UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 1, 1994 (fifty-two weeks)
Commission File Number: 001-10252
SMITH'S FOOD & DRUG CENTERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 87-0258768
(State of incorporation) (I.R.S. Employer Identification No.)
1550 South Redwood Road, Salt Lake City, UT 84104
(Address of principal executive offices) (Zip Code)
(801) 974-1400
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Class B Common Stock, $.01 par value New York Stock Exchange
(Title of each class) (Name of each exchange on
which registered)
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
The aggregate market value of the voting stock held by non-affiliates of
the registrant, computed by reference to the last sale price of the Class B
Common Stock on February 28, 1994: $454,935,147
Number of shares outstanding of each class of common stock as of February
28, 1994:
Class A 12,493,665 Class B 17,357,636
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive Proxy Statement dated March 25, 1994
for the Annual Meeting of Stockholders to be held on April 26, 1994 are
incorporated by reference into Part III of this Form 10-K.
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 Annual Report on
Form 10-K or any amendment to this Annual Report on Form 10-K. [ ]
TABLE OF CONTENTS
PART I 3
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II........ 6
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 6
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 8. Financial Statements and Supplementary Data 7
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 7
PART III 7
Item 10. Directors and Executive Officers of the Registrant 7
Item 11. Executive Compensation 8
Item 12. Security Ownership of Certain Beneficial Owners and
Management 8
Item 13. Certain Relationships and Related Transactions 8
PART IV 8
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 8
PART I
Item 1. Business
Smith's Food & Drug Centers, Inc. (the "Company") is a leading regional
supermarket and drug store chain operating in the Intermountain,
Southwestern, and Southern California regions of the United States, with
129 stores in Arizona, California, Idaho, New Mexico, Nevada, Texas, Utah
and Wyoming. The Company was founded in 1948 and reincorporated under
Delaware law in 1989. The Company's Class B Common Stock is traded on the
New York Stock Exchange under the symbol "SFD".
The Company develops and operates combination food and drug centers which
offer a full selection of supermarket food items, a wide assortment of
nonfood and drug items and a number of specialty departments including a
"Big-Deals" section which offers many food and household items in larger
"warehouse" pack sizes at warehouse club prices. Primary food products
sold in the stores include groceries, meat, poultry, produce, dairy
products, delicatessen items, prepared foods, bakery products, frozen
foods, take-out foods, fresh juices, and specialty fish, meat and cheese.
Some or all of the following nonfood items are available in the stores:
full-line pharmacy and related over-the-counter drug items, health and
beauty aids, video rentals, in-store banking services, housewares, toys,
camera/photo department items, one-hour photo processing, cosmetics and
other general merchandise.
The average size of the Company's food and drug centers opened during
fiscal 1993 was 75,700 square feet. The Company's food and drug centers
currently being opened range in size from approximately 45,000 to 82,000
square feet per store, and future stores are expected to range in size from
54,000 to 66,000 square feet per store, depending on site constraints and
the number and size of competing stores in relation to the population of
the market area being served. In order to respond to changing consumer
needs, the Company continually refines its store configurations and lay-
outs. The Company's 129 stores at January 1, 1994 consisted of 115 large
combination food and drug centers averaging 69,200 square feet, 12
superstores averaging 40,500 square feet and two conventional stores
averaging 26,000 square feet.
The combination stores range in size from 45,000 to 84,000 square feet and
offer a complete line of supermarket, nonfood and drug products. These
stores feature modern, attractive layouts with wide aisles and well-lighted
spaces to facilitate convenient shopping, a variety of specialty
departments, and centralized, highly automated checkout facilities. The
superstores range in size from 30,000 to 45,000 square feet and have the
appearance of a large supermarket augmented with a significant amount of
nonfood and drug merchandise. Generally the superstores have fewer and
more limited specialty departments than the combination stores. The
conventional stores have the appearance of traditional supermarkets.
The Company's strategy is to offer customers a broad product selection at
everyday low prices combined with quality customer service in large,
modern, attractive food and drug centers with ample parking. Customers are
able to fill a substantial portion of their daily and weekly shopping needs
at one convenient location. The Company promotes its reputation as a low
price competitor in its market areas through a policy of everyday low
pricing. Management attributes much of the Company's success to combining
broad product selection and everyday low prices with quality customer
service.
The Company's primary focus in existing markets has been on increasing
sales volume by offering customers low prices and quality customer service
combined with specifically designed marketing programs. The Company also
has focused on increasing sales volume by opening new stores in existing
and adjacent markets. During 1993, the Company opened eleven combination
stores in the following states: eight in California, one in New Mexico,
one in Texas and one in Utah. The Company has an expansion program in
progress which calls for a total of up to 60 stores in Southern California
(San Diego to Fresno) prior to mid-1997. The Company currently plans to
open 10 to 12 new stores at locations primarily in Southern California in
1994, three of which were opened during the first two months of 1994.
Operations
During 1993 the Company consolidated its Intermountain and Southwest
Regions into one region. The new Region I consists of 103 stores in
Arizona, Idaho, New Mexico, Nevada, Texas, Utah and Wyoming. Region II
consists of 26 stores in Southern California. The regions are divided into
10 geographic districts ranging from 10 to 17 stores each. The regions and
districts are staffed with operational managers who are given as much
autonomy as possible while retaining the advantages of central control and
economies of scale over accounting, real estate, legal and data processing
functions. This operational autonomy enables operating management to react
quickly to local market circumstances and gain competitive advantages as
local conditions change. District and store managers are responsible for
all aspects of store operations.
Competition
The retail food and drug industry is highly competitive. The Company
competes with other large regional and national food and drug store chains,
local food and drug stores, specialty food stores, convenience stores,
restaurants and fast food chains. Principal competitive factors include
store location, price, service, convenience, cleanliness, product quality
and variety. Because the food and drug store business is characterized by
narrow profit margins, the Company's earnings depend primarily on high
sales volume and operating efficiency.
The Company engages in aggressive price competition in each market that it
serves and monitors its market share in those markets through internal
research which is updated on a regular basis. As the Company continues to
move into new market areas (including the expansion into Southern
California), it anticipates significant competitive pressure on its
operating margins in those markets.
Purchasing, Distribution and Processing
In the fourth quarter of 1993, a new 1,000,000 square foot, fully-
integrated distribution center in Riverside, California, including a dairy
processing plant, was completed and began operations. With the addition of
this distribution center, the Company operates approximately 4.2 million
square feet of distribution and processing facilities. Central
distribution facilities in Salt Lake City and Layton, Utah; Tolleson,
Arizona; and Riverside, California supply products to all of the Company's
stores. The Company also operates a produce warehouse located in
California. The Company's processing facilities located in Layton, Utah
produce a variety of products under the Company's private labels for
distribution to Company stores. The Company's dairy plants located in
Layton, Tolleson and Riverside process a variety of milk, milk products and
fruit beverages. The Company's automated frozen dough plant produces
frozen bakery goods for final baking at in-store bakeries. The Company's
cultured dairy products plant produces sour cream, yogurt, cottage cheese
and chip dip products. The Company's ice cream processing plant supplies
all stores with Smith's private label ice cream.
The Company purchases significant levels of selected products, typically
fast moving inventory items, on a forward purchase basis in order to secure
lower prices or to take advantage of special buying opportunities. Forward
purchasing exposes the Company to risks of decreases in product pricing
during the time held in stock, changes in demand for such product and
increases in the costs of financing inventory.
The Company transports food and merchandise from its distribution centers
through a Company-owned fleet of tractors and trailers which primarily
serve nearby stores and through common carriers for stores located at
greater distances.
Employees
The Company has over 18,000 employees. Approximately half of the Company's
employees are nonunionized, although the Company anticipates that nearly
all of the Company's new employees in California will be unionized. The
Company's unionized employees work under 20 collective bargaining
agreements with local labor unions. Three collective bargaining agreements
are subject to renegotiation or will become subject to renegotiation during
1994. There can be no assurance that such agreements will be renewed or
that the terms of any such renewal will be similar to the terms of existing
agreements. Management of the Company believes that it will be able to
renew such agreements on terms acceptable to the Company. If it is unable
to do so, there could be a material adverse effect on the Company's
operations.
Governmental Regulation
The Company is subject to regulation by a variety of governmental
authorities, including federal, state and local agencies which regulate the
distribution and sale of alcoholic beverages, pharmaceuticals, milk and
other agricultural products, as well as various other food and drug items
and also regulate trade practices, building standards, labor, health,
safety and environmental matters. The Company from time to time receives
inquiries from state and federal regulatory authorities with respect to its
advertising practices, pricing policies and other trade practices. None of
these inquiries, individually or in the aggregate, has resulted, or is
expected by management to result, in any order, judgment, fine or other
action that has, or would have, a material adverse effect on the business
or financial position of the Company.
Item 2. Properties
At January 1, 1994, the Company operated 129 stores located in eight
states. Of the 129 stores, the Company owned 95 with the remainder leased
from third parties. The following is an analysis of the Company's store
properties by state at January 1, 1994:
State Owned Leased Total
Utah 29 5 34
California 17 9 26
Arizona 21 3 24
Nevada 6 10 16
New Mexico 11 4 15
Idaho 4 1 5
Wyoming 3 2 5
Texas 4 0 4
-- -- ---
Total 95 34 129
The Company leases or subleases 34 of its operating stores under leases
expiring between 1994 and 2023. Nine of the Company-owned stores are
situated on property which is ground-leased, in whole or in part, from
third parties under leases expiring between 2002 and 2040. In most cases,
such building and ground leases are subject to customary renewal options.
The Company owns 579,000 square feet of grocery warehousing facilities and
326,000 square feet of processing plants in Layton, Utah; a 226,000 square
foot nonfood warehouse in Salt Lake City, Utah; and a 1,089,000 square foot
grocery and nonfood warehouse and 91,000 square feet of processing plants
in Tolleson, Arizona. The Company leases a 40,000 square foot produce and
forward purchasing warehouse in Albuquerque, New Mexico; a 190,000 square
foot combination grocery and nonfood warehouse and a 408,000 square foot
grocery warehouse in Salt Lake City, Utah; and a 204,000 square foot
produce warehouse in Ontario, California, under leases expiring in 1995,
1997, 1997 and 1999, respectively. The Company also leases a 114,000
square foot processing plant and a 981,000 square foot grocery warehouse in
Riverside, California under leases expiring in 2018.
