loss for federal income tax purposes as a
result of such deposit and 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 deposit and such Covenant
Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred
and be continuing on the date of such deposit or insofar as Section
6.1(5) or 6.1(6) hereof is concerned, at any time in the period ending
on the 91st day after the date of deposit (it being understood that this
condition shall not be deemed satisfied until after such 91st day);
(e) such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a default under,
this Indenture or
52
<PAGE> 70
any other material agreement or instrument to which Holdings is a party
or by which Holdings is bound (and in that connection, the Trustee
shall have received a certificate from the administrative agent under
the Credit Agreement to that effect with respect to such Credit
Agreement if then in effect);
(f) Holdings shall have delivered to the Trustee an
Opinion of Counsel to the effect that, assuming that no Default or Event
of Default shall occur and be continuing under Section 6.1(5) or 6.1(6)
during the period ending on the 91st day after the date of deposit, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) Holdings shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by Holdings
with the intent of preferring the Holders over the other creditors of
Holdings or with the intent of defeating, hindering, delaying or
defrauding creditors of Holdings, or others; and
(h) Holdings shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
Section 8.5. Deposited Money and U.S. Government Obligations to be Held in
Trust; Other Miscellaneous Provisions.
Subject to Section 8.6 hereof, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee pursuant to Section
8.4 hereof 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
(excluding Holdings or any Affiliate thereof) as the Trustee may determine, to
the Holders of such Securities of all sums due and to become due thereon in
respect of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
Holdings shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or U.S. Government
Obligations deposited pursuant to Section 8.4 hereof or the principal 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 Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to Holdings from time to time upon the request of
Holdings any money or non-callable U.S. Government Obligations held by it as
provided in Section 8.4 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
53
<PAGE> 71
Section 8.4(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Covenant Defeasance.
Section 8.6. Repayment to Holdings.
Any money deposited with the Trustee or any Paying Agent in trust for
the payment of the principal of, premium, if any, or interest on any Security
and remaining unclaimed for two years after such principal, and premium, if
any, or interest has become due and payable shall be paid to Holdings on its
request or shall be discharged from such trust; and the Holder of such Security
shall thereafter, as a creditor, look only to Holdings for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money shall thereupon cease; provided, however, that the Trustee or such Paying
Agent, before being required to make any such repayment, shall at the expense
of Holdings cause to be published once, in The New York Times and The Wall
Street Journal (national edition), notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to Holdings.
Section 8.7. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or U.S. Government Obligations in accordance with Section 8.2 or 8.3
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then Holdings' obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.2 or 8.3 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.2 or 8.3 hereof,
as the case may be; provided, however, that, if Holdings makes any payment of
principal of, premium, if any, or interest on any Security following the
reinstatement of its obligations, Holdings shall be subrogated to the rights of
the Holders of such Securities to receive such payment from the money held by
the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1. Without Consent of Holders.
Holdings, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Indenture or the Securities without
notice to or consent of any Holder:
(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;
54
<PAGE> 72
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the uncertificated
Securities are issued in registered form for purposes of Section 163(f) of
the Internal Revenue Code of 1986, as from time to time amended, or in a
manner such that the uncertificated Securities are described in Section
163(f)(2)(B) of the Internal Revenue Code of 1986, as from time to time
amended;
(4) to make any other change that does not adversely affect the
rights of any Holders; or
(5) to comply with any requirements of the SEC in connection with the
qualification of this Indenture under the TIA;
provided that Holdings has delivered to the Trustee an Opinion of Counsel
stating that such amendment or supplement complies with the provisions of this
Section 9.1.
Section 9.2. With Consent of Holders.
Subject to Section 6.7, Holdings, when authorized by a Board Resolution,
and the Trustee, together, with the written consent of the Holder or Holders of
at least fifty one percent in aggregate principal amount of the outstanding
Securities, may amend or supplement this Indenture or the Securities, without
notice to any other Holders. Subject to Section 6.7, the Holder or Holders of
at least fifty one percent in aggregate principal amount of the outstanding
Securities may waive compliance by Holdings with any provision of this
Indenture or the Securities without notice to any other Holder. Without the
consent of each Holder affected, however, no amendment, supplement or waiver,
including a waiver pursuant to Section 6.4, may:
(1) change the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture or the Securities;
(2) reduce the rate or extend the time for payment of interest on any
Security;
(3) reduce the principal amount of any Security;
(4) change the Maturity Date of any Security, or alter the redemption
provisions contained in paragraph 5 of the Securities in a manner adverse to
any Holder;
(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
Security;
(6) make any changes in Section 6.4, 6.7 or this third sentence of
this Section 9.2; or
55
<PAGE> 73
(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
and the Securities as in effect on the date hereof.
Without the consent of the Holder or Holders of at least 66 2/3% of the
aggregate principal amount of the outstanding Securities, no change may be made
to the provisions of Article Eleven that adversely affects the rights of any
Holder under Article Eleven.
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, Holdings shall mail to the Holders affected thereby a notice briefly
describing the amendment, supplement or waiver. Any failure of Holdings 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, Holdings may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or
waiver.
Holdings agrees that no amendment, supplement or waiver under this
Article Nine may make any change that adversely affects the rights under
Article Eleven of any holders of Senior Indebtedness unless the holders of such
Senior Indebtedness consent to the change.
Section 9.3. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
Section 9.4. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by notice to the Trustee
or Holdings received before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Securities have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.
Holdings 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
notwithstanding the last sentence of the immediately preceding paragraph,
56
<PAGE> 74
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 Holder, unless it makes a change described in any of clauses (1)
through (7) of Section 9.2, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the
same debt as the consenting Holder's Security; provided that any such waiver
shall not impair or affect the right of any 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 without the consent of such Holder.
Section 9.5. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if Holdings or
the Trustee so determines, Holdings in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms.
Section 9.6. 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 Indenture. The
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture.
ARTICLE X
MEETINGS OF SECURITYHOLDERS
Section 10.1. Purposes for Which Meetings May Be Called.
A meeting of Holders may be called at any time and from time to time
pursuant to the provisions of this Article Ten for any of the following
purposes:
(a) to give any notice to Holdings or to the Trustee, or to give any
directions to the Trustee, or to waive or to consent to the waiving of any
Default or Event of
57
<PAGE> 75
Default hereunder and its consequences, or to take any other action
authorized to be taken by Holders pursuant to any of the provisions of
Article Six;
(b) to remove the Trustee or appoint a successor Trustee pursuant to
the provisions of Article Seven;
(c) to consent to an amendment, supplement or waiver pursuant to the
provisions of Section 9.2; or
(d) to take any other action (i) authorized to be taken by or on
behalf of the Holders of any specified aggregate principal amount of the
Securities under any other provision of this Indenture, or authorized or
permitted by law or (ii) which the Trustee deems necessary or appropriate in
connection with the administration of this Indenture.
Section 10.2. Manner of Calling Meetings.
The Trustee may at any time call a meeting of Holders to take any action
specified in Section 10.1, to be held at such time and at such place in New
York, New York or elsewhere as the Trustee shall determine. Notice of every
meeting of Holders, setting forth the time and place of such meeting and in
general terms the action proposed to be taken at such meeting, shall be mailed
by the Trustee, first-class postage prepaid, to Holdings and to the Holders at
their last addresses as they shall appear on the registration books of the
Registrar not less than 10 nor more than 60 days prior to the date fixed for a
meeting.
Any meeting of Holders shall be valid without notice if the Holders of
all Securities then outstanding are present in person or by proxy, or if notice
is waived before or after the meeting by the Holders of all Securities
outstanding, and if Holdings, any Subsidiary and the Trustee are either present
by duly authorized representatives or have, before or after the meeting, waived
notice.
Section 10.3. Call of Meetings by Holdings or Holders.
In case at any time Holdings, pursuant to a Board Resolution, or the
Holders of not less than 10% in aggregate principal amount of the Securities
then outstanding shall have requested the Trustee to call a meeting of Holders
to take any action specified in Section 10.1, by written request setting forth
in reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed the notice of such meeting within 20 days after
receipt of such request, then Holdings or the Holders in the amount above
specified may determine the time and place in New York, New York or elsewhere
for such meeting and may call such meeting for the purpose of taking such
action, by mailing or causing to be mailed notice thereof as provided in
Section 10.2, or by causing notice thereof to be published at least once in
each of two successive calendar weeks (on any Business Day during such week) in
a newspaper or newspapers printed in the English language, customarily
published at least five days a week of a general circulation in New York, New
York, the first such publication to be not less than 10 nor more than 60 days
prior to the date fixed for the meeting.
58
<PAGE> 76
Section 10.4. Who May Attend and Vote at Meetings.
To be entitled to vote at any meeting of Holders, a person shall (a) be
a registered Holder of one or more Securities, or (b) be a person appointed by
an instrument in writing as proxy for the registered Holder or Holders of
Securities. The only persons who shall be entitled to be present or to speak
at any meeting of Holders shall be the persons entitled to vote at such meeting
and their counsel and any representatives of the Trustee and its counsel and
any representatives of Holdings and its counsel.
Section 10.5. Regulations May Be Made by Trustee; Conduct of the Meeting;
Voting Rights; Adjournment.
Notwithstanding any other provision of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any action by or
any meeting of Holders, in regard to proof of the holding of Securities and of
the appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, and submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think appropriate. Such regulations may fix
a record date and time for determining the Holders of record of Securities
entitled to vote at such meeting, in which case those and only those persons
who are Holders of Securities at the record date and time so fixed, or their
proxies, shall be entitled to vote at such meeting whether or not they shall be
such Holders at the time of the meeting.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by Holdings
or by Holders as provided in Section 10.3, in which case Holdings or the
Holders calling the meeting, as the case may be, shall in like manner appoint a
temporary chairman. A permanent chairman and a permanent secretary of the
meeting shall be elected by vote of the Holders of a majority in aggregate
principal amount of the Securities represented at the meeting and entitled to
vote.
At any meeting each Holder or proxy shall be entitled to one vote for
each $1,000 principal amount of Securities held or represented by him;
provided, however, that no vote shall be cast or counted at any meeting in
respect of any Securities challenged as not outstanding and ruled by the
chairman of the meeting to be not outstanding. The chairman may adjourn any
such meeting if he is unable to determine whether any Holder or proxy shall be
entitled to vote at such meeting. The chairman of the meeting shall have no
right to vote other than by virtue of Securities held by him or instruments in
writing as aforesaid duly designating him as the proxy to vote on behalf of
other Holders. Any meeting of Holders duly called pursuant to the provisions
of Section 10.2 or Section 10.3 may be adjourned from time to time by vote of
the Holders of a majority in aggregate principal amount of the Securities
represented at the meeting and entitled to vote, and the meeting may be held as
so adjourned without further notice.
Section 10.6. Voting at the Meeting and Record To Be Kept.
The vote upon any resolution submitted to any meeting of Holders shall
be by written ballots on which shall be subscribed the signatures of the
Holders of Securities or of their
59
<PAGE> 77
representatives by proxy and the principal amount of the Securities voted by
the ballot. The permanent chairman of the meeting shall appoint two inspectors
of votes, who shall count all votes cast at the meeting for or against any
resolution and who shall make and file with the secretary of the meeting their
verified written reports in duplicate of all votes cast at the meeting. A
record in duplicate of the proceedings of each meeting of Holders shall be
prepared by the secretary of the meeting and there shall be attached to such
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
facts, setting forth a copy of the notice of the meeting and showing that such
notice was mailed as provided in Section 10.2 or published as provided in
Section 10.3. The record shall be signed and verified by the affidavits of the
permanent chairman and the secretary of the meeting and one of the duplicates
shall be delivered to Holdings and the other to the Trustee to be preserved by
the Trustee, the latter to have attached thereto the ballots voted at the
meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7. Exercise of Rights of Trustee or Holders May Not Be
Hindered or Delayed by Call of Meeting.
Nothing contained in this Article Ten shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Holders or any
rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Holders under any of the provisions of this
Indenture or of the Securities.
ARTICLE XI
SUBORDINATION
Section 11.1. Securities Subordinated to Senior Indebtedness.
Anything herein to the contrary notwithstanding, Holdings, for itself
and its successors, and each Holder, by accepting a Security, agrees, that the
payment of the principal of and interest on and premiums, penalties, fees and
other liabilities (including, without limitation, liabilities in respect of any
indemnity, reimbursement, compensation or contribution obligations, the
occurrence of a Change of Control, any liquidated damage provision, any breach
of representation or warranty, or any rights of redemption or rescission under
this Indenture, the Merger Agreement and the Registration Rights Agreement or
by law or otherwise) ("Other Obligations") with respect to the Securities is
subordinated, to the extent and in the manner provided in this Article Eleven,
to the prior payment in full in cash of all Senior Indebtedness.
This Article Eleven 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 benefit of the holders of Senior Indebtedness and
such holders are made obligees hereunder and any
60
<PAGE> 78
one or more of them may enforce such provisions. Holders of Senior
Indebtedness need not prove reliance on the subordination provisions hereof.
Section 11.2. No Payment on Securities in Certain Circumstances.
(a) No direct or indirect payment or distribution shall be made by or
on behalf of Holdings (other than a payment in Secondary Securities) on account
of principal of or interest on or Other Obligations with respect to the
Securities or to acquire, repurchase, redeem, retire or defease any of the
Securities or on account of the redemption provisions of the Securities (i)
upon the maturity of any Senior Indebtedness by lapse of time, acceleration or
otherwise, unless and until all principal thereof and interest thereon shall
first be paid in full in cash or (ii) upon the happening of any default in
payment of any principal of or interest on any Senior Indebtedness when the
same becomes due and payable (a "Payment Default"), unless and until such
default shall have been cured or waived or shall have ceased to exist.
(b) Without limiting the effect of Section 11.2(a), upon the
happening of a default or event of default (other than a Payment Default)
(including any event which, with the giving of notice or lapse of time, or
both, would become an event of default and including any default or event of
default that would result upon any payment with respect to the Securities) with
respect to any Senior Indebtedness, as such default or event of default is
defined therein or in the instrument or agreement under which it is
outstanding, and upon written notice thereof given to Holdings and the Trustee
by any holders of such Senior Indebtedness or their Representative specifying
an intent to effect a Payment Blockage Period hereunder ("Payment Notice"),
then, unless and until such default or event of default shall have been cured
or waived or shall have ceased to exist, no direct or indirect payment or
distribution (other than of Secondary Securities) shall be made by or on behalf
of Holdings on account of principal of or interest on or Other Obligations with
respect to the Securities or to acquire, repurchase, redeem, retire or defease
any of the Securities or on account of the redemption provisions of the
Securities; provided, however, that this paragraph (b) shall not prevent the
making of any payment for a period of (a "Payment Blockage Period") of more
than 179 days after a Payment Notice shall have been given (or earlier if such
Payment Blockage Period is terminated (i) by written notice to the Trustee and
Holdings from the Credit Agent or the Representative which gave such Payment
Notice, (ii) repayment in full of such Senior Indebtedness or (iii) because the
default specified in the Payment Notice is no longer continuing). Subject to
the provisions contained in Section 11.2(a) above, Holdings may resume payments
on the Securities after such Payment Blockage Period expires. Notwithstanding
the foregoing, (i) not more than one Payment Notice shall be given within a
period of 360 consecutive days, and (ii) a Payment Notice may only be given (A)
if Senior Indebtedness is outstanding under the Credit Agreement at the time of
such notice, by the Credit Agent and (B) if no Senior Indebtedness is
outstanding under the Credit Agreement at the time of such notice, by a holder
or holders (or the Representative of holders) of at least $35,000,000 principal
amount of such Senior Indebtedness. For purposes of this Section, no default
or event of default which existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Senior
Indebtedness initiating such Payment Blockage Period shall be, or be made, the
basis of the commencement of a subsequent Payment Blockage Period by the
Representative of such Senior
61
<PAGE> 79
Indebtedness whether or not within a period of 360 consecutive days unless such
default or event of default shall have been cured or waived for a period of not
less than 90 consecutive days.
(c) In furtherance of the provisions of Section 11.1, if,
notwithstanding the foregoing provisions of this Section 11.2, any direct or
indirect payment or distribution other than Secondary Securities on account of
principal of or interest on or Other Obligations with respect to the Securities
or to acquire, repurchase, redeem, retire or defease any of the Securities or
on account of the redemption provisions of the Securities shall be made by or
on behalf of Holdings and received by the Trustee, by any Holder or by any
Paying Agent (or, if Holdings or any Subsidiary or Affiliate of Holdings is
acting as Paying Agent, money for any such payment or distribution shall be
segregated and held in trust), at a time when such payment or distribution was
prohibited by the provisions of this Section 11.2, then, unless and until such
payment or distribution is no longer prohibited by this Section 11.2, such
payment or distribution (subject to the provisions of Sections 11.6 and 11.7)
shall be received, segregated from other funds, and held in trust by the
Trustee or such Holder or Paying Agent, as the case may be, for the benefit of,
and shall be immediately 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, to the extent necessary to make
payment in full in cash of all Senior Indebtedness remaining unpaid, after
giving effect to all concurrent payments and distributions to or for the
holders of Senior Indebtedness. Holdings shall give prompt notice to the
Trustee of any default or event of default or any acceleration under any Senior
Indebtedness or under any agreement pursuant to which Senior Indebtedness may
have been issued. Failure to give such notice shall not affect the
subordination of the Securities to Senior Indebtedness provided in this Article
Eleven. Notwithstanding anything to the contrary contained herein, in the
absence of its gross negligence or willful 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 such
payment over to, the holders of Senior Indebtedness or their Representative.
Section 11.3. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization
of Holdings.
Upon any payment or distribution of assets or securities of Holdings of
any kind or character, whether in cash, property or securities, upon any
dissolution, winding-up, total or partial liquidation or total or partial
reorganization of Holdings (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 Holdings and
whether voluntary or involuntary):
(a) the holders of all Senior Indebtedness shall first be entitled to
receive payments in full in cash of the principal thereof and interest
thereon before the Holders are entitled to receive any payment on account of
the principal of or interest on or Other Obligations with respect to the
Securities (whether by payment, acquisition, retirement, defeasance,
redemption or otherwise) or any other payment or distribution of assets or
securities by or on behalf of Holdings;
62
<PAGE> 80
(b) any payment or distribution of assets or securities of Holdings
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 except
for the provisions of this Article Eleven, including any such payment or
distribution that is payable or deliverable by reason of the payment of any
other Indebtedness of Holdings being subordinated to the payment of the
Securities (except for any such payment or distribution (x) authorized by an
order or decree giving effect, and stating in such order or decree that
effect is given, to the subordination of the Securities to the Senior
Indebtedness, and made by a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law, (y) of
securities that (i) are unsecured, (ii) have a Weighted Average Life to
Maturity and final maturity that are no shorter than the Weighted Average
Life to Maturity of the Securities or any securities issued to the holders of
Senior Indebtedness under the Loan Documents pursuant to a plan of
reorganization or readjustment and (iii) are subordinated, to at least the
same extent as the Securities, to the payment of all Senior Indebtedness then
outstanding or (z) of Capital Stock), 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 held or
represented by each, until all Senior Indebtedness remaining unpaid shall
have been paid in full in cash, after giving effect to all concurrent
payments and distributions to or for the holders of such Senior Indebtedness;
and
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets or securities of Holdings of any kind or character,
whether in cash, property or securities, shall be received by the Trustee or
the Holders or any Paying Agent (or, if Holdings or any Subsidiary or
Affiliate of Holdings is acting as Paying Agent, money, assets or securities
of any kind or character for any such payment or distribution shall be
segregated or held in trust) on account of principal of or interest on or
Other Obligations with respect to the Securities before all Senior
Indebtedness is paid in full in cash, such payment or distribution (subject
to the provisions of Sections 11.6 and 11.7) 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, after giving effect to all concurrent payments and distributions 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 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.
Holdings shall give prompt notice to the Trustee prior to any
dissolution, winding-up, total or partial liquidation or total or partial
reorganization of Holdings or assignment for the benefit of creditors by
Holdings.
63
<PAGE> 81
Section 11.4. Holders to Be Subrogated to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full in cash 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 Holdings
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 distributions to the holders of Senior Indebtedness by or on behalf
of Holdings, or by or on behalf of the Holders by virtue of this Article
Eleven, which otherwise would have been made to the Holders, shall, as between
Holdings and the Holders, be deemed to be payment by Holdings to or on account
of the Senior Indebtedness, it being understood that the provisions of this
Article Eleven are and are intended solely for the purpose of defining the
relative rights of the Holders, on the one 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 Eleven shall have been
applied, pursuant to the provisions of this Article Eleven, 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 Indebtedness 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.
Section 11.5. Obligations of Holdings Unconditional.
Nothing contained in this Article Eleven or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as between Holdings and
the Holders, the obligation of Holdings, which is absolute and unconditional,
to pay to the Holders the principal of and interest on and Other Obligations in
respect of the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of Holdings other than the holders of the
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 Eleven, of the holders of Senior Indebtedness in respect of cash,
property or securities of Holdings received upon the exercise of any such
remedy. Upon any payment or distribution of assets or securities of Holdings
referred to in this Article Eleven, the Trustee, subject to the provisions of
Sections 7.1 and 7.2, and the Holders shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which 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 distribution to the Trustee or to
the Holders for the purpose of ascertaining the persons entitled to participate
in such payment or distribution, the holders of Senior Indebtedness and other
Indebtedness of Holdings, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article Eleven. Nothing in this Section 11.5 shall apply to the claims
of, or payments to, the Trustee under or pursuant to Section 7.7.
64
<PAGE> 82
Section 11.6. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts 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 Holdings 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
7.1 and 7.2, shall be entitled in all respects conclusively to assume that no
such fact exists.
Section 11.7. 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 accordance with Section 8.4 shall be for the
sole benefit of Holders and, to the extent allocated for the payment of
Securities, shall not be subject to the subordination provisions of this
Article Eleven. Otherwise, any deposit of assets or securities by or on behalf
of Holdings with the Trustee or any Paying Agent (whether or not in trust) for
the payment of principal of or interest on or Other Obligations with respect to
any Securities shall be subject to the provisions of this Article Eleven;
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 11.6,
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. The foregoing shall not apply to the Paying Agent if
Holdings or any Subsidiary or Affiliate of Holdings is acting as Paying Agent.
Nothing contained in this Section 11.7 (except the first sentence of this
Section 11.7) shall limit the right of the holders of Senior Indebtedness to
recover payments as contemplated by this Article Eleven.
Section 11.8. Subordination Rights Not Impaired by Acts or Omissions of
Holdings or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness to
enforce the subordination provisions contained in this Article Eleven shall at
any time in any way be prejudiced or impaired by any act or failure to act on
the part of Holdings or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by Holdings with the terms of this
Indenture, regardless of any knowledge thereof that any such holder may have or
be otherwise charged with. The holders of Senior Indebtedness may extend,
renew, restate, supplement, modify or amend the terms of the Senior
Indebtedness or any security therefor and release, sell or exchange such
security and otherwise deal freely with Holdings and its Subsidiaries all
without affecting the liabilities and obligations of the parties to this
Indenture or the Holders. No provision in any supplemental indenture that
affects the subordination of the Securities or other provisions of this Article
Eleven shall be effective against the holders of the Senior Indebtedness who
have not consented thereto.
65
<PAGE> 83
Each Holder by accepting a Security agrees that the Representative of
any Senior Indebtedness (including without limitation, the Credit Agent), in
its discretion, without notice or demand and without affecting any rights of
any holder of Senior Indebtedness under this Article Eleven, may foreclose any
mortgage or deed of trust covering interests in real property secured thereby,
by judicial or nonjudicial sale; and such Holder hereby waives any defense to
the enforcement by the Representative (including without limitation, the Credit
Agent) of any Senior Indebtedness or by any holder of any Senior Indebtedness
against such Holder of this Article Eleven after a judicial or nonjudicial sale
or other disposition of its interests in real property secured by such mortgage
or deed of trust; and such Holder expressly waives any defense or benefits that
may be derived from California Civil Code Section Section 2808, 2809, 2810,
2819, 2845, 2849 or 2850, or California Code of Civil Procedure Section Section
580a, 580d or 726, or comparable provisions of the laws of any other
jurisdiction or any similar statute in effect in any other jurisdiction.
Section 11.9. Holders Authorize Trustee to Effectuate Subordination of
Securities.
Each Holder by accepting a Security 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 Eleven, and
appoints the Trustee his attorney-in-fact for such purpose, including, in the
event of any dissolution, winding up, liquidation or reorganization of Holdings
(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 Holdings) tending towards liquidation or reorganization of the
business and assets of Holdings, the immediate filing of a claim for the unpaid
balance of its or his Securities and Other Obligations 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 contained 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 Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee or the holders
of Senior Indebtedness or their Representative to vote in respect of the claim
of any Holder in any such proceeding.
Section 11.10. Right of Trustee to Hold Senior Indebtedness.
The Trustee shall be entitled to all of the rights set forth in this
Article Eleven in respect of any Senior Indebtedness 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.
66
<PAGE> 84
Section 11.11. Article Eleven Not to Prevent Events of Default.
The failure to make a payment on account of principal of or interest on
the Securities by reason of any provision of this Article Eleven shall not be
construed as preventing the occurrence of a Default or an Event of Default
under Section 6.1.
Section 11.12. 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 misconduct or gross negligence) if it shall in good faith
mistakenly pay over or deliver to the Holders of Securities or Holdings or any
other person, money or assets to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article Eleven or otherwise. Nothing in this
Section 11.12 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 XII
SATISFACTION AND DISCHARGE
Section 12.1. Satisfaction and Discharge of the Indenture.
This Indenture will be discharged and will cease to be of further effect
as to all outstanding Securities when:
(a) all Securities theretofore authenticated and delivered (except
lost, stolen or destroyed Securities which have been replaced or paid and
Securities for whose payment money has theretofore been deposited in trust and
thereafter repaid to Holdings) have been delivered to the Trustee for
cancellation; or
(b) (1) all Securities not theretofore delivered to the Trustee for
cancellation have become due and payable by reason of the making of a notice
of redemption or otherwise and Holdings has irrevocably deposited or caused
to be deposited with the Trustee as trust funds in trust for the purpose an
amount sufficient to pay and discharge the entire indebtedness on the
Securities not theretofore delivered to the Trustee for cancellation for
principal, premium, if any, and accrued interest to the date of maturity or
redemption;
(2) Holdings has paid all sums payable by it under this
Indenture; and
(3) Holdings has delivered irrevocable instructions to the
Trustee to apply the deposited money toward the payment of the Securities at
maturity or the redemption date, as the case may be.
Section 12.2. Conditions to Satisfaction and Discharge of the Indenture.
67
<PAGE> 85
Holdings shall deliver an Officers' Certificate and an Opinion of
Counsel to the Trustee stating that all conditions precedent to satisfaction
and discharge have been complied with.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of Section 3.18(c) of the TIA, the imposed
duties shall control.
Section 13.2. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
if to Holdings:
c/o The Yucaipa Companies
10000 Santa Monica Boulevard
Fifth Floor
Los Angeles, California 90067
Attention: Mark A. Resnik
if to the Trustee:
____________________________________
____________________________________
____________________________________
____________________________________
Attention: Corporate Trust Administration
Each of Holdings and the Trustee by written notice to each other such
person may designate additional or different addresses for notices to such
person. Any notice or communication to Holdings and the Trustee 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
certified mail, postage prepaid (except that a notice of change of address
shall not be deemed to have been given until actually received by the
addressee).
68
<PAGE> 86
Any notice or communication mailed to a Holder shall be mailed to him by
first class mail or other equivalent means at his address as it appears on the
registration 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 Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
Section 13.3. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Securities.
Holdings, the Trustee, the Registrar and any other person shall have the
protection of TIA Section 312(c).
Section 13.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by Holdings to the Trustee to take any
action under this Indenture, Holdings 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 opinion of such
counsel, all such conditions precedent have been complied with.
Section 13.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.7, shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
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
69
<PAGE> 87
matters of fact an Opinion of Counsel may rely on an Officers' Certificate or
certificates of public officials.
Section 13.6. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
Section 13.7. 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, California 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 13.8. 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
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Indenture.
Section 13.9. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of Holdings or any Subsidiary. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
Section 13.10. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such, of
Holdings shall not have any liability for any obligations of Holdings 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 Holder by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
Section 13.11. Successors.
All agreements of Holdings in this Indenture and the Securities shall
bind their respective successors. All agreements of the Trustee in this
Indenture shall bind its successor.
70
<PAGE> 88
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 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.
71
<PAGE> 89
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first written above.
Dated: ________ __, 1995
[SEAL] FOOD 4 LESS HOLDINGS, INC.
Attest: By:
------------------------------------
Name: Mark A. Resnik
Title: Vice President
____________________________
Dated: ________ __, 1995
[SEAL] ----------------------------------------
----------------------------------------
as Trustee
Attest: By:
------------------------------------
Name:
Title:
____________________________
S-1
<PAGE> 90
EXHIBIT A
PURSUANT TO PROVISIONS OF THE INTERNAL REVENUE CODE OF 1986 RELATING TO
ORIGINAL ISSUE DISCOUNT AND TREASURY REGULATIONS PROMULGATED THEREUNDER WITH
RESPECT TO DEBT INSTRUMENTS ISSUED ON OR AFTER APRIL 4, 1994, THE FOLLOWING
INFORMATION IS PROVIDED: (1) THIS SECURITY IS BEING ISSUED WITH ORIGINAL
ISSUE DISCOUNT IN THE AMOUNT OF $____ PER FACE AMOUNT; (2) THE ISSUE PRICE
OF THIS SECURITY IS $___ PER FACE AMOUNT; (3) THE ISSUE DATE OF THIS
SECURITY IS ______ __, ____; AND (4) THE YIELD TO MATURITY OF THIS SECURITY
IS __%.
FOOD 4 LESS HOLDINGS, INC.
13% Senior Subordinated Pay-in-Kind Debentures
due ________ __, 2007
No.
$
Food 4 Less Holdings, Inc., a Delaware corporation ("Holdings," which term
includes any successor entity), for value received promises to pay to
or registered assigns, the principal sum of dollars, on ________ __,
2007.
Interest payment dates: ________________ and _______________
commencing ________ __, ____.
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.
IN WITNESS WHEREOF, Holdings has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated: ________ __, 1995
FOOD 4 LESS HOLDINGS, INC.
By:
Name:
Title:
This is one of the Securities described in the within-mentioned
Indenture.
Dated: ________ __, 1995
__________________________________
as Trustee
By:
Title:
A-1
<PAGE> 91
FOOD 4 LESS HOLDINGS, INC.
13% Senior Subordinated Pay-in-Kind Debenture
due ________ __, 2007
1. Interest.
FOOD 4 LESS HOLDINGS, INC., a Delaware corporation ("Holdings"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. Holdings may, in its sole discretion, issue additional
Securities ("Secondary Securities") in lieu of a cash payment of any or all of
the interest due on any Interest Payment Date occurring on or prior to [the
Interest Payment Date five years after the Issue Date]. If Holdings issues
Secondary Securities in lieu of cash payment, in whole or in part, of interest
due on any Interest Payment Date occurring on or prior to [the Interest Payment
Date five years after the Issue Date], pursuant to this paragraph, it shall
give notice to the Trustee not less than 5 Business Days prior to the relevant
Interest Payment Date, and shall instruct the Trustee (upon written order of
Holdings signed by an Officer of Holdings given not less than 5 nor more than
45 days prior to such Interest Payment Date) to authenticate a Secondary
Security, dated such Interest Payment Date, in a principal amount equal to the
amount of interest not paid in cash in respect of this Security on such
Interest Payment Date. Each issuance of Secondary Securities in lieu of cash
payments of interest on the Securities shall be made pro rata with respect to
the outstanding Securities. Any such Secondary Securities shall be governed by
the Indenture and shall be subject to the same terms (including the maturity
date and the rate of interest from time to time payable thereon) as this
Security (except, as the case may be, with respect to the title, issuance date
and aggregate principal amount). The term Securities shall include the
Secondary Securities that may be issued under the Indenture.
Holdings will pay interest semi-annually in arrears on ___________ and
_________ of each year (the "Interest Payment Date"), commencing ___________,
____. Interest on this Security will accrue from the date of issuance or from
the most recent date to which interest has been paid. Interest will be
computed on the basis of a 360-day year of twelve 30-day months and actual
number of days elapsed.
Holdings shall pay interest on overdue principal and interest on overdue
installments of interest, to the extent lawful, at the rate per annum borne by
the Securities.
2. Method of Payment.
Holdings shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of
business on the Record Date immediately preceding the Interest Payment Date
even if the Securities 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. Holdings 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") (or, pursuant to
A-2
<PAGE> 92
Paragraph 1 hereof, in Secondary Securities). However, Holdings may pay
principal and interest by its check payable in such U.S. Legal Tender or by
wire transfer of federal funds (or, pursuant to Paragraph 1 hereof, in
Secondary Securities). Holdings may deliver any such interest payment to the
Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Norwest Bank Minnesota, N.A. (the "Trustee"), will act as
Paying Agent and Registrar. Holdings may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders. Holdings or any Subsidiary may,
subject to certain exceptions, act as Paying Agent, Registrar or co-Registrar.
4. Indenture.
Holdings issued the Securities under an Indenture, dated as of ________
__, 1995 (the "Indenture"), between Holdings and the Trustee. This Security is
one of a duly authorized issue of Securities of Holdings designated as its 13%
Senior Subordinated Pay-in-Kind Debentures due 2007. Capitalized terms herein
are used as defined in the Indenture unless otherwise defined herein. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.
Code Sections 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 general
unsecured obligations of Holdings limited in aggregate principal amount to
$100,000,000, except for Secondary Securities and except as otherwise provided
in the Indenture.
5. Optional Redemption.
The Securities may not be redeemed at the option of Holdings prior to
________ __, 2000. Thereafter, upon at least 30 days' but not more than 60
days' notice to the Holders, Holdings may redeem all or any of the Securities
at any time at redemption prices equal to the applicable percentage of the
principal amount thereof set forth below, plus accrued interest, if any, to the
Redemption Date (as defined in the Indenture) if redeemed during the 12-month
period beginning ________ __ of the years indicated below:
<TABLE>
<CAPTION>
Applicable
Year Percentage
---- ----------
<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 ________ __, 1998, Holdings may
use the Net Proceeds (as defined in the Indenture) of an Initial Public
Offering (as defined in the
A-3
<PAGE> 93
Indenture) of Holdings or the Company to redeem up to 35% of the Securities at
a redemption price equal to 110% of the principal amount thereof plus accrued
interest, if any, to the date of redemption.
In order to effect the foregoing redemption, Holdings shall send the
notice required by Section 3.3 of the Indenture not later than 30 days after
the Initial Public Offering Consummation Date (as defined in the Indenture).
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 Securities called for redemption
shall have been deposited with the Paying Agent for redemption on such
Redemption Date, then, unless Holdings 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.
In the event of a Change of Control, upon the satisfaction of the
conditions set forth in the Indenture, Holdings shall be required to offer to
purchase all of the then outstanding Securities pursuant to a Change of Control
Offer at a purchase price equal to 101% of the aggregate principal amount
thereof plus accrued interest, if any, to the date of purchase. Holders of
Securities which are the subject of such an offer to repurchase shall receive
an offer to repurchase and may elect to have such Securities repurchased in
accordance with the provisions of the Indenture pursuant to and in accordance
with the terms of the Indenture.
8. Limitation on Disposition of Assets.
Under certain circumstances Holdings is required to apply the net
proceeds from Asset Sales to the repayment of Indebtedness of Holdings or any
Subsidiary, to make Related Business Investments and certain other investments
or to purchase in a Net Proceeds Offer at a price equal to 100% of the
aggregate principal amount thereof, plus accrued interest, if any, to the date
of purchase, which shall in the aggregate equal the net proceeds required to be
applied thereto.
9. Subordination. The Securities 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 Senior Indebtedness of Holdings whether outstanding on the date of
the Indenture or thereafter created, incurred, assumed or guaranteed. Each
Holder, by accepting a Security, agrees to such subordination and authorizes
the Trustee to give it effect.
A-4
<PAGE> 94
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations
of $1,000 and integral multiples of $1,000 (other than Secondary Securities
which may be in denominations of less than $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 portions thereof selected for redemption. No service charge
shall be made for any transfer, registration or exchange, but Holdings may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith, but not for any exchange pursuant to
Section 2.10, 3.6 or 9.5 of the Indenture.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
12. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed for
one year, the Trustee and the Paying Agents will pay the money back to Holdings
at its request. After that, all liability of the Trustee and such Paying
Agents with respect to such money shall cease.
13. Discharge Prior to Redemption or Maturity.
If Holdings 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 redemption or maturity and complies with the other provisions
of the Indenture relating thereto, Holdings will be discharged from certain
provisions of the Indenture and the Securities (including the financial
covenants, but excluding its obligation to pay the principal of and interest on
the Securities).
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may
be waived with the consent of the Holders of fifty one percent in aggregate
principal amount, as the case may be, of the Securities then outstanding.
Without notice to or consent of any Holder, the parties thereto may amend or
supplement the Indenture or the Securities to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities, comply with Article Five 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
A-5
<PAGE> 95
change that does not adversely affect the rights of any Holder of a Security.
An amendment may not make any change that adversely affects the rights under
Article 11 of the Indenture of any holders of Senior Indebtedness unless the
holders of Senior Indebtedness consent to the change.
15. Successors.
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor 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 Securities to be due and payable in the manner,
at the time and with the effect provided in the Indenture. Holders of
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to 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) if it determines that
withholding notice is in their interest.
17. Trustee Dealings with Holdings.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with Holdings, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
Holdings shall have any liability for any obligation of Holdings 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 Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on this Security.
A-6
<PAGE> 96
20. Governing Law.
The Laws of the State of New York shall govern this Security and the
Indenture.
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 (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
22. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, Holdings 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.
23. Indenture.
Each Holder, by accepting a Security, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.
Holdings will furnish to any Holder of a Security upon written request
and without charge a copy of the Indenture. Requests may be made to: FOOD 4
LESS HOLDINGS, INC., c/o The Yucaipa Companies, 10000 Santa Monica Boulevard,
Fifth Floor, Los Angeles, California 90067, Attn: Mark A. Resnik.
24. Certain Information Obligations.
To the extent permitted by applicable law or regulation, whether or not
Holdings is subject to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), Holdings shall file with
the SEC all quarterly and annual reports and such other information, documents
or other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) required to be filed pursuant to such
provisions of the Exchange Act. Holdings shall file with the Trustee copies of
the quarterly and annual reports and the information, documents, and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) that it is required to file with the SEC
pursuant to the Indenture. At any time when Holdings is not permitted by
applicable law or regulations to file the aforementioned reports, Holdings
shall furnish the Trustee and the Holders with the information that Holdings
would have had to provide to the SEC if Holdings had been subject to Section 13
or 15(d) of the Exchange Act.
25. Holdings Indebtedness.
Each Holder acknowledges that Holdings is the sole obligor of the
Securities and no Subsidiary of Holdings is a co-obligor or a guarantor of the
Securities.
A-7
<PAGE> 97
[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 transfer this Security
on the books of Holdings. 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-8
<PAGE> 98
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Security purchased by Holdings
pursuant to Section 4.14 or Section 4.15 of the Indenture, check the box:
Section 4.14 [ ] Section 4.15 [ ]
If you want to elect to have only part of this Security purchased by
Holdings pursuant to Section 4.14 or Section 4.15 of the Indenture, state the
amount:
$
Date:_________________________ Signature:____________________________________
(Sign exactly as your name appears
on the front of this Security)
Signature Guarantee:_________________________________________________________
A-9
<PAGE> 1
EXHIBIT 10.30
AMENDMENT NO. 2
TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 2 (this "Amendment"), dated as of February
24, 1995, to the Agreement and Plan of Merger dated as of September 14, 1994,
as amended by Amendment No. 1 dated as of January 12, 1995 (collectively, the
"Merger Agreement"), is by and among Food 4 Less, Inc., a Delaware corporation
("F4L"), Food 4 Less Holdings, Inc., a California corporation ("F4L Holdings"),
Food 4 Less Holdings, Inc., a Delaware corporation ("F4L Holdings Delaware"),
Food 4 Less Supermarkets, Inc., a Delaware corporation ("F4L Supermarkets"),
Ralphs Supermarkets, Inc., a Delaware corporation ("Ralphs Supermarkets"), and
The Edward J. DeBartolo Corporation ("EJDC") and the other stockholders of
Ralphs Supermarkets (each a "Selling Stockholder"). Capitalized terms not
otherwise defined herein have the meanings given to them in the Merger
Agreement.
WHEREAS, F4L, F4L Holdings, F4L Holdings Delaware, F4L
Supermarkets, Ralphs Supermarkets and the Selling Stockholders previously have
entered into the Merger Agreement, by which the parties agreed to merge F4L
Supermarkets with and into Ralphs Supermarkets in accordance with the terms and
conditions of the Merger Agreement and Section 251 of the General Corporation
Law of the State of Delaware;
WHEREAS, the parties desire to amend certain provisions of
the Merger Agreement as more fully set forth herein;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto agree as follows:
1. Amendment of Defined Terms.
(a) The definition of "Closing Date" in Section 1.1 of
the Merger Agreement is hereby amended to delete the date "March 15, 1995" and
to substitute in its place the date "April 14, 1995."
(b) The definition of "Debentures" in Section 1.1 of the
Merger Agreement is hereby amended to read as follows:
"Debentures" shall mean the 13-5/8% Senior
Subordinated Pay-in-Kind Debentures due 2007 to be issued by F4L
Holdings Delaware pursuant to the Indenture.
(c) The definition of "Indenture" in Section 1.1 of the
Merger Agreement is hereby amended to delete "F4L Holdings" and to substitute
in its place "F4L Holdings Delaware."
2. Amendment of Section 2.1(a). Section 2.1(a) of the
Merger Agreement is hereby amended (i) to delete "$12.31060748 in cash"
appearing in the third line thereof and to substitute in its place "$8.20710248
in cash" and (ii) to delete "$8.2074 principal amount of Debentures" appearing
in the third line thereof and to substitute in its place "$12.310905 principal
amount of Debentures."
<PAGE> 2
3. Amendment of Section 9.6. Section 9.6 of the Merger
Agreement is hereby amended to delete "F4L Holdings" and to substitute in its
place "F4L Holdings Delaware."
4. Amendment of Section 11.1(b). Section 11.1(b) of the
Merger Agreement is hereby amended to delete the date "March 31, 1995"
appearing in the second line thereof and to substitute in its place the date
"April 14, 1995."
5. Schedules.
(a) Schedule 2.1 of the Merger Agreement is hereby deleted
and the attached Schedule 2.1 is hereby substituted in its place and
incorporated herein by reference.
(b) Schedule 9.9 of the Merger Agreement is hereby
amended to delete "$150 million" appearing in clause (1) thereof and to
substitute in its place "$140 million."
6. Exhibit A. Exhibit A (Form of Indenture) of the
Merger Agreement is hereby deleted and the attached Exhibit A (Form of
Indenture) is hereby substituted in its place and incorporated herein by
reference.
7. Exhibit D. Exhibit D (Form of Opinion of Counsel to
F4L, F4L Holdings and F4L Supermarkets) of the Merger Agreement is hereby
amended as more fully described below.
(a) All references in Paragraph 7 to the "Consulting
Agreement" are hereby amended to substitute in its place the "Put Agreement."
(b) Paragraph 7 is hereby amended to delete the phrase
"and in good standing" appearing in the first and second lines thereof.
8. Exhibit E. Exhibit E (Form of Put Agreement) of the
Merger Agreement is hereby amended to delete "$60,346,000 aggregate principal
amount of 13% Senior Subordinated Pay-in-Kind Debentures due 2006 (the
"Debentures") issued by F4L Holdings" appearing in the second recital and to
substitute in its place "$90,517,000 aggregate principal amount of 13-5/8%
Senior Subordinated Pay-in-Kind Debentures due 2007 (the "Debentures") issued
by Food 4 Less Holdings, Inc., a Delaware corporation."
9. Exhibit G. Exhibit G (Form of Registration Rights
Agreement) of the Merger Agreement is hereby amended as more fully described
below.
(a) F4L Holdings Delaware shall replace F4L Holdings as a
party to such Registration Rights Agreement and all references to the "Company"
therein shall mean F4L Holdings Delaware.
(b) The definition of "Debentures" in Section 1 is hereby
amended to (i) delete "13% Senior Subordinated Pay-in-Kind Debentures due 2006"
appearing in the first line and to substitute in its place "13-5/8% Senior
Subordinated Pay-in-Kind Debentures due 2007," and (ii) delete "$100,000,000"
appearing in the third line and to substitute in its place "$150,000,000."
10. Terms and Conditions. Except as specifically
modified herein, all other terms and conditions of the Merger Agreement shall
remain in full force and effect.
2
<PAGE> 3
IN WITNESS WHEREOF, this Amendment has been signed by or on
behalf of each of the parties as of the day first above written.
"F4L": FOOD 4 LESS, INC.
By: _________________________
Name:
Title:
"F4L HOLDINGS": FOOD 4 LESS HOLDINGS, INC.
By: _________________________
Name:
Title:
"F4L HOLDINGS DELAWARE": FOOD 4 LESS HOLDINGS, INC.
By: _________________________
Name:
Title:
"F4L SUPERMARKETS": FOOD 4 LESS SUPERMARKETS, INC.
By: _________________________
Name:
Title:
"RALPHS SUPERMARKETS": RALPHS SUPERMARKETS, INC.
By: _________________________
Name:
Title:
"SELLING
STOCKHOLDERS": THE EDWARD J. DEBARTOLO CORPORATION
By: _________________________
Name:
Title:
S-1
<PAGE> 4
CAMDEV PROPERTIES INC.
By: _________________________
Name:
Title:
BANK OF MONTREAL
By: _________________________
Name:
Title:
BANQUE PARIBAS
By: _________________________
Name:
Title:
FEDERATED DEPARTMENT STORES, INC.
By: _________________________
Name:
Title:
S-2
<PAGE> 5
EXHIBIT A
FOOD 4 LESS HOLDINGS, INC.
AND
NORWEST BANK MINNESOTA, N.A.
AS TRUSTEE
INDENTURE
Dated as of ___________ __, 1995
$150,000,000
13 5/8% Senior Subordinated Pay-in-Kind Debentures due 2007
<PAGE> 6
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA INDENTURE
Section Section
- ------- ---------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8; 7.10; 13.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6; 13.2
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10; 13.2
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2; 13.4
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2; 13.4
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.5
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5; 13.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.1
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.1
- -----------------------
</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.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Incorporation by Reference of TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 1.3. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE II THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.1. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.2. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.4. Paying Agent To Hold Assets in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.5. Securityholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.6. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.7. Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.8. Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.9. Treasury Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.10. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.13. CUSIP Number. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE III REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.1. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.2. Selection of Securities To Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.3. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.4. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.5. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.6. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IV COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.1. Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.2. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.3. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.4. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.5. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.6. Maintenance of Properties and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.7. Compliance Certificate; Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.8. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
i
<PAGE> 8
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.9. SEC Reports and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.10. Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.11. Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.12. Limitation on Incurrences of Additional Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.13. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.14. Limitation on Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.15. Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.16. Limitation on Senior Subordinated Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.17. Limitation on Preferred Stock of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.18. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries . . . . . . . . . . . . . 38
ARTICLE V SUCCESSOR CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.1. When Holdings May Merge, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.2. Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VI DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.2. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.4. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.5. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.6. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.7. Rights of Holders To Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.8. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.9. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VII TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.1. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.2. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.3. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.5. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.6. Reports By Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.7. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.8. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 7.9. Successor Trustee by Merger, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
ii
<PAGE> 9
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7.11. Preferential Collection of Claims Against Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VIII LEGAL DEFEASANCE AND COVENANT DEFEASANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.1. Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.2. Legal Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.3. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.4. Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 8.5. Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions. . 53
Section 8.6. Repayment to Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.7. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.1. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.2. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.3. Compliance with TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.4. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.5. Notation on or Exchange of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.6. Trustee To Sign Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE X MEETINGS OF SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.1. Purposes for Which Meetings May Be Called . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.2. Manner of Calling Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.3. Call of Meetings by Holdings or Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.4. Who May Attend and Vote at Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.5. Regulations May Be Made by Trustee; Conduct of the Meeting; Voting Rights; Adjournment . . . . . . . . 59
Section 10.6. Voting at the Meeting and Record To Be Kept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.7. Exercise of Rights of Trustee or Holders May Not Be Hindered or Delayed by Call of Meeting . . . . . . 60
ARTICLE XI SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.1. Securities Subordinated to Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.2. No Payment on Securities in Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.3. Securities Subordinated to Prior Payment of All Senior Indebtedness on Dissolution, Liquidation or
Reorganization of Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 11.4. Holders to Be Subrogated to Rights of Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . 64
Section 11.5. Obligations of Holdings Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11.6. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice . . . . . . . . . . . . . . . 65
</TABLE>
iii
<PAGE> 10
<TABLE>
<CAPTION>
----
<S> <C>
Section 11.7. Application by Trustee of Assets Deposited with It. . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11.8. Subordination Rights Not Impaired by Acts or Omissions of Holdings or Holders of Senior Indebtedness . 66
Section 11.9. Holders Authorize Trustee to Effectuate Subordination of Securities . . . . . . . . . . . . . . . . . 66
Section 11.10. Right of Trustee to Hold Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.11. Article Eleven Not to Prevent Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.12. No Fiduciary Duty of Trustee to Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . . . 67
ARTICLE XII SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.1. Satisfaction and Discharge of the Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.2. Conditions to Satisfaction and Discharge of the Indenture . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 13.1. TIA Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 13.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 13.3. Communications by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 13.4. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 13.5. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 13.6. Rules by Trustee, Paying Agent, Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 13.7. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 13.8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 13.9. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 13.10. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 13.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 13.12. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 13.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
iv
<PAGE> 11
INDENTURE dated as of ________ __, 1995, between FOOD 4 LESS HOLDINGS, INC., a
Delaware corporation ("Holdings"), and Norwest Bank Minnesota, N.A., a National
Banking Association, 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 13 5/8% Senior Subordinated
Pay-in-Kind Debentures due 2007:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
"Acquired Indebtedness" means Indebtedness of a person or any of its
subsidiaries existing at the time such person becomes a Subsidiary or assumed
in connection with the acquisition of assets from such person and not incurred
by such person in connection with, or in anticipation or contemplation of, such
person becoming a Subsidiary or such acquisition.
"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 this Indenture, neither BT Securities Corporation
nor any of its Affiliates shall be deemed to be an Affiliate of Holdings or any
of its Subsidiaries.
"Affiliate Obligation" means any contractual obligation (not
constituting Indebtedness) between Holdings and any Affiliate, other than
obligations relating to the purchase or sale of goods in the ordinary course of
business made in compliance with Section 4.11 hereof.
"Affiliate Transaction" shall have the meaning provided 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, 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 Holdings 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,
1
<PAGE> 12
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 Holdings or any Subsidiary of $500,000 or less or (iii) pursuant to
any foreclosure of assets or other remedy provided by applicable law to a
creditor of Holdings or any Subsidiary with a Lien on such assets, which Lien
is permitted 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 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 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 of Directors" means, with respect to any person, 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 equivalents (however designated) of
corporate stock, including each class of common stock and preferred stock of
such person, including Preferred Stock.
"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 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
2
<PAGE> 13
highest rating categories obtainable from either Moody's Investors Service,
Inc. or Standard & Poor's Ratings Group.
"Change of Control" means (I) 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 Holdings
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
Holdings (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 Holdings' Board
of Directors or (II) Holdings ceasing to own 100% of the outstanding voting
securities entitled to vote on a regular basis to elect a majority of the Board
of Directors of the Company.
"Change of Control Date" shall have the meaning provided in Section 4.14.
"Change of Control Offer" shall have the meaning provided in Section
4.14.
"Change of Control Payment Date" shall have the meaning provided in
Section 4.14.
"Company" means Food 4 Less Supermarkets, Inc., a Delaware corporation,
and its successors, including, without limitation, Ralphs Supermarkets (to be
renamed Ralphs Grocery Company) following the Merger.
"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, provided, however, that with respect to
the net income of Holdings, the net income of the Company and its subsidiaries
shall not be so excluded, notwithstanding the existence of any such Payment
Restriction, so long as the terms of any such consensual Payment Restriction
limiting the
3
<PAGE> 14
payment of dividends are not materially more restrictive at the time of
determination of Consolidated Net Income than the most restrictive Payment
Restriction limiting the payment of dividends in effect on the Issue Date; 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
Holdings or any of its Subsidiaries in connection with the Merger, including,
without limitation, the divestiture of the Excluded Assets, (viii) losses
incurred by Holdings and its Subsidiaries resulting from earthquakes and (ix)
with respect to Holdings and its Subsidiaries, 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 Disqualified Capital Stock) of such
person and its subsidiaries determined on a consolidated basis in accordance
with GAAP.
"Consulting Agreement" means that certain Consulting Agreement, dated as
of the Issue Date, between Holdings, the Company 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.
"Covenant Defeasance" shall have the meaning provided in Section 8.3.
"Credit Agent" means, at any time, the then-acting Administrative Agent
as defined in and under the Credit Agreement, which initially shall be
____________________. Holdings 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 each case, 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, replace or
refinance any borrowings and commitments then outstanding or permitted to be
outstanding any such Credit Agreement or any such prior agreement as the same
may be amended, extended, renewed, restated, supplemented or otherwise
modified (in each case, in whole or in part, and
4
<PAGE> 15
without limitation as to amount, terms, conditions, covenants and other
provisions). The term "Credit Agreement" shall include all related or
ancillary documents, including, without limitation, any guarantee agreements
and security documents. Holdings 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 Bankruptcy 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, (i) with respect to any person, 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, 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 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 (a)
redeemable or repurchasable solely at the option of such person or (b) issued
to employees of Holdings 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; and (ii) with respect to any Subsidiary of
Holdings, any Preferred Stock issued by a Subsidiary of Holdings other than
Preferred Stock issued to Holdings.
"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 (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).
"EJDC" means The Edward J. DeBartolo Corporation, an Ohio corporation.
5
<PAGE> 16
"Event of Default" shall have the meaning provided in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Excluded Assets" means assets of Holdings or any Subsidiary 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 Holdings, any
original issue discount on the Senior Discount Notes and the Securities 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)) declared or paid, or required to be declared or 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
Holdings 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.
"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.
6
<PAGE> 17
"Forward Period" shall have the meaning set forth in the definition of
Operating Coverage Ratio contained in this Section 1.1.
"GAAP" means generally accepted accounting principles as in effect in
the United States of America as of the date of this Indenture.
"Holder" means the person in whose name a Security is registered on the
Registrar's books.
"Holdings" means the party named as such above, until a successor
replaces it in accordance with the terms of this Indenture, and thereafter
means such successor.
"incur" shall have the meaning set forth in Section 4.12.
"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
or, if there is no such maximum fixed repurchase price, the liquidation
preference of such Disqualified Capital Stock, plus accrued but unpaid
dividends; (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
7
<PAGE> 18
(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 hereof, 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 Holdings, 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 supplemented from time
to time in accordance with the terms hereof.
"Independent Financial Advisor" means a reputable accounting, appraisal
or a nationally recognized investment banking firm that is, in the reasonable
judgment of the Board of Directors of Holdings, qualified to perform the task
for which such firm has been engaged hereunder and disinterested and
independent with respect to Holdings and its Affiliates.
"Initial Public Offering" means an underwritten primary public offering
of common stock of Holdings at a time when Holdings has not previously issued
or sold any equity securities in an underwritten transaction pursuant to a
registration statement filed pursuant to the Securities Act.
"Initial Public Offering Consummation Date" means the first date on
which Holdings or the Company receives any proceeds from an Initial Public
Offering.
"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 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 Holdings or any Subsidiary and other
similar customary expenses incurred, in each case in the ordinary course of
business consistent with past practice) or similar
8
<PAGE> 19
credit extension constituting Indebtedness of such other person, and any
guarantee of Indebtedness of any other person.
"Issue Date" means the date of first issuance of the Securities under
this Indenture.
"Legal Defeasance" shall have the meaning provided in Section 8.2.
"Legal Holiday" shall have the meaning provided in Section 13.7.
"Letter of Credit Obligations" means Indebtedness of Subsidiaries with
respect to letters of credit issued pursuant to the Credit Agreement, and for
purposes of Section 4.12, 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, 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 hereunder.
"Maturity Date" means ________ __, 2007.
"Merger" means (i) the merger of the Company into Ralphs Supermarkets
(with Ralphs Supermarkets surviving such merger) pursuant to the Merger
Agreement and (ii) immediately following the merger described in clause (i) of
this definition, the merger of RGC into Ralphs Supermarkets (with Ralphs
Supermarkets 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 as of
September 14, 1994, by and among Food 4 Less, Inc., a Delaware corporation,
Holdings, Food 4 Less Holdings, Inc., a California corporation, Ralphs
Supermarkets, the Company and the stockholders of Ralphs Supermarkets, as such
agreement is in effect on the Issue Date.
"Net Cash Proceeds" means Net Proceeds of (i) the sale of Qualified
Capital Stock of Holdings or (ii) any Asset Sale, in each case, in the form of
cash or Cash Equivalents.
9
<PAGE> 20
"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 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 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
Holdings, the sum of (i) the fair market value of the proceeds received by
Holdings 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 Holdings upon such conversion or exchange.
"New F4L Senior Notes" means the ___% Senior Notes due 2004 of the
Company, issued pursuant to an indenture dated as of the Issue Date, as the
same may be modified or amended from time to time and refinancings thereof, to
the extent such refinancings are permitted to be incurred under this Indenture.
"New F4L Subordinated Notes" means the 13.75% Senior Subordinated Notes
due 2005 of the Company, issued pursuant to an indenture dated as of the Issue
Date, as the same may be modified or amended from time to time and refinancings
thereof, to the extent such refinancings are permitted to be incurred under
this Indenture.
"New F4L Senior Note Indenture" means the indenture pursuant to which
the New F4L Senior Notes were issued, as amended or supplemented from time to
time in accordance with the terms thereof.
"New F4L Subordinated Note Indenture" means the indenture pursuant to
which the New F4L Subordinated Notes were issued, as amended or supplemented
from time to time in accordance with the terms thereof.
"New Notes" means the ___% Senior Subordinated Notes due 2005 of the
Company, issued pursuant to an indenture dated as of the Issue Date, as the
same may be modified or amended from time to time and refinancings thereof, to
the extent such refinancings are permitted to be incurred under this Indenture.
"New Note Indenture" means the indenture pursuant to which the New Notes
were issued, as amended or supplemented from time to time in accordance with
the terms thereof.
"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.
10
<PAGE> 21
"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 13.4 and 13.5.
"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 Holdings, 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 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 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.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of
Sections 13.4 and 13.5. Unless otherwise required by the Trustee, the legal
counsel may be an employee of or counsel to Holdings or the Trustee.
"Other Obligations" has the meaning set forth in Section 11.1 hereof.
"Pari Passu Indebtedness" means, with respect to Holdings, Indebtedness
that ranks pari passu in right of payment to the Securities (whether or not
secured by any Lien).
11
<PAGE> 22
"Paying Agent" shall have the meaning provided in Section 2.3, except
that, for the purposes of Articles Three and Eight and Section 4.14, the Paying
Agent shall not be Holdings or any Subsidiary.
"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 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 Partners, 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 Holdings or any Subsidiary, or any participant therein, (iv) a trustee
or other fiduciary holding securities under an employee benefit plan of
Holdings or any Subsidiary 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 under the Credit Agreement 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 provisions of Section 4.15 subsequent to the Issue
Date, (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 provisions of Section 4.15, and (iii) any guarantee
by Holdings of the Indebtedness referred to in the foregoing clauses (i) and
(ii); (b) Indebtedness of Holdings or a Subsidiary owed to and held by Holdings
or a Subsidiary; (c) Indebtedness incurred by Holdings 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 Holdings 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 Holdings 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
Holdings or any Subsidiary in
12
<PAGE> 23
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 Ralphs Supermarkets, the Company, and
their respective subsidiaries as described in that certain Registration
Statement of Holdings dated ______, 1995; (e) Indebtedness of Holdings or any
Subsidiary incurred under Foreign Exchange Agreements and Interest Swap
Obligations; (f) guarantees incurred in the ordinary course of business, by
Holdings or a Subsidiary, of Indebtedness of any other person in aggregate not
to exceed $25 million at any time outstanding; (g) guarantees by Holdings or a
Subsidiary of Indebtedness incurred by a wholly-owned Subsidiary so long as the
incurrence of such Indebtedness incurred by such wholly-owned Subsidiary 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 Holdings
or any Subsidiary or other agreements of Holdings 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 business, assets or Subsidiary for
the purpose 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 Holdings and its Subsidiaries in connection with
such disposition; (l) obligations in respect of performance bonds and
completion guarantees provided by Holdings or any Subsidiary in the ordinary
course of business; (m) Indebtedness of Holdings with respect to the Senior
Discount Notes and the Securities as in effect on the Issue Date (including the
accretion of the Senior Discount Notes and the issuance of Secondary Securities
in lieu of cash interest payments pursuant to the terms of this Indenture as in
effect on the Issue Date); and (n) additional Indebtedness of Holdings or any
Subsidiary 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 connection with an Asset Sale 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 Sections 4.3 and 4.11, (vi)
Investments in any Subsidiary or by any Subsidiary in Holdings or any other
Subsidiary in other Subsidiaries, and (vii) additional Investments in an
aggregate amount not exceeding $5 million.
"Permitted Payments" means any (i) payment by Holdings or any Subsidiary
to The Yucaipa Companies or the principals or any Affiliates thereof for
consulting, management, investment banking or similar services during such
period pursuant to the Consulting Agreement (including payments for the
repurchase of equity securities pursuant to the terms of such Consulting
Agreement), (ii) payment by Holdings or any Subsidiary to Apollo Advisors, L.P.
or the principals or any Affiliates thereof in an aggregate amount not to
exceed $5 million as a commitment fee in connection with the purchase of equity
securities of Holdings on the Issue Date, and (iii) any payment by Holdings or
any Subsidiary, (a) in connection with repurchases of outstanding shares of
Holdings' common stock following the death, disability or termination of
employment of management stockholders, and (b) of amounts required to be paid
by Holdings or any Subsidiaries to participants in employee benefit plans upon
any termination of employment by such participants, as provided in the documents
13
<PAGE> 24
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).
"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 Holdings, (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.
"Person" or "person" means any individual, corporation, partnership,
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 person, a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially 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, any and all shares,
interests, participations or other equivalents (however designated) of such
person's preferred or preference stock, whether outstanding on the date hereof
or issued after the Issue Date, and including, without limitation, all classes
and series of preferred or preference stock of such person.
"principal" of any Indebtedness (including the Securities) means the
principal of such Indebtedness plus the premium, 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 Regulation S-X under the Securities Act, as interpreted by
Holdings' chief financial officer or Board of Directors in consultation with
its independent certified public accountants.
"Pro Forma Period" shall have the meaning set forth in the definition of
Operating Coverage Ratio contained in this Section 1.1.
"Qualified Capital Stock" means, with respect to any person, any Capital
Stock of such person that is not Disqualified Capital Stock.
14
<PAGE> 25
"Ralphs Supermarkets" means Ralphs Supermarkets, Inc., a Delaware
corporation, until a successor replaces it and thereafter means such successor.
"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 redemption pursuant to this Indenture
and the Securities.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Securities.
"Reference Period" shall have the meaning provided in the definition of
"Operating Coverage Ratio" contained in this Section 1.1.
"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 (c), (d), (h), (j) and (m) 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 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 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 2.3.
"Registration Rights Agreement" means the registration rights agreement
dated as of the Issue Date by and among Holdings, the Company and the
stockholders of Ralphs Supermarkets with respect to the Securities.
15
<PAGE> 26
"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 Holdings or any Subsidiary 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 Holdings and any Subsidiary 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 Holdings and any Subsidiary 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.
"Restricted Debt Prepayment" means the purchase, redemption, acquisition
or retirement for value by Holdings, prior to the scheduled maturity or prior
to any scheduled repayment of principal or any sinking fund payment in respect
of any Subordinated Indebtedness.
"Restricted Payment" means any (i) Stock Payment or (ii) Investment
(other than a Permitted Investment) or (iii) Restricted Debt Prepayment.
"RGC" means Ralphs Grocery Company, a Delaware corporation, until a
successor replaces it and thereafter means such successor.
"SEC" means the Securities and Exchange Commission.
"Secondary Securities" has the meaning set forth in Section 2.2.
"Securities" means the 13% Senior Subordinated Pay-in-Kind
Debentures due 2007 of Holdings, including any Secondary Securities issued in
respect thereof, 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 SEC promulgated thereunder.
"Senior Discount Notes" means the 15.25% Senior Discount Notes due 2004
of Food 4 Less Holdings, Inc., issued pursuant to an indenture dated as of
December 15, 1992, as the same may be modified or amended from time to time and
refinancings thereof, to the extent such refinancing indebtedness is permitted
to be incurred under this Indenture.
"Senior Discount Note Indenture" means the indenture pursuant to which
the Senior Discount Notes were issued, as amended or supplemented from time to
time in accordance with the terms thereof.
16
<PAGE> 27
"Senior Indebtedness" means the principal of, premium, if any, and
interest on (such Senior Indebtedness being deemed to include for all purposes
of Article XI of this Indenture the amount required to fully secure in cash
undrawn Letter of Credit Obligations under the Credit Agreement and such
interest on Senior Indebtedness being deemed to include for all purposes of
Article XI interest accruing after the filing of a petition initiating any
proceeding pursuant to any Bankruptcy Law in accordance with and at the rate
(including any rate applicable upon any default, to the extent lawful)
specified in any document evidencing the Senior Indebtedness, whether or not
the claim for such interest is allowed as a claim after such filing in any
proceeding under such Bankruptcy Law) any Indebtedness of Holdings (and, in the
case of the Credit Agreement, all obligations of Holdings for fees, expenses,
indemnities and other amounts payable thereunder or in connection therewith),
whether outstanding on the Issue Date or thereafter created, incurred, assumed
or guaranteed or in effect guaranteed by Holdings (including, without
limitation, Indebtedness under the Credit Agreement), unless, in the case of
any particular Indebtedness, the instrument creating or evidencing such
Indebtedness 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 the principal of, premium, if
any, and interest on all obligations of every nature of Holdings from time to
time owed or guaranteed by Holdings with respect to the Credit Agreement and
the Senior Discount Notes. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (i) any Pari Passu Indebtedness or any
Subordinated Indebtedness, (ii) any Indebtedness constituting Disqualified
Capital Stock, (iii) Indebtedness of Holdings to any Subsidiary, (iv) that
portion of any Indebtedness which is incurred in violation of Section 4.12 of
this Indenture, (v) Indebtedness to, or guaranteed on behalf of, any
shareholder, director, officer or employee of Holdings or of any Subsidiary
(including, without limitation, amounts owed for compensation), (vi)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, and (vii) any liability for federal,
state, local or other taxes owed or owing by Holdings.
"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 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 Holdings 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 Holdings, dividends payable solely in Qualified Capital
Stock of Holdings), 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
17
<PAGE> 28
the case of a Subsidiary, Qualified Capital Stock of Holdings) 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 Holdings, through the issuance in exchange therefor
solely of Qualified Capital Stock of Holdings; 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 Holdings or a wholly-owned Subsidiary.
"Subordinated Indebtedness" means Indebtedness of Holdings that is
subordinated in right of payment to the Securities.
"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 50% 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 Holdings.
"The Yucaipa Companies" means The Yucaipa Companies, a California
general partnership.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb), as amended, as in effect on the date on which this Indenture is
qualified under the TIA, except as otherwise provided in Section 9.3.
"Transaction Date" shall have the meaning provided in the definition of
"Operating Coverage Ratio" contained in this Section 1.1.
"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
8.4.
"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.
18
<PAGE> 29
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
principal amount of such Indebtedness.
"wholly-owned Subsidiary" means any Subsidiary all of the shares of
Capital Stock of which (other than permitted Preferred Stock and directors'
qualifying shares) are at the time directly or indirectly owned by Holdings.
"Yearly Period" means each fiscal year of Holdings; provided that the
first Yearly Period shall begin on the Issue Date and shall end on January 28,
1996.
Section 1.2. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in, and made a part of, this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means Holdings or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
Section 1.3. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
19
<PAGE> 30
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; 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 II
THE SECURITIES
Section 2.1. Form and Dating.
The Securities 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 or as
required by the Registration Rights Agreement. Holdings 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 shall constitute,
and are hereby expressly made, a part of this Indenture and, to the extent
applicable, Holdings and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound
thereby.
Section 2.2. Execution and Authentication.
An Officer or an Assistant Secretary, shall sign (either of whom shall,
in each case, have been duly authorized by all requisite corporate actions) the
Securities for Holdings by manual or facsimile signature.
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 conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate Securities, excluding Secondary
Securities, for original issue in the aggregate principal amount of up to
$150,000,000 upon a written order of Holdings 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
20
<PAGE> 31
authenticated. The aggregate principal amount of Securities outstanding at any
time may not exceed $150,000,000, except for any Securities that may be issued
pursuant to the immediately following paragraph and except as provided in
Section 2.7 and 2.8. Upon the written order of Holdings in the form of an
Officers' Certificate, the Trustee shall authenticate Securities in
substitution of Securities originally issued to reflect any name change of
Holdings.
Holdings may, on each Interest Payment Date prior to (and including)
[the Interest Payment Date five years after the Issue Date], at its option and
in its sole discretion, pay interest in additional Securities ("Secondary
Securities") in lieu of the payment in whole or in part of interest in cash on
the Securities as provided in paragraph 1 of the Securities. Holdings shall
give written notice to the Trustee of the amount of interest to be paid in
Secondary Securities not less than five Business Days prior to the relevant
Interest Payment Date, and the Trustee or an authenticating agent (upon written
order of Holdings signed by an Officer of Holdings given not less than five nor
more than 45 days prior to such Interest Payment Date) shall authenticate for
original issue (pro rata to each Holder of any Securities of such record date)
Secondary Securities in an aggregate principal amount equal to the amount of
cash interest not paid on such Interest Payment Date. Except as set forth in
the following paragraph each issuance of Secondary Securities in lieu of the
payment of interest in cash on the Securities shall be made pro rata with
respect to the outstanding Securities, and Holdings shall have the right to
aggregate amounts of interest payable in the form of Secondary Securities to a
Holder of outstanding Securities and issue to such Holder a single Secondary
Security in payment thereof. Any Secondary Securities may be denominated a
separate series if Holdings deems it necessary to do so in order to comply with
any law or other applicable regulation or requirement, with appropriate
distinguishing designations.
The Securities shall be issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof except that
Secondary Securities or Securities issued upon registration of transfer of such
Secondary Securities may be in denominations of other than $1,000; provided
that Holdings may at its option pay cash in lieu of issuing Secondary
Securities in any denominations of less than $1,000.
The Trustee may appoint an authenticating agent reasonably acceptable to
Holdings 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 Holdings and Affiliates of Holdings.
Section 2.3. Registrar and Paying Agent.
Holdings shall maintain an office or agency in the Borough of Manhattan,
The City of New York, where (a) Securities 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 Holdings in respect of the Securities and this Indenture may
be served. Holdings may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any
21
<PAGE> 32
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve Holdings of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. Holdings may
act as its own Registrar or Paying Agent except that for the purposes of
Articles Three and Eight and Sections 4.4 and 4.14, neither Holdings nor any
Subsidiary shall act as Paying Agent. The Registrar shall keep a register of
the Securities and of their transfer and exchange. Holdings, upon notice to
the Trustee, may have one or more co-Registrars and one or more additional
paying agents reasonably acceptable to the Trustee. The term "Paying Agent"
includes any additional paying agent. Holdings initially appoints the Trustee
as Registrar and Paying Agent until such time as the Trustee has resigned or a
successor has been appointed.
Holdings 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. Holdings shall notify the
Trustee, in advance, of the name and address of any such Agent. If Holdings
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such.
Section 2.4. Paying Agent To Hold Assets in Trust.
Holdings 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 and/or Secondary Securities 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 Holdings or any other
obligor on the Securities), and shall notify the Trustee of any Default by
Holdings (or any other obligor on the Securities) in making any such payment.
If Holdings or a Subsidiary acts as Paying Agent, it shall segregate such
assets and/or Secondary Securities and hold them as a separate trust fund.
Holdings at any time may require a Paying Agent to distribute all assets and/or
Secondary Securities 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 written request to a Paying Agent, require such Paying Agent to
distribute all assets and/or Secondary Securities held by it to the Trustee and
to account for any assets so distributed. Upon distribution to the Trustee of
all assets that shall have been delivered by Holdings to the Paying Agent, the
Paying Agent shall have no further liability for such assets and/or Secondary
Securities.
Section 2.5. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, Holdings 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.
22
<PAGE> 33
Section 2.6. Transfer and Exchange.
When a Security is presented to the Registrar or a co-registrar with a
request to register a transfer, the Registrar shall register the transfer as
requested if the requirements of the Registrar are met. The Registrar need not
transfer or exchange any Securities selected for redemption. Also, it need not
transfer or exchange any Securities for a period of 30 days before a selection
of Securities to be redeemed. When Securities are presented to the Registrar
or a co-registrar with a request to exchange them for an equal principal amount
of Securities of other authorized denominations, the Registrar shall make the
exchange as requested if the requirements of the Registrar are met. Holdings
shall cooperate with the Registrar in meeting its requirements. To permit
transfers, registration and exchanges, the Trustee shall authenticate
Securities at the Registrar's request. No service charge shall be made for any
transfer, registration or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith, but not for any exchange pursuant to Section 2.10, 3.6 or
9.5.
Section 2.7. 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, Holdings shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. If required by the Trustee or
Holdings, such Holder must provide an indemnity bond or other indemnity,
sufficient in the judgment of both Holdings and the Trustee, to protect
Holdings, the Trustee or any Agent from any loss which any of them may suffer
if a Security is replaced. Holdings 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 shall constitute an additional
obligation of Holdings.
Section 2.8. Outstanding Securities.
Securities outstanding at any time are all the Securities that have been
authenticated by the Trustee, including the Secondary Securities, 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 Holdings or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof pursuant to
Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than Holdings or any 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.
23
<PAGE> 34
Section 2.9. Treasury Securities.
In determining whether the Holders of the required aggregate principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by Holdings or any of its 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.
Notwithstanding the foregoing and except as otherwise provided by the TIA, a
majority of Securities not owned by Holdings or any of its Affiliates shall be
sufficient to approve any such direction, waiver or consent.
Section 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, Holdings may prepare
and the Trustee shall authenticate temporary Securities. Temporary Securities
shall be substantially in the form of definitive Securities but may have
variations that Holdings considers appropriate for temporary Securities.
Without unreasonable delay, Holdings shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities.
Section 2.11. Cancellation.
Holdings 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 Holdings or any Subsidiary), and no one else, shall cancel and, at
the written direction of Holdings, shall dispose of all Securities surrendered
for transfer, exchange, payment or cancellation. Subject to Section 2.7,
Holdings may not issue new Securities to replace Securities that it has paid or
delivered to the Trustee for cancellation. If Holdings or any Subsidiary shall
acquire any of the Securities, such acquisition shall not operate as a
redemption 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 Holdings 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 interest, plus (to the extent lawful) any interest payable on
the defaulted interest, to the persons who are Holders on a subsequent special
record date, which date shall be the fifteenth day next preceding the date
fixed by Holdings for the payment 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, Holdings 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.
24
<PAGE> 35
Section 2.13. CUSIP Number.
Holdings in issuing the Securities may use a "CUSIP" number, and if so,
the Trustee shall use the CUSIP number in notices of redemption or exchange as
a convenience to Holders; provided that any such notice may state that no
representation 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 III
REDEMPTION
Section 3.1. Notices to Trustee.
If Holdings elects to redeem Securities pursuant to Paragraph 5 of the
Securities it shall notify the Trustee of the Redemption Date and aggregate
principal amount of the Securities to be redeemed and whether it wants the
Trustee to give notice of redemption to the Holders (at Holdings' expense) 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 notice given
pursuant to this Section 3.1 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 3.2. 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 such other
method as the Trustee considers to be fair and appropriate and in such manner
as complies with applicable legal and stock exchange requirements, if any.
Securities in denominations of less than $1,000 shall be redeemed first.
Thereafter the Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify Holdings in
writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the aggregate principal amount
thereof to be redeemed. Securities in denominations of $1,000 or less may be
redeemed only in whole. The Trustee may select for redemption portions (equal
to $1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000. Provisions of this Indenture that apply
to Securities called for redemption also apply to portions of Securities called
for redemption.
Section 3.3. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
Holdings 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 Trustee. At Holdings' request,
25
<PAGE> 36
the Trustee shall give the notice of redemption in Holdings' name and at
Holdings' 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 Holdings 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;
(6) if any Security is being redeemed in part, the portion of the
aggregate 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 portion
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 aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption.
Section 3.4. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.3,
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.
Section 3.5. Deposit of Redemption Price.
On or before the Redemption Date, Holdings 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
Holdings to the Trustee for cancellation). The Paying Agent shall promptly
return to Holdings any U.S. Legal Tender so deposited which is not required for
that purpose upon the written request of Holdings, except with respect to
monies owed as obligations to the Trustee pursuant to Article Seven.
If Holdings complies with the preceding paragraph, then, unless
Holdings defaults in the payment of such Redemption Price, interest on the
Securities to be redeemed will cease
26
<PAGE> 37
to accrue on and after the applicable Redemption Date, whether or not such
Securities are presented for payment.
If a Security is redeemed on or after a Record Date but on or prior to
the related Interest Payment Date, then any accrued and unpaid interest shall
be paid to the Person in whose name such Security was registered at the close
of business on such Record Date. If any Security called for redemption shall
not be so paid upon surrender for redemption because of the failure of Holdings
to comply with the first paragraph of this Section 3.5, interest shall be paid
on the unpaid principal, from the redemption date until such principal is paid,
and, to the extent lawful, on any interest not paid on such unpaid principal,
in each case at the rate provided in the Securities and in Section 4.1 hereof.
Section 3.6. 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 IV
COVENANTS
Section 4.1. Payment of Securities.
Holdings shall pay the principal amount of, premium, if any, and
interest on, as the case may be, the Securities on the dates and in the manner
provided in the Securities. An installment shall be considered paid on the
date it is due if the Trustee or Paying Agent (other than Holdings or a
Subsidiary) holds on that date U.S. Legal Tender and/or, to the extent
permitted by Section 2.2, Secondary Securities designated for and sufficient to
pay the installment.
Holdings shall pay interest on overdue principal (including
post-petition interest in any proceeding under any Bankruptcy Law, to the
extent allowable as a claim in any such proceeding) at the same rate borne by
the Securities and it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law, to the extent allowable as a claim in
any such proceeding) on overdue installments of interest (without regard to any
applicable grace period) at the same rate borne by the Securities, to the
extent lawful.
Section 4.2. Maintenance of Office or Agency.
Holdings shall maintain in the Borough of Manhattan, The City of New
York, the office or agency required under Section 2.3. Holdings 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 Holdings shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee set forth in Section 13.2.
27
<PAGE> 38
Section 4.3. Limitation on Restricted Payments.
Holdings shall not, and shall cause each of its Subsidiaries not to,
directly or indirectly, make any Restricted Payment if, at the time of such
Restricted Payment, or after giving effect thereto, (a) a Default or an Event
of Default shall have occurred and be continuing, (b) Holdings or such
Subsidiary could not incur at least $1 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to Section 4.12, or (c) the aggregate amount
expended for all Restricted Payments, including such 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 Holdings, which determination shall be evidenced by a Board
Resolution), subsequent to the Issue Date, shall exceed the sum of (i) 50% of
the aggregate Consolidated Net Income (or if such Consolidated Net Income is a
loss, minus 100% of such loss) of Holdings earned subsequent to the Issue Date
and on or prior to the date the Restricted Payment occurs (the "Reference
Date") plus (ii) 100% of the aggregate Net Proceeds received by Holdings from
any person (other than a Subsidiary) from the issuance and sale (including upon
exchange or conversion for other securities of Holdings) 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 Holdings or any
Subsidiary, until and to the extent such borrowing is repaid) plus (iii) 100%
of the aggregate net cash proceeds received by Holdings as capital
contributions to Holdings after the Issue Date, plus (iv) $25,000,000.
Notwithstanding the foregoing, 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 Holdings 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 Holdings, (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 Holdings 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 that (x) 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 (ii) of the definition of
"Permitted Payments" shall each be counted for purposes of computing amounts
expended pursuant to subclause (c) in the immediately preceding paragraph, and
(y) no amounts paid pursuant to clause (3) above or clause (i) of the
definition of "Permitted Payments" shall be so counted.
Prior to making any Restricted Payment under the first paragraph of this
Section 4.3, Holdings shall deliver to the Trustee an Officers' Certificate
setting forth the computation 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
28
<PAGE> 39
correctness of this computation and shall be fully protected in relying on such
Officers' Certificate.
Section 4.4. Corporate Existence.