In addition, the Company's corporate offices, data processing and records
storage facilities are located in over 100,000 square feet of office and
storage space owned by the Company in Salt Lake City, Utah.
Item 3. Legal Proceedings
The Company is a party to several actions arising in the ordinary course of
its business. Management believes that none of these actions, individually
or in the aggregate, will have a material adverse effect on the Company's
results of operations or financial position.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1993.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Company's Class B Common Stock is listed on the New York Stock Exchange
under the symbol "SFD". The following table shows the high and low sales
prices per share for all quarters of fiscal 1992 and 1993:
High Low
Fiscal 1992
First Quarter $43 1/4 $33 3/8
Second Quarter 38 27 7/8
Third Quarter 34 3/4 25 3/4
Fourth Quarter 37 3/4 32 3/4
Fiscal 1993
First Quarter $37 1/4 $31
Second Quarter 33 1/4 23 5/8
Third Quarter 26 1/2 20
Fourth Quarter 22 1/2 19
As of February 28, 1994 there were 289 Class A Common Stockholders and
1,229 Class B Common Stockholders of record. There are numerous
stockholders who hold their Class B Common Stock in the "street name" of
their various stock brokerage houses.
Cash dividends of $.13 per share of Class A Common Stock and Class B Common
Stock were paid in each of the four quarters of fiscal 1993, totaling $.52
per common share for fiscal 1993. Cash dividends of $.11 per share of
Class A Common Stock and Class B Common Stock were paid in each of the four
quarters of fiscal 1992, totaling $.44 per common share for fiscal 1992.
The Board of Directors has approved a quarterly cash dividend of $.13 per
common share commencing in the first quarter of fiscal 1994, which, if
continued, would total $.52 per common share for fiscal 1994.
Item 6. Selected Financial Data
The information required for this item is included in the Annual Report
to Stockholders for the fiscal year ended January 1, 1994 on the
schedule entitled "Five Year Summary of Selected Financial and Operating
Data" which information is attached as part of Exhibit 13.1 hereto and
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required for this item is included in the Annual Report
to Stockholders for the fiscal year ended January 1, 1994 in the section
entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" which information is attached as part of
Exhibit 13.1 hereto and incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements of the Company included in the Annual
Report to Stockholders for the fiscal year ended January 1, 1994 are
attached as part of Exhibit 13.1 hereto and incorporated herein by
reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning directors and certain executive officers of the
Company is included in the Company's Proxy Statement dated March 25, 1994
under the caption "Election of Directors," and "Other Matters -- Compliance
with Section 16(a) of the Exchange Act," which information is incorporated
herein by reference. The following sets forth certain information with
regard to other executive officers of the Company:
Matthew G. Tezak, age 38, became Senior Vice President and Chief Financial
Officer in 1993. He served as Senior Vice President, Finance and Treasurer
from 1992 to 1993 and Vice President, Finance and Treasurer from 1987 to
1992. Mr. Tezak, a certified public accountant, joined the Company in 1979
as Assistant Controller.
Larry R. McNeill, age 52, has served as Senior Vice President, Corporate
Development since 1992. Mr. McNeill joined the Company in 1979 as Vice
President, Corporate Development.
Richard C. Bylski, age 54, has served as Senior Vice President, Human
Resources since 1992. He served as Vice President, Human Resources of the
Company since 1979.
Michael C. Frei, age 47, joined the Company in March 1990 as Senior Vice
President, General Counsel and Corporate Secretary. Prior to that time,
Mr. Frei served as Vice President and General Counsel of Price Development
Company, a commercial real estate developer, since 1981.
Fred F. Urbanek, age 58, has served as Senior Vice President, Facility
Engineering since 1992. He served as Vice President, Facility Engineering
of the Company since 1985.
The Company's executive officers are appointed to serve, at the discretion
of the Board of Directors, until their successors are appointed.
Item 11. Executive Compensation
Information concerning Executive Compensation is included in the Company's
Proxy Statement dated March 25, 1994 under the caption "Executive
Compensation" which information is incorporated herein by reference (other
than information under the sub captions "Report of the Compensation
Committee on Executive Compensation" and "Performance Graph", which shall
not be deemed to be incorporated by reference herein.).
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning Security Ownership of Certain Beneficial Owners and
Management is included in the Company's Proxy Statement dated March 25,
1994 under the caption "Security Ownership of Certain Beneficial Owners and
Management" which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information concerning Certain Relationships and Related Transactions is
included in the Company's Proxy Statement dated March 25, 1994 under the
caption "Certain Transactions" which information is incorporated herein by
reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of this report:
1.Financial Statements:
The following consolidated financial statements of the Company
and its subsidiaries and the Report of Ernst & Young, Independent
Auditors included in the Company's Annual Report to Stockholders
for the fiscal year ended January 1, 1994 are incorporated herein
by reference:
Consolidated Statements of Income--fiscal years ended
January 1, 1994, January 2, 1993 and December 28, 1991
Consolidated Balance Sheets--January 1, 1994 and January 2,
1993
Consolidated Statements of Common Stockholders' Equity--
fiscal years ended January 1, 1994, January 2, 1993 and
December 28, 1991
Consolidated Statements of Cash Flows--fiscal years ended
January 1, 1994, January 2, 1993 and December 28, 1991
Notes to Consolidated Financial Statements
Report of Ernst & Young, Independent Auditors
2.Financial Statement Schedules:
The following financial statement schedules of the Company and its
subsidiaries are filed as part of this Annual Report on Form 10-K:
Schedule II - Amounts Receivable from Related Parties
and Underwriters, Promoters, and Employees Other Than
Related Parties
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted.
3.Exhibits:
The exhibits listed in the accompanying index to exhibits are filed
or incorporated by reference as part of the Form 10-K.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the fourth quarter of
fiscal 1993.
<PAGE>
<TABLE>
<CAPTION>
SMITH'S FOOD & DRUG CENTERS, INC.
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS,PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
Deductions
Balance at Amounts Balance at End
Balance at Amounts of Period
Beginning Amounts Written Not
Name of Debtor of Period Additions Collected Off Current Current
<S> <C> <C> <C> <C> <C> <C>
Fiscal year 1993:
Scott Fishburn, note
with interest at 10%,
due 5/7/95 $100,000 $100,000
Harry Moskal, notes
with interest at 10%:
Due 12/31/97 310,000 310,000
Due 1/10/01 350,000 $350,000
non-interest bearing
note, due on demand 6,000 2,000 $ 2,000 2,000
Tom Potter, notes with
interest at 10%:
Due 3/11/94 $ 20,000 20,000
Due 3/11/94 105,000 30,915 $14,398 59,687
Charlie Yamashita, note
with interest at 10%:
Due on demand 9,268 9,268
Due 3/11/94 94,000 94,000
Brent Farnsworth, notes
with interest at 10%:
Due on demand 300,000 300,000
Due 3/11/94 7,050 7,050
-------- -------- -------- ------- -------- --------
$880,268 $421,050 $392,183 $14,398 $482,737 $412,000
Fiscal year 1992:
Scott Fishburn, note
with interest at 10%,
due 5/7/95 $100,000 $100,000
Harry Moskal, notes
with interest at 10%:
Due 12/31/97 $310,000 310,000
Due 1/10/01 350,000 350,000
non-interest bearing
note, due on demand 6,000 $ 2,000 4,000
Rick Nelson, note
with interest at 10%,
due on demand 65,000 $65,000
Tom Potter, note with
interest at 10%,
due 3/11/94 105,000 35,000 70,000
Charlie Yamashita,
note with interest at
10%, due on demand 12,307 3,039 4,000 5,268
-------- -------- ------- ------- --------
$527,307 $421,000 $68,039 $41,000 $839,268
Fiscal year 1991:
Scott Fishburn, note
with interest at 10%,
due 5/7/95 $100,000 $100,000
Harry Moskal, note
with interest at 10%,
due 1/10/01 $350,000 350,000
Rick Nelson, notes
with interest at 10%:
Due on demand 75,000 $ 10,000 $ 65,000
Due 3/31/92 25,000 25,000
Abel Porter, note with
interest at 10%,
due on demand 350,000 350,000
Charlie Yamashita,
notes with interest
at 10%:
Due on demand 10,386 1,921 3,039 9,268
Due 3/1/90 10,000 10,000
Due 4/1/99 89,995 89,995
-------- -------- -------- -------- --------
$560,381 $451,921 $484,995 $ 68,039 $459,268
</TABLE>
<PAGE>
SMITH'S FOOD & DRUG CENTERS, INC.
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(DOLLAR AMOUNTS IN THOUSANDS)
Balance at Other Balance at
Beginning Additions Increase End of
Classification of Period at Cost Retirements (Decrease) Period
Fiscal Year 1993:
Land $ 277,167 $ 43,452 $ 38,150 $ 282,469
Buildings 549,935 153,675 120,835 582,775
Leasehold 30,668 8,257 59 38,866
Improvements
Fixtures and 436,969 116,917 15,004 538,882
Equipment
$1,294,739 $322,301 $174,048 $1,442,992
Fiscal Year 1992:
Land $ 186,672 $ 91,489 $ 994 $ 277,167
Buildings 455,853 96,633 2,551 549,935
Leasehold 26,046 5,236 614 30,668
Improvements
Fixtures and 356,457 94,631 14,119 436,969
Equipment
$1,025,028 $287,989 $18,278 $1,294,739
Fiscal Year 1991:
Land $134,464 $ 53,773 $ 1,565 $ 186,672
Buildings 327,705 131,593 3,445 455,853
Leasehold 26,297 1,756 2,007 26,046
Improvements
Fixtures and 282,180 94,438 20,161 356,457
Equipment
$770,646 $281,560 $27,178 $1,025,028
<PAGE>
SMITH'S FOOD & DRUG CENTERS, INC.