Except as otherwise permitted by Article Five, Holdings shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate or other existence of each of
its Significant Subsidiaries in accordance with the respective organizational
documents of each such Significant Subsidiary and the rights (charter and
statutory) and franchises of Holdings and each such Significant Subsidiary;
provided, however, that Holdings 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 franchise, if the Board
of Directors of Holdings or such Significant Subsidiary, as the case may be,
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of Holdings or any such Significant Subsidiary.
Section 4.5. Payment of Taxes and Other Claims.
Holdings 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 Subsidiaries; provided, however, that Holdings
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 material adverse effect on the
financial condition or results or operations of Holdings and its Subsidiaries
taken as a whole.
Section 4.6. Maintenance of Properties and Insurance.
(a) Holdings shall cause all properties used or useful to the conduct
of its business or the business of any Subsidiaries to be maintained and kept
in good condition, repair and working order and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
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 Holdings and its Subsidiaries taken as a whole; provided, however, that
nothing in this Section 4.6 shall prevent Holdings or any Subsidiary from
discontinuing the operation or maintenance of any of such properties, 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 Holdings or the Subsidiary concerned, or of the senior officers
of Holdings or such Subsidiary, as the case may be, desirable in the
29
<PAGE> 40
conduct of the business of Holdings or such Subsidiary, as the case may be, or
(iii) is otherwise permitted by this Indenture.
(b) Holdings shall provide or cause to be provided, 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 Holdings, are adequate and appropriate for the conduct of the business of
Holdings and such Subsidiaries in a prudent manner, 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 Holdings or
the applicable Subsidiary or (ii) customary, in the reasonable, good faith
opinion of Holdings, for corporations similarly situated in the industry,
unless the failure 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 Holdings and its Subsidiaries, taken as a whole.
Section 4.7. Compliance Certificate; Notice of Default.
(a) Holdings shall deliver to the Trustee within 120 days after the
end of Holdings' fiscal year an Officers' 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 Officers 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 certificate, that to the best of his knowledge Holdings during
such preceding fiscal year has kept, observed, performed and fulfilled each and
every such covenant and no Default or Event of Default occurred during such
year or, if such signers do know of such a Default or Event of Default, the
certificate shall describe the Default or Event of Default and its status with
particularity. The Officers' Certificate shall also notify the Trustee should
Holdings elect to change the manner in which it fixes its fiscal year end.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, Holdings shall deliver
to the Trustee within 120 days after the end of each fiscal year a written
statement by Holdings' independent certified public accountants stating (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 attention and if such a Default has come to their attention, specifying
the nature and period of existence thereof.
(c) Holdings shall, so long as the Securities are outstanding,
deliver to the Trustee, within five Business Days after any officer becomes
aware of any Default or Event of Default, an Officer's Certificate specifying
such Default or Event of Default and what action Holdings is taking or proposes
to take with respect thereto.
Section 4.8. Compliance with Laws.
Holdings 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,
30
<PAGE> 41
all states and municipalities thereof, and of any governmental 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 contested 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 Holdings and its Subsidiaries taken as a
whole.
Section 4.9. SEC Reports and Other Information.
(a) To the extent permitted by applicable law or regulation, whether
or not Holdings is subject to the requirements of Section 13 or 15(d) of the
Exchange Act, Holdings shall file with the SEC all quarterly and annual reports
and such other information, documents or other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) required to be filed pursuant to such provisions of the Exchange
Act. Holdings shall file with the Trustee, within 5 days after it files the
same with the SEC, copies of the quarterly and annual reports and the
information, documents, and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) that it is
required to file with the SEC pursuant to this Section 4.9. Holdings shall
also comply with the other provisions of TIA Section 314(a). If Holdings is
not permitted by applicable law or regulations to file the aforementioned
reports, Holdings (at its own expense) shall file with the Trustee and mail, or
cause the Trustee to mail, to Holders at their addresses appearing in the
register of Securities maintained by the Registrar at the time of such mailing
within 5 days after it would have been required to file such information with
the SEC, all information and financial statements, including any notes thereto
and with respect to annual reports, an auditors' report by an accounting firm
of established national reputation, and a "Management's Discussion and Analysis
of Financial Condition and Results of Operations," comparable to the disclosure
that Holdings would have been required to include in annual and quarterly
reports, information, documents or other reports, including, without
limitation, reports on Forms 10-K, 10-Q and 8-K, if Holdings was subject to the
requirements of such Section 13 or 15(d) of the Exchange Act.
(b) At any time when Holdings is not permitted by applicable law or
regulations to file the aforementioned reports, upon the request of a Holder of
Securities, Holdings will promptly furnish or cause to be furnished such
information as is specified pursuant to Rule 144A(d)(4) under the Securities
Act (or any successor provision thereto) to such Holder or to a prospective
purchaser of such Securities designated by such Holder, as the case may be, in
order to permit compliance by such Holder with Rule 144A under the Securities
Act.
Section 4.10. Waiver of Stay, Extension or Usury Laws.
Holdings 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 Holdings from paying all or any
portion of the principal of or interest on the Securities 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) Holdings hereby expressly waives all benefit or
advantage of any such law, and covenants that
31
<PAGE> 42
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 Holdings 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 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
Holdings or any Subsidiary (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 Holdings 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, Holdings 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
complies with clause (y) above (other than the requirement set forth in such
clause (y) that such Affiliate Transaction be in the ordinary course of
business), (B) with respect to Affiliate Transactions involving aggregate
payments in excess of $5 million and less than $15 million, Holdings or such
Subsidiary, as the case may be, shall have delivered an Officers' Certificate
to the Trustee certifying that such Affiliate Transaction complies with clause
(y) above (other than the requirement set forth in such clause (y) that such
Affiliate Transaction be in the ordinary course of business) and that such
Affiliate Transaction has received the approval of a majority of the
disinterested members of the Board of Directors of Holdings 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 Holdings 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 Transaction
are fair to Holdings 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 Affiliates
Transactions involving aggregate payments in excess of $15 million, Holdings 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 Holdings 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 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 4.3, (iii) reasonable and customary fees and
compensation paid to, and indemnity provided on behalf of, officers, directors,
employees or consultants of Holdings or any Subsidiary, as determined by the
Board of Directors of Holdings or any Subsidiary or the senior management
thereof in good faith, (iv) transactions exclusively between or among Holdings
and any of its
32
<PAGE> 43
wholly-owned Subsidiaries or exclusively between or among such wholly-owned
Subsidiaries, provided such transactions 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 pursuant to any
amendment thereto) so long as any such amendment is not disadvantageous to the
Holders in any material respect, (vi) the existence of, or the performance by
Holdings 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 is a party as of the Issue Date and any
similar agreements which it may enter into thereafter; provided, however, that
the existence of, or the performance by Holdings or any of its 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 in any material
respect, (vii) transactions permitted by, and complying with, the provisions of
Section 5.1, 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 this Indenture which are fair to
Holdings or any Subsidiary, 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.1/
Holdings will not, and will not permit any Subsidiary, 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 Securities or Event of Default shall have occurred and be
continuing at the time or as a consequence of the incurrence of such
Indebtedness, (i) Holdings may incur Indebtedness if immediately before and
immediately after giving effect to the incurrence of such Indebtedness the
Operating Coverage Ratio of Holdings would be greater than 2.0 to 1.0 and (ii)
the Company or any subsidiary of 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.
Section 4.13. Limitation on Liens.
Holdings will not create, incur, assume or suffer to exist any Lien of
any kind securing any Pari Passu Indebtedness, any Subordinated Indebtedness or
any Affiliate Obligation upon any property or assets of Holdings owned on the
Issue Date or acquired after the Issue Date, or any income or profits
therefrom, unless the Securities are secured equally and ratably with (or prior
to in the case of Subordinated Indebtedness) to the obligation or liability
secured by such Lien, and except for any Lien securing Acquired Indebtedness
created prior to the
____________________
1. This Section 4.12 will conform to the covenant in the new
public securities, as appropriately modified to be applicable to
Holdings and its subsidiaries.
33
<PAGE> 44
incurrence of such Indebtedness by Holdings, provided that any such Lien only
extends to the assets that were subject to such Lien securing such Acquired
Indebtedness prior to the related acquisition by Holdings.
Section 4.14. Limitation on Change of Control.
(a) Upon the occurrence of a Change of Control (the "Change of
Control Date"), each Holder shall have the right to require the repurchase of
such Holder's Securities pursuant to the offer described in paragraph (b),
below (the "Change of Control Offer"), at a purchase price equal to 101% of the
aggregate principal amount thereof plus accrued interest, if any, to the date
of purchase. Prior to the mailing of the notice to Holders provided for in
paragraph (b) below, but in any event within 30 days following the Change of
Control Date, Holdings shall cause the Company to 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 such 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 Securities as provided for in this Section 4.14.
Holdings shall first comply with the covenant in the immediately preceding
sentence before Holdings shall be required to repurchase Securities pursuant to
this Section 4.14, and any failure to so comply shall constitute an Event of
Default under this Indenture. Within 10 days after any Change of Control Date
requiring Holdings to make a Change of Control Offer pursuant to this Section
4.14, Holdings shall so notify the Trustee.
(b) The Change of Control Offer shall be made to all Holders and the
notice to the Holders shall contain all instructions and materials necessary to
enable such Holders to tender Securities pursuant to the Change of Control
Offer. Within 30 days following any Change of Control Date, Holdings shall
send, by first class mail, a notice to each Holder, with copies to the Trustee,
which notice shall govern the terms of the Change of Control Offer. Such
notice shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.14 and that all Securities tendered 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");
(3) that any Security not tendered will continue to accrue interest
if interest is then accruing;
(4) that, unless Holdings defaults in making payment 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;
34
<PAGE> 45
(5) that Holders electing to have a Security purchased 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
setting forth the name of the Holder, the aggregate 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 being purchased only in part
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; provided that each Holder shall tender
Securities, and each Security purchased and each such new Security issued by
Holdings shall be, in a principal amount of $1,000 or integral multiples
thereof (except for Secondary Securities that were issued in denominations
other than $1,000); and
(8) the circumstances and relevant facts regarding such Change of
Control, including information available to Holdings concerning the Person or
Persons acquiring control and such historical or pro forma financial
information as Holdings reasonably deems appropriate under the circumstances.
(c) On or before the Change of Control Payment Date, Holdings 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 portions thereof being purchased by
Holdings. The Paying Agent shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price; provided that each
such new Security shall be in the principal amount of $1,000 or integral
multiples thereof. Holdings 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 4.14, the Trustee shall act as the
Paying Agent.
(d) Holdings, to the extent applicable and if required by law, will
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.
Section 4.15. Limitation on Asset Sales.
(a) Neither Holdings nor any of its Subsidiaries will consummate an
Asset Sale, unless (a) Holdings 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, Holdings
or the applicable Subsidiary will, within 365 days of the receipt of the
proceeds therefrom, either: (i) apply or cause its Subsidiary to apply the Net
Cash Proceeds
35
<PAGE> 46
of any Asset Sale to (1) a Related Business 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 Holdings and its Subsidiaries existing on the
Issue Date or in a business reasonably related thereto; (ii) apply or cause to
be applied such Net Cash Proceeds to the repayment of Senior Indebtedness or
Pari Passu Indebtedness of Holdings or any Indebtedness of any Subsidiary;
(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 Notes tendered to Holdings for purchase at a price equal to 100% of
the aggregate principal amount thereof, plus accrued interest to the date of
purchase pursuant to an offer to purchase made by Holdings as set forth below
(a "Net Proceeds Offer"), provided, however, that if at any time any noncash
consideration received by Holdings or any Subsidiary in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash, then
such cash shall constitute Net Cash Proceeds for purposes of this Section 4.15
and shall be applied in accordance with clause (b) above within 365 days of the
receipt of such cash; and provided further, however, that if at any time any
security deposits or other amounts used to secure Letter of Credit Obligations
pursuant to clause b(iii) above are returned to Holdings or any Subsidiary,
then such security deposits or other amounts shall constitute Net Cash Proceeds
for purposes of this Section 4.15 and shall be applied in accordance with
clause (b) above within 365 days of the receipt of such security deposits or
other amounts. A Net Proceeds Offer as a result of an Asset Sale made by the
Company or one of its subsidiaries shall not be required to be in excess of the
Net Cash Proceeds of such Asset Sale less the Net Cash Proceeds actually
applied in accordance with clauses (b)(i), (ii) or (iii) above; provided,
however, that Holdings 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 Holdings
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.
(b) Notice of a Net Proceeds Offer pursuant to this Section 4.15
shall be mailed, by first class mail, by Holdings not less than 305 days nor
more than 335 days after the relevant Asset Sale to all Holders at their last
registered addresses, 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 following
terms:
(1) that the Net Proceeds Offer is being made pursuant to Section
4.15 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 Proceeds Offer, Holdings shall select
the Securities to be purchased on a pro rata basis (with such adjustments as
may be deemed appropriate by Holdings so that only Securities in
denominations of $1,000 or multiples thereof shall be purchased, except for
Secondary Securities that were issued in denominations other than $1,000);
36
<PAGE> 47
(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 Holdings defaults in making payment therefor, 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 purchased 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 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 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 telegram, 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 statement 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 principal amount to the unpurchased portion of
the Securities surrendered.
On or before the Proceeds Purchase Date, Holdings 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)(l) 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 Holdings. The Paying Agent
shall promptly mail to the Holders of Securities so accepted payment in an
amount equal to the purchase price. Holdings 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 4.15, the Trustee shall
act as the Paying Agent.
(c) Holdings 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 Securities pursuant to a Net Proceeds Offer.
Any amounts remaining after the purchase of Securities pursuant to a Net
Proceeds Offer shall be returned by the Trustee to Holdings.
37
<PAGE> 48
Section 4.16. Limitation on Senior Subordinated Indebtedness.
Holdings will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Indebtedness and senior in right of payment to the
Securities.
Section 4.17. Limitation on Preferred Stock of Subsidiaries.
Holdings will not permit any of its Subsidiaries to issue any Preferred Stock
(other than to Holdings or a wholly-owned Subsidiary), or permit any person
(other than Holdings or a wholly-owned Subsidiary) to own or hold an interest
in any Preferred Stock of any such Subsidiary, unless such Subsidiary would be
entitled to incur Indebtedness in accordance with the provisions of Section
4.12 in the aggregate principal amount equal to the aggregate liquidation value
of such Preferred Stock.
Section 4.18. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
Holdings 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 as in
effect on the Issue Date, as any such Payment Restriction may apply to any
present or future Subsidiary, (ii) the Senior Discount Note Indenture, the New
F4L Senior Note Indenture, the New F4L Subordinated Note Indenture, the New
Note Indenture and any other 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 Section 4.12), (iv) secured
Indebtedness otherwise permitted to be incurred pursuant to Sections 4.12 and
4.13 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; (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 Section 4.12; 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 of the Issue Date.
38
<PAGE> 49
ARTICLE V
SUCCESSOR CORPORATION
Section 5.1. When Holdings May Merge, Etc.
(a) Holdings, 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 Holdings shall be the continuing person, or the person (if
other than Holdings) formed by such consolidation or into which Holdings is
merged or to which all or substantially all of the properties and assets of
Holdings 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) (Holdings 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 Holdings under the Securities 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 Holdings immediately preceding the
transaction and (B) the Surviving Person could incur at least $1 of
Indebtedness other than Permitted Indebtedness pursuant to Section 4.12; and
(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.
(b) 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 Subsidiaries, the Capital Stock of which constitutes all or
substantially all of the properties and assets of Holdings shall be deemed to
be the transfer of all or substantially all of the properties and assets of
Holdings.
Section 5.2. Successor Corporation Substituted.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of Holdings or any adoption of a Plan of Liquidation by
Holdings in accordance with Section 5.1, the surviving person formed by such
consolidation or into which Holdings is
39
<PAGE> 50
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, Holdings under this
Indenture with the same effect as if such surviving person had been named as
Holdings herein; provided, however, that solely for purposes of computing
amounts described in subclause (c) of Section 4.3, any such surviving person
shall only be deemed to have succeeded to and be substituted for Holdings 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 Holdings hereunder and under the Securities and agrees to
be bound hereby and thereby, the predecessor shall be released from such
obligations.
ARTICLE VI
DEFAULT AND REMEDIES
Section 6.1. Events of Default.
An "Event of Default" occurs if:
(1) Holdings defaults in the payment of interest on the Securities
when the same becomes due and payable and the default continues for a period
of 30 days;
(2) Holdings defaults in the payment of the principal of the
Securities when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise (including the failure to repurchase
Securities tendered pursuant to the requirements set forth in Sections 4.14
and 4.15), whether or not such payment shall be prohibited by the provisions
of Article Eleven hereof;
(3) Holdings fails to comply with any of its other agreements or
covenants in, or provisions of, the Securities or this Indenture and the
default continues for the period and after the notice specified below;
(4) there shall be a default under any bond, debenture, or other
evidence of Indebtedness of Holdings or of any Significant Subsidiary or
under any mortgage, indenture or other instrument under which there may be
issued or by which there may be secured or evidenced any such Indebtedness,
whether such Indebtedness now exists or shall hereafter be created, if both
(A) such default either (i) results from the failure to pay such Indebtedness
at its stated final maturity (that is, the date of the last principal
installment of any installment Indebtedness under the instrument or agreement
pursuant to or under which such Indebtedness was created or is evidenced) or
(ii) relates to an obligation (including any obligation to pay interest, to
purchase such Indebtedness or to pay the principal of such Indebtedness,
other than the obligation to pay any principal of 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 the maturity of
which has been so accelerated, aggregates $25 million or more at any one
time;
40
<PAGE> 51
(5) Holdings or any Significant Subsidiary (A) commences a voluntary
case or proceeding under any Bankruptcy Law with respect to itself, (B)
consents to the entry of a judgment, decree or order for relief against it in
an involuntary case or proceeding under any Bankruptcy Law, (C) consents to
the appointment of a Custodian of it or for substantially all of its
property, (D) consents to or acquiesces in the institution of a bankruptcy or
an insolvency proceeding against it, (E) makes a general assignment for the
benefit of its creditors, or (F) takes any corporate action to authorize or
effect any of the foregoing;
(6) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of Holdings or any Significant Subsidiary in an
involuntary case or proceeding under any Bankruptcy Law, which shall (A)
approve as properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect of Holdings or any Significant
Subsidiary, (B) appoint a Custodian of Holdings or any Significant Subsidiary
or for substantially all of its property or (C) order the winding-up or
liquidation of its affairs; and such judgment, decree or order shall remain
unstayed and in effect for a period of 60 consecutive days;
(7) the lenders under the Credit Agreement shall commence judicial
proceedings to foreclose upon any material portion of the assets of Holdings
and its Subsidiaries; or
(8) any final judgments or order for payment of money in excess of
$25 million shall be rendered against Holdings or any Significant Subsidiary
by a court of competent jurisdiction and shall remain undischarged for a
period of 60 days after such judgment becomes final and nonappealable.
A Default under clause (3) above (other than in the case of any Defaults
resulting from any Default under Section 4.3, 4.14 or 5.1, which Defaults shall
be Events of Default with the notice specified in this paragraph but without
the passage of time specified in this paragraph) is not an Event of Default
until the Trustee notifies Holdings, or the Holders of at least 25% in
aggregate principal amount of the outstanding Securities notify Holdings and
the Trustee, of the Default, and Holdings 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 aggregate principal amount of the Securities then outstanding. When a
Default is cured, it ceases.
Section 6.2. Acceleration.
(a) If an Event of Default (other than an Event of Default specified
in Section 6.1(5) or (6) with respect to Holdings or any Significant
Subsidiary) occurs and is continuing, the Trustee may, by notice to Holdings
(and, if any Indebtedness is outstanding under the Credit Agreement or the
Credit Agreement is otherwise in effect, to the Credit Agent), or the Holders
of at least 25% in aggregate principal amount of the Securities then
outstanding may, by written notice to Holdings and the Trustee, and the Trustee
shall (with
41
<PAGE> 52
notice to the Credit Agent if any Indebtedness is outstanding under the Credit
Agreement or the Credit Agreement is otherwise in effect), upon the request of
such Holders, declare the aggregate principal amount of the Securities
outstanding, together with accrued but unpaid interest thereon to the date of
payment, to be due and payable and, upon any such declaration, the same shall
become and be due and payable; provided, that so long as the Credit Agreement
shall be in force and effect, if any such Event of Default shall have occurred
and be continuing, any such acceleration shall not be effective until the
earlier of (a) five Business Days following a notice of acceleration given to
Holdings and the Credit Agent under the Credit Agreement and only if upon such
fifth Business Day such Event of Default shall be continuing or (b) the
acceleration of any Indebtedness under the Credit Agreement. If an Event of
Default specified in Section 6.1(5) or (6) occurs with respect to Holdings or
any Significant Subsidiary, all unpaid principal and accrued interest on the
Securities then outstanding shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. Upon payment of such principal amount, interest, and premium, if any,
all of Holdings' obligations under the Securities and this Indenture, other
than obligations under Section 7.7, shall terminate. The Holders of a majority
in aggregate principal 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 and
interest on the Securities which have 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
principal, which has become due otherwise than by such declaration of
acceleration, has been paid, and (iii) the rescission would not conflict with
any judgment or decree of a court of competent jurisdiction.
(b) In the event of a declaration of acceleration under this
Indenture because an Event of Default set forth in Section 6.1(4) 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 or the maturity thereof shall have been extended such that it is not
then due and payable, or the underlying default has been cured (and any
acceleration based thereon of such other Indebtedness has been rescinded),
within 90 days of such maturity or declaration of acceleration, as the case may
be.
Section 6.3. 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 Holder in exercising any right or remedy
accruing upon an Event of Default shall
42
<PAGE> 53
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 6.4. Waiver of Past Defaults.
Subject to Sections 6.7 and 9.2, the Holders of at least a majority in
aggregate 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 (1) and (2) of Section 6.1. When a Default or Event of
Default is waived, it is cured and ceases.
Section 6.5. Control by Majority.
The Holders of at least a majority in aggregate 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. Subject to Section 7.1, 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 Holder,
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.
Section 6.6. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee notice of a continuing Event of
Default;
(2) the Holder or Holders of at least 25% in aggregate principal
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 at least 25%
in aggregate principal amount of the outstanding Securities do not give the
Trustee a direction which, in the opinion of the Trustee, is inconsistent
with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
43
<PAGE> 54
Section 6.7. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, 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 6.8. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified in
clause (1) or (2) of Section 6.1 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against
Holdings or any other obligor on the Securities for the whole amount of
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 Securities 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 Trustee, its agents
and counsel.
Section 6.9. 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 Holders allowed in
any judicial proceedings relating to Holdings 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 Holder to make such payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 6.10. 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 7.7;
44
<PAGE> 55
Second: if the Holders are forced to proceed against Holdings directly
without the Trustee, to the Holders for their collection costs;
Third: to the Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
interest, respectively; and
Fourth: to Holdings.
The Trustee, upon prior notice to Holdings, may fix a record date and
payment date for any payment to the Holders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken 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 suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7, or a suit by a Holder or Holders of more than 10% in
aggregate principal amount of the outstanding Securities.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
Section 7.1. 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 could 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 covenants 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
45
<PAGE> 56
of this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.1.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by 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 6.5.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) 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 7.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree with Holdings. Assets held in
trust by the Trustee need not be segregated from other assets except to the
extent required by law.
Section 7.2. Rights of Trustee.
Subject to Section 7.1:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 13.4 and 13.5. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such certificate or 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.
46
<PAGE> 57
(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 resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as
it may see fit.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
Section 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with Holdings, 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 7.4. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for Holdings' use
of the proceeds from the Securities, and it shall not be responsible for any
statement in the Securities other than the Trustee's certificate of
authentication.
Section 7.5. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default occurs. Except in the case of a Default or an Event of Default in
payment of principal of, premium, if any, or interest on, any Security,
including the failure to make payment on the Change of Control Payment Date
pursuant to a Change of Control Offer, the Trustee may withhold the notice if
and so long as its board of directors, the executive committee of its board of
directors or a committee of its directors and/or Trust Officers in good faith
determines that withholding the notice is in the interest of the Holders.
Section 7.6. Reports By Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, the Trustee shall, to the extent that any of the events
described in TIA Section 313(a) occurred within the previous twelve months,
but not otherwise, mail to each Holder a brief
47
<PAGE> 58
report dated as of such May 15 that complies with TIA Section 313(a). The
Trustee also shall comply with TIA Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
mailed to Holdings and filed with the SEC and each stock exchange, if any, on
which the Securities are listed.
Holdings shall notify the Trustee if the Securities become listed on any
stock exchange.
Section 7.7. Compensation and Indemnity.
Holdings 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. Holdings shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it including, without limitation, any taxes
imposed on the trust or on the income from the Securities. Such expenses shall
include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
Holdings 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
hereunder. The Trustee shall notify Holdings promptly of any claim asserted
against the Trustee for which it may seek indemnity. Holdings shall defend the
claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and Holdings shall pay the reasonable fees and expenses of
such counsel; provided that Holdings 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 Holdings and the Trustee in connection with such defense as
reasonably determined by the Trustee. Holdings need not pay for any settlement
made without its written consent. Holdings 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 Holdings' payment obligations in this Section 7.7, the Trustee
shall have a lien prior to the Securities on all assets held or collected by
the Trustee, in its capacity as Trustee, except assets held in trust to pay
principal of, premium, if any, or interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(5) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 7.8. Replacement of Trustee.
The Trustee may resign by so notifying Holdings. The Holders of a
majority in aggregate principal amount of the outstanding Securities may remove
the Trustee by so notifying
48
<PAGE> 59
Holdings and the Trustee may appoint a successor Trustee with Holdings'
consent. Holdings 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, Holdings shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after
the successor Trustee takes office, the Holders of a majority in aggregate
principal amount of the Securities may appoint a successor Trustee to replace
the successor Trustee appointed by Holdings.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to Holdings. 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 7.7, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, Holdings or the
Holders of at least 10% in aggregate principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.8,
Holdings' obligations under Section 7.7 shall continue for the benefit of the
retiring Trustee.
Section 7.9. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
49
<PAGE> 60
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Sections 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 Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities, or certificates of interest or
participation in other securities, of Holdings are outstanding, if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
Section 7.11. Preferential Collection of Claims Against Holdings.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1. Option to Effect Legal Defeasance or Covenant Defeasance.
Holdings may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.2 or 8.3 hereof be applied to all outstanding Securities upon
compliance with the conditions set forth below in this Article Eight.
Section 8.2. Legal Defeasance.
Upon Holdings' exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, Holdings shall, subject to the satisfaction of
the conditions set forth in Section 8.4 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Securities on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that Holdings shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Securities, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.5 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Securities and this Indenture (and the Trustee, on
demand of and at the expense of Holdings, shall execute proper instruments
acknowledging the same), except for the following provisions which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Securities to receive solely from the trust fund
described in Section 8.4 hereof, and as more fully set forth in such Section,
payments in respect of the principal, of, premium, if any, and interest on such
Securities when such payments are due, (b) Holdings' obligations with respect
to such Securities under Article Two and Section 4.2 hereof and the rights,
powers, trusts, duties and immunities of the Trustee and Holdings' obligations
in connection therewith, and (c) this Article Eight. Subject to compliance
with this Article Eight, Holdings may exercise its option under this Section
8.2 notwithstanding the prior exercise of its option under Section 8.3 hereof.
50
<PAGE> 61
Section 8.3. Covenant Defeasance.
Upon Holdings' exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, Holdings shall, subject to the satisfaction of
the conditions set forth in Section 8.4 hereof, be released from its
obligations under the covenants contained in Sections 4.3 and 4.6 through 4.18
and Article V hereof with respect to the outstanding Securities on and after
the date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Securities shall thereafter be deemed not "outstanding"
for the purposes of any direction, waiver, consent or declaration or act of
Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Securities shall not be deemed
outstanding for accounting purposes). For this purpose, Covenant Defeasance
means that, with respect to the outstanding Securities, Holdings 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 6.1 hereof, but, except as specified above, the
remainder of this Indenture and such Securities shall be unaffected thereby.
In addition, upon Holdings' exercise under Section 8.1 hereof of the option
applicable to this Section 8.3 hereof, subject to the satisfaction of the
conditions set forth in Section 8.4 hereof, Sections 6.1(3) (but only to the
extent it relates to a breach of any of the covenants contained in Sections 4.3
and 4.6 through 4.18 and Article V hereof), 6.1(4) and 6.1(7) hereof shall not
constitute Events of Default.
Section 8.4. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.2 or 8.3 hereof to the outstanding Securities:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) Holdings must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders of the Securities, cash in
United States dollars, or direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for
the payment of which obligation or guarantee the full faith and credit
of the United States of America is pledged ("U.S. Government
Obligations"), or a combination thereof, in such amounts and at such
times as will be sufficient, without consideration of the reinvestment
of such interest and after payment of all federal, state and local taxes
or other charges or assessments in respect thereof payable by the
Trustee, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Securities to redemption or maturity
provided that the 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 Securities on the Maturity Date or
such redemption date, as the case may be;
51
<PAGE> 62
(b) in the case of an election under Section 8.2 hereof,
Holdings shall have delivered to the Trustee an Opinion of Counsel
stating that (A) Holdings 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 the outstanding Securities
will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit and 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 deposit and Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.3 hereof,
Holdings shall have delivered to the Trustee an Opinion of Counsel
stating that the Holders of the outstanding Securities will not
recognize income, gain or loss for federal income tax purposes as a
result of such deposit and 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 deposit and such Covenant
Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred
and be continuing on the date of such deposit or insofar as Section
6.1(5) or 6.1(6) hereof is concerned, at any time in the period ending
on the 91st day after the date of deposit (it being understood that this
condition shall not be deemed satisfied until after such 91st day);
(e) such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a default under,
this Indenture or any other material agreement or instrument to which
Holdings is a party or by which Holdings is bound (and in that
connection, the Trustee shall have received a certificate from the
administrative agent under the Credit Agreement to that effect with
respect to such Credit Agreement if then in effect);
(f) Holdings shall have delivered to the Trustee an
Opinion of Counsel to the effect that, assuming that no Default or Event
of Default shall occur and be continuing under Section 6.1(5) or 6.1(6)
during the period ending on the 91st day after the date of deposit, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) Holdings shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by Holdings
with the intent of preferring the Holders over the other creditors of
Holdings or with the intent of defeating, hindering, delaying or
defrauding creditors of Holdings, or others; and
52
<PAGE> 63
(h) Holdings shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
Section 8.5. Deposited Money and U.S. Government Obligations to be Held in
Trust; Other Miscellaneous Provisions.
Subject to Section 8.6 hereof, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee pursuant to Section
8.4 hereof 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
(excluding Holdings or any Affiliate thereof) as the Trustee may determine, to
the Holders of such Securities of all sums due and to become due thereon in
respect of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
Holdings shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or U.S. Government
Obligations deposited pursuant to Section 8.4 hereof or the principal 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 Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to Holdings from time to time upon the request of
Holdings any money or non-callable U.S. Government Obligations held by it as
provided in Section 8.4 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.4(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Covenant Defeasance.
Section 8.6. Repayment to Holdings.
Any money deposited with the Trustee or any Paying Agent in trust for
the payment of the principal of, premium, if any, or interest on any Security
and remaining unclaimed for two years after such principal, and premium, if
any, or interest has become due and payable shall be paid to Holdings on its
request or shall be discharged from such trust; and the Holder of such Security
shall thereafter, as a creditor, look only to Holdings for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money shall thereupon cease; provided, however, that the Trustee or such Paying
Agent, before being required to make any such repayment, shall at the expense
of Holdings cause to be published once, in The New York Times and The Wall
Street Journal (national edition), notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to Holdings.
53
<PAGE> 64
Section 8.7. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or U.S. Government Obligations in accordance with Section 8.2 or 8.3
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then Holdings' obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.2 or 8.3 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.2 or 8.3 hereof,
as the case may be; provided, however, that, if Holdings makes any payment of
principal of, premium, if any, or interest on any Security following the
reinstatement of its obligations, Holdings shall be subrogated to the rights of
the Holders of such Securities to receive such payment from the money held by
the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1. Without Consent of Holders.
Holdings, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Indenture or the Securities without
notice to or consent of any Holder:
(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;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the uncertificated
Securities are issued in registered form for purposes of Section 163(f) of
the Internal Revenue Code of 1986, as from time to time amended, or in a
manner such that the uncertificated Securities are described in Section
163(f)(2)(B) of the Internal Revenue Code of 1986, as from time to time
amended;
(4) to make any other change that does not adversely affect the
rights of any Holders; or
(5) to comply with any requirements of the SEC in connection with the
qualification of this Indenture under the TIA;
provided that Holdings has delivered to the Trustee an Opinion of Counsel
stating that such amendment or supplement complies with the provisions of this
Section 9.1.
Section 9.2. With Consent of Holders.
54
<PAGE> 65
Subject to Section 6.7, Holdings, when authorized by a Board Resolution,
and the Trustee, together, with the written consent of the Holder or Holders of
at least fifty four percent in aggregate principal amount of the outstanding
Securities (or at least a majority in aggregate principal amount of the
outstanding Securities in the event that EJDC shall cease to beneficially own
at least a majority in aggregate principal amount of the outstanding
Securities), may amend or supplement this Indenture or the Securities, without
notice to any other Holders. Subject to Section 6.7, the Holder or Holders of
at least fifty four percent in aggregate principal amount of the outstanding
Securities (or at least a majority in aggregate principal amount of the
outstanding Securities in the event that EJDC shall cease to beneficially own
at least a majority in aggregate principal amount of the outstanding
Securities) may waive compliance by Holdings with any provision of this
Indenture or the Securities without notice to any other Holder. Without the
consent of each Holder affected, however, no amendment, supplement or waiver,
including a waiver pursuant to Section 6.4, may:
(1) change the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture or the Securities;
(2) reduce the rate or extend the time for payment of interest on any
Security;
(3) reduce the principal amount of any Security;
(4) change the Maturity Date of any Security, or alter the redemption
provisions contained in paragraph 5 of the Securities in a manner adverse to
any Holder;
(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
Security;
(6) make any changes in Section 6.4, 6.7 or this third sentence of
this Section 9.2; or
(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
and the Securities as in effect on the date hereof.
Without the consent of the Holder or Holders of at least 66 2/3% of the
aggregate principal amount of the outstanding Securities, no change may be made
to the provisions of Article Eleven that adversely affects the rights of any
Holder under Article Eleven.
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, Holdings shall mail to the Holders affected thereby a notice briefly
describing the amendment,
55
<PAGE> 66
supplement or waiver. Any failure of Holdings 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, Holdings may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or
waiver.
Holdings agrees that no amendment, supplement or waiver under this
Article Nine may make any change that adversely affects the rights under
Article Eleven of any holders of Senior Indebtedness unless the holders of such
Senior Indebtedness consent to the change.
Section 9.3. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
Section 9.4. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by notice to the Trustee
or Holdings received before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Securities have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.
Holdings 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
notwithstanding 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 Holder, unless it makes a change described in any of clauses (1)
through (7) of Section 9.2, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the
same debt as the consenting Holder's Security; provided that any such waiver
shall not impair or affect the right of any 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 without the consent of such Holder.
56
<PAGE> 67
Section 9.5. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if Holdings or
the Trustee so determines, Holdings in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms.
Section 9.6. 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 Indenture. The
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture.
ARTICLE X
MEETINGS OF SECURITYHOLDERS
Section 10.1. Purposes for Which Meetings May Be Called.
A meeting of Holders may be called at any time and from time to time
pursuant to the provisions of this Article Ten for any of the following
purposes:
(a) to give any notice to Holdings or to the Trustee, or to give any
directions to the Trustee, or to waive or to consent to the waiving of any
Default or Event of Default hereunder and its consequences, or to take any
other action authorized to be taken by Holders pursuant to any of the
provisions of Article Six;
(b) to remove the Trustee or appoint a successor Trustee pursuant to
the provisions of Article Seven;
(c) to consent to an amendment, supplement or waiver pursuant to the
provisions of Section 9.2; or
(d) to take any other action (i) authorized to be taken by or on
behalf of the Holders of any specified aggregate principal amount of the
Securities under any other provision of this Indenture, or authorized or
permitted by law or (ii) which the Trustee deems necessary or appropriate in
connection with the administration of this Indenture.
Section 10.2. Manner of Calling Meetings.
57
<PAGE> 68
The Trustee may at any time call a meeting of Holders to take any action
specified in Section 10.1, to be held at such time and at such place in New
York, New York or elsewhere as the Trustee shall determine. Notice of every
meeting of Holders, setting forth the time and place of such meeting and in
general terms the action proposed to be taken at such meeting, shall be mailed
by the Trustee, first-class postage prepaid, to Holdings and to the Holders at
their last addresses as they shall appear on the registration books of the
Registrar not less than 10 nor more than 60 days prior to the date fixed for a
meeting.
Any meeting of Holders shall be valid without notice if the Holders of
all Securities then outstanding are present in person or by proxy, or if notice
is waived before or after the meeting by the Holders of all Securities
outstanding, and if Holdings, any Subsidiary and the Trustee are either present
by duly authorized representatives or have, before or after the meeting, waived
notice.
Section 10.3. Call of Meetings by Holdings or Holders.
In case at any time Holdings, pursuant to a Board Resolution, or the
Holders of not less than 10% in aggregate principal amount of the Securities
then outstanding shall have requested the Trustee to call a meeting of Holders
to take any action specified in Section 10.1, by written request setting forth
in reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed the notice of such meeting within 20 days after
receipt of such request, then Holdings or the Holders in the amount above
specified may determine the time and place in New York, New York or elsewhere
for such meeting and may call such meeting for the purpose of taking such
action, by mailing or causing to be mailed notice thereof as provided in
Section 10.2, or by causing notice thereof to be published at least once in
each of two successive calendar weeks (on any Business Day during such week) in
a newspaper or newspapers printed in the English language, customarily
published at least five days a week of a general circulation in New York, New
York, the first such publication to be not less than 10 nor more than 60 days
prior to the date fixed for the meeting.
Section 10.4. Who May Attend and Vote at Meetings.
To be entitled to vote at any meeting of Holders, a person shall (a) be
a registered Holder of one or more Securities, or (b) be a person appointed by
an instrument in writing as proxy for the registered Holder or Holders of
Securities. The only persons who shall be entitled to be present or to speak
at any meeting of Holders shall be the persons entitled to vote at such meeting
and their counsel and any representatives of the Trustee and its counsel and
any representatives of Holdings and its counsel.
Section 10.5. Regulations May Be Made by Trustee; Conduct of the Meeting;
Voting Rights; Adjournment.
Notwithstanding any other provision of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any action by or
any meeting of Holders, in regard to proof of the holding of Securities and of
the appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, and submission and examination of proxies,
58
<PAGE> 69
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think appropriate. Such
regulations may fix a record date and time for determining the Holders of
record of Securities entitled to vote at such meeting, in which case those and
only those persons who are Holders of Securities at the record date and time so
fixed, or their proxies, shall be entitled to vote at such meeting whether or
not they shall be such Holders at the time of the meeting.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by Holdings
or by Holders as provided in Section 10.3, in which case Holdings or the
Holders calling the meeting, as the case may be, shall in like manner appoint a
temporary chairman. A permanent chairman and a permanent secretary of the
meeting shall be elected by vote of the Holders of a majority in aggregate
principal amount of the Securities represented at the meeting and entitled to
vote.
At any meeting each Holder or proxy shall be entitled to one vote for
each $1,000 principal amount of Securities held or represented by him;
provided, however, that no vote shall be cast or counted at any meeting in
respect of any Securities challenged as not outstanding and ruled by the
chairman of the meeting to be not outstanding. The chairman may adjourn any
such meeting if he is unable to determine whether any Holder or proxy shall be
entitled to vote at such meeting. The chairman of the meeting shall have no
right to vote other than by virtue of Securities held by him or instruments in
writing as aforesaid duly designating him as the proxy to vote on behalf of
other Holders. Any meeting of Holders duly called pursuant to the provisions
of Section 10.2 or Section 10.3 may be adjourned from time to time by vote of
the Holders of a majority in aggregate principal amount of the Securities
represented at the meeting and entitled to vote, and the meeting may be held as
so adjourned without further notice.
Section 10.6. Voting at the Meeting and Record To Be Kept.
The vote upon any resolution submitted to any meeting of Holders shall
be by written ballots on which shall be subscribed the signatures of the
Holders of Securities or of their representatives by proxy and the principal
amount of the Securities voted by the ballot. The permanent chairman of the
meeting shall appoint two inspectors of votes, who shall count all votes cast
at the meeting for or against any resolution and who shall make and file with
the secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Holders shall be prepared by the secretary of the meeting and there
shall be attached to such record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more persons
having knowledge of the facts, setting forth a copy of the notice of the
meeting and showing that such notice was mailed as provided in Section 10.2 or
published as provided in Section 10.3. The record shall be signed and verified
by the affidavits of the permanent chairman and the secretary of the meeting
and one of the duplicates shall be delivered to Holdings and the other to the
Trustee to be preserved by the Trustee, the latter to have attached thereto the
ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
59
<PAGE> 70
Section 10.7. Exercise of Rights of Trustee or Holders May Not Be
Hindered or Delayed by Call of Meeting.
Nothing contained in this Article Ten shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Holders or any
rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Holders under any of the provisions of this
Indenture or of the Securities.
ARTICLE XI
SUBORDINATION
Section 11.1. Securities Subordinated to Senior Indebtedness.
Anything herein to the contrary notwithstanding, Holdings, for itself
and its successors, and each Holder, by accepting a Security, agrees, that the
payment of the principal of and interest on and premiums, penalties, fees and
other liabilities (including, without limitation, liabilities in respect of any
indemnity, reimbursement, compensation or contribution obligations, the
occurrence of a Change of Control, any liquidated damage provision, any breach
of representation or warranty, or any rights of redemption or rescission under
this Indenture, the Merger Agreement and the Registration Rights Agreement or
by law or otherwise) ("Other Obligations") with respect to the Securities is
subordinated, to the extent and in the manner provided in this Article Eleven,
to the prior payment in full in cash of all Senior Indebtedness.
This Article Eleven 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 benefit of the holders of Senior Indebtedness and
such holders are made obligees hereunder and any one or more of them may
enforce such provisions. Holders of Senior Indebtedness need not prove
reliance on the subordination provisions hereof.
Section 11.2. No Payment on Securities in Certain Circumstances.
(a) No direct or indirect payment or distribution shall be made by or
on behalf of Holdings (other than a payment in Secondary Securities) on account
of principal of or interest on or Other Obligations with respect to the
Securities or to acquire, repurchase, redeem, retire or defease any of the
Securities or on account of the redemption provisions of the Securities (i)
upon the maturity of any Senior Indebtedness by lapse of time, acceleration or
otherwise, unless and until all principal thereof and interest thereon shall
first be paid in full in cash or (ii) upon the happening of any default in
payment of any principal of or interest on any Senior Indebtedness when the
same becomes due and payable (a "Payment Default"), unless and until such
default shall have been cured or waived or shall have ceased to exist.
(b) Without limiting the effect of Section 11.2(a), upon the
happening of a default or event of default (other than a Payment Default)
(including any event which, with the giving of notice or lapse of time, or
both, would become an event of default and including any
60
<PAGE> 71
default or event of default that would result upon any payment with respect to
the Securities) with respect to any Senior Indebtedness, as such default or
event of default is defined therein or in the instrument or agreement under
which it is outstanding, and upon written notice thereof given to Holdings and
the Trustee by any holders of such Senior Indebtedness or their Representative
specifying an intent to effect a Payment Blockage Period hereunder ("Payment
Notice"), then, unless and until such default or event of default shall have
been cured or waived or shall have ceased to exist, no direct or indirect
payment or distribution (other than of Secondary Securities) shall be made by
or on behalf of Holdings on account of principal of or interest on or Other
Obligations with respect to the Securities or to acquire, repurchase, redeem,
retire or defease any of the Securities or on account of the redemption
provisions of the Securities; provided, however, that this paragraph (b) shall
not prevent the making of any payment for a period of (a "Payment Blockage
Period") of more than 179 days after a Payment Notice shall have been given (or
earlier if such Payment Blockage Period is terminated (i) by written notice to
the Trustee and Holdings from the Credit Agent or the Representative which gave
such Payment Notice, (ii) repayment in full of such Senior Indebtedness or
(iii) because the default specified in the Payment Notice is no longer
continuing). Subject to the provisions contained in Section 11.2(a) above,
Holdings may resume payments on the Securities after such Payment Blockage
Period expires. Notwithstanding the foregoing, (i) not more than one Payment
Notice shall be given within a period of 360 consecutive days, and (ii) a
Payment Notice may only be given (A) if Senior Indebtedness is outstanding
under the Credit Agreement at the time of such notice, by the Credit Agent and
(B) if no Senior Indebtedness is outstanding under the Credit Agreement at the
time of such notice, by a holder or holders (or the Representative of holders)
of at least $35,000,000 principal amount of such Senior Indebtedness. For
purposes of this Section, no default or event of default which existed or was
continuing on the date of the commencement of any Payment Blockage Period with
respect to the Senior Indebtedness initiating such Payment Blockage Period
shall be, or be made, the basis of the commencement of a subsequent Payment
Blockage Period by the Representative of such Senior Indebtedness whether or
not within a period of 360 consecutive days unless such default or event of
default shall have been cured or waived for a period of not less than 90
consecutive days.
(c) In furtherance of the provisions of Section 11.1, if,
notwithstanding the foregoing provisions of this Section 11.2, any direct or
indirect payment or distribution other than Secondary Securities on account of
principal of or interest on or Other Obligations with respect to the Securities
or to acquire, repurchase, redeem, retire or defease any of the Securities or
on account of the redemption provisions of the Securities shall be made by or
on behalf of Holdings and received by the Trustee, by any Holder or by any
Paying Agent (or, if Holdings or any Subsidiary or Affiliate of Holdings is
acting as Paying Agent, money for any such payment or distribution shall be
segregated and held in trust), at a time when such payment or distribution was
prohibited by the provisions of this Section 11.2, then, unless and until such
payment or distribution is no longer prohibited by this Section 11.2, such
payment or distribution (subject to the provisions of Sections 11.6 and 11.7)
shall be received, segregated from other funds, and held in trust by the
Trustee or such Holder or Paying Agent, as the case may be, for the benefit of,
and shall be immediately 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, to the extent necessary to make
payment in full in cash of all Senior Indebtedness remaining unpaid, after
giving effect to all concurrent payments and distributions
61
<PAGE> 72
to or for the holders of Senior Indebtedness. Holdings shall give prompt
notice to the Trustee of any default or event of default or any acceleration
under any Senior Indebtedness or under any agreement pursuant to which Senior
Indebtedness may have been issued. Failure to give such notice shall not
affect the subordination of the Securities to Senior Indebtedness provided in
this Article Eleven. Notwithstanding anything to the contrary contained
herein, in the absence of its gross negligence or willful 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 such payment over to, the holders of Senior Indebtedness or their
Representative.
Section 11.3. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization
of Holdings.
Upon any payment or distribution of assets or securities of Holdings of
any kind or character, whether in cash, property or securities, upon any
dissolution, winding-up, total or partial liquidation or total or partial
reorganization of Holdings (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 Holdings and
whether voluntary or involuntary):
(a) the holders of all Senior Indebtedness shall first be entitled to
receive payments in full in cash of the principal thereof and interest
thereon before the Holders are entitled to receive any payment on account of
the principal of or interest on or Other Obligations with respect to the
Securities (whether by payment, acquisition, retirement, defeasance,
redemption or otherwise) or any other payment or distribution of assets or
securities by or on behalf of Holdings;
(b) any payment or distribution of assets or securities of Holdings
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 except
for the provisions of this Article Eleven, including any such payment or
distribution that is payable or deliverable by reason of the payment of any
other Indebtedness of Holdings being subordinated to the payment of the
Securities (except for any such payment or distribution (x) authorized by an
order or decree giving effect, and stating in such order or decree that
effect is given, to the subordination of the Securities to the Senior
Indebtedness, and made by a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law, (y) of
securities that (i) are unsecured, (ii) have a Weighted Average Life to
Maturity and final maturity that are no shorter than the Weighted Average
Life to Maturity of the Securities or any securities issued to the holders of
Senior Indebtedness under the Credit Agreement pursuant to a plan of
reorganization or readjustment and (iii) are subordinated, to at least the
same extent as the Securities, to the payment of all Senior Indebtedness then
outstanding or (z) of Capital Stock), 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 held or
represented by each, until all Senior Indebtedness remaining unpaid shall
have been paid in full in cash, after giving
62
<PAGE> 73
effect to all concurrent payments and distributions to or for the holders of
such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets or securities of Holdings of any kind or character,
whether in cash, property or securities, shall be received by the Trustee or
the Holders or any Paying Agent (or, if Holdings or any Subsidiary or
Affiliate of Holdings is acting as Paying Agent, money, assets or securities
of any kind or character for any such payment or distribution shall be
segregated or held in trust) on account of principal of or interest on or
Other Obligations with respect to the Securities before all Senior
Indebtedness is paid in full in cash, such payment or distribution (subject
to the provisions of Sections 11.6 and 11.7) 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, after giving effect to all concurrent payments and distributions 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 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.
Holdings shall give prompt notice to the Trustee prior to any
dissolution, winding-up, total or partial liquidation or total or partial
reorganization of Holdings or assignment for the benefit of creditors by
Holdings.
Section 11.4. Holders to Be Subrogated to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full in cash 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 Holdings
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 distributions to the holders of Senior Indebtedness by or on behalf
of Holdings, or by or on behalf of the Holders by virtue of this Article
Eleven, which otherwise would have been made to the Holders, shall, as between
Holdings and the Holders, be deemed to be payment by Holdings to or on account
of the Senior Indebtedness, it being understood that the provisions of this
Article Eleven are and are intended solely for the purpose of defining the
relative rights of the Holders, on the one 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 Eleven shall have been
applied, pursuant to the provisions of this Article Eleven, 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
63
<PAGE> 74
Indebtedness 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.
Section 11.5. Obligations of Holdings Unconditional.
Nothing contained in this Article Eleven or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as between Holdings and
the Holders, the obligation of Holdings, which is absolute and unconditional,
to pay to the Holders the principal of and interest on and Other Obligations in
respect of the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of Holdings other than the holders of the
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 Eleven, of the holders of Senior Indebtedness in respect of cash,
property or securities of Holdings received upon the exercise of any such
remedy. Upon any payment or distribution of assets or securities of Holdings
referred to in this Article Eleven, the Trustee, subject to the provisions of
Sections 7.1 and 7.2, and the Holders shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which 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 distribution to the Trustee or to
the Holders for the purpose of ascertaining the persons entitled to participate
in such payment or distribution, the holders of Senior Indebtedness and other
Indebtedness of Holdings, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article Eleven. Nothing in this Section 11.5 shall apply to the claims
of, or payments to, the Trustee under or pursuant to Section 7.7.
Section 11.6. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts 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 Holdings 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
7.1 and 7.2, shall be entitled in all respects conclusively to assume that no
such fact exists.
Section 11.7. 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 accordance with Section 8.4 shall be for the
sole benefit of Holders and, to the extent allocated for the payment of
Securities, shall not be subject to the subordination provisions of this
Article Eleven. Otherwise, any deposit of assets or securities by or on behalf
of Holdings with the Trustee or any Paying Agent (whether or not in trust) for
the payment of principal of or interest on or Other Obligations with respect to
any Securities shall be subject to the provisions of this Article Eleven;
provided that if prior to the second
64
<PAGE> 75
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 11.6, 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. The
foregoing shall not apply to the Paying Agent if Holdings or any Subsidiary or
Affiliate of Holdings is acting as Paying Agent. Nothing contained in this
Section 11.7 (except the first sentence of this Section 11.7) shall limit the
right of the holders of Senior Indebtedness to recover payments as contemplated
by this Article Eleven.
Section 11.8. Subordination Rights Not Impaired by Acts or Omissions of
Holdings or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness to
enforce the subordination provisions contained in this Article Eleven shall at
any time in any way be prejudiced or impaired by any act or failure to act on
the part of Holdings or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by Holdings with the terms of this
Indenture, regardless of any knowledge thereof that any such holder may have or
be otherwise charged with. The holders of Senior Indebtedness may extend,
renew, restate, supplement, modify or amend the terms of the Senior
Indebtedness or any security therefor and release, sell or exchange such
security and otherwise deal freely with Holdings and its Subsidiaries all
without affecting the liabilities and obligations of the parties to this
Indenture or the Holders. No provision in any supplemental indenture that
affects the subordination of the Securities or other provisions of this Article
Eleven shall be effective against the holders of the Senior Indebtedness who
have not consented thereto.
Each Holder by accepting a Security agrees that the Representative of
any Senior Indebtedness (including without limitation, the Credit Agent), in
its discretion, without notice or demand and without affecting any rights of
any holder of Senior Indebtedness under this Article Eleven, may foreclose any
mortgage or deed of trust covering interests in real property secured thereby,
by judicial or nonjudicial sale; and such Holder hereby waives any defense to
the enforcement by the Representative (including without limitation, the Credit
Agent) of any Senior Indebtedness or by any holder of any Senior Indebtedness
against such Holder of this Article Eleven after a judicial or nonjudicial sale
or other disposition of its interests in real property secured by such mortgage
or deed of trust; and such Holder expressly waives any defense or benefits that
may be derived from California Civil Code Sections 2808, 2809, 2810, 2819,
2845, 2849 or 2850, or California Code of Civil Procedure Sections 580a,
580d or 726, or comparable provisions of the laws of any other jurisdiction
or any similar statute in effect in any other jurisdiction.
Section 11.9. Holders Authorize Trustee to Effectuate Subordination of
Securities.
Each Holder by accepting a Security 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 Eleven, and
appoints the Trustee his attorney-in-fact for such
65
<PAGE> 76
purpose, including, in the event of any dissolution, winding up, liquidation or
reorganization of Holdings (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 Holdings) tending towards liquidation
or reorganization of the business and assets of Holdings, the immediate filing
of a claim for the unpaid balance of its or his Securities and Other
Obligations 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 contained
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 Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee or the holders of Senior Indebtedness or their
Representative to vote in respect of the claim of any Holder in any such
proceeding.
Section 11.10. Right of Trustee to Hold Senior Indebtedness.
The Trustee shall be entitled to all of the rights set forth in this
Article Eleven in respect of any Senior Indebtedness 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 11.11. Article Eleven Not to Prevent Events of Default.
The failure to make a payment on account of principal of or interest on
the Securities by reason of any provision of this Article Eleven shall not be
construed as preventing the occurrence of a Default or an Event of Default
under Section 6.1.
Section 11.12. 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 misconduct or gross negligence) if it shall in good faith
mistakenly pay over or deliver to the Holders of Securities or Holdings or any
other person, money or assets to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article Eleven or otherwise. Nothing in this
Section 11.12 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 XII
66
<PAGE> 77
SATISFACTION AND DISCHARGE
Section 12.1. Satisfaction and Discharge of the Indenture.
This Indenture will be discharged and will cease to be of further effect
as to all outstanding Securities when:
(a) all Securities theretofore authenticated and delivered (except
lost, stolen or destroyed Securities which have been replaced or paid and
Securities for whose payment money has theretofore been deposited in trust and
thereafter repaid to Holdings) have been delivered to the Trustee for
cancellation; or
(b) (1) all Securities not theretofore delivered to the Trustee for
cancellation have become due and payable by reason of the making of a notice
of redemption or otherwise and Holdings has irrevocably deposited or caused
to be deposited with the Trustee as trust funds in trust for the purpose an
amount sufficient to pay and discharge the entire indebtedness on the
Securities not theretofore delivered to the Trustee for cancellation for
principal, premium, if any, and accrued interest to the date of maturity or
redemption;
(2) Holdings has paid all sums payable by it under this
Indenture; and
(3) Holdings has delivered irrevocable instructions to the
Trustee to apply the deposited money toward the payment of the Securities at
maturity or the redemption date, as the case may be.
Section 12.2. Conditions to Satisfaction and Discharge of the Indenture.
Holdings shall deliver an Officers' Certificate and an Opinion of
Counsel to the Trustee stating that all conditions precedent to satisfaction
and discharge have been complied with.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of Section 3.18(c) of the TIA, the imposed
duties shall control.
Section 13.2. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
67
<PAGE> 78
if to Holdings:
c/o The Yucaipa Companies
10000 Santa Monica Boulevard
Fifth Floor
Los Angeles, California 90067
Attention: Mark A. Resnik
if to the Trustee:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Attention: Corporate Trust Administration
Each of Holdings and the Trustee by written notice to each other such
person may designate additional or different addresses for notices to such
person. Any notice or communication to Holdings and the Trustee 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
certified mail, postage prepaid (except that a notice of change of address
shall not be deemed to have been given until actually received by the
addressee).
Any notice or communication mailed to a Holder shall be mailed to him by
first class mail or other equivalent means at his address as it appears on the
registration 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 Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
Section 13.3. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Securities.
Holdings, the Trustee, the Registrar and any other person shall have the
protection of TIA Section 312(c).
Section 13.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by Holdings to the Trustee to take any
action under this Indenture, Holdings shall furnish to the Trustee:
68
<PAGE> 79
(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 opinion of such
counsel, all such conditions precedent have been complied with.
Section 13.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.7, shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
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 13.6. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
Section 13.7. 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, California 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.
69
<PAGE> 80
Section 13.8. 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
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Indenture.
Section 13.9. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of Holdings or any Subsidiary. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
Section 13.10. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such, of
Holdings shall not have any liability for any obligations of Holdings 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 Holder by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
Section 13.11. Successors.
All agreements of Holdings 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 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.
70
<PAGE> 81
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first written above.
Dated: , 1995
-------------
[SEAL] FOOD 4 LESS HOLDINGS, INC.
Attest: By:
-----------------------------------
Name: Mark A. Resnik
Title: Vice President
- ----------------------------
Dated: , 1995
-------------
[SEAL] --------------------------------------
--------------------------------------
as Trustee
Attest: By:
-----------------------------------
Name:
Title:
- ----------------------------
71
<PAGE> 82
EXHIBIT A
PURSUANT TO PROVISIONS OF THE INTERNAL REVENUE CODE OF 1986 RELATING TO
ORIGINAL ISSUE DISCOUNT AND TREASURY REGULATIONS
PROMULGATED THEREUNDER WITH RESPECT TO DEBT INSTRUMENTS ISSUED ON OR AFTER
APRIL 4, 1994, THE FOLLOWING INFORMATION IS
PROVIDED: (1) THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT IN THE
AMOUNT OF $____ PER FACE AMOUNT; (2) THE ISSUE
PRICE OF THIS SECURITY IS $___ PER FACE AMOUNT; (3) THE ISSUE DATE OF THIS
SECURITY IS ______ __, ____; AND (4) THE YIELD TO
MATURITY OF THIS SECURITY IS __%.
FOOD 4 LESS HOLDINGS, INC.
13 5/8% Senior Subordinated Pay-in-Kind Debentures
due ________ __, 2007
No. $
Food 4 Less Holdings, Inc., a Delaware corporation ("Holdings," which term
includes any successor entity), for value received promises to pay to
or registered assigns, the principal sum of dollars, on ________ __,
2007.
Interest payment dates: ________________ and _______________
commencing ________ __, ____.
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.
IN WITNESS WHEREOF, Holdings has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated: ________ __, 1995
FOOD 4 LESS HOLDINGS, INC.
By:
---------------------------------
Name:
Title:
This is one of the Securities described in the within-mentioned
Indenture.
Dated: ________ __, 1995
-------------------------------------
as Trustee
By:
---------------------------------
Title:
A-1
<PAGE> 83
FOOD 4 LESS HOLDINGS, INC.
13 5/8% Senior Subordinated Pay-in-Kind Debenture
due ________ __, 2007
1. Interest.
FOOD 4 LESS HOLDINGS, INC., a Delaware corporation ("Holdings"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. Holdings may, in its sole discretion, issue additional
Securities ("Secondary Securities") in lieu of a cash payment of any or all of
the interest due on any Interest Payment Date occurring on or prior to [the
Interest Payment Date five years after the Issue Date]. If Holdings issues
Secondary Securities in lieu of cash payment, in whole or in part, of interest
due on any Interest Payment Date occurring on or prior to [the Interest Payment
Date five years after the Issue Date], pursuant to this paragraph, it shall
give notice to the Trustee not less than 5 Business Days prior to the relevant
Interest Payment Date, and shall instruct the Trustee (upon written order of
Holdings signed by an Officer of Holdings given not less than 5 nor more than
45 days prior to such Interest Payment Date) to authenticate a Secondary
Security, dated such Interest Payment Date, in a principal amount equal to the
amount of interest not paid in cash in respect of this Security on such
Interest Payment Date. Each issuance of Secondary Securities in lieu of cash
payments of interest on the Securities shall be made pro rata with respect to
the outstanding Securities. Any such Secondary Securities shall be governed by
the Indenture and shall be subject to the same terms (including the maturity
date and the rate of interest from time to time payable thereon) as this
Security (except, as the case may be, with respect to the title, issuance date
and aggregate principal amount). The term Securities shall include the
Secondary Securities that may be issued under the Indenture.
Holdings will pay interest semi-annually in arrears on ___________ and
_________ of each year (the "Interest Payment Date"), commencing ___________,
____. Interest on this Security will accrue from the date of issuance or from
the most recent date to which interest has been paid. Interest will be
computed on the basis of a 360-day year of twelve 30-day months and actual
number of days elapsed.
Holdings shall pay interest on overdue principal and interest on overdue
installments of interest, to the extent lawful, at the rate per annum borne by
the Securities.
2. Method of Payment.
Holdings shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of
business on the Record Date immediately preceding the Interest Payment Date
even if the Securities 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. Holdings 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") (or, pursuant to
A-2
<PAGE> 84
Paragraph 1 hereof, in Secondary Securities). However, Holdings may pay
principal and interest by its check payable in such U.S. Legal Tender or by
wire transfer of federal funds (or, pursuant to Paragraph 1 hereof, in
Secondary Securities). Holdings may deliver any such interest payment to the
Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Norwest Bank Minnesota, N.A. (the "Trustee"), will act as
Paying Agent and Registrar. Holdings may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders. Holdings or any Subsidiary may,
subject to certain exceptions, act as Paying Agent, Registrar or co-Registrar.
4. Indenture.
Holdings issued the Securities under an Indenture, dated as of ________
__, 1995 (the "Indenture"), between Holdings and the Trustee. This Security is
one of a duly authorized issue of Securities of Holdings designated as its 13
5/8% Senior Subordinated Pay-in-Kind Debentures due 2007. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein.
The terms of the Securities include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code Sections 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 general
unsecured obligations of Holdings limited in aggregate principal amount to
$150,000,000, except for Secondary Securities and except as otherwise provided
in the Indenture.
5. Optional Redemption.
The Securities may not be redeemed at the option of Holdings prior to
________ __, 2000. Thereafter, upon at least 30 days' but not more than 60
days' notice to the Holders, Holdings may redeem all or any of the Securities
at any time at redemption prices equal to the applicable percentage of the
principal amount thereof set forth below, plus accrued interest, if any, to the
Redemption Date (as defined in the Indenture) if redeemed during the 12-month
period beginning ________ __ of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.8125%
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.1094%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.4063%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.7031%
2004 and thereafter . . . . . . . . . . . . . . . . . . . . . 100.0000%
</TABLE>
A-3
<PAGE> 85
Notwithstanding the foregoing, prior to ________ __, 1998, Holdings may
use the Net Proceeds (as defined in the Indenture) of an Initial Public
Offering (as defined in the Indenture) of Holdings or the Company to redeem up
to 35% of the Securities at a redemption price equal to 110% of the principal
amount thereof plus accrued interest, if any, to the date of redemption.
In order to effect the foregoing redemption, Holdings shall send the
notice required by Section 3.3 of the Indenture not later than 30 days after
the Initial Public Offering Consummation Date (as defined in the Indenture).
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 Securities called for redemption
shall have been deposited with the Paying Agent for redemption on such
Redemption Date, then, unless Holdings 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.
In the event of a Change of Control, upon the satisfaction of the
conditions set forth in the Indenture, Holdings shall be required to offer to
purchase all of the then outstanding Securities pursuant to a Change of Control
Offer at a purchase price equal to 101% of the aggregate principal amount
thereof plus accrued interest, if any, to the date of purchase. Holders of
Securities which are the subject of such an offer to repurchase shall receive
an offer to repurchase and may elect to have such Securities repurchased in
accordance with the provisions of the Indenture pursuant to and in accordance
with the terms of the Indenture.
8. Limitation on Disposition of Assets.
Under certain circumstances Holdings is required to apply the net
proceeds from Asset Sales to the repayment of Indebtedness of Holdings or any
Subsidiary, to make Related Business Investments and certain other investments
or to purchase in a Net Proceeds Offer at a price equal to 100% of the
aggregate principal amount thereof, plus accrued interest, if any, to the date
of purchase, which shall in the aggregate equal the net proceeds required to be
applied thereto.
9. Subordination. The Securities 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 Senior Indebtedness of Holdings whether outstanding on the date of
the Indenture or thereafter
A-4
<PAGE> 86
created, incurred, assumed or guaranteed. Each Holder, by accepting a
Security, agrees to such subordination and authorizes the Trustee to give it
effect.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations
of $1,000 and integral multiples of $1,000 (other than Secondary Securities
which may be in denominations of less than $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 portions thereof selected for redemption. No service charge
shall be made for any transfer, registration or exchange, but Holdings may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith, but not for any exchange pursuant to
Section 2.10, 3.6 or 9.5 of the Indenture.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
12. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed for
one year, the Trustee and the Paying Agents will pay the money back to Holdings
at its request. After that, all liability of the Trustee and such Paying
Agents with respect to such money shall cease.
13. Discharge Prior to Redemption or Maturity.
If Holdings 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 redemption or maturity and complies with the other provisions
of the Indenture relating thereto, Holdings will be discharged from certain
provisions of the Indenture and the Securities (including the financial
covenants, but excluding its obligation to pay the principal of and interest on
the Securities).
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least
fifty four percent (and, in some cases, a majority) in aggregate principal
amount of the Securities then outstanding, and any existing Default or Event of
Default or compliance with any provision may be waived with the consent of the
Holders of fifty four percent (and, in some cases, a majority) in aggregate
principal amount, as the case may be, of the Securities then outstanding.
Without notice to or consent of any Holder, the parties thereto may amend or
A-5
<PAGE> 87
supplement the Indenture or the Securities to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities, comply with Article Five 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. An amendment
may not make any change that adversely affects the rights under Article 11 of
the Indenture of any holders of Senior Indebtedness unless the holders of
Senior Indebtedness consent to the change.
15. Successors.
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor 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 Securities to be due and payable in the manner,
at the time and with the effect provided in the Indenture. Holders of
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to 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) if it determines that
withholding notice is in their interest.
17. Trustee Dealings with Holdings.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with Holdings, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
Holdings shall have any liability for any obligation of Holdings 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 Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on this Security.
A-6
<PAGE> 88
20. Governing Law.
The Laws of the State of New York shall govern this Security and the
Indenture.
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 (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
22. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, Holdings 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.
23. Indenture.
Each Holder, by accepting a Security, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.
Holdings will furnish to any Holder of a Security upon written request
and without charge a copy of the Indenture. Requests may be made to: FOOD 4
LESS HOLDINGS, INC., c/o The Yucaipa Companies, 10000 Santa Monica Boulevard,
Fifth Floor, Los Angeles, California 90067, Attn: Mark A. Resnik.
24. Certain Information Obligations.
To the extent permitted by applicable law or regulation, whether or not
Holdings is subject to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), Holdings shall file with
the SEC all quarterly and annual reports and such other information, documents
or other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) required to be filed pursuant to such
provisions of the Exchange Act. Holdings shall file with the Trustee copies of
the quarterly and annual reports and the information, documents, and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) that it is required to file with the SEC
pursuant to the Indenture. At any time when Holdings is not permitted by
applicable law or regulations to file the aforementioned reports, Holdings
shall furnish the Trustee and the Holders with the information that Holdings
would have had to provide to the SEC if Holdings had been subject to Section 13
or 15(d) of the Exchange Act.
25. Holdings Indebtedness.
Each Holder acknowledges that Holdings is the sole obligor of the
Securities and no Subsidiary of Holdings is a co-obligor or a guarantor of the
Securities.
A-7
<PAGE> 89
[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 transfer this Security
-----------------------
on the books of Holdings. 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-8
<PAGE> 90
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Security purchased by Holdings
pursuant to Section 4.14 or Section 4.15 of the Indenture, check the box:
Section 4.14 [ ] Section 4.15 [ ]
If you want to elect to have only part of this Security purchased by
Holdings pursuant to Section 4.14 or Section 4.15 of the Indenture, state the
amount:
$
Date:_______________
Signature:____________________________
(Sign exactly as your name appears
on the front of this Security)
Signature Guarantee:___________________________________________________________
A-9
<PAGE> 1
EXHIBIT 10.31
AMENDMENT NO. 3
TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 3 (this "Amendment"), dated as of April 26,
1995, to the Agreement and Plan of Merger dated as of September 14, 1994, as
amended by Amendment No. 1 dated as of January 12, 1995 and Amendment No. 2
dated as of February 24, 1995 (collectively, the "Merger Agreement"), is by and
among Food 4 Less, Inc., a Delaware corporation ("F4L"), Food 4 Less Holdings,
Inc., a California corporation ("F4L Holdings"), Food 4 Less Holdings, Inc., a
Delaware corporation ("F4L Holdings Delaware"), Food 4 Less Supermarkets, Inc.,
a Delaware corporation ("F4L Supermarkets"), Ralphs Supermarkets, Inc., a
Delaware corporation ("Ralphs Supermarkets"), and The Edward J. DeBartolo
Corporation ("EJDC") and the other stockholders of Ralphs Supermarkets (each a
"Selling Stockholder"). Capitalized terms not otherwise defined herein have
the meanings given to them in the Merger Agreement.
WHEREAS, F4L, F4L Holdings, F4L Holdings Delaware, F4L
Supermarkets, Ralphs Supermarkets and the Selling Stockholders previously have
entered into the Merger Agreement, by which the parties agreed to merge F4L
Supermarkets with and into Ralphs Supermarkets in accordance with the terms and
conditions of the Merger Agreement and Section 251 of the General Corporation
Law of the State of Delaware;
WHEREAS, the parties desire to amend certain provisions of
the Merger Agreement as more fully set forth herein;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto agree as follows:
1. Defined Terms.
(a) Section 1.1 of the Merger Agreement is hereby amended
to add the following defined terms:
"Discount Debentures" shall mean the 13-5/8% Senior Discount
Debentures due 2005 to be issued by F4L Holdings Delaware
pursuant to the terms set forth in the Description of Discount
Debentures attached hereto as Exhibit I.
"Discount Debenture Indenture" shall mean the indenture
governing the Discount Debentures to be entered into
by F4L Holdings Delaware on the Closing Date.
(b) The definition of "Closing Date" in Section 1.1 of
the Merger Agreement is hereby amended to delete the date "April 14, 1995" and
to substitute in its place the date "June 6, 1995."
<PAGE> 2
2. Amendment of Section 2.1(a). Section 2.1(a) of the
Merger Agreement is hereby amended to delete the first sentence thereof and to
substitute in its place the following sentence:
F4L Holdings Delaware will purchase 12,184,405.61789 Shares
(the "Share Purchase"), pro rata from the Selling Stockholders
in proportion to their respective holdings, for per Share
consideration consisting of (i) $8.20698 in cash, (ii)
$10.79265 principal amount of Debentures and (iii) $1.5184
initial accreted value of Discount Debentures (or the pro rata
portion of such cash, Debentures and Discount Debentures, in
the case of fractional shares) (collectively, and together
with the cash amounts referred to in Section 2.1(b) below, the
"Purchase Consideration").
3. Amendment of Section 2.1(b). Section 2.1(b) of the
Merger Agreement is hereby deleted in full and the following provision is
hereby substituted in its place:
Debentures and Discount Debentures will each be issued only in
denominations of $1000 and integral multiples of $1000. A
Selling Stockholder will not be entitled to receive Debentures
or Discount Debentures in initial principal amounts less than
$1000, or in initial principal amounts in excess of $1000 (or
an integral multiple thereof) but less than the next highest
integral multiple ("Fractional Amounts"), but instead will be
entitled to receive cash in lieu of any such Fractional
Amount.
4. Amendment of Section 2.1(c). Section 2.1(c) of the
Merger Agreement is hereby amended to delete the share amount
"12,184,418.99116" appearing therein and to substitute in its place the share
amount "12,184,405.61789."
5. Amendment of Section 2.6(a). Section 2.6(a) of the
Merger Agreement is hereby amended to delete the amount "$20.51800748"
appearing in the third line thereof and to substitute in its place the amount
"$20.51803."
6. Amendment of Section 2.6(e). Section 2.6(e) of the
Merger Agreement is hereby amended to delete the parenthetical phrase
"(including the principal amount of Seller Debentures)" and to substitute in
its place the parenthetical phrase "(including the initial principal amount of
the Debentures and the Discount Debentures)."
7. Amendment of Sections 2.7, 2.8, 3.4, 5.1, 5.10,
6.1(d), 8.9, 9.6. Sections 2.7, 2.8, 3.4, 5.1, 5.10, 6.1(d) and 8.9 of the
Merger Agreement are hereby amended so that each reference therein to the
Debentures shall also include the Discount Debentures and Sections 5.1 and 9.6
are hereby amended so that each reference therein to the Indenture shall also
include the Discount Debenture Indenture.
8. Amendment of Section 5.6. Section 5.6 of the Merger
Agreement is hereby amended to add the words "or as partly or wholly replaced
by" to the eighth line thereof following the words "exchanged for."
9. Amendment of Section 11.1(b). Section 11.1(b) of the
Merger Agreement is hereby amended (i) to delete the date "April 14, 1995"
appearing in the second line thereof and to
2
<PAGE> 3
substitute in its place the date "June 6, 1995" and (ii) to delete the date
"April 30, 1995" appearing in the third line thereof and to substitute in its
place the date "June 30, 1995."
10. Schedules.
(a) Schedule 2.1 of the Merger Agreement is hereby
deleted and the attached Schedule 2.1 is hereby substituted in its place and
incorporated herein by reference.
(b) Schedule 9.9 of the Merger Agreement is hereby
amended to delete "$2.150 billion" in clause (2) thereof and to substitute in
its place "$2.210 billion."
11. Exhibit A. Exhibit A (Form of Indenture) of the
Merger Agreement is hereby deleted and the attached Exhibit A (Form of
Indenture) is hereby substituted in its place and incorporated herein by
reference.
12. Exhibit D. Exhibit D (Form of Opinion of Counsel to
F4L) of the Merger Agreement is hereby amended so that (i) each reference
therein to the Debentures shall also include the Discount Debentures and (ii)
each reference therein to the Indenture shall also include the Discount
Debenture Indenture.
13. Exhibit E. Exhibit E (Form of Put Agreement) of the
Merger Agreement is hereby amended to delete the amount $90,517,000" appearing
in the second recital and to substitute in its place the amount "$79,354,000."
14. Exhibit G. Exhibit G (Form of Registration Rights
Agreement) of the Merger Agreement is hereby amended as more fully described
below.
(a) The definition of "Debentures" in Section 1 is hereby
amended to delete "$150,000,000" appearing in the third line
thereof and to substitute in its place "$131,500,000."
(b) The following sentence is hereby added at the end of
Section 2: "It is further understood that a gift of any
Debentures by Federated Department Stores, Inc. to Federated
Department Stores Foundation, an Ohio not-for-profit
corporation, made at any time while the Shelf Registration
Statement is effective shall be deemed to be a transfer
pursuant to an effective Registration Statement."
(c) The parenthetical phrase contained in Section 5(d) shall
be deleted and the parenthetical phrase "(other than the
Company's 13-5/8% Senior Discount Debentures due 2005 sold for
the account of RGC Partners, L.P. and other than bank
borrowings, obligations of the Company with respect to trade
debt and other debt incurred by the Company in the ordinary
course of business)" shall be substituted in its place.
15. Exhibit I. Exhibit I (Description of the New
Discount Debentures), as attached hereto, is hereby added as an Exhibit to the
Merger Agreement.
16. Partnership. Notwithstanding Section 5.14 of the
Merger Agreement, the Selling Stockholders, together with certain other
entities, including an affiliate of The Yucaipa Companies, will
3
<PAGE> 4
be parties to a partnership agreement, a subscription agreement and related
documents with respect to RGC Partners, L.P., a partnership to be formed for
the purpose of acquiring the Discount Debentures.
17. Amendment of Article IX. Article IX of the Merger
Agreement is hereby amended to add the following new Section 9.14 at the end
thereof:
Section 9.14 Partnership Agreement. RGC Partners, L.P. shall
have been formed and funded as contemplated by the commitment to purchase
partnership interests.
18. Terms and Conditions. Except as specifically
modified herein, all other terms and conditions of the Merger Agreement shall
remain in full force and effect.
4
<PAGE> 5
IN WITNESS WHEREOF, this Amendment has been signed by or on
behalf of each of the parties as of the day first above written.
"F4L": FOOD 4 LESS, INC.
By: _________________________
Name:
Title:
"F4L HOLDINGS": FOOD 4 LESS HOLDINGS, INC.
By: _________________________
Name:
Title:
"F4L HOLDINGS DELAWARE": FOOD 4 LESS HOLDINGS, INC.
By: _________________________
Name:
Title:
"F4L SUPERMARKETS": FOOD 4 LESS SUPERMARKETS, INC.
By: _________________________
Name:
Title:
"RALPHS SUPERMARKETS": RALPHS SUPERMARKETS, INC.
By: _________________________
Name:
Title:
"SELLING
STOCKHOLDERS": THE EDWARD J. DEBARTOLO CORPORATION
By: _________________________
Name:
Title:
S-1
<PAGE> 6
CAMDEV PROPERTIES INC.
By: _________________________
Name:
Title:
BANK OF MONTREAL
By: _________________________
Name:
Title:
BANQUE PARIBAS
By: _________________________
Name:
Title:
FEDERATED DEPARTMENT STORES, INC.
By: _________________________
Name:
Title:
S-2
<PAGE> 7
SCHEDULE 2.1
CONSIDERATION TO RSI SHAREHOLDERS
<TABLE>
<Option> # shares # shares
purchased convt'd mrgr cash purch price debentures
# RSI shares owned (Section 2.1) (Section 2.6) (Section 2.1(a)) (Section 2.1(a))
------------------ ----------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
EJDC ................................ 15,440,600.00000 7,352,658.59421 8,087,941.40579 $60,343,122.03 $ 79,354,000
Camdev Properties ................... 3,276,681.37923 1,560,322.75323 1,716,358.62600 $12,805,537.63 $ 16,840,000
Bank of Montreal .................... 2,591,815.11029 1,234,196.31655 1,357,618.79374 $10,129,024.49 $ 13,320,000
Banque Paribas ...................... 2,591,815.11029 1,234,196.31655 1,357,618.79374 $10,129,024.49 $ 13,320,000
Federated Department Stores, Inc. ... 1,686,368.28990 803,031.63735 883,336.65255 $ 6,590,464.29 $ 8,666,000
---------------- ---------------- ---------------- -------------- ------------
Total ........................... 25,587,279.88971 12,184,405.61789 13,402,874.27182 $99,997,173.22 $131,500,000
</TABLE>
<TABLE>
<CAPTION>
discount cash in lieu tot cash cash payable
debentures of fract purch price in merger cash total
(Section 2.1(a)) (Section 2.1(b)) (Section 2.1) (Section 2.6) (purch + mrgr)
---------------- ---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
EJDC ................................ $11,164,000 $ 947.59 $60,344,069.62 $165,948,624.40 $226,292,694.02
Camdev Properties ................... $ 2,369,000 $ 17.36 $12,805,554.99 $ 35,216,297.78 $ 48,021,852.77
Bank of Montreal .................... $ 1,874,000 $ 248.88 $10,129,273.36 $ 27,855,663.14 $ 37,984,936.50
Banque Paribas ...................... $ 1,874,000 $ 248.88 $10,129,273.36 $ 27,855,663.14 $ 37,984,936.50
Federated Department Stores, Inc. ... $ 1,219,000 $ 839.40 $ 6,591,303.99 $ 18,124,327.94 $ 24,715,631.93
----------- --------- -------------- --------------- ---------------
Total ........................... $18,500,000 $2,302.10 $99,999,475.32 $275,000,576.40 $375,000,051.71
</TABLE>
<TABLE>
<CAPTION>
Per share amounts
- -----------------
Purchase price
(Section 2.1)
--------------
<S> <C> <C>
cash ......................... $ 8.2069800000
debentures ................... $10.7926500000
discount debentures .......... $ 1.5184000000
--------------
Total ...................... $20.5180300000
Merger consideration
(Section 2.6)
--------------------
cash ......................... $20.5180300000
</TABLE>
<PAGE> 8
EXHIBIT A
FOOD 4 LESS HOLDINGS, INC.
AND
NORWEST BANK MINNESOTA, N.A.
AS TRUSTEE
INDENTURE
Dated as of ___________ __, 1995
$131,500,000
13-5/8% Senior Subordinated Pay-in-Kind Debentures due 2007
<PAGE> 9
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA INDENTURE
Section Section
- ------- ---------------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8; 7.10; 13.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6; 13.2
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10; 13.2
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2; 13.4
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2; 13.4
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.5
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5; 13.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.1
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.1
- -----------------------
</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.