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
(DOLLAR AMOUNTS IN THOUSANDS)
Additions
Balance at Charged to Other Balance at
Beginning Costs and Increase End of
Classification of Period Expenses Retirements (Decrease) Period
Fiscal Year 1993:
Buildings $ 60,199 $17,902 $ 2,438 $ 75,663
Leasehold 6,742 1,884 293 8,333
Improvements
Fixtures and 150,160 62,387 12,180 200,367
Equipment
$217,101 $82,173 $14,911 $284,363
Fiscal Year 1992:
Buildings $ 45,388 $15,675 $ 864 $ 60,199
Leasehold 5,371 1,744 373 6,742
Improvements
Fixtures and 112,919 50,362 13,121 150,160
Equipment
$163,678 $67,781 $14,358 $217,101
Fiscal Year 1991:
Land
Buildings $ 34,482 $11,312 $ 406 $ 45,388
Leasehold 5,560 1,553 1,742 5,371
Improvements
Fixtures and 93,292 37,630 18,003 112,919
Equipment
$133,334 $50,495 $20,151 $163,678
<PAGE>
INDEX TO EXHIBITS
(Item 14(a))
Exhibit
Number Document
3(i) Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 in
the Company's Registration Statement on Form S-1
(Commission File No. 33-28698) which became effective
on June 21, 1989).
3(ii)By-Laws of the Company (incorporated by
reference to Exhibit 3.2 in the Company's
Registration Statement on Form S-1 (Commission File
No. 33-28698) which became effective on June 21,
1989).
4.1 Article IV of Restated Certificate of
Incorporation of the Company (see Exhibit 3(i)).
4.2 Certain instruments which define the rights of
holders of long-term debt of the Company and its
subsidiaries are not being filed because the total
amount of securities authorized under each such
instrument does not exceed 10% of the total
consolidated assets of the Company and its
subsidiaries. The Company hereby agrees to furnish a
copy of each such instrument to the Commission upon
request.
4.3 Form of Pass Through Trust Agreement between the
Company and the Pass Through Trustee Company
(incorporated by reference to Exhibit 4.1 in the
Company's Registration Statement on Form S-3
(Commission File No. 33-51097) which became effective
on January 26, 1994).
4.4 Form of Pass Through Certificate (included in
Exhibit 4.3).
*10.1 Amended and Restated 1989 Stock Option Plan
(incorporated by reference to Exhibit 10.1 of the
Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1991).
*10.2 1993 Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.2 of the
Company's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993).
*10.3First Amendment to the 1993 Employee Stock
Purchase Plan (Exhibit 10.2) dated as of August 2,
1993.
*10.4Employees' Profit Sharing Plan and Trust, as
amended and restated as of July 27, 1982
(incorporated by reference to Exhibit 10.4 of the
Company's Registration Statement on Form S-1
(Commission File No. 33-28698) which became effective
June 21, 1989).
*10.5 Pension Plan of Employees, as amended and
restated as of July 27, 1982 (incorporated by
reference to Exhibit 10.5 of the Company's
Registration Statement on Form S-1 (Commission File
No. 33-28698) which became effective on June 21,
1989)
10.6 Employee Profit Sharing Plan dated as of January
3, 1994, First Amendment dated as of August 2, 1994
and Second Amendment dated as of January 27, 1994.
*10.7 Forms of Supplemental Compensation
Agreements dated as of January 2, 1985, and amended
as of March 14, 1985, between the Company and certain
executive officers (incorporated by reference to
Exhibit 10.6 of the Company's Registration Statement
on Form S-1 (Commission File No. 33-28698) which
became effective on June 21, 1989).
10.8 Commitment Letter to the Company from Banco
di Roma, dated as of July 16, 1993.
10.9 Revolving Credit Agreement, dated as of
October 15, 1993, between the Company and Credit
Suisse.
10.10 Promissory Note of the Company to Banque
Nationale de Paris, dated as of May 29, 1991, and
Commitment Letter to the Company from Banque
Nationale de Paris, dated as of May 29, 1991
(incorporated by reference to Exhibit 10.8 of the
Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1991)
10.11 Promissory Notes of the Company to West One
Bank Idaho, N.A., dated as of July 22, 1993.
10.12 Loan Agreement Between the Company and a
consortium of lenders dated May 1, 1992 (incorporated
by reference to Exhibit 10.11 of the Company's Annual
Report on Form 10-K for the fiscal year ended January
2, 1993).
10.13 Loan Agreement between the Company and a
consortium of lenders dated December 15, 1992
(incorporated by reference to Exhibit 10.12 of the
Company's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993).
*10.14 Form of Additional Retirement Benefit
Agreement between the Company and certain of its
executive officers (incorporated by reference to
Exhibit 10.13 of the Company's Annual Report on Form
10-K for the fiscal year ended January 2, 1993).
*10.15 Form of Indemnification Agreement between
the Company and its directors and officers
(incorporated by reference to Exhibit 10.14 of the
Company's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993).
10.16 Revolving Credit Agreement, dated as of
June 28, 1993, between the Company and Bank of
America (incorporated by reference to Exhibit 10.15
of the Company's Form 10-Q for the second quarter
ended July 3, 1993).
10.17 Loan Agreement between the Company and a
consortium of lenders dated November 1, 1993.
13.1 Company's Annual Report to Stockholders for the
fiscal year ended January 1, 1994 (selected pages
only).
22.1 Subsidiaries of the Company.
23.1 Consent of Ernst & Young, Independent
Auditors.
* Indicates management contract or compensatory plan or arrangement.
<PAGE>
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.
SMITH'S FOOD & DRUG CENTERS, INC.
Date: March 24, 1994 By /s/ Jeffrey P. Smith
Jeffrey P. Smith
Chairman of the Board of Directors
and Chief Executive Officer
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.
Signature Capacity Date
/s/ Jeffrey P. Smith Chairman of the Board of March 24, 1994
Jeffrey P. Smith Directors and Chief
Executive Officer
(Principal Executive
Officer)
/s/ Richard D. Smith President and Chief March 24, 1994
Richard D. Smith Operating Officer;
Director
/s/ Robert D. Bolinder Executive Vice President, March 24, 1994
Robert D. Bolinder Corporate Planning and
Development; Director
/s/ Matthew G. Tezak Senior Vice President and March 24, 1994
Matthew G. Tezak Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Kenneth A. White Senior Vice President and March 24, 1994
Kenneth A. White Regional Manager, Region
II; Director
/s/ Rodney H. Brady Director March 24, 1994
Rodney H. Brady
/s/ Allen P. Martindale Director March 24, 1994
Allen P. Martindale
/s/ DeLonne Anderson Director March 24, 1994
DeLonne Anderson
/s/ Alan R. Hoefer Director March 24, 1994
Alan R. Hoefer
/s/ Duane Peters Director March 24, 1994
Duane Peters
/s/ Ray V. Rose Director March 24, 1994
Ray V. Rose
/s/ Fred L. Smith Director March 24, 1994
Fred L. Smith
/s/ Sean D. Smith Director March 24, 1994
Sean D. Smith
/s/ Douglas John Tigert Director March 24, 1994
Douglas John Tigert
<PAGE>
INDEX TO EXHIBITS
Page Number in
Exhibit Sequentially
Number Document Numbered Copy
3(i) Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1
in the Company's Registration Statement on Form S-
1 (Commission File No. 33-28698) which became
effective on June 21, 1989).
3(ii) By-Laws of the Company (incorporated by reference
to Exhibit 3.2 in the Company's Registration
Statement on Form S-1 (Commission File No. 33-
28698) which became effective on June 21, 1989)..
4.1 Article IV of Restated Certificate of
Incorporation of the Company (see Exhibit 3(i)).
4.2 Certain instruments which define the rights of
holders of long-term debt of the Company and its
subsidiaries are not being filed because the total
amount of securities authorized under each such
instrument does not exceed 10% of the total
consolidated assets of the Company and its
subsidiaries. The Company hereby agrees to
furnish a copy of each such instrument to the
Commission upon request.
4.3 Form of Pass Through Trust Agreement between the
Company and the Pass Through Trustee (incorporated
by reference to Exhibit 4.1 in the Company's
Registration Statement on Form S-3 (Commission
File No. 33-51097) which became effective on
January 26, 1994).
4.4 Form of Pass Through Certificate (included in
Exhibit 4.3).
*10.1 Amended and Restated 1989 Stock Option Plan
(incorporated by reference to Exhibit 10.1 of the
Company's Annual Report on Form 10-K for the
fiscal year ended December 28, 1991).
*10.2 1993 Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.2 of the Company's Annual
Report on Form 10-K for the fiscal year ended
January 2, 1993).
*10.3 First Amendment to the 1993 Employee Stock
Purchase Plan (Exhibit 10.2) dated as of August 2,
1993.
*10.4 Employees' Profit Sharing Plan and Trust, as
amended and restated as of July 27, 1982
(incorporated by reference to Exhibit 10.4 of the
Company's Registration Statement on Form S-1
(Commission File No. 33-28698) which became
effective on June 21, 1989).
*10.5 Pension Plan of Employees, as amended and restated
as of July 27, 1982 (incorporated by reference to
Exhibit 10.5 of the Company's Registration
Statement on Form S-1 (Commission File No. 33-
28698) which became effective on June 21, 1989)
10.6 Employee Profit Sharing Plan dated as of January
3, 1994, First Amendment dated as of August 2,
1994 and Second Amendment dated as of January 27,
1994.
*10.7 Forms of Supplemental Compensation Agreements
dated as of January 2, 1985, and amended as of
March 14, 1985, between the Company and certain
executive officers (incorporated by reference to
Exhibit 10.6 of the Company's Registration
Statement on Form S-1 (Commission File No. 33-
28698) which became effective on June 21, 1989).
10.8 Commitment Letter to the Company from Banco di
Roma, dated as of July 16, 1993.
10.9 Revolving Credit Agreement, dated as of October
15, 1993, between the Company and Credit Suisse.
10.10 Promissory Note of the Company to Banque Nationale
de Paris, dated as of May 29, 1991, and Commitment
Letter to the Company from Banque Nationale de
Paris, dated as of May 29, 1991 (incorporated by
reference to Exhibit 10.8 of the Company's Annual
Report on Form 10-K for the fiscal year ended
December 28, 1991).
10.11 Promissory Notes of the Company to West One Bank,
Idaho, N.A., dated as of July 22, 1993.
10.12 Loan Agreement between the Company and a
consortium of lenders dated May 1, 1992
(incorporated by reference to Exhibit 10.11 of the
Company's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993).