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Incorporation by Reference of TIA . . . . . . . . . . . . . . . 19
Section 1.3. Rules of Construction . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE II THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.1. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.2. Execution and Authentication . . . . . . . . . . . . . . . . . . 21
Section 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . 22
Section 2.4. Paying Agent To Hold Assets in Trust . . . . . . . . . . . . . . 22
Section 2.5. Securityholder Lists . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.6. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . 23
Section 2.7. Replacement Securities . . . . . . . . . . . . . . . . . . . . . 23
Section 2.8. Outstanding Securities . . . . . . . . . . . . . . . . . . . . . 24
Section 2.9. Treasury Securities . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.10. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.13. CUSIP Number. . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE III REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.1. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.2. Selection of Securities To Be Redeemed . . . . . . . . . . . . . 25
Section 3.3. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.4. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . 27
Section 3.5. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . 27
Section 3.6. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . 27
ARTICLE IV COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.1. Payment of Securities . . . . . . . . . . . . . . . . . . . . . 27
Section 4.2. Maintenance of Office or Agency . . . . . . . . . . . . . . . . 28
Section 4.3. Limitation on Restricted Payments . . . . . . . . . . . . . . . 28
Section 4.4. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.5. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . 29
Section 4.6. Maintenance of Properties and Insurance . . . . . . . . . . . . 30
Section 4.7. Compliance Certificate; Notice of Default . . . . . . . . . . . 30
</TABLE>
i
<PAGE> 11
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.8. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 31
Section 4.9. SEC Reports and Other Information . . . . . . . . . . . . . . 31
Section 4.10. Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . 32
Section 4.11. Limitation on Transactions with Affiliates . . . . . . . . . . 32
Section 4.12. Limitation on Incurrences of Additional Indebtedness . . . . . 34
Section 4.13. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . 34
Section 4.14. Limitation on Change of Control . . . . . . . . . . . . . . . 34
Section 4.15. Limitation on Asset Sales . . . . . . . . . . . . . . . . . . 36
Section 4.16. Limitation on Senior Subordinated Indebtedness . . . . . . . . 38
Section 4.17. Limitation on Preferred Stock of Subsidiaries . . . . . . . . 38
Section 4.18. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries . . . . . . . . . . . . . . . . . . . 39
ARTICLE V SUCCESSOR CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.1. When Holdings May Merge, Etc . . . . . . . . . . . . . . . . . 39
Section 5.2. Successor Corporation Substituted . . . . . . . . . . . . . . 40
ARTICLE VI DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.2. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.4. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . 43
Section 6.5. Control by Majority . . . . . . . . . . . . . . . . . . . . . 44
Section 6.6. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . 44
Section 6.7. Rights of Holders To Receive Payment . . . . . . . . . . . . . 44
Section 6.8. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . 45
Section 6.9. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . 45
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VII TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.1. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.2. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.3. Individual Rights of Trustee . . . . . . . . . . . . . . . . . 48
Section 7.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . 48
Section 7.5. Notice of Default . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.6. Reports By Trustee to Holders . . . . . . . . . . . . . . . . 48
Section 7.7. Compensation and Indemnity . . . . . . . . . . . . . . . . . . 49
Section 7.8. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
ii
<PAGE> 12
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7.9. Successor Trustee by Merger, Etc . . . . . . . . . . . . . . 50
Section 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . 50
Section 7.11. Preferential Collection of Claims Against Holdings . . . . . 51
ARTICLE VIII LEGAL DEFEASANCE AND COVENANT DEFEASANCE . . . . . . . . . . . . . 51
Section 8.1. Option to Effect Legal Defeasance or Covenant Defeasance . . 51
Section 8.2. Legal Defeasance . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.3. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . 51
Section 8.4. Conditions to Legal or Covenant Defeasance . . . . . . . . . 52
Section 8.5. Deposited Money and U.S. Government Obligations to be
Held in Trust; Other Miscellaneous Provisions. . . . . . . .
Section 8.6. Repayment to Holdings . . . . . . . . . . . . . . . . . . . 54
Section 8.7. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . . . . . . . . . . . . . . 55
Section 9.1. Without Consent of Holders . . . . . . . . . . . . . . . . . 55
Section 9.2. With Consent of Holders . . . . . . . . . . . . . . . . . . 55
Section 9.3. Compliance with TIA . . . . . . . . . . . . . . . . . . . . 57
Section 9.4. Revocation and Effect of Consents . . . . . . . . . . . . . 57
Section 9.5. Notation on or Exchange of Securities . . . . . . . . . . . 57
Section 9.6. Trustee To Sign Amendments, Etc. . . . . . . . . . . . . . . 58
ARTICLE X MEETINGS OF SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . 58
Section 10.1. Purposes for Which Meetings May Be Called . . . . . . . . . 58
Section 10.2. Manner of Calling Meetings . . . . . . . . . . . . . . . . . 58
Section 10.3. Call of Meetings by Holdings or Holders . . . . . . . . . . 59
Section 10.4. Who May Attend and Vote at Meetings . . . . . . . . . . . . 59
Section 10.5. Regulations May Be Made by Trustee; Conduct of the Meeting;
Voting Rights; Adjournment . . . . . . . . . . . . . . . . 59
Section 10.6. Voting at the Meeting and Record To Be Kept . . . . . . . . 60
Section 10.7. Exercise of Rights of Trustee or Holders May Not Be
Hindered or Delayed by Call of Meeting . . . . . . . . . . 61
ARTICLE XI SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.1. Securities Subordinated to Senior Indebtedness . . . . . . . 61
Section 11.2. No Payment on Securities in Certain Circumstances . . . . . 61
Section 11.3. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or
Reorganization of Holdings . . . . . . . . . . . . . . . . . 63
</TABLE>
iii
<PAGE> 13
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 11.4. Holders to Be Subrogated to Rights of Holders of
Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . 64
Section 11.5. Obligations of Holdings Unconditional . . . . . . . . . . . . . . 65
Section 11.6. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11.7. Application by Trustee of Assets Deposited with It. . . . . . . . 65
Section 11.8. Subordination Rights Not Impaired by Acts or
Omissions of Holdings or Holders of Senior Indebtedness . . . . 66
Section 11.9. Holders Authorize Trustee to Effectuate Subordination
of Securities . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 11.10. Right of Trustee to Hold Senior Indebtedness . . . . . . . . . . 67
Section 11.11. Article Eleven Not to Prevent Events of Default . . . . . . . . . 67
Section 11.12. No Fiduciary Duty of Trustee to Holders of Senior Indebtedness . 67
ARTICLE XII SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . 68
Section 12.1. Satisfaction and Discharge of the Indenture . . . . . . . . . . 68
Section 12.2. Conditions to Satisfaction and Discharge of the Indenture . . . 68
ARTICLE XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 13.1. TIA Controls . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 13.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 13.3. Communications by Holders with Other Holders . . . . . . . . . . 69
Section 13.4. Certificate and Opinion as to Conditions Precedent . . . . . . . 70
Section 13.5. Statements Required in Certificate or Opinion . . . . . . . . . 70
Section 13.6. Rules by Trustee, Paying Agent, Registrar . . . . . . . . . . . 70
Section 13.7. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 13.8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 13.9. No Adverse Interpretation of Other Agreements . . . . . . . . . 71
Section 13.10. No Recourse Against Others . . . . . . . . . . . . . . . . . . . 71
Section 13.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 13.12. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . 71
Section 13.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
iv
<PAGE> 14
INDENTURE dated as of ________ __, 1995, between FOOD 4 LESS HOLDINGS, INC., a
Delaware corporation ("Holdings"), and Norwest Bank Minnesota, N.A., a National
Banking Association, 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 13-5/8% Senior Subordinated
Pay-in-Kind Debentures due 2007:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
"Acquired Indebtedness" means Indebtedness of a person or any of its
subsidiaries existing at the time such person becomes a Subsidiary or assumed
in connection with the acquisition of assets from such person and not incurred
by such person in connection with, or in anticipation or contemplation of, such
person becoming a Subsidiary or such acquisition.
"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 this Indenture, neither BT Securities Corporation
nor any of its Affiliates shall be deemed to be an Affiliate of Holdings or any
of its Subsidiaries.
"Affiliate Obligation" means any contractual obligation (not
constituting Indebtedness) between Holdings and any Affiliate, other than
obligations relating to the purchase or sale of goods in the ordinary course of
business made in compliance with Section 4.11 hereof.
"Affiliate Transaction" shall have the meaning provided 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, 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 Holdings 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,
1
<PAGE> 15
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 Holdings or any Subsidiary of $500,000 or less, (iii) pursuant to
any foreclosure of assets or other remedy provided by applicable law to a
creditor of Holdings or any Subsidiary with a Lien on such assets, which Lien
is permitted under this Indenture, provided that such foreclosure or other
remedy is conducted in a commercially reasonable manner or in accordance with
any Bankruptcy Law, or (iv) the proceeds of which are not applied as
contemplated in Section 4.15 hereof and which, together with all other such
Asset Sale proceeds, do not exceed $20 million.
"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 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 of Directors" means, with respect to any person, 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 equivalents (however designated) of
corporate stock, including each class of common stock and preferred stock of
such person, including Preferred Stock.
"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 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
2
<PAGE> 16
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 (I) 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 Holdings
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
Holdings (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 Holdings' Board
of Directors or (II) Holdings ceasing to own 100% of the outstanding voting
securities entitled to vote on a regular basis to elect a majority of the Board
of Directors of the Company (other than in connection with a merger of Holdings
and the Company).
"Change of Control Date" shall have the meaning provided in Section 4.14.
"Change of Control Offer" shall have the meaning provided in Section
4.14.
"Change of Control Payment Date" shall have the meaning provided in
Section 4.14.
"Company" means Food 4 Less Supermarkets, Inc., a Delaware corporation,
and its successors, including, without limitation, Ralphs Supermarkets (to be
renamed Ralphs Grocery Company) following the Merger.
"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
3
<PAGE> 17
by, such person or a subsidiary of such person not subject to any Payment
Restriction, provided, however, that with respect to the net income of
Holdings, the net income of the Company and its wholly-owned subsidiaries shall
not be so excluded, notwithstanding the existence of any such Payment
Restriction, so long as the terms of any such consensual Payment Restriction
limiting the payment of dividends are not materially more restrictive at the
time of determination of Consolidated Net Income than the most restrictive
Payment Restriction limiting the payment of dividends in effect on the Issue
Date and so long as the Company continues to be a wholly-owned subsidiary of
Holdings; 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
Holdings or any of its Subsidiaries in connection with the Merger, including,
without limitation, the divestiture of the Excluded Assets, (viii) losses
incurred by Holdings and its Subsidiaries resulting from earthquakes and (ix)
with respect to Holdings and its Subsidiaries, 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 Disqualified Capital Stock) of such
person and its subsidiaries determined on a consolidated basis in accordance
with GAAP.
"Consulting Agreement" means that certain Consulting Agreement, dated as
of the Issue Date, between Holdings, the Company 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.
"Covenant Defeasance" shall have the meaning provided in Section 8.3.
"Credit Agent" means, at any time, the then-acting Administrative Agent
as defined in and under the Credit Agreement, which initially shall be
____________________. Holdings 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 as borrower, Holdings as guarantor, certain of
the Company's 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
4
<PAGE> 18
modified (in each case, 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, replace or
refinance any borrowings and commitments then outstanding or permitted to be
outstanding under such Credit Agreement or any such prior agreement as the same
may be amended, extended, renewed, restated, supplemented or otherwise modified
(in each case, in whole or in part, and without limitation as to amount, terms,
conditions, covenants and other provisions). The term "Credit Agreement" shall
include all related or ancillary documents, including, without limitation, any
guarantee agreements and security documents. Holdings 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 Bankruptcy 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, (i) with respect to any person, 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, 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 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 (a)
redeemable or repurchasable solely at the option of such person or (b) issued
to employees of Holdings 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; and (ii) with respect to any Subsidiary of
Holdings, any Preferred Stock issued by a Subsidiary of Holdings other than
Preferred Stock issued to Holdings.
"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 (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 (excluding any such items which represent the reversal
of any accrual of, or cash
5
<PAGE> 19
reserve for, anticipated charges in any prior 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).
"EJDC" means The Edward J. DeBartolo Corporation, an Ohio corporation.
"Event of Default" shall have the meaning provided in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Excluded Assets" means assets of Holdings or any Subsidiary required to
be disposed of by applicable regulatory authorities in connection with the
Merger.
"Existing Indebtedness" means the following indebtedness of the Company
outstanding on the Issue Date after giving effect to the Merger: (a) the ___%
Senior Notes due 2004 issued pursuant to an indenture dated as of the Issue
Date; (b) the 10.45% Senior Notes due 2000 issued pursuant to an indenture
dated as of April 15, 1992; (c) the ___% Senior Subordinated Notes due 2005
issued pursuant to an indenture dated as of the Issue Date; (d) the 9% Senior
Subordinated Notes due 2003 issued pursuant to an indenture dated as of March
30, 1993; (e) the 10 1/4% Senior Subordinated Notes due 2002 issued pursuant to
an indenture dated as of July 29, 1992; (f) the 13.75% Senior Subordinated
Notes due 2005 issued pursuant to an indenture dated as of the Issue Date; and
(g) the 13.75% Senior Subordinated Notes due 2001 issued pursuant to an
indenture dated as of June 15, 1991.
"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 Holdings, any
original issue discount on the Senior Discount Debentures, the Senior Discount
Notes and the Securities 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 declared or paid in cash or required to be declared
or paid in cash during such 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
6
<PAGE> 20
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 Holdings 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.
"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.
"Forward Period" shall have the meaning set forth in the definition of
Operating Coverage Ratio contained in this Section 1.1.
"GAAP" means generally accepted accounting principles as in effect in
the United States of America as of the date of this Indenture.
"Holder" means the person in whose name a Security is registered on the
Registrar's books.
"Holdings" means the party named as such above, until a successor
replaces it in accordance with the terms of this Indenture, and thereafter
means such successor.
"incur" shall have the meaning set forth in Section 4.12.
"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
or, if there is no such maximum fixed repurchase price, the liquidation
preference of such Disqualified Capital Stock, plus accrued but unpaid
dividends; (iii)
7
<PAGE> 21
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 hereof, 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 Holdings, 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 supplemented from time
to time in accordance with the terms hereof.
"Independent Financial Advisor" means a reputable accounting, appraisal
or a nationally recognized investment banking firm that is, in the reasonable
judgment of the Board of Directors of Holdings, qualified to perform the task
for which such firm has been engaged hereunder and disinterested and
independent with respect to Holdings and its Affiliates.
"Initial Public Offering" means an underwritten primary public offering
of common stock of Holdings at a time when Holdings has not previously issued
or sold any equity securities in an underwritten transaction pursuant to a
registration statement filed pursuant to the Securities Act.
"Initial Public Offering Consummation Date" means the first date on
which Holdings or the Company receives any proceeds from an Initial Public
Offering.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Securities.
8
<PAGE> 22
"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 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 Holdings or any Subsidiary 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 first issuance of the Securities pursuant
to this Indenture.
"Legal Defeasance" shall have the meaning provided in Section 8.2.
"Legal Holiday" shall have the meaning provided in Section 13.7.
"Letter of Credit Obligations" means Indebtedness of Subsidiaries with
respect to letters of credit issued pursuant to the Credit Agreement, and for
purposes of Section 4.12, 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, 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 hereunder.
"Maturity Date" means ________ __, 2007.
"Merger" means (i) the merger of the Company into Ralphs Supermarkets
(with Ralphs Supermarkets surviving such merger) pursuant to the Merger
Agreement and (ii) immediately following the merger described in clause (i) of
this definition, the merger of RGC
9
<PAGE> 23
into Ralphs Supermarkets (with Ralphs Supermarkets 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 as of
September 14, 1994, by and among Food 4 Less, Inc., a Delaware corporation,
Holdings, Food 4 Less Holdings, Inc., a California corporation, Ralphs
Supermarkets, the Company and the stockholders of Ralphs Supermarkets, as such
agreement is in effect on the Issue Date.
"Net Cash Proceeds" means Net Proceeds of (i) the sale of Qualified
Capital Stock of Holdings or (ii) any Asset Sale, in each case, 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 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 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
Holdings, the sum of (i) the fair market value of the proceeds received by
Holdings 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 Holdings upon such conversion or exchange.
"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 13.4 and 13.5.
"Old RGC Notes" means the 9% Senior Subordinated Notes due 2003 and the
10-1/4% Senior Subordinated Notes due 2002 of Ralphs Grocery Company.
"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 Holdings, after
giving
10
<PAGE> 24
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 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 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.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of
Sections 13.4 and 13.5. Unless otherwise required by the Trustee, the legal
counsel may be an employee of or counsel to Holdings or the Trustee.
"Other Obligations" has the meaning set forth in Section 11.1 hereof.
"Pari Passu Indebtedness" means, with respect to Holdings, Indebtedness
that ranks pari passu in right of payment to the Securities (whether or not
secured by any Lien).
"Paying Agent" shall have the meaning provided in Section 2.3, except
that, for the purposes of Articles Three and Eight and Section 4.14, the Paying
Agent shall not be Holdings or any Subsidiary.
"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 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.
11
<PAGE> 25
"Permitted Holder" means (i) Food 4 Less Equity Partners, 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 Holdings or any Subsidiary, or any participant therein, (iv) a trustee
or other fiduciary holding securities under an employee benefit plan of
Holdings or any Subsidiary 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 (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 $750 million or such lesser amount as may be actually funded under the
Term Loans on or within 91 days following the Issue Date (with any such amounts
funded after the Issue Date to be used to finance the repurchase of up to
$224.5 million aggregate principal amount of Old RGC Notes pursuant to the
"change of control purchase offer" provision set forth in Section 1014 of the
indentures pursuant to which the Old RGC Notes were issued, plus related fees
and expenses), less the aggregate amount of all principal repayments thereunder
pursuant to and in accordance with the provisions of Section 4.15 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 provisions of Section 4.15;
(b) any guarantee by Holdings of the Indebtedness referred to in the foregoing
clause (a); (c) Indebtedness of Holdings or a Subsidiary owed to and held by
Holdings or a Subsidiary; (d) Indebtedness incurred by Holdings 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 (d) does not exceed, in the
aggregate, 3% of net sales of Holdings 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 (d) does
not exceed, in the aggregate, 3% of the aggregate net sales of Holdings 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); (e) Indebtedness incurred by
Holdings 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
Ralphs Supermarkets, the Company, and their respective subsidiaries as
described in that certain Registration Statement of Holdings dated ______,
1995; (f) Indebtedness of Holdings or any Subsidiary incurred under Foreign
Exchange Agreements and Interest Swap Obligations; (g) guarantees incurred in
the ordinary course of business, by Holdings or a Subsidiary, of Indebtedness
of any other person in aggregate not to exceed $25 million at any time
outstanding; (h) guarantees by Holdings or a Subsidiary of Indebtedness
incurred by a wholly-owned Subsidiary so long as the incurrence of such
Indebtedness incurred by such wholly-owned
12
<PAGE> 26
Subsidiary is permitted under the terms of this Indenture; (i) Refinancing
Indebtedness; (j) Indebtedness for letters of credit relating to workers'
compensation claims and self-insurance or similar requirements in the ordinary
course of business; (k) Existing Indebtedness and other Indebtedness
outstanding on the Issue Date (after giving effect to the Merger); (l)
Indebtedness arising from guarantees of Indebtedness of Holdings or any
Subsidiary or other agreements of Holdings 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 business, assets or Subsidiary for
the purpose 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 Holdings and its Subsidiaries in connection with
such disposition; (m) obligations in respect of performance bonds and
completion guarantees provided by Holdings or any Subsidiary in the ordinary
course of business; (n) Indebtedness of Holdings with respect to the Senior
Discount Notes, if any, the Senior Discount Debentures (including the accretion
of the Senior Discount Notes and the Senior Discount Debentures up to their
respective stated principal amount at maturity) and the Securities (including
the issuance of Secondary Securities in lieu of cash interest payments pursuant
to the terms of this Indenture); and (o) additional Indebtedness of Holdings or
any Subsidiary 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 connection with an Asset Sale 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 Sections 4.3 and 4.11, (vi)
Investments in any Subsidiary or by any Subsidiary in Holdings or any other
Subsidiary in other Subsidiaries, and (vii) additional Investments in an
aggregate amount not exceeding $5 million.
"Permitted Payments" means any (i) payment by Holdings or any Subsidiary
to The Yucaipa Companies or the principals or any Affiliates thereof for
consulting, management, investment banking or similar services, or for
reimbursement of losses, costs and expenses pursuant to the Consulting
Agreement, (ii) payment by Holdings or any Subsidiary to Apollo Advisors, L.P.
or the principals or any Affiliates thereof in an aggregate amount not to
exceed $5 million as a commitment fee in connection with the purchase of equity
securities of Holdings on the Issue Date, and (iii) payment by Holdings or any
Subsidiary, (a) in connection with repurchases of outstanding shares of
Holdings' common stock following the death, disability or termination of
employment of management stockholders, and (b) of amounts required to be paid
by Holdings or any Subsidiaries to participants in employee benefit plans upon
any 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).
"Permitted Transferees" means, with respect to any person, (i) any
Affiliate of such person, (ii) the heirs, executors, administrators,
testamentary trustees, legatees or bene-
13
<PAGE> 27
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 Holdings, (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.
"Person" or "person" means any individual, corporation, partnership,
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 person, a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially 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, any and all shares,
interests, participations or other equivalents (however designated) of such
person's preferred or preference stock, whether outstanding on the date hereof
or issued after the Issue Date, and including, without limitation, all classes
and series of preferred or preference stock of such person.
"principal" of any Indebtedness (including the Securities) means the
principal of such Indebtedness plus the premium, 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 Regulation S-X under the Securities Act, as interpreted by
Holdings' chief financial officer or Board of Directors in consultation with
its independent certified public accountants.
"Pro Forma Period" shall have the meaning set forth in the definition of
Operating Coverage Ratio contained in this Section 1.1.
"Qualified Capital Stock" means, with respect to any person, any Capital
Stock of such person that is not Disqualified Capital Stock.
"Ralphs Supermarkets" means Ralphs Supermarkets, Inc., a Delaware
corporation, until a successor replaces it and thereafter means such successor.
"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.
14
<PAGE> 28
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Securities.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Securities.
"Reference Period" shall have the meaning provided in the definition of
"Operating Coverage Ratio" contained in this Section 1.1.
"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 (b), (d), (e), (i), (k) and (n) 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 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 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 2.3.
"Registration Rights Agreement" means the registration rights agreement
dated as of the Issue Date by and among Holdings, the Company and the
stockholders of Ralphs Supermarkets with respect to the Securities.
"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 Holdings or any Subsidiary 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 Holdings and any Subsidiary as it is
conducted as of the Issue
15
<PAGE> 29
Date and as such business may thereafter evolve or change; and (iii) any
capital expenditure or Investment in each case reasonably related to the
business of Holdings and any Subsidiary 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.
"Restricted Debt Prepayment" means the purchase, redemption, acquisition
or retirement for value by Holdings, prior to the scheduled maturity or prior
to any scheduled repayment of principal or any sinking fund payment in respect
of any Subordinated Indebtedness.
"Restricted Payment" means any (i) Stock Payment or (ii) Investment
(other than a Permitted Investment) or (iii) Restricted Debt Prepayment.
"RGC" means Ralphs Grocery Company, a Delaware corporation, until a
successor replaces it and thereafter means such successor.
"SEC" means the Securities and Exchange Commission.
"Secondary Securities" has the meaning set forth in Section 2.2.
"Securities" means the 13-5/8% Senior Subordinated Pay-in-Kind
Debentures due 2007 of Holdings, including any Secondary Securities issued in
respect thereof, in each case, issued pursuant to this Indenture, as the same
may be modified or amended from time to time and refinancings thereof, to the
extent such refinancing indebtedness is permitted to be incurred under this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Senior Discount Debentures" means the 13-5/8% Senior Discount
Debentures due 2005 of Holdings, issued pursuant to the Senior Discount
Debenture Indenture, as the same may be modified or amended from time to time
and refinancings thereof, to the extent such refinancing indebtedness is
permitted to be incurred under this Indenture.
"Senior Discount Debenture Indenture" means the indenture between
Holdings and United States Trust Company of New York, as trustee, dated as of
the Issue Date, pursuant to which the Senior Discount Debentures were issued,
as amended or supplemented from time to time in accordance with the terms
thereof.
"Senior Discount Notes" means the 15.25% Senior Discount Notes due 2004
of Food 4 Less Holdings, Inc., issued pursuant to the Senior Discount Note
Indenture, as the same may be modified or amended from time to time and
refinancings thereof, to the extent such refinancing indebtedness is permitted
to be incurred under this Indenture.
16
<PAGE> 30
"Senior Discount Note Indenture" means the indenture between Holdings
and United States Trust Company of New York, as trustee, dated as of December
15, 1992, pursuant to which the Senior Discount Notes were issued, as amended
or supplemented from time to time in accordance with the terms thereof.
"Senior Indebtedness" means the principal of, premium, if any, and
interest on (such Senior Indebtedness being deemed to include for all purposes
of Article XI of this Indenture the amount required to fully secure in cash
undrawn Letter of Credit Obligations under the Credit Agreement and such
interest on Senior Indebtedness being deemed to include for all purposes of
Article XI interest accruing after the filing of a petition initiating any
proceeding pursuant to any Bankruptcy Law in accordance with and at the rate
(including any rate applicable upon any default, to the extent lawful)
specified in any document evidencing the Senior Indebtedness, whether or not
the claim for such interest is allowed as a claim after such filing in any
proceeding under such Bankruptcy Law) any Indebtedness of Holdings (and, in the
case of the Credit Agreement, all obligations of Holdings for fees, expenses,
indemnities and other amounts payable thereunder or in connection therewith),
whether outstanding on the Issue Date or thereafter created, incurred, assumed
or guaranteed or in effect guaranteed by Holdings (including, without
limitation, Indebtedness under the Credit Agreement), unless, in the case of
any particular Indebtedness, the instrument creating or evidencing such
Indebtedness 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 the principal of, premium, if
any, and interest on all obligations of every nature of Holdings from time to
time owed or guaranteed by Holdings with respect to the Credit Agreement, the
Senior Discount Debentures and the Senior Discount Notes, if any.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) any
Pari Passu Indebtedness or any Subordinated Indebtedness, (ii) any Indebtedness
constituting Disqualified Capital Stock, (iii) Indebtedness of Holdings to any
Subsidiary, (iv) that portion of any Indebtedness which is incurred in
violation of Section 4.12 of this Indenture, (v) Indebtedness to, or guaranteed
on behalf of, any shareholder, director, officer or employee of Holdings or of
any Subsidiary (including, without limitation, amounts owed for compensation),
(vi) Indebtedness to trade creditors and other amounts incurred in connection
with obtaining goods, materials or services, and (vii) any liability for
federal, state, local or other taxes owed or owing by Holdings.
"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 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 Holdings 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 Holdings, dividends payable solely in Qualified Capital
Stock of Holdings), or the making by
17
<PAGE> 31
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 Holdings) 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 Holdings,
through the issuance in exchange therefor solely of Qualified Capital Stock of
Holdings; 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 Holdings or a wholly-owned
Subsidiary.
"Subordinated Indebtedness" means Indebtedness of Holdings that is
subordinated in right of payment to the Securities.
"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 50% 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 Holdings.
"Term Loans" means the term loan facility under the Credit Agreement and
any agreement governing Indebtedness incurred to refund, replace or refinance
any borrowings outstanding under such facility or under any prior refunding,
replacement or refinancing thereof (in each case, in whole or in part, and
without limitation as to amount, terms, conditions, covenants and other
provisions).
"The Yucaipa Companies" means The Yucaipa Companies, a California
general partnership, or any successor thereto which is an Affiliate of Ronald
W. Burkle or his Permitted Transferees and which has been established for the
sole purpose of changing the form of The Yucaipa Companies from that of a
partnership to that of a limited liability company or any other form of entity
which is not materially adverse to the rights of the Holders under this
Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb), as amended, as in effect on the date on which this Indenture
is qualified under the TIA, except as otherwise provided in Section 9.3.
18
<PAGE> 32
"Transaction Date" shall have the meaning provided in the definition of
"Operating Coverage Ratio" contained in this Section 1.1.
"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
8.4.
"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.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
principal amount of such Indebtedness.
"wholly-owned Subsidiary" means any Subsidiary all of the shares of
Capital Stock of which (other than permitted Preferred Stock and directors'
qualifying shares) are at the time directly or indirectly owned by Holdings.
"Yearly Period" means each fiscal year of Holdings; provided that the
first Yearly Period shall begin on the Issue Date and shall end on January 28,
1996.
Section 1.2. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in, and made a part of, this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
19
<PAGE> 33
"obligor" on the indenture securities means Holdings or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
Section 1.3. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in
the plural include the singular;
(5) provisions apply to successive events and transactions; 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 II
THE SECURITIES
Section 2.1. Form and Dating.
The Securities 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 or as
required by the Registration Rights Agreement. Holdings 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 shall constitute,
and are hereby expressly made, a part of this Indenture and, to the extent
applicable, Holdings and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound
thereby.
20
<PAGE> 34
Section 2.2. Execution and Authentication.
An Officer or an Assistant Secretary, shall sign (either of whom shall,
in each case, have been duly authorized by all requisite corporate actions) the
Securities for Holdings by manual or facsimile signature.
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 conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate Securities, excluding Secondary
Securities, for original issue in the aggregate principal amount of up to
$131,500,000 upon a written order of Holdings 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 $131,500,000, except for any Securities that may be issued
pursuant to the immediately following paragraph and except as provided in
Section 2.7 and 2.8. Upon the written order of Holdings in the form of an
Officers' Certificate, the Trustee shall authenticate Securities in
substitution of Securities originally issued to reflect any name change of
Holdings.
Holdings may, on each Interest Payment Date prior to (and including)
[the Interest Payment Date five years after the Issue Date], at its option and
in its sole discretion, pay interest in additional Securities ("Secondary
Securities") in lieu of the payment in whole or in part of interest in cash on
the Securities as provided in paragraph 1 of the Securities. Holdings shall
give written notice to the Trustee of the amount of interest to be paid in
Secondary Securities not less than five Business Days prior to the relevant
Interest Payment Date, and the Trustee or an authenticating agent (upon written
order of Holdings signed by an Officer of Holdings given not less than five nor
more than 45 days prior to such Interest Payment Date) shall authenticate for
original issue (pro rata to each Holder of any Securities of such record date)
Secondary Securities in an aggregate principal amount equal to the amount of
cash interest not paid on such Interest Payment Date. Except as set forth in
the following paragraph each issuance of Secondary Securities in lieu of the
payment of interest in cash on the Securities shall be made pro rata with
respect to the outstanding Securities, and Holdings shall have the right to
aggregate amounts of interest payable in the form of Secondary Securities to a
Holder of outstanding Securities and issue to such Holder a single Secondary
Security in payment thereof. Any Secondary Securities may be denominated a
separate series if Holdings deems it necessary to do so in order to comply with
any law or other applicable regulation or requirement, with appropriate
distinguishing designations.
The Securities shall be issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof except that
Secondary Securities or Securities issued upon registration of transfer of such
Secondary Securities may be in
21
<PAGE> 35
denominations of other than $1,000; provided that Holdings may at its option
pay cash in lieu of issuing Secondary Securities in any denominations of less
than $1,000.
The Trustee may appoint an authenticating agent reasonably acceptable to
Holdings 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 Holdings and Affiliates of Holdings.
Section 2.3. Registrar and Paying Agent.
Holdings shall maintain an office or agency in the Borough of Manhattan,
The City of New York, where (a) Securities 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 Holdings in respect of the Securities and this Indenture may
be served. Holdings may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve Holdings of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. Holdings may
act as its own Registrar or Paying Agent except that for the purposes of
Articles Three and Eight and Sections 4.4 and 4.14, neither Holdings nor any
Subsidiary shall act as Paying Agent. The Registrar shall keep a register of
the Securities and of their transfer and exchange. Holdings, upon notice to
the Trustee, may have one or more co-Registrars and one or more additional
paying agents reasonably acceptable to the Trustee. The term "Paying Agent"
includes any additional paying agent. Holdings initially appoints the Trustee
as Registrar and Paying Agent until such time as the Trustee has resigned or a
successor has been appointed.
Holdings 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. Holdings shall notify the
Trustee, in advance, of the name and address of any such Agent. If Holdings
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such.
Section 2.4. Paying Agent To Hold Assets in Trust.
Holdings 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 and/or Secondary Securities 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 Holdings or any other
obligor on the Securities), and shall notify the Trustee of any Default by
Holdings (or any other obligor on the Securities) in making any such payment.
If Holdings or a Subsidiary acts as Paying Agent, it shall segregate such
assets and/or Secondary Securities and hold them as a separate trust fund.
Holdings at any time may require a Paying Agent to distribute all assets and/or
Secondary Securities held by it to the Trustee and account for any assets
disbursed and
22
<PAGE> 36
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 and/or Secondary Securities held by it to the Trustee and to account for
any assets so distributed. Upon distribution to the Trustee of all assets that
shall have been delivered by Holdings to the Paying Agent, the Paying Agent
shall have no further liability for such assets and/or Secondary Securities.
Section 2.5. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, Holdings 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 2.6. Transfer and Exchange.
When a Security is presented to the Registrar or a co-registrar with a
request to register a transfer, the Registrar shall register the transfer as
requested if the requirements of the Registrar are met. The Registrar need not
transfer or exchange any Securities selected for redemption. Also, it need not
transfer or exchange any Securities for a period of 30 days before a selection
of Securities to be redeemed. When Securities are presented to the Registrar
or a co-registrar with a request to exchange them for an equal principal amount
of Securities of other authorized denominations, the Registrar shall make the
exchange as requested if the requirements of the Registrar are met. Holdings
shall cooperate with the Registrar in meeting its requirements. To permit
transfers, registration and exchanges, the Trustee shall authenticate
Securities at the Registrar's request. No service charge shall be made for any
transfer, registration or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith, but not for any exchange pursuant to Section 2.10, 3.6 or
9.5.
Section 2.7. 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, Holdings shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. If required by the Trustee or
Holdings, such Holder must provide an indemnity bond or other indemnity,
sufficient in the judgment of both Holdings and the Trustee, to protect
Holdings, the Trustee or any Agent from any loss which any of them may suffer
if a Security is replaced. Holdings 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 shall constitute an additional
obligation of Holdings.
23
<PAGE> 37
Section 2.8. Outstanding Securities.
Securities outstanding at any time are all the Securities that have been
authenticated by the Trustee, including the Secondary Securities, 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 Holdings or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof pursuant to
Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than Holdings or any 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 2.9. Treasury Securities.
In determining whether the Holders of the required aggregate principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by Holdings or any of its 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.
Notwithstanding the foregoing and except as otherwise provided by the TIA, a
majority of Securities not owned by Holdings or any of its Affiliates shall be
sufficient to approve any such direction, waiver or consent.
Section 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, Holdings may prepare
and the Trustee shall authenticate temporary Securities. Temporary Securities
shall be substantially in the form of definitive Securities but may have
variations that Holdings considers appropriate for temporary Securities.
Without unreasonable delay, Holdings shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities.
Section 2.11. Cancellation.
Holdings 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 Holdings or any Subsidiary), and no one else, shall cancel and, at
the written direction of Holdings, shall dispose of all Securities surrendered
for transfer, exchange, payment or cancellation. Subject to Section 2.7,
Holdings may not issue new
24
<PAGE> 38
Securities to replace Securities that it has paid or delivered to the Trustee
for cancellation. If Holdings or any Subsidiary shall acquire any of the
Securities, such acquisition shall not operate as a redemption 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 Holdings 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 interest, plus (to the extent lawful) any interest payable on
the defaulted interest, to the persons who are Holders on a subsequent special
record date, which date shall be the fifteenth day next preceding the date
fixed by Holdings for the payment 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, Holdings 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.
Holdings in issuing the Securities may use a "CUSIP" number, and if so,
the Trustee shall use the CUSIP number in notices of redemption or exchange as
a convenience to Holders; provided that any such notice may state that no
representation 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 III
REDEMPTION
Section 3.1. Notices to Trustee.
If Holdings elects to redeem Securities pursuant to Paragraph 5 of the
Securities it shall notify the Trustee of the Redemption Date and aggregate
principal amount of the Securities to be redeemed and whether it wants the
Trustee to give notice of redemption to the Holders (at Holdings' expense) 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 notice given
pursuant to this Section 3.1 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 3.2. 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 such other
method as the Trustee considers to be fair and appropriate and in such manner
as complies with applicable legal and stock exchange
25
<PAGE> 39
requirements, if any; provided, however, that any redemption pursuant to
paragraph 5(b) of the Securities shall be made on a pro rata basis.
Securities in denominations of less than $1,000 shall be redeemed first.
Thereafter the Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify Holdings in
writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the aggregate principal amount
thereof to be redeemed. Securities in denominations of $1,000 or less may be
redeemed only in whole. The Trustee may select for redemption portions (equal
to $1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000. Provisions of this Indenture that apply
to Securities called for redemption also apply to portions of Securities called
for redemption.
Section 3.3. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
Holdings 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 Trustee. At Holdings' request, the Trustee shall give the notice
of redemption in Holdings' name and at Holdings' 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 Holdings 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;
(6) if any Security is being redeemed in part, the portion of the
aggregate 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 portion
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 aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption.
26
<PAGE> 40
Section 3.4. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.3,
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.
Section 3.5. Deposit of Redemption Price.
On or before the Redemption Date, Holdings 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
Holdings to the Trustee for cancellation). The Paying Agent shall promptly
return to Holdings any U.S. Legal Tender so deposited which is not required for
that purpose upon the written request of Holdings, except with respect to
monies owed as obligations to the Trustee pursuant to Article Seven.
If Holdings complies with the preceding paragraph, then, unless
Holdings 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.
If a Security is redeemed on or after a Record Date but on or prior to
the related Interest Payment Date, then any accrued and unpaid interest shall
be paid to the Person in whose name such Security was registered at the close
of business on such Record Date. If any Security called for redemption shall
not be so paid upon surrender for redemption because of the failure of Holdings
to comply with the first paragraph of this Section 3.5, interest shall be paid
on the unpaid principal, from the redemption date until such principal is paid,
and, to the extent lawful, on any interest not paid on such unpaid principal,
in each case at the rate provided in the Securities and in Section 4.1 hereof.
Section 3.6. 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 IV
COVENANTS
Section 4.1. Payment of Securities.
Holdings shall pay the principal amount of, premium, if any, and
interest on, as the case may be, the Securities on the dates and in the manner
provided in the Securities. An installment shall be considered paid on the
date it is due if the Trustee or Paying Agent (other
27
<PAGE> 41
than Holdings or a Subsidiary) holds on that date U.S. Legal Tender and/or, to
the extent permitted by Section 2.2, Secondary Securities designated for and
sufficient to pay the installment.
Holdings shall pay interest on overdue principal (including
post-petition interest in any proceeding under any Bankruptcy Law, to the
extent allowable as a claim in any such proceeding) at the same rate borne by
the Securities and it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law, to the extent allowable as a claim in
any such proceeding) on overdue installments of interest (without regard to any
applicable grace period) at the same rate borne by the Securities, to the
extent lawful.
Section 4.2. Maintenance of Office or Agency.
Holdings shall maintain in the Borough of Manhattan, The City of New
York, the office or agency required under Section 2.3. Holdings 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 Holdings shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee set forth in Section 13.2.
Section 4.3. Limitation on Restricted Payments.
Holdings 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) Holdings or such
Subsidiary could not incur at least $1 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 Holdings, which determination shall be evidenced
by a Board Resolution), 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) of Holdings earned
subsequent to the Issue Date and on or prior to the date the proposed
Restricted Payment occurs (the "Reference Date") plus (ii) 100% of the
aggregate Net Proceeds received by Holdings from any person (other than a
Subsidiary) from the issuance and sale (including upon exchange or conversion
for other securities of Holdings) 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 Holdings or any Subsidiary,
until and to the extent such borrowing is repaid) plus (iii) 100% of the
aggregate net cash proceeds received by Holdings as capital contributions to
Holdings after the Issue Date, plus (iv) $25,000,000.
Notwithstanding the foregoing, if no Default or Event of Default shall
have occurred and be continuing as a consequence thereof, the provisions set
forth in the immediately
28
<PAGE> 42
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 Holdings 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 Holdings, (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 Holdings 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 (x) 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) of the definition of "Permitted Payments"
shall each be counted for purposes of computing amounts expended pursuant to
subclause (c) in the immediately preceding paragraph, and (y) no amounts paid
pursuant to clause (3) above or pursuant to clause (i) or (ii) of the
definition of "Permitted Payments" shall be so counted.
Prior to making any Restricted Payment under the first paragraph of this
Section 4.3, Holdings shall deliver to the Trustee an Officers' Certificate
setting forth the computation 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 4.4. Corporate Existence.
Except as otherwise permitted by Article Five, Holdings shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate or other existence of each of
its Significant Subsidiaries in accordance with the respective organizational
documents of each such Significant Subsidiary and the rights (charter and
statutory) and franchises of Holdings and each such Significant Subsidiary;
provided, however, that Holdings 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 franchise, if the Board
of Directors of Holdings or such Significant Subsidiary, as the case may be,
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of Holdings or any such Significant Subsidiary.
Section 4.5. Payment of Taxes and Other Claims.
Holdings 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 Subsidiaries; provided, however, that Holdings
shall not be required to pay or
29
<PAGE> 43
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 material adverse effect on the financial condition
or results or operations of Holdings and its Subsidiaries taken as a whole.
Section 4.6. Maintenance of Properties and Insurance.
(a) Holdings shall cause all properties used or useful to the conduct
of its business or the business of any Subsidiaries to be maintained and kept
in good condition, repair and working order and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
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 Holdings and its Subsidiaries taken as a whole; provided, however, that
nothing in this Section 4.6 shall prevent Holdings or any Subsidiary from
discontinuing the operation or maintenance of any of such properties, 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 Holdings or the Subsidiary concerned, or of the senior officers
of Holdings or such Subsidiary, as the case may be, desirable in the conduct of
the business of Holdings or such Subsidiary, as the case may be, or (iii) is
otherwise permitted by this Indenture.
(b) Holdings shall provide or cause to be provided, 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 Holdings, are adequate and appropriate for the conduct of the business of
Holdings and such Subsidiaries in a prudent manner, 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 Holdings or
the applicable Subsidiary or (ii) customary, in the reasonable, good faith
opinion of Holdings, for corporations similarly situated in the industry,
unless the failure 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 Holdings and its Subsidiaries, taken as a whole.
Section 4.7. Compliance Certificate; Notice of Default.
(a) Holdings shall deliver to the Trustee within 120 days after the
end of Holdings' fiscal year an Officers' 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 Officers 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 certificate, that to the best of his knowledge Holdings during
such preceding fiscal year has kept, observed, performed and fulfilled each and
every such covenant and no Default or Event
30
<PAGE> 44
of Default occurred during such year or, if such signers do know of such a
Default or Event of Default, the certificate shall describe the Default or
Event of Default and its status with particularity. The Officers' Certificate
shall also notify the Trustee should Holdings elect to change the manner in
which it fixes its fiscal year end.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, Holdings shall deliver
to the Trustee within 120 days after the end of each fiscal year a written
statement by Holdings' independent certified public accountants stating (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 attention and if such a Default has come to their attention, specifying
the nature and period of existence thereof.
(c) Holdings shall, so long as the Securities are outstanding,
deliver to the Trustee, within five Business Days after any officer becomes
aware of any Default or Event of Default, an Officer's Certificate specifying
such Default or Event of Default and what action Holdings is taking or proposes
to take with respect thereto.
Section 4.8. Compliance with Laws.
Holdings 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 governmental 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 contested 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 Holdings and its Subsidiaries taken as a whole.
Section 4.9. SEC Reports and Other Information.
(a) To the extent permitted by applicable law or regulation, whether
or not Holdings is subject to the requirements of Section 13 or 15(d) of the
Exchange Act, Holdings shall file with the SEC all quarterly and annual reports
and such other information, documents or other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) required to be filed pursuant to such provisions of the Exchange
Act. Holdings shall file with the Trustee, within 5 days after it files the
same with the SEC, copies of the quarterly and annual reports and the
information, documents, and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) that it is
required to file with the SEC pursuant to this Section 4.9. Holdings shall
also comply with the other provisions of TIA Section 314(a). If Holdings is
not permitted by applicable law or regulations to file the aforementioned
reports, Holdings (at its own expense) shall file with the Trustee and mail, or
cause the Trustee to mail, to Holders at their addresses appearing in the
register of Securities maintained by the Registrar at the time of such mailing
within 5 days after it would have been required to file such information with
the SEC, all information and financial statements, including any notes thereto
and with respect to annual reports, an auditors' report
31
<PAGE> 45
by an accounting firm of established national reputation, and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
comparable to the disclosure that Holdings would have been required to include
in annual and quarterly reports, information, documents or other reports,
including, without limitation, reports on Forms 10-K, 10-Q and 8-K, if Holdings
was subject to the requirements of such Section 13 or 15(d) of the Exchange
Act.
(b) At any time when Holdings is not permitted by applicable law or
regulations to file the aforementioned reports, upon the request of a Holder of
Securities, Holdings will promptly furnish or cause to be furnished such
information as is specified pursuant to Rule 144A(d)(4) under the Securities
Act (or any successor provision thereto) to such Holder or to a prospective
purchaser of such Securities designated by such Holder, as the case may be, in
order to permit compliance by such Holder with Rule 144A under the Securities
Act.
Section 4.10. Waiver of Stay, Extension or Usury Laws.
Holdings 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 Holdings from paying all or any
portion of the principal of or interest on the Securities 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) Holdings 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 Holdings 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
Holdings or any Subsidiary (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 Holdings 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, Holdings 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
complies with clause (y) above (other than the requirement set forth in such
clause (y) that such Affiliate Transaction be in the ordinary course of
business), (B) with respect to Affiliate Transactions involving aggregate
payments in excess of $5 million and less than $15 million, Holdings or such
Subsidiary, as the case may be, shall have delivered an Officers' Certificate
to the Trustee certifying that such
32
<PAGE> 46
Affiliate Transaction complies with clause (y) above (other than the
requirement set forth in such clause (y) that such Affiliate Transaction be in
the ordinary course of business) and that such Affiliate Transaction has
received the approval of a majority of the disinterested members of the Board
of Directors of Holdings 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 Holdings 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 Transaction are fair to Holdings 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 Affiliates Transactions involving aggregate payments in
excess of $15 million, Holdings 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 Holdings 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 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 4.3, (iii) reasonable and customary fees and
compensation paid to, and indemnity provided on behalf of, officers, directors,
employees or consultants of Holdings or any Subsidiary, as determined by the
Board of Directors of Holdings or any Subsidiary or the senior management
thereof in good faith, (iv) transactions exclusively between or among Holdings
and any of its wholly-owned Subsidiaries or exclusively between or among such
wholly-owned Subsidiaries, provided such transactions 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 pursuant to any amendment thereto) so long as any such amendment is
not disadvantageous to the Holders in any material respect, (vi) the existence
of, or the performance by Holdings 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 is a party as of the Issue Date and any similar agreements which it may
enter into thereafter; provided, however, that the existence of, or the
performance by Holdings or any of its 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 in any material respect, (vii)
transactions permitted by, and complying with, the provisions of Section 5.1,
and (viii) transactions with suppliers or other purchases or sales of goods or
services, 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 Holdings or any Subsidiary,
in the reasonable determination of the Board of Directors or senior management
of Holdings, or are on terms at least as favorable as might reasonably have
been obtained at such time from an unaffiliated party.
33
<PAGE> 47
Section 4.12. Limitation on Incurrences of Additional Indebtedness.1/
Holdings will not, and will not permit any Subsidiary, 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 Securities or Event of Default shall have occurred and be
continuing at the time or as a consequence of the incurrence of any such
Indebtedness, (i) Holdings may incur Indebtedness if immediately before and
immediately after giving effect to the incurrence of such Indebtedness the
Operating Coverage Ratio of Holdings would be greater than 2.0 to 1.0 and (ii)
the Company or any subsidiary of 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.
Section 4.13. Limitation on Liens.
Holdings will not create, incur, assume or suffer to exist any Lien of
any kind securing any Pari Passu Indebtedness, any Subordinated Indebtedness or
any Affiliate Obligation upon any property or assets of Holdings owned on the
Issue Date or acquired after the Issue Date, or any income or profits
therefrom, unless the Securities are secured equally and ratably with (or prior
to in the case of Subordinated Indebtedness) to the obligation or liability
secured by such Lien, and except for any Lien securing Acquired Indebtedness
created prior to the incurrence of such Indebtedness by Holdings, provided that
any such Lien only extends to the assets that were subject to such Lien
securing such Acquired Indebtedness prior to the related acquisition by
Holdings.
Section 4.14. Limitation on Change of Control.
(a) Upon the occurrence of a Change of Control (the "Change of
Control Date"), each Holder shall have the right to require the repurchase of
such Holder's Securities pursuant to the offer described in paragraph (b),
below (the "Change of Control Offer"), at a purchase price equal to 101% of the
aggregate principal amount thereof plus accrued interest, if any, to the date
of purchase. Prior to the mailing of the notice to Holders provided for in
paragraph (b) below, but in any event within 30 days following the Change of
Control Date, Holdings shall cause the Company to 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 such 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 Securities as provided for in this Section 4.14.
Holdings shall first comply with the covenant in the immediately preceding
sentence before Holdings shall be required to repurchase Securities
____________________
1. This Section 4.12 will conform to the covenant in the new
public securities, as appropriately modified to be applicable to
Holdings and its subsidiaries.
34
<PAGE> 48
pursuant to this Section 4.14, and any failure to so comply shall constitute an
Event of Default under this Indenture. Within 10 days after any Change of
Control Date requiring Holdings to make a Change of Control Offer pursuant to
this Section 4.14, Holdings shall so notify the Trustee.
(b) The Change of Control Offer shall be made to all Holders and the
notice to the Holders shall contain all instructions and materials necessary to
enable such Holders to tender Securities pursuant to the Change of Control
Offer. Within 30 days following any Change of Control Date, Holdings shall
send, by first class mail, a notice to each Holder, with copies to the Trustee,
which notice shall govern the terms of the Change of Control Offer. Such
notice shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.14 and that all Securities tendered 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");
(3) that any Security not tendered will continue to accrue interest
if interest is then accruing;
(4) that, unless Holdings defaults in making payment 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 purchased 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
setting forth the name of the Holder, the aggregate 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 being purchased only in part
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; provided that each Holder shall tender
Securities, and each Security purchased and each such new Security issued by
Holdings shall be, in a principal amount of $1,000 or integral multiples
thereof (except for Secondary Securities that were issued in denominations
other than $1,000); and
35
<PAGE> 49
(8) the circumstances and relevant facts regarding such Change of
Control, including information available to Holdings concerning the Person or
Persons acquiring control and such historical or pro forma financial
information as Holdings reasonably deems appropriate under the circumstances.
(c) On or before the Change of Control Payment Date, Holdings 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 portions thereof being purchased by
Holdings. The Paying Agent shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price; provided that each
such new Security shall be in the principal amount of $1,000 or integral
multiples thereof. Holdings 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 4.14, the Trustee shall act as the
Paying Agent.
(d) Holdings, to the extent applicable and if required by law, will
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.
Section 4.15. Limitation on Asset Sales.
(a) Neither Holdings nor any of its Subsidiaries will consummate an
Asset Sale, unless (a) Holdings 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, Holdings
or the applicable Subsidiary 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 Business 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 Holdings and its Subsidiaries
existing on the Issue Date or in a business reasonably related thereto; (ii)
apply or cause to be applied such Net Cash Proceeds to the repayment of Senior
Indebtedness or Pari Passu Indebtedness of Holdings or any Indebtedness of any
Subsidiary; (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 Securities tendered to Holdings for purchase
at a price equal to 100% of the aggregate principal amount thereof, plus
accrued interest to the date of purchase pursuant to an offer to purchase made
by Holdings as set forth below (a "Net Proceeds Offer"), provided, however,
that if at any time any noncash consideration received by Holdings or any
Subsidiary in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash, then such cash shall constitute Net Cash
Proceeds for purposes of this Section 4.15 and shall be applied in accordance
with clause (b) above within 365 days of the receipt of such cash; and provided
further, however, that if at any time any security deposits or other amounts
used to secure Letter of Credit Obligations pursuant to clause (b) (iii) above
are returned to Holdings or any Subsidiary, then such security deposits or
other amounts shall constitute Net Cash Proceeds for
36
<PAGE> 50
purposes of this Section 4.15 and shall be applied in accordance with clause
(b) above within 365 days of the receipt of such security deposits or other
amounts. A Net Proceeds Offer as a result of an Asset Sale made by the Company
or one of its subsidiaries shall not be required to be in excess of the Net
Cash Proceeds of such Asset Sale less the Net Cash Proceeds actually applied in
accordance with clauses (b)(i), (ii) or (iii) above; provided, however, that
Holdings shall have the right to exclude from the foregoing provisions Asset
Sales subsequent to the Issue Date, the proceeds of which are derived from the
sale and substantially concurrent lease-back of one or more supermarkets and/or
related assets or equipment which are acquired or constructed by Holdings or a
Subsidiary subsequent to the Issue Date, provided that any such sale and
substantially concurrent lease-back occurs within 270 days following such
acquisition or the completion of such construction, as the case may be.
(b) Notice of a Net Proceeds Offer pursuant to this Section 4.15
shall be mailed, by first class mail, by Holdings not less than 305 days nor
more than 335 days after the relevant Asset Sale to all Holders at their last
registered addresses, 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 following
terms:
(1) that the Net Proceeds Offer is being made pursuant to Section
4.15 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 Proceeds Offer, Holdings shall select
the Securities to be purchased on a pro rata basis (with such adjustments as
may be deemed appropriate by Holdings so that only Securities in
denominations of $1,000 or multiples thereof shall be purchased, except for
Secondary Securities that were issued in denominations other than $1,000);
(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 Holdings defaults in making payment therefor, 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 purchased 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 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 Proceeds Purchase
Date;
37
<PAGE> 51
(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 telegram, 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 statement 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 principal amount to the unpurchased portion of
the Securities surrendered.
On or before the Proceeds Purchase Date, Holdings 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)(l) 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 Holdings. The Paying Agent
shall promptly mail to the Holders of Securities so accepted payment in an
amount equal to the purchase price. Holdings 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 4.15, the Trustee shall
act as the Paying Agent.
(c) Holdings 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 Securities pursuant to a Net Proceeds Offer.
Any amounts remaining after the purchase of Securities pursuant to a Net
Proceeds Offer shall be returned by the Trustee to Holdings.
Section 4.16. Limitation on Senior Subordinated Indebtedness.
Holdings will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that by its terms is subordinate or junior
in right of payment to any Senior Indebtedness and senior in right of payment
to the Securities.
Section 4.17. Limitation on Preferred Stock of Subsidiaries.
Holdings will not permit any of its Subsidiaries to issue any Preferred Stock
(other than to Holdings or a wholly-owned Subsidiary), or permit any person
(other than Holdings or a wholly-owned Subsidiary) to own or hold an interest
in any Preferred Stock of any such Subsidiary, unless such Subsidiary would be
entitled to incur Indebtedness in accordance with the provisions of Section
4.12 in the aggregate principal amount equal to the aggregate liquidation value
of such Preferred Stock.
38
<PAGE> 52
Section 4.18. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
Holdings 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 as in
effect on the Issue Date, as any such Payment Restriction may apply to any
present or future Subsidiary, (ii) this Indenture, the Senior Discount Note
Indenture, the Senior Discount Debenture Indenture, the indentures with respect
to Existing Indebtedness and any other 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 Section
4.12), (iv) secured Indebtedness otherwise permitted to be incurred pursuant to
Sections 4.12 and 4.13 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;
(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 Section 4.12; 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 of the Issue Date.
ARTICLE V
SUCCESSOR CORPORATION
Section 5.1. When Holdings May Merge, Etc.
(a) Holdings, 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 Holdings shall be the continuing person, or the person (if
other than Holdings) formed by such consolidation or into which Holdings is
merged or to which
39
<PAGE> 53
all or substantially all of the properties and assets of Holdings 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) (Holdings
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 Holdings
under the Securities 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 Holdings immediately preceding the
transaction and (B) the Surviving Person could incur at least $1 of
additional Indebtedness other than Permitted Indebtedness pursuant to Section
4.12; and
(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.
(b) 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 Subsidiaries, the Capital Stock of which constitutes all or
substantially all of the properties and assets of Holdings shall be deemed to
be the transfer of all or substantially all of the properties and assets of
Holdings.
Section 5.2. Successor Corporation Substituted.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of Holdings or any adoption of a Plan of Liquidation by
Holdings in accordance with Section 5.1, the surviving person formed by such
consolidation or into which Holdings 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, Holdings under this Indenture with the same effect as if
such surviving person had been named as Holdings herein; provided, however,
that solely for purposes of computing amounts described in subclause (c) of
Section 4.3, any such surviving person shall only be deemed to have succeeded
to and be substituted for Holdings 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 Holdings hereunder and
under the Securities and agrees to be bound hereby and thereby, the predecessor
shall be released from such obligations.
40
<PAGE> 54
ARTICLE VI
DEFAULT AND REMEDIES
Section 6.1. Events of Default.
An "Event of Default" occurs if:
(1) Holdings defaults in the payment of interest on the Securities
when the same becomes due and payable and the default continues for a period
of 30 days;
(2) Holdings defaults in the payment of the principal of the
Securities when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise (including the failure to repurchase
Securities tendered pursuant to the requirements set forth in Sections 4.14
and 4.15), whether or not such payment shall be prohibited by the provisions
of Article Eleven hereof;
(3) Holdings fails to comply with any of its other agreements or
covenants in, or provisions of, the Securities or this Indenture and the
default continues for the period and after the notice specified below;
(4) there shall be a default under any bond, debenture, or other
evidence of Indebtedness of Holdings or of any Significant Subsidiary or
under any mortgage, indenture or other instrument under which there may be
issued or by which there may be secured or evidenced any such Indebtedness,
whether such Indebtedness now exists or shall hereafter be created, if both
(A) such default either (i) results from the failure to pay such Indebtedness
at its stated final maturity (that is, the date of the last principal
installment of any installment Indebtedness under the instrument or agreement
pursuant to or under which such Indebtedness was created or is evidenced) or
(ii) relates to an obligation (including any obligation to pay interest, to
purchase such Indebtedness or to pay the principal of such Indebtedness,
other than the obligation to pay any principal of 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 the maturity of
which has been so accelerated, aggregates $25 million or more at any one time
outstanding;
(5) Holdings or any Significant Subsidiary (A) commences a voluntary
case or proceeding under any Bankruptcy Law with respect to itself, (B)
consents to the entry of a judgment, decree or order for relief against it in
an involuntary case or proceeding under any Bankruptcy Law, (C) consents to
the appointment of a Custodian of it or for substantially all of its
property, (D) consents to or acquiesces in the institution of a bankruptcy or
an insolvency proceeding against it, (E) makes a general assignment for the
benefit of its creditors, or (F) takes any corporate action to authorize or
effect any of the foregoing;
41
<PAGE> 55
(6) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of Holdings or any Significant Subsidiary in an
involuntary case or proceeding under any Bankruptcy Law, which shall (A)
approve as properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect of Holdings or any Significant
Subsidiary, (B) appoint a Custodian of Holdings or any Significant Subsidiary
or for substantially all of its property or (C) order the winding-up or
liquidation of its affairs; and such judgment, decree or order shall remain
unstayed and in effect for a period of 60 consecutive days;
(7) the lenders under the Credit Agreement shall commence judicial
proceedings to foreclose upon any material portion of the assets of Holdings
and its Subsidiaries; or
(8) any final judgment or order for payment of money in excess of $25
million shall be entered against Holdings or any Significant Subsidiary by a
court of competent jurisdiction and shall remain undischarged for a period of
60 days after such judgment becomes final and nonappealable.
A Default under clause (3) above (other than in the case of any Defaults
resulting from any Default under Section 4.3, 4.14 or 5.1, which Defaults shall
be Events of Default with the notice specified in this paragraph but without
the passage of time specified in this paragraph) is not an Event of Default
until the Trustee notifies Holdings, or the Holders of at least 25% in
aggregate principal amount of the outstanding Securities notify Holdings and
the Trustee, of the Default, and Holdings 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 aggregate principal amount of the Securities then outstanding. When a
Default is cured, it ceases.
Section 6.2. Acceleration.
(a) If an Event of Default (other than an Event of Default specified
in Section 6.1(5) or (6) with respect to Holdings or any Significant
Subsidiary) occurs and is continuing, the Trustee may, by notice to Holdings
(and, if any Indebtedness is outstanding under the Credit Agreement or the
Credit Agreement is otherwise in effect, to the Credit Agent), or the Holders
of at least 25% in aggregate principal amount of the Securities then
outstanding may, by written notice to Holdings and the Trustee, and the Trustee
shall (with notice to the Credit Agent if any Indebtedness is outstanding under
the Credit Agreement or the Credit Agreement is otherwise in effect), upon the
request of such Holders, declare the aggregate principal amount of the
Securities outstanding, together with accrued but unpaid interest thereon to
the date of payment, to be due and payable and, upon any such declaration, the
same shall become and be due and payable; provided, that so long as the Credit
Agreement shall be in force and effect, if any such Event of Default shall have
occurred and be continuing, any such acceleration shall not be effective until
the earlier of (a) five Business Days following a notice of acceleration given
to Holdings and the Credit Agent under the Credit Agreement and only if upon
such fifth Business Day such Event of Default shall be continuing or (b) the
acceleration
42
<PAGE> 56
of any Indebtedness under the Credit Agreement. If an Event of Default
specified in Section 6.1(5) or (6) occurs with respect to Holdings or any
Significant Subsidiary, all unpaid principal and accrued interest on the
Securities then outstanding shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. Upon payment of such principal amount, interest, and premium, if any,
all of Holdings' obligations under the Securities and this Indenture, other
than obligations under Section 7.7, shall terminate. The Holders of a majority
in aggregate principal 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 and
interest on the Securities which have 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
principal, which has become due otherwise than by such declaration of
acceleration, has been paid, and (iii) the rescission would not conflict with
any judgment or decree of a court of competent jurisdiction.
(b) In the event of a declaration of acceleration under this
Indenture because an Event of Default set forth in Section 6.1(4) 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 or the maturity thereof shall have been extended such that it is not
then due and payable, or the underlying default has been cured (and any
acceleration based thereon of such other Indebtedness has been rescinded),
within 90 days of such maturity or declaration of acceleration, as the case may
be.
Section 6.3. 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 Holder 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 6.4. Waiver of Past Defaults.
Subject to Sections 6.7 and 9.2, the Holders of at least fifty four
percent (54%) in aggregate principal amount of the outstanding Securities (or
at least a majority in aggregate principal amount of the outstanding Securities
in the event that EJDC shall cease to beneficially
43
<PAGE> 57
own at least a majority in aggregate 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 (1) and (2) of Section 6.1.
When a Default or Event of Default is waived, it is cured and ceases.
Section 6.5. Control by Majority.
The Holders of at least a majority in aggregate 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. Subject to Section 7.1, 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 Holder,
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.
Section 6.6. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee notice of a continuing Event of
Default;
(2) the Holder or Holders of at least 25% in aggregate principal
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 at least 25%
in aggregate principal amount of the outstanding Securities do not give the
Trustee a direction which, in the opinion of the Trustee, is inconsistent
with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
Section 6.7. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, 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.
44
<PAGE> 58
Section 6.8. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified in
clause (1) or (2) of Section 6.1 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against
Holdings or any other obligor on the Securities for the whole amount of
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 Securities 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 Trustee, its agents
and counsel.
Section 6.9. 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 Holders allowed in
any judicial proceedings relating to Holdings 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 Holder to make such payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 6.10. 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 7.7;
Second: if the Holders are forced to proceed against Holdings directly
without the Trustee, to the Holders for their collection costs;
Third: to the Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
interest, respectively; and
Fourth: to Holdings.
45
<PAGE> 59
The Trustee, upon prior notice to Holdings, may fix a record date and
payment date for any payment to the Holders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken 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 suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7, or a suit by a Holder or Holders of more than 10% in
aggregate principal amount of the outstanding Securities.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
Section 7.1. 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 could 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 covenants 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 Indenture. However,
the Trustee shall examine the certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.1.
46
<PAGE> 60
(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 6.5.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) 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 7.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree with Holdings. Assets held in
trust by the Trustee need not be segregated from other assets except to the
extent required by law.
Section 7.2. Rights of Trustee.
Subject to Section 7.1:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 13.4 and 13.5. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such certificate or 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 resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as
it may see fit.
47
<PAGE> 61
(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 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with Holdings, 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 7.4. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for Holdings' use
of the proceeds from the Securities, and it shall not be responsible for any
statement in the Securities other than the Trustee's certificate of
authentication.
Section 7.5. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default occurs. Except in the case of a Default or an Event of Default in
payment of principal of, premium, if any, or interest on, any Security,
including the failure to make payment on the Change of Control Payment Date
pursuant to a Change of Control Offer, the Trustee may withhold the notice if
and so long as its board of directors, the executive committee of its board of
directors or a committee of its directors and/or Trust Officers in good faith
determines that withholding the notice is in the interest of the Holders.
Section 7.6. Reports By Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, the Trustee shall, to the extent that any of the events
described in TIA Section 313(a) occurred within the previous twelve months,
but not otherwise, mail to each Holder a brief report dated as of such May 15
that complies with TIA Section 313(a). The Trustee also shall comply with TIA
Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
mailed to Holdings and filed with the SEC and each stock exchange, if any, on
which the Securities are listed.
Holdings shall notify the Trustee if the Securities become listed on any
stock exchange.
48
<PAGE> 62
Section 7.7. Compensation and Indemnity.
Holdings 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. Holdings shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it including, without limitation, any taxes
imposed on the trust or on the income from the Securities. Such expenses shall
include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
Holdings 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
hereunder. The Trustee shall notify Holdings promptly of any claim asserted
against the Trustee for which it may seek indemnity. Holdings shall defend the
claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and Holdings shall pay the reasonable fees and expenses of
such counsel; provided that Holdings 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 Holdings and the Trustee in connection with such defense as
reasonably determined by the Trustee. Holdings need not pay for any settlement
made without its written consent. Holdings 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 Holdings' payment obligations in this Section 7.7, the Trustee
shall have a lien prior to the Securities on all assets held or collected by
the Trustee, in its capacity as Trustee, except assets held in trust to pay
principal of, premium, if any, or interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(5) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 7.8. Replacement of Trustee.
The Trustee may resign by so notifying Holdings. The Holders of a
majority in aggregate principal amount of the outstanding Securities may remove
the Trustee by so notifying Holdings and the Trustee may appoint a successor
Trustee with Holdings' consent. Holdings 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
49
<PAGE> 63
(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, Holdings shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after
the successor Trustee takes office, the Holders of a majority in aggregate
principal amount of the Securities may appoint a successor Trustee to replace
the successor Trustee appointed by Holdings.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to Holdings. 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 7.7, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, Holdings or the
Holders of at least 10% in aggregate principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.8,
Holdings' obligations under Section 7.7 shall continue for the benefit of the
retiring Trustee.
Section 7.9. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Sections 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 Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities, or certificates of interest or
participation in other securities, of Holdings are outstanding, if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
50
<PAGE> 64
Section 7.11. Preferential Collection of Claims Against Holdings.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1. Option to Effect Legal Defeasance or Covenant Defeasance.
Holdings may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.2 or 8.3 hereof be applied to all outstanding Securities upon
compliance with the conditions set forth below in this Article Eight.
Section 8.2. Legal Defeasance.
Upon Holdings' exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, Holdings shall, subject to the satisfaction of
the conditions set forth in Section 8.4 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Securities on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that Holdings shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Securities, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.5 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Securities and this Indenture (and the Trustee, on
demand of and at the expense of Holdings, shall execute proper instruments
acknowledging the same), except for the following provisions which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Securities to receive solely from the trust fund
described in Section 8.4 hereof, and as more fully set forth in such Section,
payments in respect of the principal, of, premium, if any, and interest on such
Securities when such payments are due, (b) Holdings' obligations with respect
to such Securities under Article Two and Section 4.2 hereof and the rights,
powers, trusts, duties and immunities of the Trustee and Holdings' obligations
in connection therewith, and (c) this Article Eight. Subject to compliance
with this Article Eight, Holdings may exercise its option under this Section
8.2 notwithstanding the prior exercise of its option under Section 8.3 hereof.
Section 8.3. Covenant Defeasance.
Upon Holdings' exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, Holdings shall, subject to the satisfaction of
the conditions set forth in Section 8.4 hereof, be released from its
obligations under the covenants contained in Sections 4.3 and 4.6 through 4.18
and Article V hereof with respect to the outstanding Securities on and after
the date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the
51
<PAGE> 65
Securities shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Securities shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Securities, Holdings 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 6.1
hereof, but, except as specified above, the remainder of this Indenture and
such Securities shall be unaffected thereby. In addition, upon Holdings'
exercise under Section 8.1 hereof of the option applicable to this Section 8.3
hereof, subject to the satisfaction of the conditions set forth in Section 8.4
hereof, Sections 6.1(3) (but only to the extent it relates to a breach of any
of the covenants contained in Sections 4.3 and 4.6 through 4.18 and Article V
hereof), 6.1(4) and 6.1(7) hereof shall not constitute Events of Default.
Section 8.4. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.2 or 8.3 hereof to the outstanding Securities:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) Holdings must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders of the Securities, cash in
United States dollars, or direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for
the payment of which obligation or guarantee the full faith and credit
of the United States of America is pledged ("U.S. Government
Obligations"), or a combination thereof, in such amounts and at such
times as will be sufficient, without consideration of the reinvestment
of such interest and after payment of all federal, state and local taxes
or other charges or assessments in respect thereof payable by the
Trustee, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Securities to redemption or maturity
provided that the 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 Securities on the Maturity Date or
such redemption date, as the case may be;
(b) in the case of an election under Section 8.2 hereof,
Holdings shall have delivered to the Trustee an Opinion of Counsel
stating that (A) Holdings 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 the
52
<PAGE> 66
outstanding Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and 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 deposit and Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.3 hereof,
Holdings shall have delivered to the Trustee an Opinion of Counsel
stating that the Holders of the outstanding Securities will not
recognize income, gain or loss for federal income tax purposes as a
result of such deposit and 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 deposit and such Covenant
Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred
and be continuing on the date of such deposit or insofar as Section
6.1(5) or 6.1(6) hereof is concerned, at any time in the period ending
on the 91st day after the date of deposit (it being understood that this
condition shall not be deemed satisfied until after such 91st day);
(e) such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a default under,
this Indenture or any other material agreement or instrument to which
Holdings is a party or by which Holdings is bound (and in that
connection, the Trustee shall have received a certificate from the
administrative agent under the Credit Agreement to that effect with
respect to such Credit Agreement if then in effect);
(f) Holdings shall have delivered to the Trustee an
Opinion of Counsel to the effect that, assuming that no Default or Event
of Default shall occur and be continuing under Section 6.1(5) or 6.1(6)
during the period ending on the 91st day after the date of deposit, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) Holdings shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by Holdings
with the intent of preferring the Holders over the other creditors of
Holdings or with the intent of defeating, hindering, delaying or
defrauding creditors of Holdings, or others; and
(h) Holdings shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
53
<PAGE> 67
Section 8.5. Deposited Money and U.S. Government Obligations to be Held in
Trust; Other Miscellaneous Provisions.
Subject to Section 8.6 hereof, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee pursuant to Section
8.4 hereof 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
(excluding Holdings or any Affiliate thereof) as the Trustee may determine, to
the Holders of such Securities of all sums due and to become due thereon in
respect of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
Holdings shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or U.S. Government
Obligations deposited pursuant to Section 8.4 hereof or the principal 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 Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to Holdings from time to time upon the request of
Holdings any money or non-callable U.S. Government Obligations held by it as
provided in Section 8.4 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.4(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Covenant Defeasance.
Section 8.6. Repayment to Holdings.
Any money deposited with the Trustee or any Paying Agent in trust for
the payment of the principal of, premium, if any, or interest on any Security
and remaining unclaimed for two years after such principal, and premium, if
any, or interest has become due and payable shall be paid to Holdings on its
request or shall be discharged from such trust; and the Holder of such Security
shall thereafter, as a creditor, look only to Holdings for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money shall thereupon cease; provided, however, that the Trustee or such Paying
Agent, before being required to make any such repayment, shall at the expense
of Holdings cause to be published once, in The New York Times and The Wall
Street Journal (national edition), notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to Holdings.
Section 8.7. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or U.S. Government Obligations in accordance with Section 8.2 or 8.3
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining
54
<PAGE> 68
or otherwise prohibiting such application, then Holdings' obligations under
this Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.2 or 8.3 hereof until such time as
the Trustee or Paying Agent is permitted to apply all such money in accordance
with Section 8.2 or 8.3 hereof, as the case may be; provided, however, that, if
Holdings makes any payment of principal of, premium, if any, or interest on any
Security following the reinstatement of its obligations, Holdings shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1. Without Consent of Holders.
Holdings, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Indenture or the Securities without
notice to or consent of any Holder:
(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;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the uncertificated
Securities are issued in registered form for purposes of Section 163(f) of
the Internal Revenue Code of 1986, as from time to time amended, or in a
manner such that the uncertificated Securities are described in Section
163(f)(2)(B) of the Internal Revenue Code of 1986, as from time to time
amended;
(4) to make any other change that does not adversely affect the
rights of any Holders; or
(5) to comply with any requirements of the SEC in connection with the
qualification of this Indenture under the TIA;
provided that Holdings has delivered to the Trustee an Opinion of Counsel
stating that such amendment or supplement complies with the provisions of this
Section 9.1.
Section 9.2. With Consent of Holders.
Subject to Section 6.7, Holdings, when authorized by a Board Resolution,
and the Trustee, together, with the written consent of the Holder or Holders of
at least fifty four percent (54%) in aggregate principal amount of the
outstanding Securities (or at least a majority in aggregate principal amount of
the outstanding Securities in the event that EJDC shall cease to
55
<PAGE> 69
beneficially own at least a majority in aggregate principal amount of the
outstanding Securities), may amend or supplement this Indenture or the
Securities, without notice to any other Holders. Subject to Section 6.7, the
Holder or Holders of at least fifty four percent (54%) in aggregate principal
amount of the outstanding Securities (or at least a majority in aggregate
principal amount of the outstanding Securities in the event that EJDC shall
cease to beneficially own at least a majority in aggregate principal amount of
the outstanding Securities) may waive compliance by Holdings with any provision
of this Indenture or the Securities without notice to any other Holder.
Without the consent of each Holder affected, however, no amendment, supplement
or waiver, including a waiver pursuant to Section 6.4, may:
(1) change the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture or the Securities;
(2) reduce the rate or extend the time for payment of interest on any
Security;
(3) reduce the principal amount of any Security;
(4) change the Maturity Date of any Security, or alter the redemption
provisions contained in paragraph 5 of the Securities in a manner adverse to
any Holder;
(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
Security;
(6) make any changes in Section 6.4, 6.7 or this third sentence of
this Section 9.2; or
(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
and the Securities as in effect on the date hereof.
Without the consent of the Holder or Holders of at least 75% of the
aggregate principal amount of the outstanding Securities, no such amendment,
supplement or waiver may change the Change of Control Payment Date or the
purchase price in connection with any repurchase of Securities pursuant to
Section 4.14 hereof in a manner adverse to any Holder or waive a Default or
Event of Default resulting from a failure to comply with Section 4.14 hereof.
Without the consent of the Holder or Holders of at least 66-2/3% of the
aggregate principal amount of the outstanding Securities, no change may be made
to the provisions of Article Eleven that adversely affects the rights of any
Holder under Article Eleven.
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.
56
<PAGE> 70
After an amendment, supplement or waiver under this Section becomes
effective, Holdings shall mail to the Holders affected thereby a notice briefly
describing the amendment, supplement or waiver. Any failure of Holdings 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, Holdings may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or
waiver.
Holdings agrees that no amendment, supplement or waiver under this
Article Nine may make any change that adversely affects the rights under
Article Eleven of any holders of Senior Indebtedness unless the holders of such
Senior Indebtedness consent to the change.
Section 9.3. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
Section 9.4. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by notice to the Trustee
or Holdings received before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Securities have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.
Holdings 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
notwithstanding 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 Holder, unless it makes a change described in any of clauses (1)
through (7) of Section 9.2, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the
same debt as the consenting Holder's Security; provided that any such waiver
shall not impair or affect the right of any 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
57
<PAGE> 71
the enforcement of any such payment on or after such respective dates without
the consent of such Holder.
Section 9.5. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if Holdings or
the Trustee so determines, Holdings in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms.
Section 9.6. 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 Indenture. The
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture.
ARTICLE X
MEETINGS OF SECURITYHOLDERS
Section 10.1. Purposes for Which Meetings May Be Called.
A meeting of Holders may be called at any time and from time to time
pursuant to the provisions of this Article Ten for any of the following
purposes:
(a) to give any notice to Holdings or to the Trustee, or to give any
directions to the Trustee, or to waive or to consent to the waiving of any
Default or Event of Default hereunder and its consequences, or to take any
other action authorized to be taken by Holders pursuant to any of the
provisions of Article Six;
(b) to remove the Trustee or appoint a successor Trustee pursuant to
the provisions of Article Seven;
(c) to consent to an amendment, supplement or waiver pursuant to the
provisions of Section 9.2; or
(d) to take any other action (i) authorized to be taken by or on
behalf of the Holders of any specified aggregate principal amount of the
Securities under any other provision of this Indenture, or authorized or
permitted by law or (ii) which the Trustee deems necessary or appropriate in
connection with the administration of this Indenture.
58
<PAGE> 72
Section 10.2. Manner of Calling Meetings.
The Trustee may at any time call a meeting of Holders to take any action
specified in Section 10.1, to be held at such time and at such place in New
York, New York or elsewhere as the Trustee shall determine. Notice of every
meeting of Holders, setting forth the time and place of such meeting and in
general terms the action proposed to be taken at such meeting, shall be mailed
by the Trustee, first-class postage prepaid, to Holdings and to the Holders at
their last addresses as they shall appear on the registration books of the
Registrar not less than 10 nor more than 60 days prior to the date fixed for a
meeting.
Any meeting of Holders shall be valid without notice if the Holders of
all Securities then outstanding are present in person or by proxy, or if notice
is waived before or after the meeting by the Holders of all Securities
outstanding, and if Holdings, any Subsidiary and the Trustee are either present
by duly authorized representatives or have, before or after the meeting, waived
notice.
Section 10.3. Call of Meetings by Holdings or Holders.
In case at any time Holdings, pursuant to a Board Resolution, or the
Holders of not less than 10% in aggregate principal amount of the Securities
then outstanding shall have requested the Trustee to call a meeting of Holders
to take any action specified in Section 10.1, by written request setting forth
in reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed the notice of such meeting within 20 days after
receipt of such request, then Holdings or the Holders in the amount above
specified may determine the time and place in New York, New York or elsewhere
for such meeting and may call such meeting for the purpose of taking such
action, by mailing or causing to be mailed notice thereof as provided in
Section 10.2, or by causing notice thereof to be published at least once in
each of two successive calendar weeks (on any Business Day during such week) in
a newspaper or newspapers printed in the English language, customarily
published at least five days a week of a general circulation in New York, New
York, the first such publication to be not less than 10 nor more than 60 days
prior to the date fixed for the meeting.
Section 10.4. Who May Attend and Vote at Meetings.
To be entitled to vote at any meeting of Holders, a person shall (a) be
a registered Holder of one or more Securities, or (b) be a person appointed by
an instrument in writing as proxy for the registered Holder or Holders of
Securities. The only persons who shall be entitled to be present or to speak
at any meeting of Holders shall be the persons entitled to vote at such meeting
and their counsel and any representatives of the Trustee and its counsel and
any representatives of Holdings and its counsel.
Section 10.5. Regulations May Be Made by Trustee; Conduct of the Meeting;
Voting Rights; Adjournment.
Notwithstanding any other provision of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any action by or
any meeting of Holders,
59
<PAGE> 73
in regard to proof of the holding of Securities and of the appointment of
proxies, and in regard to the appointment and duties of inspectors of votes,
and submission and examination of proxies, certificates and other evidence of
the right to vote, and such other matters concerning the conduct of the meeting
as it shall think appropriate. Such regulations may fix a record date and time
for determining the Holders of record of Securities entitled to vote at such
meeting, in which case those and only those persons who are Holders of
Securities at the record date and time so fixed, or their proxies, shall be
entitled to vote at such meeting whether or not they shall be such Holders at
the time of the meeting.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by Holdings
or by Holders as provided in Section 10.3, in which case Holdings or the
Holders calling the meeting, as the case may be, shall in like manner appoint a
temporary chairman. A permanent chairman and a permanent secretary of the
meeting shall be elected by vote of the Holders of a majority in aggregate
principal amount of the Securities represented at the meeting and entitled to
vote.