10.13 Loan Agreement between the Company and a
consortium of lenders dated December 15, 1992
(incorporated by reference to Exhibit 10.12 of the
Company's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993).
*10.14 Form of Additional Retirement Benefit Agreement
between the Company and certain of its executive
officers (incorporated by reference to Exhibit
10.13 of the Company's Annual Report on Form 10-K
for the fiscal year ended January 2, 1993).
*10.15 Form of Indemnification Agreement between the
Company and its directors and officers
(incorporated by reference to Exhibit 10.14 of the
Company's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993).
10.16 Revolving Credit Agreement, dated as of June 28,
1993, between the Company and Bank of America
(incorporated by reference to Exhibit 10.15 of the
Company's Form 10-Q for the second quarter ended
July 3, 1993).
10.17 Loan Agreement between the Company and a
consortium of lenders dated November 1, 1993.
13.1 Company's Annual Report to Stockholders for the
fiscal year ended January 1, 1994 (selected pages
only).
22.1 Subsidiaries of the Company.
23.1 Consent of Ernst & Young, Independent Auditors.
* Indicates management contract or compensatory plan or arrangement.
EXHIBIT 10.3
FIRST AMENDMENT TO
SMITH'S FOOD & DRUG CENTERS, INC.
1993 EMPLOYEE STOCK PURCHASE PLAN
WHEREAS, the 1993 Employee Stock Purchase Plan (the "Plan") of Smith's
Food & Drug Centers, Inc. (the "Company") was established by the Company
effective January 3, 1993; and
WHEREAS, the Company desires to amend the Plan as hereinafter set
forth;
NOW, THEREFORE, Paragraph 3(a) of the Plan is hereby amended and
restated to read in its entirety as follows:
3. Eligibility.
(a) Employment. Any Employee who is not an executive officer or
a director and who (i) shall be employed by the Company on the date of
such Employee's enrollment in the Plan; and (ii) shall be at least
eighteen (18) years of age shall be eligible to participate in the
Plan. Executive officers of the Company and directors (if they are
otherwise eligible to participate in the Plan) may only so participate
provided they have been employed by the Company for at least three (3)
months.
Such amendment of Paragraph 3(a) shall serve to eliminate the three
(3) month waiting period for eligibility under the Plan for all employees
other than officers and directors.
The Plan remains in full force and effect and remains unmodified
except to the extent specifically amended herein.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed by
its duly authorized officers this __________ day of ____________________,
1993.
SMITH'S FOOD & DRUG CENTERS, INC.
By: ______________________________
Its __________________________
ATTEST:
_______________________
14248.2
EXHIBIT 10.6
SMITH'S FOOD & DRUG CENTERS, INC. EMPLOYEE PROFIT SHARING PLAN
Established Effective January 3, 1993
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS 1
Affiliated Company 1
Agent for Service 1
Authorized Absence 1
Beneficiary 2
Break in Service 2
Code 2
Committee 2
Common Stock 2
Company 2
Compensation 2
Disability 3
Employee 3
Employment Commencement Date 3
ERISA 3
Fiduciary 3
Hour of Service 4
Named Fiduciary 4
Participant 4
Participant Account 4
Plan 4
Plan Year 4
Related Plan 4
Trust 4
Trust Fund 4
Trustees 4
Valuation Date 4
Year of Service 4
ARTICLE II - SERVICE AND LEAVE OF ABSENCE 5
2.1 Years of Service 5
2.2 Hours of Service. 5
ARTICLE III - ELIGIBILITY AND PARTICIPATION 7
3.1 Initial Participation 7
3.2 Termination of Participation 7
3.3 Participation Following Re-Employment or Ineligible
Employment 7
ARTICLE IV - CONTRIBUTIONS 8
4.1 Amount of Contributions 8
4.2 Time for Payment 8
4.3 Form of Contributions 8
4.4 Return of Contributions for Failure of
Deductibility or Mistake of Fact 8
4.5 For Exclusive Benefit of Employees 9
4.6 Participant Contributions 9
4.7 Rollovers and Transfers from Other Plans 9
ARTICLE V - ACCOUNTS, ALLOCATIONS AND VESTING 9
5.1 Participant Accounts 9
5.2 Allocation and Crediting of Company Contributions
and Forfeitures 9
5.3 Allocation and Crediting of Cash Dividends 9
5.4 Stock Splits, Warrants and Options 10
5.5 General Limitation on Allocations to P
articipants 10
5.6 Vesting 12
5.7 Permissive Vesting 12
ARTICLE VI - VALUATION 12
6.1 Valuation of Trust Fund 12
6.2 Allocation of Earnings and Losses 13
6.3 Notice of Value of Participant Accounts 13
ARTICLE VII - PAYMENT OF ACCOUNT BALANCES 13
7.1 Fully Vested Benefits 13
7.2 Non-Vested Benefits 13
7.3 Forfeitures 13
7.4 Manner of Making Distributions 13
7.5 Time for Making Distributions 14
7.6 Persons Under Legal or Other Disability 14
7.7 Designation of Beneficiaries 15
7.8 Missing Participants or Beneficiaries 15
7.9 Pre-Termination Distributions on Account of
Hardship 16
7.10 Rollover Transfers and Withholding 17
ARTICLE VIII - LIMITATIONS OF RIGHTS 17
8.1 Non-Transferability of Benefits 17
8.2 Employees' Rights; Limitations 17
ARTICLE IX - AMENDMENT; MERGER, CONSOLIDATION OR
TRANSFER OF ASSETS; TERMINATION 17
9.1 Amendment 17
9.2 Merger, Consolidation or Transfer of Assets 18
9.3 Termination 18
9.4 Discontinuance of Contributions 18
9.5 Limitations 19
9.6 Notice of Amendment, Termination or Partial
Termination 19
ARTICLE X - TRUST FUND 19
10.1 Trust Agreement 19
10.2 Trust Contributions 19
10.3 Trust Fund Investments 20
10.4 Participant Accounts 20
10.5 Voting Rights 20
ARTICLE XI - CLAIM AND REVIEW PROCEDURE 20
11.1 Definitions 20
11.2 Claim Filing Procedure 20
11.3 Consideration of Claim; Rendering of Decision 21
11.4 Appellate Review Procedure 21
11.5 Limitation on Claims Procedure 22
11.6 Other Remedies 22
11.7 Authorized Representatives 22
ARTICLE XII - ADMINISTRATION 22
12.1 Allocation of Responsibility Among Fiduciaries 22
12.2 Appointment of Committee 23
12.3 Committee Meetings 23
12.4 Committee Officers 23
12.5 Committee Expenses 23
12.6 Committee Responsibilities 24
12.7 Other Powers 24
12.8 Indemnification of Committee 24
12.9 Expenses of Establishing and Administering the
Plan 25
ARTICLE XIII - TOP-HEAVY PROVISIONS 25
13.1 Special Rules Applicable for Top-Heavy
Plan Years 25
13.2 Definitions Relating to Top-Heavy Provisions 26
ARTICLE XIV - MISCELLANEOUS 28
14.1 Governing Law 28
14.2 Information Returns 28
14.3 Company Action 28
14.4 Company Records 28
14.5 No Guarantee of Interests 28
14.6 Interpretations and Adjustments 28
14.7 Uniform Rules 29
14.8 Evidence 29
14.9 Waiver of Notice 29
14.10 Gender and Number 29
SMITH'S FOOD & DRUG CENTERS, INC. EMPLOYEE PROFIT SHARING PLAN
Established Effective January 3, 1993
THIS EMPLOYEE PROFIT SHARING PLAN, is hereby established
effective January 3, 1993, by Smith's Food & Drug Centers, Inc.,
a Delaware corporation, for the purpose of providing funds for
the eventual retirement of its eligible employees, and to provide
eligible employees greater incentive to strive for the success of
the operation of Smith's Food & Drug Centers, Inc. through
ownership of Smith's Food & Drug Centers, Inc. common stock
acquired with plan contributions.
ARTICLE I
DEFINITIONS
The following terms, when used in the Plan, shall have the
meaning set forth below, unless a different meaning is plainly
required by the context:
"Affiliated Company" means the Company, and any other
employer that is, along with the Company, a member of a
controlled group of corporations or under common control (as
defined in Section 414(b) and (c) of the Code), a member of an
affiliated service group (as defined in Section 414(m) of the
Code) which includes the Company or any other entity required to
be aggregated with the Company pursuant to regulations under
Section 414(o) of the Code.
"Agent for Service" means the Committee or any member
thereof.
"Authorized Absence" means any of the following periods of
absence from employment from the Company:
(a) layoffs, not in excess of 6 months, due to
temporary closing or downturn of business,
(b) leaves of absence authorized by the Company in
accordance with standard personnel policies applied in a
uniform and nondiscriminatory manner to all Employees
similarly situated, and
(c) military leave while the Employee's rights are
protected by law; provided the Employee returns to
employment with the Company immediately (but in the case
of military leave, within the 90-day period following
release or discharge from the military or within the
period prescribed by applicable law, whichever is longer)
upon the expiration of such periods of absence.
"Beneficiary" means the person or persons who become
entitled to receive payments in the event of the death of a
Participant in accordance with the provisions of Section 7.7.
"Break in Service" means a Plan Year during which an
Employee or Participant is credited with 500 or fewer Hours of
Service with the Company. A Break in Service shall not be deemed
to have occurred during any period of Authorized Absence.
"Code" means the Internal Revenue Code of 1986, as
amended. Reference to a section of the Code shall include that
section and any comparable section or sections of any future
legislation that amends, supplements or supersedes said section.
"Committee" means the Administrative Committee designated
in accordance with Section 12.2.
"Common Stock" means the Company's Class B common stock
which is readily tradable on an established securities market or
other common stock issued by the Company which is readily
tradable on an established securities market.
"Company" means Smith's Food & Drug Centers, Inc., a
corporation organized and existing under the laws of the State of
Delaware, and, where applicable, its subsidiaries which have
adopted the Plan.