At any meeting each Holder or proxy shall be entitled to one vote for
each $1,000 principal amount of Securities held or represented by him;
provided, however, that no vote shall be cast or counted at any meeting in
respect of any Securities challenged as not outstanding and ruled by the
chairman of the meeting to be not outstanding. The chairman may adjourn any
such meeting if he is unable to determine whether any Holder or proxy shall be
entitled to vote at such meeting. The chairman of the meeting shall have no
right to vote other than by virtue of Securities held by him or instruments in
writing as aforesaid duly designating him as the proxy to vote on behalf of
other Holders. Any meeting of Holders duly called pursuant to the provisions
of Section 10.2 or Section 10.3 may be adjourned from time to time by vote of
the Holders of a majority in aggregate principal amount of the Securities
represented at the meeting and entitled to vote, and the meeting may be held as
so adjourned without further notice.
Section 10.6. Voting at the Meeting and Record To Be Kept.
The vote upon any resolution submitted to any meeting of Holders shall
be by written ballots on which shall be subscribed the signatures of the
Holders of Securities or of their representatives by proxy and the principal
amount of the Securities voted by the ballot. The permanent chairman of the
meeting shall appoint two inspectors of votes, who shall count all votes cast
at the meeting for or against any resolution and who shall make and file with
the secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Holders shall be prepared by the secretary of the meeting and there
shall be attached to such record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more persons
having knowledge of the facts, setting forth a copy of the notice of the
meeting and showing that such notice was mailed as provided in Section 10.2 or
published as provided in Section 10.3. The record shall be signed and verified
by the affidavits of the permanent chairman and the secretary of the meeting
and one of the duplicates shall be delivered to Holdings and the other to the
Trustee to be preserved by the Trustee, the latter to have attached thereto the
ballots voted at the meeting.
60
<PAGE> 74
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7. Exercise of Rights of Trustee or Holders May Not Be
Hindered or Delayed by Call of Meeting.
Nothing contained in this Article Ten shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Holders or any
rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Holders under any of the provisions of this
Indenture or of the Securities.
ARTICLE XI
SUBORDINATION
Section 11.1. Securities Subordinated to Senior Indebtedness.
Anything herein to the contrary notwithstanding, Holdings, for itself
and its successors, and each Holder, by accepting a Security, agrees, that the
payment of the principal of and interest on and premiums, penalties, fees and
other liabilities (including, without limitation, liabilities in respect of any
indemnity, reimbursement, compensation or contribution obligations, the
occurrence of a Change of Control, any liquidated damage provision, any breach
of representation or warranty, or any rights of redemption or rescission under
this Indenture, the Merger Agreement and the Registration Rights Agreement or
by law or otherwise) ("Other Obligations") with respect to the Securities is
subordinated, to the extent and in the manner provided in this Article Eleven,
to the prior payment in full in cash of all Senior Indebtedness.
This Article Eleven 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 benefit of the holders of Senior Indebtedness and
such holders are made obligees hereunder and any one or more of them may
enforce such provisions. Holders of Senior Indebtedness need not prove
reliance on the subordination provisions hereof.
Section 11.2. No Payment on Securities in Certain Circumstances.
(a) No direct or indirect payment or distribution shall be made by or
on behalf of Holdings (other than a payment in Secondary Securities) on account
of principal of or interest on or Other Obligations with respect to the
Securities or to acquire, repurchase, redeem, retire or defease any of the
Securities or on account of the redemption provisions of the Securities (i)
upon the maturity of any Senior Indebtedness by lapse of time, acceleration or
otherwise, unless and until all principal thereof and interest thereon shall
first be paid in full in cash or (ii) upon the happening of any default in
payment of any principal of or interest on any Senior Indebtedness when the
same becomes due and payable (a "Payment Default"), unless and until such
default shall have been cured or waived or shall have ceased to exist.
61
<PAGE> 75
(b) Without limiting the effect of Section 11.2(a), upon the
happening of a default or event of default (other than a Payment Default)
(including any event which, with the giving of notice or lapse of time, or
both, would become an event of default and including any default or event of
default that would result upon any payment with respect to the Securities) with
respect to any Senior Indebtedness, as such default or event of default is
defined therein or in the instrument or agreement under which it is
outstanding, and upon written notice thereof given to Holdings and the Trustee
by any holders of such Senior Indebtedness or their Representative specifying
an intent to effect a Payment Blockage Period hereunder ("Payment Notice"),
then, unless and until such default or event of default shall have been cured
or waived or shall have ceased to exist, no direct or indirect payment or
distribution (other than of Secondary Securities) shall be made by or on behalf
of Holdings on account of principal of or interest on or Other Obligations with
respect to the Securities or to acquire, repurchase, redeem, retire or defease
any of the Securities or on account of the redemption provisions of the
Securities; provided, however, that this paragraph (b) shall not prevent the
making of any payment for a period of (a "Payment Blockage Period") of more
than 179 days after a Payment Notice shall have been given (or earlier if such
Payment Blockage Period is terminated (i) by written notice to the Trustee and
Holdings from the Credit Agent or the Representative which gave such Payment
Notice, (ii) repayment in full of such Senior Indebtedness or (iii) because the
default specified in the Payment Notice is no longer continuing). Subject to
the provisions contained in Section 11.2(a) above, Holdings may resume payments
on the Securities after such Payment Blockage Period expires. Notwithstanding
the foregoing, (i) not more than one Payment Notice shall be given within a
period of 360 consecutive days, and (ii) a Payment Notice may only be given (A)
if Senior Indebtedness is outstanding under the Credit Agreement at the time of
such notice, by the Credit Agent and (B) if no Senior Indebtedness is
outstanding under the Credit Agreement at the time of such notice, by a holder
or holders (or the Representative of holders) of at least $35,000,000 principal
amount of such Senior Indebtedness. For purposes of this Section, no default
or event of default which existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Senior
Indebtedness initiating such Payment Blockage Period shall be, or be made, the
basis of the commencement of a subsequent Payment Blockage Period by the
Representative of such Senior Indebtedness whether or not within a period of
360 consecutive days unless such default or event of default shall have been
cured or waived for a period of not less than 90 consecutive days.
(c) In furtherance of the provisions of Section 11.1, if,
notwithstanding the foregoing provisions of this Section 11.2, any direct or
indirect payment or distribution other than Secondary Securities on account of
principal of or interest on or Other Obligations with respect to the Securities
or to acquire, repurchase, redeem, retire or defease any of the Securities or
on account of the redemption provisions of the Securities shall be made by or
on behalf of Holdings and received by the Trustee, by any Holder or by any
Paying Agent (or, if Holdings or any Subsidiary or Affiliate of Holdings is
acting as Paying Agent, money for any such payment or distribution shall be
segregated and held in trust), at a time when such payment or distribution was
prohibited by the provisions of this Section 11.2, then, unless and until such
payment or distribution is no longer prohibited by this Section 11.2, such
payment or distribution (subject to the provisions of Sections 11.6 and 11.7)
shall be received, segregated from other funds, and held in trust by the
Trustee or such Holder or Paying Agent, as the case may be, for the benefit of,
and shall be immediately paid over to, the holders of Senior Indebtedness or
their
62
<PAGE> 76
Representative, ratably according to the respective amounts of Senior
Indebtedness held or represented by each, to the extent necessary to make
payment in full in cash of all Senior Indebtedness remaining unpaid, after
giving effect to all concurrent payments and distributions to or for the
holders of Senior Indebtedness. Holdings shall give prompt notice to the
Trustee of any default or event of default or any acceleration under any Senior
Indebtedness or under any agreement pursuant to which Senior Indebtedness may
have been issued. Failure to give such notice shall not affect the
subordination of the Securities to Senior Indebtedness provided in this Article
Eleven. Notwithstanding anything to the contrary contained herein, in the
absence of its gross negligence or willful 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 such
payment over to, the holders of Senior Indebtedness or their Representative.
Section 11.3. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization
of Holdings.
Upon any payment or distribution of assets or securities of Holdings of
any kind or character, whether in cash, property or securities, upon any
dissolution, winding-up, total or partial liquidation or total or partial
reorganization of Holdings (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 Holdings and
whether voluntary or involuntary):
(a) the holders of all Senior Indebtedness shall first be entitled to
receive payments in full in cash of the principal thereof and interest
thereon before the Holders are entitled to receive any payment on account of
the principal of or interest on or Other Obligations with respect to the
Securities (whether by payment, acquisition, retirement, defeasance,
redemption or otherwise) or any other payment or distribution of assets or
securities by or on behalf of Holdings;
(b) any payment or distribution of assets or securities of Holdings
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 except
for the provisions of this Article Eleven, including any such payment or
distribution that is payable or deliverable by reason of the payment of any
other Indebtedness of Holdings being subordinated to the payment of the
Securities (except for any such payment or distribution (x) authorized by an
order or decree giving effect, and stating in such order or decree that
effect is given, to the subordination of the Securities to the Senior
Indebtedness, and made by a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law, (y) of
securities that (i) are unsecured, (ii) have a Weighted Average Life to
Maturity and final maturity that are no shorter than the Weighted Average
Life to Maturity of the Securities or any securities issued to the holders of
Senior Indebtedness under the Credit Agreement pursuant to a plan of
reorganization or readjustment and (iii) are subordinated, to at least the
same extent as the Securities, to the payment of all Senior Indebtedness then
outstanding or (z) of Capital Stock), shall be paid by the liquidating
trustee or agent or other person making such a payment or distribution,
63
<PAGE> 77
directly 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, after giving effect to all concurrent
payments and distributions to or for the holders of such Senior Indebtedness;
and
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets or securities of Holdings of any kind or character,
whether in cash, property or securities, shall be received by the Trustee or
the Holders or any Paying Agent (or, if Holdings or any Subsidiary or
Affiliate of Holdings is acting as Paying Agent, money, assets or securities
of any kind or character for any such payment or distribution shall be
segregated or held in trust) on account of principal of or interest on or
Other Obligations with respect to the Securities before all Senior
Indebtedness is paid in full in cash, such payment or distribution (subject
to the provisions of Sections 11.6 and 11.7) 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, after giving effect to all concurrent payments and distributions 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 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.
Holdings shall give prompt notice to the Trustee prior to any
dissolution, winding-up, total or partial liquidation or total or partial
reorganization of Holdings or assignment for the benefit of creditors by
Holdings.
Section 11.4. Holders to Be Subrogated to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full in cash 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 Holdings
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 distributions to the holders of Senior Indebtedness by or on behalf
of Holdings, or by or on behalf of the Holders by virtue of this Article
Eleven, which otherwise would have been made to the Holders, shall, as between
Holdings and the Holders, be deemed to be payment by Holdings to or on account
of the Senior Indebtedness, it being understood that the provisions of this
Article Eleven are and are intended solely for the purpose of defining the
relative rights of the Holders, on the one hand, and the holders of Senior
Indebtedness, on the other hand.
64
<PAGE> 78
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article Eleven shall have been
applied, pursuant to the provisions of this Article Eleven, 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 Indebtedness 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.
Section 11.5. Obligations of Holdings Unconditional.
Nothing contained in this Article Eleven or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as between Holdings and
the Holders, the obligation of Holdings, which is absolute and unconditional,
to pay to the Holders the principal of and interest on and Other Obligations in
respect of the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of Holdings other than the holders of the
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 Eleven, of the holders of Senior Indebtedness in respect of cash,
property or securities of Holdings received upon the exercise of any such
remedy. Upon any payment or distribution of assets or securities of Holdings
referred to in this Article Eleven, the Trustee, subject to the provisions of
Sections 7.1 and 7.2, and the Holders shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which 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 distribution to the Trustee or to
the Holders for the purpose of ascertaining the persons entitled to participate
in such payment or distribution, the holders of Senior Indebtedness and other
Indebtedness of Holdings, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article Eleven. Nothing in this Section 11.5 shall apply to the claims
of, or payments to, the Trustee under or pursuant to Section 7.7.
Section 11.6. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts 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 Holdings 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
7.1 and 7.2, shall be entitled in all respects conclusively to assume that no
such fact exists.
Section 11.7. 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 accordance with Section 8.4 shall be for the
sole benefit of Holders and, to the extent allocated for the payment of
Securities, shall not be subject to the
65
<PAGE> 79
subordination provisions of this Article Eleven. Otherwise, any deposit of
assets or securities by or on behalf of Holdings with the Trustee or any Paying
Agent (whether or not in trust) for the payment of principal of or interest on
or Other Obligations with respect to any Securities shall be subject to the
provisions of this Article Eleven; 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 11.6, 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. The
foregoing shall not apply to the Paying Agent if Holdings or any Subsidiary or
Affiliate of Holdings is acting as Paying Agent. Nothing contained in this
Section 11.7 (except the first sentence of this Section 11.7) shall limit the
right of the holders of Senior Indebtedness to recover payments as contemplated
by this Article Eleven.
Section 11.8. Subordination Rights Not Impaired by Acts or Omissions of
Holdings or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness to
enforce the subordination provisions contained in this Article Eleven shall at
any time in any way be prejudiced or impaired by any act or failure to act on
the part of Holdings or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by Holdings with the terms of this
Indenture, regardless of any knowledge thereof that any such holder may have or
be otherwise charged with. The holders of Senior Indebtedness may extend,
renew, restate, supplement, modify or amend the terms of the Senior
Indebtedness or any security therefor and release, sell or exchange such
security and otherwise deal freely with Holdings and its Subsidiaries all
without affecting the liabilities and obligations of the parties to this
Indenture or the Holders. No provision in any supplemental indenture that
affects the subordination of the Securities or other provisions of this Article
Eleven shall be effective against the holders of the Senior Indebtedness who
have not consented thereto.
Each Holder by accepting a Security agrees that the Representative of
any Senior Indebtedness (including without limitation, the Credit Agent), in
its discretion, without notice or demand and without affecting any rights of
any holder of Senior Indebtedness under this Article Eleven, may foreclose any
mortgage or deed of trust covering interests in real property secured thereby,
by judicial or nonjudicial sale; and such Holder hereby waives any defense to
the enforcement by the Representative (including without limitation, the Credit
Agent) of any Senior Indebtedness or by any holder of any Senior Indebtedness
against such Holder of this Article Eleven after a judicial or nonjudicial sale
or other disposition of its interests in real property secured by such mortgage
or deed of trust; and such Holder expressly waives any defense or benefits that
may be derived from California Civil Code Section Section 2808, 2809, 2810,
2819, 2845, 2849 or 2850, or California Code of Civil Procedure Section Section
580a, 580d or 726, or comparable provisions of the laws of any other
jurisdiction or any similar statute in effect in any other jurisdiction.
66
<PAGE> 80
Section 11.9. Holders Authorize Trustee to Effectuate Subordination of
Securities.
Each Holder by accepting a Security 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 Eleven, and
appoints the Trustee his attorney-in-fact for such purpose, including, in the
event of any dissolution, winding up, liquidation or reorganization of Holdings
(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 Holdings) tending towards liquidation or reorganization of the
business and assets of Holdings, the immediate filing of a claim for the unpaid
balance of its or his Securities and Other Obligations 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 contained 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 Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee or the holders
of Senior Indebtedness or their Representative to vote in respect of the claim
of any Holder in any such proceeding.
Section 11.10. Right of Trustee to Hold Senior Indebtedness.
The Trustee shall be entitled to all of the rights set forth in this
Article Eleven in respect of any Senior Indebtedness 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 11.11. Article Eleven Not to Prevent Events of Default.
The failure to make a payment on account of principal of or interest on
the Securities by reason of any provision of this Article Eleven shall not be
construed as preventing the occurrence of a Default or an Event of Default
under Section 6.1.
Section 11.12. 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 misconduct or gross negligence) if it shall in good faith
mistakenly pay over or deliver to the Holders of Securities or Holdings or any
other person, money or assets to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article Eleven or otherwise. Nothing in this
Section 11.12 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.
67
<PAGE> 81
ARTICLE XII
SATISFACTION AND DISCHARGE
Section 12.1. Satisfaction and Discharge of the Indenture.
This Indenture will be discharged and will cease to be of further effect
as to all outstanding Securities when:
(a) all Securities theretofore authenticated and delivered (except
lost, stolen or destroyed Securities which have been replaced or paid and
Securities for whose payment money has theretofore been deposited in trust and
thereafter repaid to Holdings) have been delivered to the Trustee for
cancellation; or
(b) (1) all Securities not theretofore delivered to the Trustee for
cancellation have become due and payable by reason of the making of a notice
of redemption or otherwise and Holdings has irrevocably deposited or caused
to be deposited with the Trustee as trust funds in trust for the purpose an
amount sufficient to pay and discharge the entire indebtedness on the
Securities not theretofore delivered to the Trustee for cancellation for
principal, premium, if any, and accrued interest to the date of maturity or
redemption;
(2) Holdings has paid all sums payable by it under this
Indenture; and
(3) Holdings has delivered irrevocable instructions to the
Trustee to apply the deposited money toward the payment of the Securities at
maturity or the redemption date, as the case may be.
Section 12.2. Conditions to Satisfaction and Discharge of the Indenture.
Holdings shall deliver an Officers' Certificate and an Opinion of
Counsel to the Trustee stating that all conditions precedent to satisfaction
and discharge have been complied with.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of Section 3.18(c) of the TIA, the imposed
duties shall control.
68
<PAGE> 82
Section 13.2. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
if to Holdings:
c/o The Yucaipa Companies
10000 Santa Monica Boulevard
Fifth Floor
Los Angeles, California 90067
Attention: Mark A. Resnik
if to the Trustee:
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
Attention: Corporate Trust Administration
Each of Holdings and the Trustee by written notice to each other such
person may designate additional or different addresses for notices to such
person. Any notice or communication to Holdings and the Trustee 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
certified mail, postage prepaid (except that a notice of change of address
shall not be deemed to have been given until actually received by the
addressee).
Any notice or communication mailed to a Holder shall be mailed to him by
first class mail or other equivalent means at his address as it appears on the
registration 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 Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
Section 13.3. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Securities.
Holdings, the Trustee, the Registrar and any other person shall have the
protection of TIA Section 312(c).
69
<PAGE> 83
Section 13.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by Holdings to the Trustee to take any
action under this Indenture, Holdings 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 opinion of such
counsel, all such conditions precedent have been complied with.
Section 13.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.7, shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
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 13.6. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
Section 13.7. 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, California 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.
70
<PAGE> 84
Section 13.8. 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
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Indenture.
Section 13.9. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of Holdings or any Subsidiary. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
Section 13.10. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such, of
Holdings shall not have any liability for any obligations of Holdings 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 Holder by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
Section 13.11. Successors.
All agreements of Holdings 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 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.
71
<PAGE> 85
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first written above.
Dated: ________ __, 1995
[SEAL] FOOD 4 LESS HOLDINGS,
INC.
Attest: By:
______________________________
Name: Mark A. Resnik
Title: Vice President
____________________________
Dated: ________ __, 1995
[SEAL] _______________________________
_______________________________
as Trustee
Attest: By:
______________________________
Name:
Title:
____________________________
S-1
<PAGE> 86
EXHIBIT A
PURSUANT TO PROVISIONS OF THE INTERNAL REVENUE CODE OF 1986 RELATING TO
ORIGINAL ISSUE DISCOUNT AND TREASURY REGULATIONS PROMULGATED THEREUNDER WITH
RESPECT TO DEBT INSTRUMENTS ISSUED ON OR AFTER APRIL 4, 1994, THE FOLLOWING
INFORMATION IS PROVIDED: (1) THIS SECURITY IS BEING ISSUED WITH ORIGINAL
ISSUE DISCOUNT IN THE AMOUNT OF $____ PER FACE AMOUNT; (2) THE ISSUE PRICE
OF THIS SECURITY IS $___ PER FACE AMOUNT; (3) THE ISSUE DATE OF THIS SECURITY
IS ______ __, ____; AND (4) THE YIELD TO MATURITY OF THIS SECURITY IS __%.
FOOD 4 LESS HOLDINGS, INC.
13-5/8% Senior Subordinated Pay-in-Kind Debentures
due ________ __, 2007
No. $
Food 4 Less Holdings, Inc., a Delaware corporation ("Holdings," which term
includes any successor entity), for value received promises to pay to
or registered assigns, the principal sum of dollars, on ________ __,
2007.
Interest payment dates: ________________ and _______________
commencing ________ __, ____.
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.
IN WITNESS WHEREOF, Holdings has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated: ________ __, 1995
FOOD 4 LESS HOLDINGS, INC.
By:
_______________________________________
Name:
Title:
This is one of the Securities described in the within-mentioned
Indenture.
Dated: ________ __, 1995
__________________________________
as Trustee
By:
_______________________________________
Title:
A-1
<PAGE> 87
FOOD 4 LESS HOLDINGS, INC.
13-5/8% Senior Subordinated Pay-in-Kind Debenture
due ________ __, 2007
1. Interest.
FOOD 4 LESS HOLDINGS, INC., a Delaware corporation ("Holdings"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. Holdings may, in its sole discretion, issue additional
Securities ("Secondary Securities") in lieu of a cash payment of any or all of
the interest due on any Interest Payment Date occurring on or prior to [the
Interest Payment Date five years after the Issue Date]. If Holdings issues
Secondary Securities in lieu of cash payment, in whole or in part, of interest
due on any Interest Payment Date occurring on or prior to [the Interest Payment
Date five years after the Issue Date], pursuant to this paragraph, it shall
give notice to the Trustee not less than 5 Business Days prior to the relevant
Interest Payment Date, and shall instruct the Trustee (upon written order of
Holdings signed by an Officer of Holdings given not less than 5 nor more than
45 days prior to such Interest Payment Date) to authenticate a Secondary
Security, dated such Interest Payment Date, in a principal amount equal to the
amount of interest not paid in cash in respect of this Security on such
Interest Payment Date. Each issuance of Secondary Securities in lieu of cash
payments of interest on the Securities shall be made pro rata with respect to
the outstanding Securities. Any such Secondary Securities shall be governed by
the Indenture and shall be subject to the same terms (including the maturity
date and the rate of interest from time to time payable thereon) as this
Security (except, as the case may be, with respect to the title, issuance date
and aggregate principal amount). The term Securities shall include the
Secondary Securities that may be issued under the Indenture.
Holdings will pay interest semi-annually in arrears on ___________ and
_________ of each year (the "Interest Payment Date"), commencing ___________,
____. Interest on this Security will accrue from the date of issuance or from
the most recent date to which interest has been paid. Interest will be
computed on the basis of a 360-day year of twelve 30-day months and actual
number of days elapsed.
Holdings shall pay interest on overdue principal and interest on overdue
installments of interest, to the extent lawful, at the rate per annum borne by
the Securities.
2. Method of Payment.
Holdings shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of
business on the Record Date immediately preceding the Interest Payment Date
even if the Securities 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. Holdings 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") (or, pursuant to
A-2
<PAGE> 88
Paragraph 1 hereof, in Secondary Securities). However, Holdings may pay
principal and interest by its check payable in such U.S. Legal Tender or by
wire transfer of federal funds (or, pursuant to Paragraph 1 hereof, in
Secondary Securities). Holdings may deliver any such interest payment to the
Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Norwest Bank Minnesota, N.A. (the "Trustee"), will act as
Paying Agent and Registrar. Holdings may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders. Holdings or any Subsidiary may,
subject to certain exceptions, act as Paying Agent, Registrar or co-Registrar.
4. Indenture.
Holdings issued the Securities under an Indenture, dated as of ________
__, 1995 (the "Indenture"), between Holdings and the Trustee. This Security is
one of a duly authorized issue of Securities of Holdings designated as its
13-5/8% Senior Subordinated Pay-in-Kind Debentures due 2007. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein.
The terms of the Securities include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code Section Section 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 general
unsecured obligations of Holdings limited in aggregate principal amount to
$131,500,000, except for Secondary Securities and except as otherwise provided
in the Indenture.
5. Optional Redemption.
(a) The Securities may not be redeemed at the option of Holdings prior
to ________ __, 2000. Thereafter, upon at least 30 days' but not more than 60
days' notice to the Holders, Holdings may redeem all or any of the Securities
at any time at redemption prices equal to the applicable percentage of the
principal amount thereof set forth below, plus accrued interest, if any, to the
Redemption Date (as defined in the Indenture) if redeemed during the 12-month
period beginning ________ __ of the years indicated below:
Applicable
Year Percentage
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.8125%
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.1094%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.4063%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.7031%
2004 and thereafter . . . . . . . . . . . . . . . . . . . . . 100.0000%
(b) Notwithstanding the foregoing, prior to ________ __, 1998, Holdings
may use the Net Proceeds (as defined in the Indenture) of an Initial Public
Offering (as defined in the
A-3
<PAGE> 89
Indenture) of Holdings or the Company to redeem up to 35% of the Securities at
a redemption price equal to 110% of the principal amount thereof plus accrued
interest, if any, to the date of redemption.
In order to effect the foregoing redemption, Holdings shall send the
notice required by Section 3.3 of the Indenture not later than 30 days after
the Initial Public Offering Consummation Date (as defined in the Indenture).
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 Securities called for redemption
shall have been deposited with the Paying Agent for redemption on such
Redemption Date, then, unless Holdings 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.
In the event of a Change of Control, upon the satisfaction of the
conditions set forth in the Indenture, Holdings shall be required to offer to
purchase all of the then outstanding Securities pursuant to a Change of Control
Offer at a purchase price equal to 101% of the aggregate principal amount
thereof plus accrued interest, if any, to the date of purchase. Holders of
Securities which are the subject of such an offer to repurchase shall receive
an offer to repurchase and may elect to have such Securities repurchased in
accordance with the provisions of the Indenture pursuant to and in accordance
with the terms of the Indenture.
8. Limitation on Disposition of Assets.
Under certain circumstances Holdings is required to apply the net
proceeds from Asset Sales to the repayment of Indebtedness of Holdings or any
Subsidiary, to make Related Business Investments and certain other investments
or to purchase in a Net Proceeds Offer at a price equal to 100% of the
aggregate principal amount thereof, plus accrued interest, if any, to the date
of purchase, which shall in the aggregate equal the net proceeds required to be
applied thereto.
9. Subordination.
The Securities 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
Senior Indebtedness of Holdings whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder,
by accepting a Security, agrees to such subordination and authorizes the
Trustee to give it effect.
A-4
<PAGE> 90
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations
of $1,000 and integral multiples of $1,000 (other than Secondary Securities
which may be in denominations of less than $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 portions thereof selected for redemption. No service charge
shall be made for any transfer, registration or exchange, but Holdings may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith, but not for any exchange pursuant to
Section 2.10, 3.6 or 9.5 of the Indenture.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
12. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed for
one year, the Trustee and the Paying Agents will pay the money back to Holdings
at its request. After that, all liability of the Trustee and such Paying
Agents with respect to such money shall cease.
13. Discharge Prior to Redemption or Maturity.
If Holdings 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 redemption or maturity and complies with the other provisions
of the Indenture relating thereto, Holdings will be discharged from certain
provisions of the Indenture and the Securities (including the financial
covenants, but excluding its obligation to pay the principal of and interest on
the Securities).
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least
fifty four percent (and, in some cases, a majority) in aggregate principal
amount of the Securities then outstanding, and any existing Default or Event of
Default or compliance with any provision may be waived with the consent of the
Holders of fifty four percent (and, in some cases, a majority) in aggregate
principal amount, as the case may be, of the Securities then outstanding.
Without the consent of the Holders of at least 75% in aggregate principal
amount of the Securities then outstanding, no such amendment, supplement or
waiver may change the Change of Control Payment Date or the purchase price in
connection with any repurchase of Securities pursuant to Section 4.14 of the
Indenture in a manner adverse to any Holder or waive a
A-5
<PAGE> 91
Default or Event of Default resulting from a failure to comply with Section
4.14 of the Indenture. Without the consent of the Holders of at least 66-2/3%
in aggregate principal amount of the Securities then outstanding, no change may
be made to the provisions of Article Eleven of the Indenture that adversely
affects the rights of any Holder under Article Eleven. Without notice to or
consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Securities to, among other things, cure any ambiguity, defect
or inconsistency, provide for uncertificated Securities in addition to or in
place of certificated Securities, comply with Article Five 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. An amendment may not make any
change that adversely affects the rights under Article Eleven of the Indenture
of any holders of Senior Indebtedness unless the holders of Senior Indebtedness
consent to the change.
15. Successors.
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor 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 Securities to be due and payable in the manner,
at the time and with the effect provided in the Indenture. Holders of
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to 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) if it determines that
withholding notice is in their interest.
17. Trustee Dealings with Holdings.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with Holdings, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
Holdings shall have any liability for any obligation of Holdings 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 Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
A-6
<PAGE> 92
19. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on this Security.
20. Governing Law.
The Laws of the State of New York shall govern this Security and the
Indenture.
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 (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
22. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, Holdings 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.
23. Indenture.
Each Holder, by accepting a Security, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.
Holdings will furnish to any Holder of a Security upon written request
and without charge a copy of the Indenture. Requests may be made to: FOOD 4
LESS HOLDINGS, INC., c/o The Yucaipa Companies, 10000 Santa Monica Boulevard,
Fifth Floor, Los Angeles, California 90067, Attn: Mark A. Resnik.
24. Certain Information Obligations.
To the extent permitted by applicable law or regulation, whether or not
Holdings is subject to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), Holdings shall file with
the SEC all quarterly and annual reports and such other information, documents
or other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) required to be filed pursuant to such
provisions of the Exchange Act. Holdings shall file with the Trustee copies of
the quarterly and annual reports and the information, documents, and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) that it is required to file with the SEC
pursuant to the Indenture. At any time when Holdings is not permitted by
applicable law or regulations to file the aforementioned reports, Holdings
shall furnish the Trustee and the Holders with the information that Holdings
would have had to provide to the SEC if Holdings had been subject to Section 13
or 15(d) of the Exchange Act.
A-7
<PAGE> 93
25. Holdings Indebtedness.
Each Holder acknowledges that Holdings is the sole obligor of the
Securities and no Subsidiary of Holdings is a co-obligor or a guarantor of the
Securities.
A-8
<PAGE> 94
[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 transfer this Security
on the books of Holdings. 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-9
<PAGE> 95
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Security purchased by Holdings
pursuant to Section 4.14 or Section 4.15 of the Indenture, check the box:
Section 4.14 [ ] Section 4.15 [ ]
If you want to elect to have only part of this Security purchased by
Holdings pursuant to Section 4.14 or Section 4.15 of the Indenture, state the
amount:
$
Date:_______________
Signature:_____________________________
(Sign exactly as your name appears
on the front of this Security)
Signature Guarantee:____________________________________________________
A-10
<PAGE> 96
EXHIBIT I
DESCRIPTION OF THE NEW DISCOUNT DEBENTURES
GENERAL
The 13 5/8% Senior Discount Debentures due 2005 (the "New Discount
Debentures") will be issued under an indenture (the "New Discount Debenture
Indenture"), to be dated as of , 1995, between New Holdings and
United States Trust Company of New York, as trustee (the "New Discount Debenture
Trustee").
The following summary of certain provisions of the New Discount Debentures
and the New Discount Debenture Indenture 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 Discount Debentures and the New Discount Debenture Indenture, including
the definitions of certain terms therein and those terms made a part of the New
Discount Debenture Indenture 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 form of the New Discount Debenture
Indenture may be obtained from New Holdings.
As used below in this "Description of the New Discount Debentures," "New
Holdings" means Food 4 Less Holdings, Inc., a Delaware corporation, as survivor
of the FFL Merger and the Reincorporation Merger, but not any of its
subsidiaries.
PRINCIPAL, MATURITY AND INTEREST
The New Discount Debentures will be limited in aggregate principal amount
at maturity to $193,300,000 and will mature on , 2005. The New
Discount Debentures will be issued at a substantial discount from their
principal amount. Until , 2000, no interest will accrue on the New
Discount Debentures, but the Accreted Value will accrete at a rate of 13 5/8%
(representing the amortization of the original issue discount) from the date of
original issuance until , 2000, on a semi-annual bond equivalent
basis using a 360 day year comprised of twelve 30-day months and actual number
of days elapsed, such that the Accreted Value shall be equal to the full
principal amount of the New Discount Debenture on , 2000. The
initial Accreted Value per $1,000 principal amount of New Discount Debentures
will be $ (representing the original purchase price). Beginning on
, 2000, cash interest on the New Discount Debentures will accrue
at a rate of 13 5/8% per annum and will be payable semiannually in arrears on
and of each year, commencing ,
2000, to the Holders of record on the immediately preceding and
. Interest is computed on the basis of a 360-day year comprised
of twelve 30-day months and actual number of days elapsed.
The New Discount Debentures will be issued in fully registered form only,
without coupons, in denominations of $1,000 and integral multiples thereof.
Initially, the New Discount Debenture Trustee will act as Paying Agent and
Registrar for the New Discount Debentures. The New Discount Debentures may be
presented for registration of transfer and exchange at the offices of the
Registrar, which initially will be the New Discount Debenture Trustee's
corporate trust office. New Holdings may change any Paying Agent and Registrar
without notice to holders of the New Discount Debentures (the "Holders"). New
Holdings will pay principal, premium, if any, and interest on the New Discount
Debentures at the Trustee's corporate office located in the Borough of
Manhattan, The City of New York. At New Holdings' option, interest may be paid
at the New Discount Debenture Trustee's corporate office or by check mailed to
the registered holders of the New Discount Debentures at their respective
addresses set forth in the register of Holders of New Discount Debentures.
Unless otherwise designated by New Holdings, New Holdings' office or agency in
New York is the office of the New Discount Debenture Trustee maintained for such
purpose.
1
<PAGE> 97
OPTIONAL REDEMPTION
On or after , 2000, the New Discount 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 and unpaid interest to the
redemption date, if redeemed during the twelve-month period commencing on
in the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000.............................................................. 106.8125%
2001.............................................................. 105.1094%
2002.............................................................. 103.4063%
2003.............................................................. 101.7031%
2004 and thereafter............................................... 100.0000%
</TABLE>
Notwithstanding the foregoing, prior to 1998, New Holdings may
use the net proceeds of an Initial Public Offering of New Holdings or the
Company to redeem up to 35% of the New Discount Debentures at a redemption price
equal to 110% of the Accreted Value thereof on the date of redemption.
NOTICES AND SELECTION
In the event of a redemption of less than all of the New Discount
Debentures at the option of New Holdings, such New Discount Debentures will be
selected for redemption by the New Discount Debenture Trustee pro rata, by lot
or by any other method that the New Discount Debenture Trustee considers fair
and appropriate and in such manner as complies with applicable legal and stock
exchange requirements, if any; provided, however, that any redemption pursuant
to the provisions relating to an Initial Public 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 whose New Discount
Debentures are to be redeemed at such Holder's registered address. New Discount
Debentures in denominations of $1,000 principal amount at maturity may be
redeemed only in whole and the New Discount Debenture Trustee may select for
redemption portions (equal to $1,000 principal amount at maturity or any
integral multiple thereof) of the principal amount of New Discount Debentures
that have denominations larger than $1,000 principal amount at maturity. If any
New Discount Debenture is to be redeemed in part, the notice of redemption
relating to such New Discount Debenture will state the portion of the principal
amount (in integral multiples of $1,000 principal amount at maturity) to be
redeemed and that a New Discount Debenture or New Discount Debentures in the
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon surrender of the original New Discount
Debenture. On and after the redemption date, interest will cease to accrue on
the New Discount Debentures or portions thereof called for redemption (unless
New Holdings shall default in the payment of the redemption price or accrued
interest). New Discount Debentures that are redeemed by New Holdings or that are
purchased by New Holdings 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 New Holdings will be surrendered to the New Discount
Debenture Trustee for cancellation.
RANKING
The New Discount Debentures will be senior unsecured obligations of New
Holdings and will rank senior in right of payment to all Subordinated
Indebtedness of New Holdings, including the Seller Debentures. The New Discount
Debentures will rank pari passu in right of payment with all unsubordinated
Indebtedness of New Holdings, including New Holdings' guarantees of the
Company's obligations under the Credit Agreement and the Senior Discount Notes
to the extent any remain outstanding following the Merger. In addition, the New
Discount Debentures will effectively be subordinated to all liabilities
(including trade payables) of the Company.
2
<PAGE> 98
CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined below), each Holder
will have the right to require the repurchase of such Holder's New Discount
Debentures pursuant to the offer described below (the "Change of Control
Offer"), at a purchase price equal to 101% of the Accreted Value thereof on the
Change of Control Payment Date (as defined below) (if such date is prior to
, 2000) or 101% of the principal amount thereof, plus accrued
interest, if any, to the Change of Control Payment Date (if such date is on or
after , 2000).
Within 30 days following the date upon which the Change of Control occurred
(the "Change of Control Date"), New Holdings must send, by first class mail, a
notice to each Holder, with a copy to the New Discount Debenture Trustee, which
notice shall govern the terms of the Change of Control Offer. 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"). Holders electing
to have a New Discount Debenture purchased pursuant to a Change of Control Offer
will be required to surrender the New Discount Debenture, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the New Discount
Debenture 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.
The New Discount Debenture 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 any Change of Control,
New Holdings will cause the Company to 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 such 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 Discount Debentures as provided above. New Holdings shall
first comply with the covenant in the immediately preceding sentence before New
Holdings shall be required to repurchase New Discount Debentures pursuant to the
provisions described above. New Holdings' failure to comply with the covenants
described in this paragraph shall constitute an Event of Default under the New
Discount Debenture Indenture.
New Holdings will comply with the requirements of 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
The New Discount Debenture Indenture will contain, among other things, the
following covenants:
Limitation on Restricted Payments. The New Discount Debenture Indenture
will provide that New Holdings 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)
New Holdings or such Subsidiary could not incur at least $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 New Holdings, which determination
shall be evidenced by a Board Resolution), 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) of New
Holdings earned subsequent to the Issue Date and on or prior to the date the
proposed Restricted Payment occurs (the "Reference Date") plus (ii) 100% of the
aggregate Net Proceeds received by New Holdings from any person (other than a
Subsidiary) from the issuance and sale (including upon exchange or conversion
for other securities of New Holdings) 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
3
<PAGE> 99
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
New Holdings or any Subsidiary, until and to the extent such borrowing is
repaid), plus (iii) 100% of the aggregate net cash proceeds received by New
Holdings as capital contributions to New Holdings 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 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 New Holdings 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 New Holdings, (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 New Holdings 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 (x) 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) of the definition of Permitted
Payments shall each be counted for purposes of computing amounts expended
pursuant to subclause (c) in the immediately preceding paragraph, and (y) no
amounts paid pursuant to clause (3) above or pursuant to clause (i) or (ii) of
the definition of "Permitted Payments" shall be so counted.
Limitation on Incurrences of Additional Indebtedness. The New Discount
Debenture Indenture will provide that New Holdings shall not, and shall not
permit any Subsidiary, 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 Discount Debentures or Event
of Default shall have occurred and be continuing at the time or as a consequence
of the incurrence of any such Indebtedness, (i) New Holdings may incur
Indebtedness if immediately before and immediately after giving effect to the
incurrence of such Indebtedness the Operating Coverage Ratio of New Holdings
would be greater than 2.0 to 1.0 and (ii) the Company or any subsidiary of 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.