"Compensation" means wages within the meaning of Section
3401(a) of the Code and all other payments of compensation to an
Employee by the Company for which the Company is required to
furnish the Employee a written statement under Sections 6041(d),
6051(a)(3) and 6052 of the Code. Compensation is determined
without regard to any rules under Section 3401 which limit the
remuneration included in wages based on the nature or location of
the employment or the services performed. Notwithstanding the
foregoing, Compensation shall include any amount which is
contributed by the Company pursuant to a salary reduction
arrangement and which is not includable in the gross income of
the Employee under Sections 125 (i.e., a cafeteria plan) or
402(a)(8) (i.e., a Section 401(k) cash or deferred arrangement)
of the Code. Notwithstanding the foregoing, Compensation shall
not include amounts in excess of $200,000 (adjusted at the same
time and in the same manner as permitted under Section 415(d) of
the Code). In determining the Compensation of a Participant for
purposes of this limitation, the rules of Section 414(q)(6) of
the Code shall apply, except that in applying such rules, the
term "family" shall include only the spouse of the Participant
and any lineal descendants of the Participant who have not
attained age 19 before the close of the applicable period. If,
as a result of the application of such rules the adjusted
$200,000 limitation is exceeded, the limitation shall be prorated
among the affected individuals in proportion to each such
individual's Compensation as determined under this provision
prior to the application of this limitation.
"Disability" means, as determined by the Committee in its
sole discretion, the inability of a Participant to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected
to result in death or to be of long, continued and indefinite
duration.
"Employee" means any person who is employed by the Company
but excludes any person who is employed as an independent
contractor. A person who is considered a leased employee of the
Company within the meaning of Sections 414(n)(2) and 414(o)(2) of
the Code shall not be considered an Employee for purposes of the
Plan but shall be considered an employee for purposes of the
requirements of Section 414(n)(3) of the Code; provided, however,
a leased employee shall not be considered an employee of the
Company for any purpose if:
(a) such leased employee is covered by a
money purchase pension plan providing:
(1) a non-integrated employer
contribution rate of at least 10% of
compensation, as defined in Section
415(c)(3) of the Code, but including
amounts contributed pursuant to a salary
reduction agreement which are excludable
from the employee's gross income under
Sections 125, 401(a)(8), 402(h) or 403(b)
of the Code;
(2) immediate participation; and
(3) full and immediate vesting.
(b) leased employees do not constitute
more than 20% of the recipient's non-highly
compensated work force.
"Employment Commencement Date" means the date on which an
Employee is first credited with an Hour of Service or, if
applicable, the date on which an Employee is first credited with
an Hour of Service following a Break in Service.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
"Fiduciary" means any person who: (a) exercises any
discretionary authority or control respecting management of the
Plan or exercises any authority or control respecting management
or disposition of the assets of the Plan, (b) renders investment
advice for a fee or any other compensation, direct or indirect,
with respect to any monies or other property of the Trust Fund,
or has any authority or responsibility to do so, or (c) has any
discretionary responsibility in the administration of the Plan
and Trust.
"Hour of Service" mean each hour credited to an Employee
under Section 2.2.
"Named Fiduciary" means the Committee.
"Participant" means any Employee who becomes a Participant
as provided in Article III hereof. Whether or not an Employee is
eligible to be a Participant shall be determined by the
Committee.
"Participant Account" means the account established and
maintained for each Participant pursuant to Article V.
"Plan" means the plan set forth in and created by this
document, and all subsequent amendments thereto.
"Plan Year" means the fiscal year of the Plan and shall
coincide with the Company's fiscal year.
"Related Plan" means any defined contribution plan (as
defined in Section 415(k) of the Code) maintained by the Company
or by any other employer that is, along with the Company, a
member of a controlled group of corporations or under common
control (as defined in Section 414(b) and (c) of the Code, as
modified by Section 415(h) thereof) or by any member of an
affiliated service group (as defined in Section 414(m) of the
Code) or by any other entity required to be aggregated with the
Company pursuant to regulations under Section 414(o) of the Code.
"Trust" means the trust set forth in and created by the
Smith's Food & Drug Centers, Inc. Stock Profit Sharing Trust
effective January 3, 1993.
"Trust Fund" means all assets held by the Trustees for the
Company under the Trust.
"Trustees" means the trustee or trustees of the Trust
created pursuant to the Plan and any duly appointed and qualified
successor trustee or trustees.
"Valuation Date" means each date the Trust Fund is valued
by the Trustees in accordance with Section 6.1.
"Year of Service" means each year credited to an Employee
under Section 2.1.
ARTICLE II
SERVICE AND LEAVE OF ABSENCE
2.1 Years of Service. Years of Service shall include
each Plan Year during which an Employee has completed at least
1,000 Hours of Service with the Company.
2.1.1 Years of Service shall not include Plan
Years beginning prior to the effective date of the Plan.
2.1.2 If a Participant who incurred a Break in
Service is reemployed by the Company, his Years of Service
shall include Years of Service to his credit at the
beginning of such Break in Service, unless he did not have
a vested and nonforfeitable right to any portion of his
Participant Account prior to such Break in Service and the
number of consecutive one-year Breaks in Service equals or
exceeds five.
2.2 Hours of Service. The term "Hour of Service", with
respect to any Employee, shall include:
2.2.1 Each hour for which an Employee is paid, or
entitled to payment, for the performance of duties for the
Company or an Affiliated Company. These hours shall be
credited to the Employee for the computation period or
periods in which the duties are performed.
2.2.2 Each hour for which an Employee is paid, or
entitled to payment, by the Company or an Affiliated
Company on account of a period of time during which no
duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), lay
off, jury duty, military duty or leave of absence. No
more than 501 Hours of Service shall be credited under
this paragraph for any single continuous period (whether
or not such period occurs in a single computation period).
Hours under this paragraph shall be calculated and
credited pursuant to Section 2530.200b-2 of the Department
of Labor Regulations which are incorporated herein by this
reference.
2.2.3 Each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by
the Company or an Affiliated Company. For vesting
purposes, these hours shall be credited to the Employee
for the computation period or periods to which the award
or agreement pertains rather than the computation period
in which the award, agreement or payment is made.
2.2.4 Hours of Service shall be determined on the
following basis: for hourly paid Employees, from records
of the Company or Affiliated Company of hours worked and
hours for which payment is made or due as determined under
this Section 2.2, and for salaried Employees, on the basis
of 45 hours per week, with an Employee receiving credit
for a full week for each week during which he has one Hour
of Service. An Employee shall not receive credit more
than once for any Hour of Service.
2.2.5 For purposes only of determining a Break in
Service:
(a) For any period of Authorized Absence,
Hours of Service are determined on the basis of a
45-hour week or pro rata portion thereof.
(b) For any period of absence (i) by
reason of the pregnancy of the Employee, the birth of
a child of the Employee, or the placement of a child
with the Employee in connection with the adoption of
such child by the Employee or (ii) for purposes of
caring for such child of the Employee for a period
beginning immediately following such birth or
placement, Hours of Service are determined under
2.2.5(c) and (d).
(c) The hours to be credited as Hours of
Service for purposes of 2.2.5(b) shall be those Hours
of Service which otherwise would normally have been
credited to the Employee under the Plan, except that
if the Committee is unable to determine the
foregoing, eight Hours of Service shall be credited
to the Employee for each working day of such absence.
Provided, that the total Hours of Service to be
credited by reason of any one pregnancy or placement
shall not exceed 501.
(d) The Hours of Service described in
2.2.5(b) and (c) shall be credited only to the
computation period in which the period of absence
begins if the Employee would be prevented from
incurring a One Year Break in Service in such period
solely because such period of absence is treated as
Hours of Service hereunder, or, in any other case, in
the immediately following computation period.
2.2.6 Notwithstanding anything else to the contrary,
for purposes only of allocating contributions and
forfeitures under Section 5.2, the following shall apply:
(a) The hours to be credited as Hours of
Service pursuant to this Section 2.2 shall only be
hours for which an Employee is paid, or entitled to
payment, by the Company and such hours shall be
credited to the Plan Year in which the payment is
made. Hours of Service for salaried Employees shall
be determined on the basis of 45 hours per week. A
salaried Employee who is employed for less than a
full week shall be credited with the pro rata portion
of such week during which he is employed by the
Company.
(b) The Hours of Service credited to a
Participant during a Plan Year shall not exceed
2,080.
2.2.7 Provisions of this Section 2.2 shall be construed
so as to resolve any ambiguities in favor of crediting an
Employee with Hours of Service.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Initial Participation. Each Employee shall become a
Participant in the Plan on his Employment Commencement Date.
Notwithstanding the foregoing, the following classes of Employees
shall be excluded from participation in the Plan: (a) Employees
who are holding or have exercised an option under any stock
option plan of the Company; (b) Employees who are officers of the
Company; and (c) Employees who are members of the Board of
Directors of the Company.
3.2 Termination of Participation. A Participant shall
continue to be such until the first to occur of the following
events:
3.2.1 Normal or Late Retirement. The Participant
retires from the employ of the Company on or after the
date on which he attains age 65. Until actual retirement,
a Participant shall continue to participate in the Plan.
3.2.2 Disability Retirement. The Participant
retires or is retired from the employ of the Company
because of Disability, irrespective of his age.
3.2.3 Death. The Participant dies.
3.2.4 Resignation or Dismissal. The Participant
resigns or is dismissed from the employ of the Company
before retirement in accordance with 3.2.l or 3.2.2 above.
3.2.5 Ineligible Class of Employees. The
Participant becomes a member of an ineligible class of
Employees.
3.3 Participation Following Re-Employment or Ineligible
Employment.
3.3.1 Former Employees. A former Participant shall
become a Participant immediately upon his return to the
employ of the Company.
3.3.2 Eligible Classes of Employees. In the event a
Participant becomes ineligible to participate because the
Employee is no longer a member of the eligible class of
Employees, such Employee shall participate immediately
upon his return to an eligible class of Employees. In the
event an Employee who has never been a Participant because
the Employee was not a member of the eligible class of
Employees becomes a member of the eligible class, such
Employee shall participate immediately if such Employee
has satisfied the requirements of Section 3.1, and would
have previously become a Participant had the Employee been
in the eligible class.
ARTICLE IV
CONTRIBUTIONS
4.1 Amount of Contributions. With respect to each Plan
Year and subject to Section 4.4, the Company shall contribute to
the Plan such amounts as may be determined by the Executive
Committee of the Board of Directors or by the executive
officer(s) of the Company to whom the Board of Directors has
delegated such responsibility.
4.2 Time for Payment. The Company may make payment of
its contribution for a Plan Year in one sum or several
installments on any date or dates which the Company may select,
but shall complete the transfer of its contribution for each Plan
Year on or before the date prescribed by law (including
extensions thereof) for the filing of its federal income tax
return for the fiscal year corresponding to the applicable Plan
Year.
4.3 Form of Contributions. The Company contributions
with respect to each Plan Year shall be transferred to the
Trustees in the form of cash or Common Stock, as determined by
the Company's Board of Directors.
4.4 Return of Contributions for Failure of Deductibility
or Mistake of Fact. Notwithstanding anything herein to the
contrary, upon the Company's request, a contribution which was
conditioned upon the deductibility of the contribution under
Section 404 of the Code shall be returned (to the extent the
deduction is disallowed) to the Company within one year after the
date on which the deduction is disallowed. Each contribution
made by the Company pursuant to this Article IV is hereby
expressly conditioned upon the deductibility of the contribution
under Section 404 of the Code. If a contribution or any portion
thereof is made by the Company as a result of a mistake of fact,
the Trustees shall, upon written request by the Company, return
the contribution or such portion to the Company within one year
after the date of payment to the Trustees. If a contribution
under the Plan is conditioned on initial qualification of the
Plan under Section 401(a) of the Code, and the Plan receives an
adverse determination with respect to its initial qualification,
the Trustees shall, upon written request of the Company, return
to the Company the amount of such contribution (increased by
earnings attributable thereto and reduced by losses attributable
thereto) within one calendar year after the date that
qualification of the Plan is denied, provided that the
application for the determination is made by the time prescribed
by law for filing the Company's return for the taxable year in
which the Plan is adopted, or such later date as the Secretary of
the Treasury may prescribe.
4.5 For Exclusive Benefit of Employees. Any and all
contributions by the Company to the Plan, with the exceptions
covered by Section 4.4, shall be irrevocable, and neither such
contributions nor any income therefrom shall be used for, nor
diverted to, purposes other than for the exclusive benefit of
Participants or their Beneficiaries under the Plan.
4.6 Participant Contributions. No Participant shall be
required or permitted to make contributions to the Plan.
4.7 Rollovers and Transfers from Other Plans. Rollover
contributions and transfers from other qualified retirement plans
shall not be permitted.
ARTICLE V
ACCOUNTS, ALLOCATIONS AND VESTING
5.1 Participant Accounts. A separate Participant Account
shall be established and maintained by the Committee for each
Participant.
5.2 Allocation and Crediting of Company Contributions and
Forfeitures. Subject to the limitations in this Section 5.2 and
Section 5.5, as of the last day of each Plan Year, the Company
contribution for the Plan Year ending on that date, together with
forfeitures which arose under the Plan during that year, shall be
allocated among and credited to the Participant Accounts of the
Participants described below in the ratio which the Hours of
Service credited to each Participant for the Plan Year bears to
the total Hours of Service credited to all Participants for such
Plan Year. The Company contribution for any Plan Year will be
allocated among and credited to the Participant Accounts of the
following Participants:
5.2.1 Participants who are credited with a Year of
Service for the Plan Year and are still Employees as of
the last day of the Plan Year; and
5.2.2 Participants who died, retired or became
permanently and totally disabled during the Plan Year.
Any allocation of Common Stock will be carried in whole and
fractional shares.
5.3 Allocation and Crediting of Cash Dividends. Any cash
dividends declared on the Common Stock held in Participant
Accounts shall be allocated to the corresponding Participant
Accounts and may be applied by the Trustees to the purchase of
additional Common Stock.
5.4 Stock Splits, Warrants and Options. Any Common Stock
received by the Trustees as a result of a stock split or stock
dividend, or a reorganization or other recapitalization of the
Company will be allocated in the same manner as the Common Stock
to which it is attributable is then allocated. In the event any
rights, warrants or options are issued on Common Stock, the
Trustees will exercise them for the acquisition of additional
Common Stock to the extent that cash is then available from any
source including dividends on Common Stock. Any Common Stock
acquired in this fashion will be treated as Common Stock bought
by the Trustees for the net price paid. Any rights, warrants or
options on Common Stock which cannot be exercised for lack of
cash may be sold by the Trustees and the proceeds treated as a
current cash dividend received on Common Stock. Common Stock
acquired in this fashion will be allocated to each Participant
Account in the same ratio that the Common Stock in each
Participant Account bears to the aggregate total of the Common
Stock in all Participant Accounts.
5.5 General Limitation on Allocations to Participants.
Notwithstanding any other provisions of the Plan, the Annual
Addition (defined in 5.5.4) credited to a Participant Account for
any Plan Year shall not exceed an amount equal to:
5.5.1 The lesser of:
(a) $30,000 or, if greater, one-fourth of
the defined benefit dollar limitation set forth in
Section 415(b)(1)(A) of the Code as in effect for the
limitation year; or
(b) 25 percent of the Participant's
Compensation for the limitation year (defined in
5.5.6).
If the foregoing limitation is exceeded, the Participant's
Annual Addition shall be reduced as provided in 5.5.5.
5.5.2 The limitation in 5.5.1 shall not apply to any
contribution for medical benefits (within the meaning of
Section 419A(f)(2) of the Code) after separation from
service and any other amount which is otherwise treated as
an Annual Addition under Section 415(l)(1) of the Code.
5.5.3 If a Participant also participates in a
defined benefit plan (as defined in Section 415(k) of the
Code) maintained by the Company, the sum of the defined
benefit plan fraction and the defined contribution plan
fraction (as such terms are defined in Section 415(e) of
the Code) shall not exceed 1.0 for any limitation year
(defined in 5.5.6). If the sum of the fractions exceeds
1.0, the Participant's Annual Addition shall be reduced as
provided in 5.5.5. For purposes of this Section 5.5, a
plan is deemed to be maintained by the Company if the plan
is maintained by any employer that is, along with the
Company, a member of a controlled group of corporations or
under common control (as defined in Section 414(b) and (c)
of the Code, as modified by Section 415(b) thereof) or a
member of an affiliated service group (as defined in
Section 414(m) of the Code).
5.5.4 The Annual Addition described in 5.5.1 subject
to the above limitations consists of the following:
(a) The amount of any Company
contributions credited to the Participant's Account
under the Plan and the Participant's account under
any Related Plan during the Plan Year;
(b) The amount of any forfeitures credited
to the Participant's Account under the Plan and the
Participant's account under any Related Plan during
the Plan Year;
(c) The amount of any contributions made
by the Participant under any Related Plan during the
Plan Year; and
(d) The amount allocated to the
Participant's individual medical account, as defined
in Section 415(1)(1) of the Code, under any Related
Plan during the Plan Year; and
(e) The amount attributable to
post-retirement medical benefits allocated to the
separate account of a Participant, who is a key
employee (as defined in Section 419A(d)(3) of the
Code), under a welfare benefit plan (as defined in
Section 419(e) of the Code) maintained by the
Company.
5.5.5 Any increases in the value of a Participant's
Account due to an increase in the fair market value of the
Trust Fund are not subject to the limitations of 5.5.1.
In the event that it is determined that, but for this
5.5.5, the Annual Addition to a Participant's Account
would be in excess of the limitations contained in this
Section, such Annual Addition shall be reduced to the
extent necessary to bring such Annual Addition within the
limitations contained in this Section in the following
order:
(a) Any Participant contributions which
are included in such Annual Addition shall be
returned to a Participant and shall be treated as a
withdrawal of Participant contributions; and
(b) If there are no such Participant
contributions, or if such Participant contributions
are not sufficient to reduce the Annual Addition to
the limitations contained herein, such Participant's
allocable share of Company contributions for the Plan
Year shall be reduced.
The portion of any contribution which has been allocated
to a Participant under the Plan for a Plan Year, but which
cannot be credited to his Participant Account because of
the limitations imposed by this Section 5.5 shall, subject
to the limitations of this Section 5.5, be allocated among
and credited to the Participants entitled to share in the
contribution for that year in accordance with Section 5.2.
5.5.6 For purposes of this Section 5.5, the term
"limitation year" means the period to be used in
determining the Plan's compliance with Section 415 of the
Code and the regulations thereunder. The Company shall
take all actions to ensure that the limitation year is the
same period as the Plan Year.
5.6 Vesting. A Participant's interest in his Participant
Account shall become vested and nonforfeitable to the extent of
the following percentages, based upon his Years of Service
completed after the effective date of the Plan, unless otherwise
provided in Articles IX or XIII:
Years of Service Percentage Vested
Less than 5 0
5 or more 100
The foregoing to the contrary notwithstanding, if a Participant
retires or is retired pursuant to 3.2.1 or 3.2.2 or dies while an
Employee of the Company, the Participant's interest in his
Participant Account shall thereafter be fully vested and
nonforfeitable.
5.7 Permissive Vesting. Notwithstanding the rules of
Section 5.6 above, the Board of Directors of the Company may
determine that the interests of all Participants under the Plan
who are affected by a closure or sale of a unit of the Company to
an entity that is not an Affiliated Company shall become fully
vested and nonforfeitable, notwithstanding the fact that the
closure or sale does not constitute a partial termination under
Section 9.3.
ARTICLE VI
VALUATION
6.1 Valuation of Trust Fund. As soon as practicable, the
Trustees shall determine the fair market value of the Trust Fund
as of the last day of each Plan Year (excluding the Company's
contribution due as of that day and any amounts distributed to
Participants whose participation was terminated during the
period), and as of such other dates as may be determined by the
Trustees, in such manner as the Trustees in their discretion
shall prescribe but in accordance with a method consistently
followed and uniformly applied.
6.2 Allocation of Earnings and Losses. Any increases or
decreases in such value since the preceding Valuation Date shall
be allocated by the Committee to Participant Accounts on the
basis of account balances as of the last day of the current Plan
Year, but prior to crediting of any contributions for such Plan
Year.
6.3 Notice of Value of Participant Accounts. Within 60
days following receipt of a written request (but not more
frequently than once during any 12-month period), the Committee
shall give a Participant notice in writing of the fair market
value of his Participant Account. Alternatively, the Committee
may elect to give each Participant notice in writing as soon as
practicable after the end of the Plan Year of the fair market
value of his Participant Account including Company contributions
and forfeitures allocated to his account as of the last day of
the Plan Year.