Limitation on Liens. The New Discount Debenture Indenture will provide that
New Holdings shall not create, incur, assume or suffer to exist any Liens upon
any of its assets unless the New Discount Debentures are equally and ratably
secured by the Liens covering such assets, except for (i) existing and future
Liens securing Indebtedness and other obligations of New Holdings and its
Subsidiaries under the Credit Agreement and related documents or any refinancing
or replacement thereof in whole or in part permitted under the New Discount
Debenture Indenture, (ii) Permitted Liens, (iii) 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 New Holdings or any
Subsidiary other than the property or assets so acquired, (iv) Liens existing on
the Issue Date (after giving effect to the Merger), (v) Liens to secure
Capitalized Lease Obligations and certain other Indebtedness that is otherwise
permitted under the New Discount Debenture 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 property other than such item of
property and any improvement on such item; (vi) Liens in favor of the New
Discount Debenture Trustee under the New Discount Debenture Indenture and any
substantially equivalent lien granted to any trustee or similar institution
under any indenture for Indebtedness permitted by
4
<PAGE> 100
the terms of the New Discount Debenture Indenture; and (vii) 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 if
any such clauses limit the amount secured by or the assets subject to such
Liens, no replacement, 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. The New Discount Debenture Indenture will
provide that neither New Holdings nor any of its Subsidiaries shall consummate
an Asset Sale unless (a) New Holdings 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, New
Holdings or the applicable Subsidiary 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 Business 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 New Holdings and its Subsidiaries existing
on the Issue Date or in a business reasonably related thereto; (ii) apply or
cause to be applied such Net Cash Proceeds to the repayment of Pari Passu
Indebtedness of New Holdings or any Indebtedness of any Subsidiary; (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 Discount Debentures tendered to New Holdings pursuant to an offer to
purchase made by New Holdings as set forth below (a "Net Proceeds Offer") for
purchase at a price equal to 100% of the Accreted Value thereof on the date of
purchase, if such date is prior to , 2000 or 100% of the principal
amount thereof, plus accrued interest to the date of purchase if such date is on
or after , 2000; provided, however, that if at any time any non-cash
consideration received by New Holdings or any Subsidiary in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash, then
such cash shall constitute Net Cash Proceeds for purposes of this covenant and
shall be applied in accordance with clause (b) above within 365 days of the
receipt of such cash; and provided further, however, that if at any time any
security deposits or other amounts used to secure Letter of Credit Obligations
pursuant to clause (b)(iii) above are returned to New Holdings or any
Subsidiary, then such security deposits or other amounts shall constitute Net
Cash Proceeds for purposes of this covenant and shall be applied in accordance
with clause (b) above within 365 days of the receipt of such security deposits
or other amounts. A Net Proceeds Offer as a result of an Asset Sale made by the
Company or one of its subsidiaries shall not be required to be in excess of the
Net Cash Proceeds of such Asset Sale less the Net Cash Proceeds actually applied
in accordance with clauses (b)(i), (ii) or (iii) above; provided, however, that
New Holdings shall have the right to exclude from the foregoing provisions Asset
Sales subsequent to the Issue Date, the proceeds of which are derived from the
sale and substantially concurrent lease-back of one or more supermarkets and/or
related assets or equipment which are acquired or constructed by New Holdings or
a Subsidiary subsequent to the Issue Date, provided that any such sale and
substantially concurrent lease-back occurs within [270] days following such
acquisition or the completion of such construction, as the case may be.
Each Net Proceeds Offer will be mailed to record Holders of New Discount
Debentures as shown on the register of Holders not less than 305 nor more than
335 days after the relevant Asset Sale, with a copy to the 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 New Discount Debenture Indenture. Upon receiving
notice of the Net Proceeds Offer, Holders may elect to tender the New Discount
Debentures in whole or in part in integral multiples of $1,000 in exchange for
cash. To the extent Holders properly tender New Discount Debentures in an amount
exceeding the Net Proceeds Offer, New Discount Debentures of tendering Holders
will be repurchased on a pro rata basis (based on amounts tendered).
New Holdings 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 Discount Debentures pursuant to a Net Proceeds Offer.
5
<PAGE> 101
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The New Discount Debenture Indenture will provide that New
Holdings 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 as in effect
on the Issue Date, as any such Payment Restriction may apply to any present or
future Subsidiary, (ii) the New Discount Debenture Indenture, the Seller
Debenture Indenture, the Senior Discount Note Indenture, the indentures with
respect to Existing Indebtedness and any other 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.
Limitation on Transactions with Affiliates. The New Discount Debenture
Indenture will provide that neither New Holdings 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
New Holdings 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 New Holdings 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, New Holdings or such
Subsidiary, as the case may be, shall have delivered an Officers' Certificate to
the New Discount Debenture Trustee certifying that such transaction or series of
transactions complies with clause (y) above (other than the requirement set
forth in such clause (y) that such Affiliate Transaction be in the ordinary
course of business), (B) with respect to Affiliate Transactions involving
aggregate payments in excess of $5 million and less than $15 million, New
Holdings or such Subsidiary, as the case may be, shall have delivered an
Officers' Certificate to the New Discount Debenture Trustee certifying that such
Affiliate Transaction complies with clause (y) above (other than the requirement
set forth in such clause (y) that such Affiliate Transaction be in the ordinary
course of business) and that such Affiliate Transaction has received the
approval of a majority of the disinterested members of the Board of Directors of
New Holdings 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 New
Holdings 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
6
<PAGE> 102
such Affiliate Transaction are fair to New Holdings 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, New Holdings or such Subsidiary, as the case may be, shall have
delivered to the New Discount Debenture Trustee, a written opinion from an
Independent Financial Advisor to the effect that the financial terms of such
Affiliate Transaction are fair to New Holdings 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 New Holdings or any Subsidiary, as determined by the Board of
Directors of New Holdings or any Subsidiary or the senior management thereof in
good faith, (iv) transactions exclusively between or among New Holdings 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 New Discount Debenture 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 in any material
respect, (vi) the existence of, or the performance by New Holdings 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 is a party as of the Issue Date and any similar agreements
which it may enter into thereafter; provided, however, that the existence of, or
the performance by New Holdings 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 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) transactions with suppliers or other purchases or sales of goods or
services, 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 Discount Debenture Indenture which are fair to New
Holdings, in the reasonable determination of the Board of Directors or senior
management of New Holdings, 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. The New Discount Debenture
Indenture will provide that New Holdings will not permit any of its Subsidiaries
to issue any Preferred Stock (other than to New Holdings or a wholly-owned
Subsidiary), or permit any person (other than New Holdings or a wholly-owned
Subsidiary) to own or hold an interest in any Preferred Stock of such
Subsidiary, unless such Subsidiary would be entitled to incur Indebtedness in
accordance with the provisions described above under "-- Limitation on
Incurrence of Additional Indebtedness" in the aggregate principal amount equal
to the aggregate liquidation value of such Preferred Stock.
No Amendment to Subordination Provisions of Seller Debentures. The New
Discount Debenture Indenture will provide that New Holdings will not amend,
modify or alter the Seller Debenture Indenture in any way that would (i)
increase the principal of, advance the final maturity date of or shorten the
Weighted Average Life to Maturity of any Seller Debentures such that the final
maturity date of the Seller Debentures is earlier than the 91st day following
the final maturity date of the New Discount Debentures or (ii) amend the
provisions of Article Eleven of the Seller Debenture Indenture (which relates to
subordination) or certain of the defined terms used therein in a manner that
would be adverse to the Holders of the New Discount Debentures.
Limitations on Mergers and Certain Other Transactions. The New Discount
Debenture Indenture will provide that New Holdings, 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
7
<PAGE> 103
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 New
Holdings shall be the continuing person, or the person (if other than New
Holdings) formed by such consolidation or into which New Holdings is merged or
to which all or substantially all of the properties and assets of New Holdings
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) (New
Holdings 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 New
Holdings under the New Discount Debentures and the New Discount Debenture
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 New Holdings immediately preceding the
transaction, and (B) the Surviving Person could incur at least $1 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the provisions of
the covenant described under the heading "-- Limitation on Incurrences of
Additional Indebtedness" above; and (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.
Notwithstanding the foregoing, the consummation of the Merger on the Issue
Date need only comply with clauses (1) and (3) of the foregoing paragraph.
The New Discount Debenture Indenture will provide that upon any
consolidation or merger or any transfer of all or substantially all of the
assets of New Holdings or any adoption of a Plan of Liquidation by New Holdings
in accordance with the foregoing, the surviving person formed by such
consolidation or into which New Holdings 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, New Holdings under the New Discount Debenture Indenture with the same effect
as if such surviving person had been named as New Holdings 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 New Holdings 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 New
Holdings under the New Discount Debenture Indenture and under the New Discount
Debentures and agrees to be bound thereby, the predecessor shall be released
from such obligations.
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 Subsidiaries, the
Capital Stock of which constitutes all or substantially all of the properties
and assets of New Holdings shall be deemed to be the transfer of all or
substantially all of the properties and assets of New Holdings.
EVENTS OF DEFAULT
The following events constitute "Events of Default" under the New Discount
Debenture Indenture: (i) failure to make any payment of interest on the New
Discount Debentures 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 New
Discount Debentures when due, whether at maturity, upon acceleration, redemption
or otherwise (including the failure to repurchase New Discount Debentures
tendered pursuant to the requirements set forth in the covenants described under
the headings "-- Certain Covenants -- Change of Control" and "-- Certain
Covenants -- Limitation on Asset Sales"), (iii) failure to comply with any other
agreement or covenant contained in, or provisions of, the New Discount
Debentures or the New Discount Debenture Indenture, if such failure continues
unremedied for 30 days after notice given by the New Discount Debenture Trustee
or the Holders of at least 25% in principal amount of the New Discount
Debentures then outstanding (except in the case of a default with respect to the
covenants described under the headings "-- Certain Covenants -- Limitation on
Restricted Payments," "-- Change of Control," "-- Certain
Covenants -- Limitation
8
<PAGE> 104
on Asset Sales" and "-- Certain Covenants -- Limitations on Mergers and Certain
Other Transactions," which shall constitute Events of Default with notice but
without passage of time); (iv) a default under any bond, debenture, or other
evidence of Indebtedness of New Holdings or of any Significant Subsidiary or
under any mortgage, indenture or other instrument under which there may be
issued or by which there may be secured or evidenced any such Indebtedness,
whether such Indebtedness now exists or shall hereafter be created, if both (A)
such default either (1) results from the failure to pay such Indebtedness at its
stated final maturity or (2) relates to an obligation (other than the obligation
to pay any principal of 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 $25 million or more at
any one time outstanding; (v) New Holdings or any Significant Subsidiary (a)
commences a voluntary case or proceeding under any Bankruptcy Law with respect
to itself, (b) consents to the entry of a judgment, decree or order for relief
against it in an involuntary case or proceeding under any Bankruptcy Law, (c)
consents to the appointment of a Custodian of it or for substantially all of its
property, (d) consents to or acquiesces in the institution of a bankruptcy or an
insolvency proceeding against it, (e) makes a general assignment for the benefit
of its creditors, or (f) takes any corporate action to authorize or effect any
of the foregoing; (vi) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of New Holdings or any Significant
Subsidiary in an involuntary case or proceeding under any Bankruptcy Law, which
shall (a) approve as properly filed a petition seeking reorganization,
arrangement, adjustment or composition in respect of New Holdings or any
Significant Subsidiary, (b) appoint a Custodian of New Holdings or any
Significant Subsidiary or for substantially all of its property or (c) order the
winding-up or liquidation of its affairs; and such judgment, decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; (vii)
the lenders under the Credit Agreement shall commence judicial proceedings to
foreclose upon any material portion of the assets of New Holdings and its
Subsidiaries; or (viii) any final judgment or order for payment of money in
excess of $25 million shall be entered against New Holdings or any Significant
Subsidiary by a court of competent jurisdiction and shall remain undischarged
for a period of 60 days after such judgment becomes final and nonappealable.
If an Event of Default (other than an Event of Default resulting from
bankruptcy, insolvency, receivership or reorganization of New Holdings or any
Significant Subsidiary) occurs and is continuing, the New Discount Debenture
Trustee or the Holders of at least 25% in aggregate principal amount of the New
Discount Debentures then outstanding may declare the Default Amount due and
payable by notice in writing to New Holdings and the New Discount Debenture
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
New Holdings 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 shall occur with respect
to New Holdings or a Significant Subsidiary, the Default Amount shall ipso facto
become immediately due and payable without any declaration or other act on the
part of the New Discount Debenture Trustee or any of the Holders of the New
Discount Debentures. Subject to certain conditions, the Holders of a majority in
principal amount of the New Discount Debentures then outstanding, by notice to
the New Discount Debenture Trustee, may rescind an acceleration if all existing
Events of Default are remedied. In certain cases the Holders of a majority in
principal amount of outstanding New Discount Debentures may waive any past
default and its consequences, except a default in the payment of principal of or
interest on any of the New Discount Debentures.
The New Discount Debenture Indenture provides that if a Default or an Event
of Default occurs and is continuing thereunder and if it is known to the New
Discount Debenture Trustee, the New Discount Debenture Trustee shall mail to
each Holder of the New Discount Debentures notice of the uncured 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 principal of, premium, if any, or interest on, any New Discount
Debenture, including the failure to make payment on the Change of Control
Payment
9
<PAGE> 105
Date pursuant to a Change of Control Offer or payment when due pursuant to a Net
Proceeds Offer, the New Discount Debenture Trustee may withhold such notice if
it in good faith determines that withholding such notice is in the interest of
the Holders.
The New Discount Debenture Indenture provides that no holder may pursue any
remedy thereunder unless the New Discount Debenture 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 written request to act by
Holders of at least 25% in principal amount of the New Discount Debentures 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 on the New Discount Debentures.
Under the New Discount Debenture Indenture, two officers of New Holdings
are required to certify to the New Discount Debenture Trustee within 120 days
after the end of each fiscal year of New Holdings whether or not they know of
any Default or Event of Default that occurred during such fiscal year and, if
applicable, describe such Default or Event of Default and the status thereof.
DEFEASANCE OF INDENTURE
New Holdings may, at its option and at any time, elect to have New
Holdings' obligations discharged with respect to the outstanding New Discount
Debentures. Such Legal Defeasance means that New Holdings shall be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
New Discount Debentures except for (i) the rights of Holders of outstanding New
Discount Debentures to receive payments in respect of the principal of, premium,
if any, and interest on such New Discount Debentures when such payments are due
solely from the funds held by the New Discount Debenture Trustee in the trust
referred to below; (ii) New Holdings' obligations to issue temporary New
Discount Debentures, register the transfer or exchange of New Discount
Debentures, replace mutilated, destroyed, lost or stolen New Discount Debentures
and maintain an office or agency for payments in respect of the New Discount
Debentures and money for security payments held in trust in respect of the New
Discount Debentures; (iii) the rights, powers, trusts, duties and immunities of
the New Discount Debenture Trustee and New Holdings' obligations in connection
therewith; and (iv) the Legal Defeasance provisions of the New Discount
Debenture Indenture. In addition, New Holdings may, at its option and at any
time elect to have the obligations of New Holdings 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 the New Discount
Debentures.
In order to exercise either Legal Defeasance or Covenant Defeasance with
respect to the New Discount Debentures, (i) New Holdings must have irrevocably
deposited with the New Discount Debenture Trustee, in trust, for the benefit of
the Holders of the New Discount Debentures, cash in U.S. dollars, U.S.
Government Obligations (as defined in the New Discount Debenture Indenture), or
a combination thereof, in such amounts as will be sufficient, in the opinion of
a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding New Discount
Debentures to redemption or maturity provided that the New Discount Debenture
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 Discount Debentures on the Maturity Date or such redemption date, as the
case may be; (ii) in the case of Legal Defeasance, New Holdings shall have
delivered to the New Discount Debenture Trustee an opinion of counsel stating
that (A) New Holdings 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 outstanding New Discount Debentures 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, New Holdings shall have
delivered to the New Discount Debenture Trustee an opinion of counsel stating
that the Holders of outstanding New Discount Debentures 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
10
<PAGE> 106
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as clauses (v) and (vi) 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 New Discount Debenture
Indenture or any other material agreement or instrument to which New Holdings is
a party or by which it is bound (and in that connection, the New Discount
Debenture 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) New Holdings shall have delivered to the New Discount Debenture
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (vii) New Holdings shall have delivered to the New Discount
Debenture Trustee an Officer's Certificate stating that the deposit was not made
by New Holdings with the intent of preferring the Holders of the New Discount
Debentures over other creditors of New Holdings or with the intent of defeating,
hindering, delaying or defrauding creditors of Holdings, or others; and (viii)
New Holdings shall have delivered to the New Discount Debenture 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
The New Discount Debenture Indenture will be discharged and will cease to
be of further effect as to all outstanding New Discount Debentures when either
(a) all New Discount Debentures theretofore authenticated and delivered (except
lost, stolen or destroyed New Discount Debentures which have been replaced or
paid and New Discount Debentures for whose payment money has theretofore been
deposited in trust and thereafter repaid to New Holdings) have been delivered to
the New Discount Debenture Trustee for cancellation; or (b)(i) all New Discount
Debentures not theretofore delivered to the New Discount Debenture Trustee for
cancellation have become due and payable by reason of the making of a notice of
redemption or otherwise and New Holdings has irrevocably deposited or caused to
be deposited with the New Discount Debenture Trustee as trust funds in trust for
the purpose an amount of money sufficient to pay and discharge the entire
indebtedness on the New Discount Debentures not theretofore delivered to the New
Discount Debenture Trustee for cancellation for principal, premium, if any, and
accrued interest to the date of maturity or redemption; (ii) New Holdings has
paid all sums payable by it under the New Discount Debenture Indenture; and
(iii) New Holdings has delivered irrevocable instructions to the New Discount
Debenture Trustee to apply the deposited money toward the payment of the New
Discount Debentures at maturity or the redemption date, as the case may be. In
addition, New Holdings must deliver an Officers' Certificate and an Opinion of
Counsel to the New Discount Debenture Trustee stating that all conditions
precedent to satisfaction and discharge have been complied with.
MODIFICATION OF THE NEW DISCOUNT DEBENTURE INDENTURE
The New Discount Debenture Indenture and the New Discount Debentures may be
amended or supplemented (and compliance with any provision thereof may be
waived) by New Holdings, the New Discount Debenture Trustee and the Holders of
not less than a majority in aggregate principal amount of the New Discount
Debentures then outstanding, except that (i) without the consent of each Holder
of New Discount Debentures affected, no such amendment, supplement or waiver may
(1) change the principal amount of New Discount Debentures whose Holders must
consent to an amendment, supplement or waiver of any provision of the New
Discount Debenture Indenture or the New Discount Debentures; (2) reduce the rate
or extend the time for payment of interest on any New Discount Debenture; (3)
reduce the Accreted Value of any New Discount Debenture; (4) reduce the
principal amount of any New Discount Debenture; (5) change the Maturity Date of
any New Discount Debenture, or alter the redemption provisions in a manner
adverse to any Holder; (6) 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 New
Discount Debenture, or (7) make the principal of, or the interest on, any New
Discount Debentures payable with anything or in any manner other than as
provided for in the New Discount Debenture Indenture and the New Discount
Debentures as in effect on the date of the New
11
<PAGE> 107
Discount Debenture Indenture and (ii) without the consent of Holders of not less
than 75% in aggregate principal amount of New Discount Debentures then
outstanding, no such amendment, supplement or waiver may change the Change of
Control Payment Date or the purchase price in connection with any repurchase of
New Discount Debentures pursuant to the covenant described under "-- Change of
Control" above in a manner adverse to any Holder or waive a Default or Event of
Default resulting from a failure to comply with the covenant described under
"-- Change of Control" above.
In addition, New Holdings and the New Discount Debenture Trustee may amend
the New Discount Debenture Indenture and the New Discount Debentures (a) to cure
any ambiguity, defect or inconsistency therein; provided, that such amendment or
supplement does not adversely affect the rights of any Holder or (b) to make any
other change that does not adversely affect the rights of any Holder thereunder
in any material respect.
THE NEW DISCOUNT DEBENTURE TRUSTEE
The Holders of a majority in principal amount of the outstanding New
Discount Debentures may remove the New Discount Debenture Trustee and appoint a
successor trustee with New Holdings' consent, by so notifying the New Discount
Debenture Trustee to be so removed and New Holdings. In addition, the Holders of
a majority in principal amount of the outstanding New Discount Debentures 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 Discount
Debenture Trustee or of exercising any trust or power conferred on the New
Discount Debenture Trustee.
The New Discount Debenture Indenture provides that, in case a Default or an
Event of Default has occurred and is continuing, the New Discount Debenture
Trustee thereunder shall exercise such of the rights and powers vested in it by
the New Discount Debenture 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 his own affairs. Subject to the latter
provision, the New Discount Debenture Trustee is under no obligation to exercise
any of its rights or powers under the New Discount Debenture Indenture at the
request, order or direction of any of the Holders, unless they shall have
offered to the New Discount Debenture Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred thereby. If
New Holdings fails to pay such amounts of principal of, or interest on, the New
Discount Debentures as shall have become due and payable upon demand as
specified in the New Discount Debenture Indenture, the New Discount Debenture
Trustee thereunder, at the request of the Holders of a majority in aggregate
principal amount of the New Discount Debentures 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.
The New Discount Debenture Indenture contains limitations on the rights of
the New Discount Debenture Trustee, should it become a creditor of New Holdings,
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.
The New Discount Debenture Trustee is permitted to engage in other transactions;
however, if the New Discount Debenture Trustee acquires any "conflicting
interest," it must eliminate such conflict or resign.
The New Discount Debenture Trustee is also the trustee for (a) the %
Senior Subordinated Notes due 2005 of the Company; (b) the 9% Senior
Subordinated Notes due 2003 of the Company; (c) the 10 1/4% Senior Subordinated
Notes due 2002 of the Company; (d) the 13.75% Senior Subordinated Notes due 2005
of the Company; and (e) the 13.75% Senior Subordinated Notes due 2001 of the
Company.
REPORTS
The New Discount Debenture Indenture will provide that to the extent
permitted by applicable law or regulation, whether or not New Holdings is
subject to the requirements of Section 13 or 15(d) of the Exchange Act, New
Holdings shall file with the SEC all quarterly and annual reports and such other
information, documents or other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) required to be
filed pursuant to such provisions of the Exchange Act. New
12
<PAGE> 108
Holdings shall file with the New Discount Debenture Trustee, within 15 days
after it files the same with the SEC, copies of the quarterly and annual reports
and the information, documents, and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) that it
is required to file with the SEC pursuant to the New Discount Debenture
Indenture. New Holdings shall also comply with the other provisions of TIA
sec. 314(a). If New Holdings is not permitted by applicable law or regulations
to file the aforementioned reports, New Holdings (at its own expense) shall file
with the New Discount Debenture Trustee and mail, or cause the New Discount
Debenture Trustee to mail, to Holders at their addresses appearing in the
register of New Discount Debentures maintained by the Registrar at the time of
such mailing within 5 days after it would have been required to file such
information with the SEC, all information and financial statements, including
any notes thereto and with respect to annual reports, an auditors' report by an
accounting firm of established national reputation, and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
comparable to the disclosure that Holdings would have been required to include
in annual and quarterly reports, information, documents or other reports,
including, without limitation, reports on Forms 10-K, 10-Q and 8-K, if New
Holdings was subject to the requirements of such Section 13 or 15(d) of the
Exchange Act.
At any time when New Holdings is not permitted by applicable law or
regulations to file the aforementioned reports, upon the request of a Holder of
New Discount Debentures, New Holdings will promptly furnish or cause to be
furnished such information as is specified pursuant to Rule 144A(d)(4) under the
Securities Act (or any successor provision thereto) to such Holder or to a
prospective purchaser of such New Discount Debentures designated by such Holder,
as the case may be, in order to permit compliance by such Holder with Rule 144A
under the Securities Act.
CERTAIN DEFINITIONS
"Accreted Value" means, as of any date of determination prior to
, 2000, the sum of (a) the initial purchase price of each New Discount
Debenture and (b) the portion of the excess of the principal amount of each New
Discount Debenture over such initial purchase price which shall have been
accreted through such date, such amount to be so accreted on a daily basis and
compounded semi-annually on each and at the rate of 13 5/8%
per annum from the date of issuance of the New Discount Debentures through the
date of determination, computed on the basis of a 360-day year of twelve 30-day
months.
"Acquired Indebtedness" means Indebtedness of a person or any of its
subsidiaries existing at the time such person becomes a Subsidiary or assumed in
connection with the acquisition of assets from such person and not incurred by
such person in connection with, or in anticipation or contemplation of, such
person becoming a Subsidiary or such acquisition.
"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 Discount Debenture Indenture, neither BT
Securities Corporation nor any of its Affiliates shall be deemed to be an
Affiliate of New Holdings 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 New Holdings 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 New Holdings or any
13
<PAGE> 109
Subsidiary of $500,000 or less, (iii) pursuant to any foreclosure of assets or
other remedy provided by applicable law to a creditor of New Holdings or any
Subsidiary with a Lien on such assets, which Lien is permitted under the New
Discount Debenture Indenture, provided that such foreclosure or other remedy is
conducted in a commercially reasonable manner or in accordance with any
Bankruptcy Law, or (iv) the proceeds of which are not applied as contemplated in
"-- Certain Covenants -- Limitation on Asset Sales" and which, together with all
other such Asset Sale proceeds, do not exceed $20 million.
"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 principle 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.
"Board of Directors" means, with respect to any person, 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 equivalents (however designated) of corporate
stock, including each class of common stock and preferred stock of such person,
including Preferred Stock.
"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 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 (I) 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 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 New Holdings
(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 New Holdings' Board of Directors or
(II) New Holdings ceasing to own 100% of the outstanding voting securities
entitled to vote on a regular basis to elect a majority
14
<PAGE> 110
of the Board of Directors of the Company (other than in connection with a merger
of New Holdings and the Company).
"Company" 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.
"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; provided, however, that with respect to the net income of
New Holdings, the net income of the Company and its wholly-owned subsidiaries
shall not be so excluded, notwithstanding the existence of any such Payment
Restriction, so long as the terms of any such consensual Payment Restriction
limiting the payment of dividends are not materially more restrictive at the
time of determination of Consolidated Net Income than the most restrictive
Payment Restriction limiting the payment of dividends in effect on the Issue
Date and so long as the Company continues to be a wholly-owned subsidiary of New
Holdings; 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 New
Holdings or any of its Subsidiaries in connection with the Merger, including,
without limitation, the divestiture of the Excluded Assets, (viii) losses
incurred by New Holdings and its Subsidiaries resulting from earthquakes and
(ix) with respect to New Holdings and its Subsidiaries, 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 Disqualified Capital Stock) of such
person and its subsidiaries determined on a consolidated basis in accordance
with GAAP.
"Consulting Agreement" means 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 amendment or replacement agreement do not exceed the amounts
payable under such Consulting Agreement as in effect on the Issue Date.
"Credit Agreement" means the Credit Agreement, dated as of the Issue Date,
by and among the Company as borrower, New Holdings as guarantor, certain of the
Company's 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 each case, 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, replace or refinance any borrowings and commitments then outstanding
or permitted to be outstanding under such Credit Agreement or any such prior
agreement as
15
<PAGE> 111
the same may be amended, extended, renewed, restated, supplemented or otherwise
modified (in each case, in whole or in part, and without limitation as to
amount, terms, conditions, covenants and other provisions). The term "Credit
Agreement" shall include all related or ancillary documents, including, without
limitation, any guarantee agreements and security documents. New Holdings shall
promptly notify the New Discount Debenture Trustee 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.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Default Amount" means (i) if the Date of Declaration (as defined below) is
prior to , 2000, the unpaid Accreted Value of the New Discount
Debentures then outstanding as of the date on which the New Discount Debentures
are declared to be due and payable (the "Date of Declaration"), and (ii) if the
Date of Declaration is on or after , 2000, the aggregate principal
amount of the New Discount Debentures then outstanding as of the Date of
Declaration, plus accrued and unpaid interest thereon to the Date of
Declaration.
"Disqualified Capital Stock" means, (i) with respect to any person, 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, putable 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, 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 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 (a) redeemable or repurchasable
solely at the option of such person or (b) issued to employees of New Holdings
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; and (ii) with respect to any Subsidiary of New Holdings, any
Preferred Stock issued by a Subsidiary of New Holdings other than Preferred
Stock issued to New Holdings.
"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 (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
(excluding any such items which represent the reversal of any accrual of, or
cash reserve for, anticipated charges in any prior 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).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Excluded Assets" means assets of New Holdings or any Subsidiary required
to be disposed of by applicable regulatory authorities in connection with the
Merger.
16
<PAGE> 112
"Existing Indebtedness" means the following indebtedness of the Company
outstanding on the Issue Date after giving effect to the Merger: (a) the %
Senior Notes due 2004 issued pursuant to an indenture dated as of the Issue
Date; (b) the 10.45% Senior Notes due 2000 issued pursuant to an indenture dated
as of April 15, 1992; (c) the % Senior Subordinated Notes due 2005 issued
pursuant to an indenture dated as of the Issue Date; (d) the 9% Senior
Subordinated Notes due 2003 issued pursuant to an indenture dated as of March
30, 1993; (e) the 10 1/4% Senior Subordinated Notes due 2002 issued pursuant to
an indenture dated as of July 29, 1992; (f) the 13.75% Senior Subordinated Notes
due 2005 issued pursuant to an indenture dated as of the Issue Date; and (g) the
13.75% Senior Subordinated Notes due 2001 issued pursuant to an indenture dated
as of June 15, 1991.
"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 New Holdings, any
original issue discount on the New Discount Debentures, the Senior Discount
Notes and the Seller Debentures 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 declared or paid in cash or required to be
declared or paid in cash, during such 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 New Holdings 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.
"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.
"GAAP" means generally accepted accounting principles as in effect in the
United States of America as of the Issue Date.
"Holdings" means Food 4 Less Holdings, Inc., a California corporation, and
its successors, including, without limitation, New Holdings, following the
Reincorporation Merger.
"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
17
<PAGE> 113
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 or, if there is no such maximum fixed repurchase price, the
liquidation preference of such Disqualified Capital Stock, plus accrued but
unpaid dividends; (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
the New Discount Debenture 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 Discount Debenture 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
liabilities of such partnership unless any such general partner shall, in the
reasonable determination of the Board of Directors of New Holdings, 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.
"Independent Financial Advisor" means a reputable accounting, appraisal or
a nationally recognized investment banking firm that is, in the reasonable
judgment of the Board of Directors of New Holdings, qualified to perform the
task for which such firm has been engaged hereunder and disinterested and
independent with respect to New Holdings and its Affiliates.
"Initial Public Offering" means an underwritten primary public offering of
common stock of New Holdings at a time when New Holdings has not previously
issued or sold any equity securities in an underwritten transaction pursuant to
a registration statement filed pursuant to the Securities Act.
"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 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 New Holdings or any Subsidiary 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 Discount
Debentures pursuant to the New Discount Debenture Indenture.
18
<PAGE> 114
"Letter of Credit Obligations" means Indebtedness of the Subsidiaries with
respect to letters of credit issued pursuant to the Credit Agreement, and for
purposes of the provisions of the New Discount Debenture Indenture summarized
under the heading "Limitations on Incurrences of Additional 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 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 hereunder.
"Maturity Date" means , 2005.
"Merger" means (i) the merger of Food 4 Less Supermarkets, Inc. into Ralphs
Supermarkets, Inc. (with Ralphs 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 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 as of
September 14, 1994, by and among New Holdings, Holdings, FFL, Food 4 Less
Supermarkets, Inc., RSI and the stockholders of RSI, as such agreement is in
effect on the Issue Date.
"Net Cash Proceeds" means Net Proceeds of (i) the sale of Qualified Capital
Stock of New Holdings or (ii) any Asset Sale, in each case, 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 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 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 New Holdings, the
sum of (i) the fair market value of the proceeds received by New Holdings 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 New Holdings upon such conversion or exchange.
"New Discount Debentures" means the 13 5/8% Senior Discount Debentures due
2005 of New Holdings issued pursuant to the New Discount Debenture Indenture, as
the same may be modified or amended from time to time and refinancings thereof,
to the extent such refinancing indebtedness is permitted to be incurred under
the New Discount Debenture Indenture.
"New Discount Debenture Indenture" means the indenture between New Holdings
and United States Trust Company of New York, as trustee, dated as of the Issue
Date, pursuant to which the New Discount Debentures will be issued, as amended
or supplemented from time to time in accordance with the terms thereof.
"New Holdings" means Food 4 Less Holdings, Inc., a Delaware corporation,
and its successors.
"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
19
<PAGE> 115
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 New
Holdings, 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
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 New Holdings, Indebtedness
that ranks pari passu in right of payment to the New Discount Debentures
(whether or not secured by any Lien) including the Senior Discount Notes, to the
extent any remain outstanding following the Merger.
"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 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 Partners, 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 New Holdings or
any Subsidiary, or any participant therein, (iv) a trustee or other fiduciary
holding securities under an employee benefit plan of New Holdings or any
Subsidiary 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 (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 $750 million or
such lesser amount as may be actually funded under the Term Loans on or within
91 days following the Issue Date (with any such amounts funded after the Issue
Date to be used to finance the repurchase of up to $224.5 million aggregate
principal amount of Old RGC Notes pursuant to the "change of control purchase
offer" provision set forth in section 1014 of the indentures pursuant to which
the Old RGC Notes were issued, plus related fees and expenses) less the
aggregate amount of all principal repayments thereunder pursuant to
20
<PAGE> 116
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) any guarantee by New Holdings of the Indebtedness
referred to in the foregoing clause (a); (c) Indebtedness of New Holdings or a
Subsidiary owed to and held by New Holdings or a Subsidiary; (d) Indebtedness
incurred by New Holdings 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 (d) does not exceed, in the aggregate, 3% of net sales of New Holdings
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 (d) does not exceed, in the aggregate, 3% of the
aggregate net sales of New Holdings 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); (e) Indebtedness incurred by New Holdings 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, Food 4 Less
Supermarkets, Inc. and their respective subsidiaries as described in this
Prospectus; (f) Indebtedness of New Holdings or any Subsidiary incurred under
Foreign Exchange Agreements and Interest Swap Obligations; (g) guarantees
incurred in the ordinary course of business, by New Holdings or a Subsidiary, of
Indebtedness of any other person in aggregate not to exceed $25 million at any
time outstanding; (h) guarantees by New Holdings or a Subsidiary of Indebtedness
incurred by a wholly-owned Subsidiary so long as the incurrence of such
Indebtedness incurred by such wholly-owned Subsidiary is permitted under the
terms of the New Discount Debenture Indenture; (i) Refinancing Indebtedness; (j)
Indebtedness for letters of credit relating to workers' compensation claims and
self-insurance or similar requirements in the ordinary course of business; (k)
Existing Indebtedness and other Indebtedness outstanding on the Issue Date
(after giving effect to the Merger); (l) Indebtedness arising from guarantees of
Indebtedness of New Holdings or any Subsidiary or other agreements of New
Holdings 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 business, assets or Subsidiary for the purpose 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 New Holdings and its Subsidiaries in connection with such disposition; (m)
obligations in respect of performance bonds and completion guarantees provided
by New Holdings or any Subsidiary in the ordinary course of business; (n)
Indebtedness of New Holdings with respect to the Senior Discount Notes, if any,
New Discount Debentures (including the accretion of the Senior Discount Notes
and the New Discount Debentures up to their respective stated principal amount
at maturity) and Seller Debentures (including the issuance of secondary
securities in lieu of cash interest payments pursuant to the terms of the Seller
Debenture Indenture); and (o) additional Indebtedness of New Holdings or any
Subsidiary 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 connection with an Asset Sale 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 New Discount
Debenture Indenture summarized under "Limitation on Restricted Payments" and
"Limitation on Transac-
21
<PAGE> 117
tions with Affiliates," (vi) Investments by any Subsidiary in other
Subsidiaries, 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 New
Holdings 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)
judgement 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 New Holdings 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 New Holdings 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 New Holdings 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 New
Holdings 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 New
Holdings or any Subsidiary of its obligations under such lease; (xv) Liens
arising from filing UCC financial statements for precautionary purposes in
connection with true leases of personal property that are otherwise permitted
under the New Discount Debenture Indenture and under which New Holdings or any
Subsidiary is lessee; and (xvi) additional Liens securing Indebtedness of the
Company 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 New Holdings or any
Subsidiary to The Yucaipa Companies or the principals or any Affiliate thereof
for consulting, management, investment banking or similar services, or for
reimbursement of losses, costs and expenses pursuant to the Consulting
Agreement, (ii) any payment by New Holdings or any Subsidiary to Apollo
Advisors, L.P. or the principals or Affiliates thereof in an aggregate amount
not to exceed $5 million as a commitment fee in connection with the purchase of
equity securities of New Holdings on the Issue Date, and (iii) any payment by
New Holdings or any Subsidiary (a) in connection with repurchases of outstanding
shares of New Holdings common stock following the death, disability or
termination of employment of management stockholders, and (b) of amounts
22
<PAGE> 118
required to be paid by New Holdings or any Subsidiaries to participants in
employee benefit plans upon any 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).
"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 New Holdings, (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 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, any and all shares,
interests, participations or other equivalents (however designated) of such
person's preferred or preference stock, whether outstanding on the date hereof
or issued after the Issue Date, and including, without limitation, all classes
and series of preferred or preference stock of such person.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of the New Discount Debenture Indenture, a
calculation in accordance with Article 11 of Regulation S-X under the Securities
Act as interpreted by New Holdings' 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 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 (b), (d), (e), (i), (k) and (n) of the definition thereof) incurred in
accordance with the New Discount Debenture 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 and (y) shall contain subordination
and default
23
<PAGE> 119
provisions no less favorable in any material respect to Holders 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 New Holdings or any Subsidiary 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 New Holdings and any Subsidiary 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 in each case reasonably
related to the business of New Holdings and any Subsidiary as it is conducted as
of the Issue Date and as such business may thereafter evolve or change.
"Restricted Debt Prepayment" means the purchase, redemption, acquisition or
retirement for value by New Holdings, prior to the scheduled maturity or prior
to any scheduled repayment of principal or any sinking fund payment in respect
of any Subordinated Indebtedness.
"Restricted Payment" means any (i) Stock Payment or (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 SEC promulgated thereunder.
"Seller Debentures" means the 13 5/8% Senior Subordinated Pay-in-Kind
Debentures due 2007 of New Holdings, including any secondary securities issued
in respect thereof, in each case, issued pursuant to the Seller Debenture
Indenture, as the same may be modified or amended from time to time and
refinancings thereof, to the extent such refinancing indebtedness is permitted
to be incurred under the New Discount Debenture Indenture.
"Seller Debenture Indenture" means the indenture between New Holdings and
Norwest Bank Minnesota, N.A., as trustee, dated as of the Issue Date, pursuant
to which the Seller Debentures will be issued, as amended or supplemented from
time to time in accordance with the terms thereof.
"Senior Discount Notes" means the 15.25% Senior Discount Notes due 2004 of
Holdings issued pursuant to the Senior Discount Note Indenture, as the same may
be modified or amended from time to time and refinancings thereof, to the extent
such refinancing indebtedness is permitted to be incurred under the New Discount
Debenture Indenture.
"Senior Discount Note Indenture" means the indenture between Holdings and
United States Trust Company of New York, as trustee, dated as of December 15,
1992, pursuant to which the Senior Discount Notes were issued, as amended or
supplemented from time to time in accordance with the terms thereof.
"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 New Holdings 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 New Holdings 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 New Holdings, dividends payable solely in Qualified
Capital Stock of New Holdings), 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
24
<PAGE> 120
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 New Holdings) 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 New
Holdings, through the issuance in exchange therefor solely of Qualified Capital
Stock of New Holdings, 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 New Holdings or a wholly
owned Subsidiary.
"Subordinated Indebtedness" means Indebtedness of New Holdings that is
subordinated in right of payment to the New Discount Debentures, including
Indebtedness under the Seller Debentures.
"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 50% 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 New Holdings.
"Term Loans" means the term loan facility under the Credit Agreement and
any agreement governing Indebtedness incurred to refund, replace or refinance
any borrowings outstanding under such facility or under any prior refunding,
replacement or refinancing thereof (in each case, in whole or in part, and
without limitation as to amount, terms, conditions, covenants and other
provisions).
"The Yucaipa Companies" means The Yucaipa Companies, a California general
partnership, or any successor thereto which is an Affiliate of Ronald W. Burkle
or his Permitted Transferees and which has been established for the sole purpose
of changing the form of The Yucaipa Companies from that of a partnership to that
of a limited liability company or any other form of entity which is not
materially adverse to the rights of the Holders under the Indenture.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"wholly-owned Subsidiary" means any Subsidiary all of the shares of Capital
Stock of which (other than directors' qualifying shares) are at the time
directly or indirectly owned by New Holdings.
"Yearly Period" means each fiscal year of New Holdings; provided that the
first Yearly Period shall begin on the Issue Date and shall end on January 28,
1996.
25
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) AUDITED
CONSOLIDATED BALANCE SHEETS AND AUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) 52 WEEKS ENDED JANUARY
29, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-29-1995
<PERIOD-END> JAN-29-1995
<EXCHANGE-RATE> 1
<CASH> 35,125
<SECURITIES> 0
<RECEIVABLES> 43,597
<ALLOWANCES> 0
<INVENTORY> 221,388
<CURRENT-ASSETS> 319,903
<PP&E> 624,724<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,509,914
<CURRENT-LIABILITIES> 439,403
<BONDS> 883,020
<COMMON> 0
0
0
<OTHER-SE> 27,187
<TOTAL-LIABILITY-AND-EQUITY> 1,509,914
<SALES> 2,724,604
<TOTAL-REVENUES> 2,724,604
<CGS> 2,101,033
<TOTAL-COSTS> 2,101,033
<OTHER-EXPENSES> 478,018
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 112,651
<INCOME-PRETAX> 32,118
<INCOME-TAX> 0
<INCOME-CONTINUING> 32,118
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,118
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>PP&E, net
</FN>
</TABLE>