ARTICLE VII
PAYMENT OF ACCOUNT BALANCES
7.1 Fully Vested Benefits. If a Participant retires or
is retired from the employ of the Company under 3.2.1 or 3.2.2,
dies while in the employ of the Company, or resigns or is
dismissed when his Participant Account is fully vested in him,
the entire balance (after all adjustments then required under the
Plan have been made) in his Participant Account will become
distributable to or for his benefit, or to or for the benefit of
his Beneficiary, as the case may be, in accordance with Sections
7.4 and 7.5.
7.2 Non-Vested Benefits. Except as specifically provided
in Section 7.1, if a Participant resigns or is dismissed from the
employ of the Company before retirement under 3.2.1 or 3.2.2 and
before becoming vested under Article V, the Participant will not
be entitled to a benefit under the Plan. The balance in his
Participant Account will be reduced to the extent not vested in
accordance with Article V.
7.3 Forfeitures. The amount, if any, by which a
Participant Account is reduced in accordance with Section 7.2
will be a forfeiture and, to the extent not needed to restore
forfeitures pursuant to this Section 7.3, will be allocated and
credited in accordance with Section 5.2 as of the last day of the
Plan Year in which the Participant was deemed to receive a
distribution of his Participant Account. For purposes of this
Section 7.3, a zero vested Participant Account balance will be
deemed distributed immediately upon termination of employment by
the Participant. If a Participant is deemed to receive a
distribution pursuant to this Section 7.3, and the Participant
resumes employment covered under this Plan before the Participant
has incurred five consecutive one-year Breaks in Service, his
Participant Account balance on the date of the deemed
distribution shall be restored, without adjustment for earnings
or losses.
7.4 Manner of Making Distributions. The entire balance
(after all adjustments then required under the Plan have been
made) in a Participant Account, as of the Valuation Date next
preceding the date of distribution, will be distributed in a
single sum to or for the benefit of the Participant, or in the
event of his death to or for the benefit of his Beneficiary, in
the form of whole shares of Common Stock, or cash in the
following manner. At least 30 days before the proposed payment
date, the Committee shall notify the Participant of his right to
demand distribution of his Participant Account entirely in whole
shares of Common Stock (with the value of fractional shares paid
in cash). The Participant or, if applicable, the Beneficiary
does not elect, within 15 days following the date of notification
by the Committee of such right, to receive a distribution of his
Participant Account entirely in whole shares of Common Stock
(with the value of fractional shares paid in cash), the
Participant Account shall be distributed entirely in whole shares
of Common Stock (with the value of fractional shares paid in
cash) or in cash as determined by the Committee. The amount of
fractional shares, if any, to be paid in cash will be based on
the market value of the Common Stock as of the Valuation Date
coincident with or immediately preceding the date on which the
distribution occurs.
7.5 Time for Making Distributions. If a Participant
Account becomes distributable under Section 7.1, distribution of
the balance of such Account will be made as soon as
administratively practicable following the date the Participant
terminates participation in the Plan pursuant to Section 3.2, but
in no event later than the 60th day next following the close of
the Plan Year during which the Participant attains age 65 or
terminates employment with the Company, whichever occurs last.
However, if the balance of the Participant Account exceeds
$3,500, distribution of such Account shall not be made prior to
age 65 or death, whichever occurs first, unless the Participant
consents in writing to such distribution. Anything else to the
contrary notwithstanding, distribution of the Participant Account
will be made or commenced by April 1 of the calendar year
following the calendar year in which the Participant attains
70-1/2 without regard to whether the Participant has terminated
employment. If a Participant is eligible to share in any
contribution or other amount not distributed pursuant to the
foregoing provisions, such amount shall be distributed as soon as
administratively practicable after the time such amount is
allocated on his behalf. If part or all of a Participant Account
is assigned to an alternate payee pursuant to a qualified
domestic relations order within the meaning of Section 414(p) of
the Code, distribution of the assigned portion of such Account
may be made or commenced in accordance with this Article without
regard to whether the Participant has attained his "earliest
retirement age" within the meaning of Section 414(p) of the Code.
For purposes of the distribution of the assigned portion of the
Participant Account, the alternate payee will be treated as if
the alternate payee were a Participant.
7.6 Persons Under Legal or Other Disability. In the
event a Participant or Beneficiary is declared incompetent and a
conservator or other person legally charged with the care of his
person or of his estate is appointed, any benefits to which such
Participant or Beneficiary is entitled shall be paid to such
conservator or other person legally charged with the care of his
person or of his estate.
7.7 Designation of Beneficiaries. Each Participant from
time to time, by signing a form furnished by the Committee, may
designate any person or persons to whom his benefits under the
Plan are to be distributed if the Participant dies before
receiving all of such benefits. If the Participant is married,
the Participant may not designate a Beneficiary other than the
Participant's spouse unless the Participant's spouse consents in
writing to such designation. The consent is irrevocable, must
designate a Beneficiary which cannot be changed without spousal
consent (unless the consent of the spouse expressly permits
designations by the Participant without spousal consent), must
acknowledge the effect of such designation, and must be witnessed
by a Plan representative or a notary public. Such consent will
not be required if it is established to the satisfaction of the
Committee that the spouse cannot be located or that there is some
other circumstance precluding such consent as set forth in
regulations under Section 417 of the Code. If the spouse is
legally incompetent to give consent, the spouse's legal guardian,
even if such guardian is the Participant, may give consent. Any
beneficiary designation or any consent by the Participant's
spouse (or establishment that a spouse cannot be located) will be
void if the Participant marries or remarries.
A beneficiary designation form will be effective only when
the form is filed in writing with the Committee while the
Participant is alive and will cancel all beneficiary designation
forms previously signed and filed by the Participant. If a
Participant failed to designate a Beneficiary before his death as
provided above, or if the Beneficiary designated by a deceased
Participant dies before him or before complete distribution of
his benefits, the Beneficiary designated shall be deemed to be
the Participant's spouse, if the Participant was married at the
time of his death. If the Participant was not married at the
time of his death, the Committee shall make distribution of the
Participant's interest in the Trust Fund to the person or persons
indicated below in the following order of priority:
7.7.1 The issue of the Participant by right of
representation.
7.7.2 The parents of the Participant.
7.7.3 The siblings of the Participant and their
issue by right of representation.
7.7.4 The executor, administrator or personal
representative of the Participant's estate.
7.8 Missing Participants or Beneficiaries. Each
Participant and each designated Beneficiary must file with the
Company from time to time in writing his post office address and
each change of post office address. Any communication, statement
or notice addressed to a Participant or Beneficiary at his last
post office address filed with the Company will be binding on the
Participant and his Beneficiary for all purposes of the Plan.
The Committee shall not be required to search for or locate a
Participant or Beneficiary. If the Company or Committee notify a
Participant or Beneficiary that he is entitled to a distribution
and also notifies him of the provisions of this Section, and the
Participant or Beneficiary fails to claim his benefits under the
Plan or make his whereabouts known to the Company or the
Committee within two calendar years after the notification, the
benefits under the Plan of the Participant or Beneficiary will be
disposed of as follows:
7.8.1 If the whereabouts of the Participant is
unknown but the whereabouts of the Participant's
designated Beneficiary then is known to the Company or the
Committee, distribution will be made to the designated
Beneficiary.
7.8.2 If the whereabouts of the Participant and his
designated Beneficiary then is unknown to the Company or
the Committee, but the whereabouts of one or more
relatives by adoption, blood or marriage of the
Participant is known to the Company or the Committee, the
Committee shall distribute the Participant's benefits to
any one or more of such relatives and in such proportions
as the Committee determines.
7.8.3 If the whereabouts of the Participant, his
designated Beneficiary and relatives is unknown, the
balance of the Participant Account shall be deemed a
forfeiture.
The foregoing to the contrary notwithstanding, if a claim for
benefits distributed pursuant to the foregoing provisions is made
by a Participant or designated Beneficiary who has not received
such distribution and who would otherwise be entitled thereto,
the Participant's benefit shall be restored and distributed under
the applicable provisions of the Plan.
7.9 Pre-Termination Distributions on Account of Hardship.
The Committee may, upon the request of a Participant at any time
prior to his termination of employment, direct the Trustees to
make a lump-sum distribution to the Participant from the vested
portion of his Participant Account, determined as of the
Valuation Date coinciding with or immediately succeeding the date
a request is made hereunder, for the purposes set forth below,
subject to the following rules:
(a) Each request for a distribution must be made by
written application to the Committee supported by such
evidence as the Committee may require;
(b) In no event shall the amount distributed to a
Participant in accordance with this Section 7.9 exceed the
amount necessary to satisfy the financial hardship serving
as the basis for the distribution;
(c) The Committee shall direct the Trustee to make a
distribution to a Participant in accordance with this
Section 7.9 only to enable the Participant (1) to meet any
expenses incurred or necessary for medical care, described
in Section 213(d) of the Code, to the extent not covered
by insurance, for the Participant or any of his
dependents; (2) to pay tuition and related educational
fees for the next 12-months post-secondary education for
the Participant or any of his dependents; or (3) to
purchase a principal residence for the Participant; or (4)
to prevent eviction from the Participant's principal
residence or foreclosure of the mortgage on the
Participant's principal residence.
7.10 Rollover Transfers and Withholding. If a
distribution under this Article VII constitutes an "eligible
rollover distribution" within the meaning of Section 402(f)(2)(A)
of the Code, and the Participant or Beneficiary entitled to such
distribution elects to have such distribution paid directly to an
"eligible retirement plan" within the meaning of Section
401(a)(31)(D) of the Code, the Committee shall cause the
distribution to be made in the form of a "trustee-to-trustee
transfer" to the "eligible retirement plan" pursuant to Section
401(a)(31) of the Code and regulations thereunder. Within a
reasonable time (i.e., no earlier than 90 days and no later than
30 days) prior to making an "eligible rollover distribution," the
Committee shall provide the Participant or Beneficiary, whichever
is applicable, with the written explanation described in Section
402(f) of the Code. To the extent required by the Code and
regulations thereunder, the Committee shall direct the Trustees
to withhold income tax on distributions from the Plan.
ARTICLE VIII
LIMITATIONS OF RIGHTS
8.1 Non-Transferability of Benefits. The interests of
Participants and Beneficiaries under the Plan are not subject to
the claims of their creditors and may not in any way be assigned,
alienated or encumbered. The foregoing shall not apply to
qualified domestic relations orders within the meaning of Section
414(p) of the Code and regulations thereunder. The Committee
shall adopt written rules and procedures relating to the
administration of and payment pursuant to qualified domestic
relations orders.
8.2 Employees' Rights; Limitations. Neither the adoption
of this Plan nor any modification thereof, nor the payment of any
benefits, shall be construed as giving any Participant or other
person any legal or equitable right against the Company, the
Committee or the Trustees, or in or to any property in the Trust
Fund, except as provided herein, nor as enlarging, modifying or
affecting the tenure or terms of employment of any Participant.
ARTICLE IX
AMENDMENT; MERGER, CONSOLIDATION OR
TRANSFER OF ASSETS; TERMINATION
9.1 Amendment. While the Company expects and intends to
continue the Plan, it must necessarily reserve and reserves the
right, subject to Section 9.5, to amend the Plan in whole or in
part from time to time either retroactively or prospectively, by
an instrument in writing, duly executed and acknowledged.
9.2 Merger, Consolidation or Transfer of Assets. This
Plan shall not be merged or consolidated with, nor shall any
assets or liabilities be transferred to, any other plan, unless
the benefits payable to each Participant if the Plan was
terminated immediately after such action would be equal to or
greater than the benefits to which such Participant would have
been entitled if this Plan had been terminated immediately before
such action.
9.3 Termination.
9.3.1 The Plan will terminate on the date the Plan
is terminated by the Company. Notwithstanding the
foregoing, the Plan will terminate on the last day of the
Plan Year coincident with or next following the first to
occur of the following:
(a) The date the Company is judicially
declared bankrupt or insolvent; or
(b) The dissolution, merger, consolidation
or reorganization of the Company, or the sale by the
Company of all or substantially all of its assets,
except that, subject to the provisions of Section
9.2, in any such event arrangements may be made
whereby the Plan will be continued by any successor
to the Company or any purchaser of all or
substantially all of the Company's assets, in which
case the successor or purchaser will be substituted
for the Company under the Plan.
9.3.2 On termination of the Plan in accordance with
9.3.1, or on partial termination of the Plan by operation
of law, any adjustments required under the Plan as of the
last day of the Plan Year coincident with or next
following such termination or partial termination shall be
made and each affected Participant's benefits will be
fully vested and nonforfeitable. The Committee shall then
direct the Trustees to make distribution of such benefits
in accordance with Article VII. All appropriate
accounting provisions of the Plan will continue to apply
until the benefits of all affected Participants have been
distributed to them.
9.4 Discontinuance of Contributions. The Company shall
have the right at any time to discontinue its contributions
hereunder. For purposes of this Section 9.4, a complete
discontinuance of contributions is contrasted with a suspension
of contributions under the Plan which is merely a temporary
cessation of contributions by the Company. Upon complete
discontinuance of the Company's contributions, all affected
Participants' rights to benefits shall become vested and
nonforfeitable. The Committee shall continue to direct the
Trustees to make distributions of benefits from time to time in
accordance with Article VII. All appropriate accounting
provisions of the Plan will continue to apply until the benefits
of all affected Participants have been distributed to them.
9.5 Limitations.
9.5.1 No amendment, modification or termination of
this Plan shall reduce the vested interest of any
Participant or cause any part of the Trust Fund to revert
to the Company (except as may be specifically provided
elsewhere in the Plan with respect to the return of
Company contributions) or to be used for or diverted to or
for the benefit of anyone other than Participants in the
Plan and their Beneficiaries, including for this purpose
former Participants and their Beneficiaries. For purposes
of this paragraph, a Plan amendment which has the effect
of (a) eliminating or reducing an early retirement benefit
or a retirement-type subsidy, or (b) eliminating an
optional form of benefit, with respect to benefits
attributable to service before the amendment, shall be
treated as reducing vested interests. In the case of a
retirement-type subsidy, the preceding sentence shall
apply only with respect to a Participant who satisfies
(either before or after the amendment) the pre-amendment
conditions for the subsidy.
9.5.2 If any amendment changes the vesting schedule,
any Participant with three or more Years of Service may,
by filing a written request with the Committee within 60
days after receipt of notice of such amendment, elect to
have his vested interest computed under the vesting
schedule in effect prior to the amendment.
9.5.3 The rights, duties or responsibilities of the
Trustees shall not be changed without their written
consent.
9.6 Notice of Amendment, Termination or Partial
Termination. Affected Participants will be notified by the
Committee of an amendment, termination or partial termination of
the Plan within a reasonable time.
ARTICLE X
TRUST FUND
10.1 Trust Agreement. The Company will enter into a Trust
Agreement with the Trustees providing for the administration of
the Trust Fund in such form and containing such provisions as the
Company deems appropriate, including, but not by way of
limitation, provisions with respect to the powers and authority
of the Trustees, and the authority of the Company to amend or
terminate the Trust Agreement or to change Trustees and to settle
accounts of the Trustees on behalf of all persons having an
interest in the Trust Fund.
10.2 Trust Contributions. The Trustees will not be
responsible in any way for the collection of contributions
provided for under this Plan. The Trustees will accept and hold
under the Trust Agreement such contributions as they may receive
from time to time from the Company. All contributions under the
Plan will be paid over to the Trustees and will be held and
administered under the Trust Agreement together with the income
therefrom, for use in providing the benefits of the Plan. The
Company will have no liability for the payment of benefits under
the Plan.
10.3 Trust Fund Investments. The Trust Fund will consist
primarily of Common Stock. The Trustees are directed to invest
and hold up to 100% of the Trust Fund in shares of Common Stock.
The Trustees may purchase or sell Common Stock from or to the
Company (provided, the requirements of Section 408(e) of ERISA
are satisfied) or from or to any other source, and such Common
Stock may be outstanding, newly issued or treasury securities.
The Trustees shall not borrow money from the Company for the
purpose of purchasing Common Stock.
10.4 Participant Accounts. The Trustees are not required
to maintain a segregation of assets in the Trust Fund for each
Participant Account.
10.5 Voting Rights. The Trustees will, in their fiduciary
capacity, exercise all voting rights with respect to the Common
Stock in the Trust Fund.
ARTICLE XI
CLAIM AND REVIEW PROCEDURE
11.1 Definitions. For the purposes of the Claims
Procedure described in this Article, the following definitions
shall apply:
11.1.1 "Claim" refers to a request by a Claimant in
accordance with this Article for a benefit under this
Plan.
11.1.2 "Claimant" refers to any Participant of this
Plan and to any Beneficiary who is either in pay status on
the date of a Claim is submitted hereunder or who as of
such date claims to be entitled to receive a benefit under
this Plan.
11.2 Claim Filing Procedure. Each Claimant shall have the
right to submit a Claim with respect to a benefit sought
hereunder. Such Claim shall be in writing, signed by the
Claimant under oath, and addressed and delivered to the Committee
or its designated representative either personally or by
certified or registered mail, return receipt requested. The
Claim shall state with particularity:
11.2.1 The benefit claimed;
11.2.2 The provisions of the Plan and the particular
provisions of law, if any, upon which the Claimant relies
in support of his Claim; and
11.2.3 All facts believed to be relevant in
connection with such Claim.
11.3 Consideration of Claim; Rendering of Decision. Upon
receipt of a Claim hereunder, the Committee or its designated
representative shall consider the merits of the Claim and shall
within 90 days from the receipt of the Claim render a decision on
the merits and communicate the same to the Claimant. In the
event the Committee or its designated representative denies the
Claim in whole or in part, the Claimant shall be so notified in
writing, which shall set forth the following in a manner
reasonably calculated to be understood by the Claimant:
11.3.1 The reason or reasons for rejection of the
Claim;
11.3.2 The provisions of the Plan and the particular
provisions of law, if any, relied upon in reaching such
determination;
11.3.3 A description of any additional information
needed from the Claimant in order for him to perfect his
Claim; and
11.3.4 A statement outlining the Appellate Review
Procedure as set forth in Section 11.4.
The failure of the Committee or its designated representative to
render a decision on the merits of a Claim shall be deemed to be
a denial of such Claim; notice of such denial shall be deemed to
have been given to the Claimant on the 90th day from receipt by
the Committee or its designated representative of the Claim.
11.4 Appellate Review Procedure. Where a Claim has been
or is deemed denied, the Claimant shall have the right within 60
days after the date he receives or is deemed to have been given
notice that his Claim has been rejected, in whole or in part, to
a full and fair review pursuant to the Appellate Review Procedure
set forth herein. Such procedure shall enable the Claimant to
appeal from an adverse decision by delivering a written request
for an appeal to the Committee either personally or by certified
or registered mail, return receipt requested. Such request shall
set forth the reasons why the Claimant believes the decision
rejecting his Claim is erroneous and shall be signed by the
Claimant under oath. Within 30 days after such request is
received, the Committee will conduct a full and fair review of
the entire Claim at a hearing, de novo, at which the Committee
may invite the Claimant to present his views with respect to the
merits of the Claim. In addition, the Claimant may submit issues
and comments in writing to the Committee for consideration and
may review pertinent documents. A decision with respect to the
merits of the Claim shall be rendered by the Committee not later
than 60 days after the delivery of the written request for an
appeal hereunder, unless special circumstances (such as the need
to hold a hearing) require an extension of time for processing,
and then not later than 120 days after receipt of the request.
The Claimant shall be notified in writing of the Appellate Review
decision, which shall include specific reasons believed to
support such decision, including specific references to
provisions of this Plan and of law, shall be written in a manner
reasonably calculated to be understood by the Claimant and shall
be delivered to the Claimant.
11.5 Limitation on Claims Procedure.
11.5.1 Insofar as the same is consistent with
regulations promulgated under Section 503 of the ERISA,
relating to Claims Procedures, any Claim under this Claims
Procedure must be submitted within 18 months from the
earlier of (1) the date on which the Claimant learned of
facts sufficient to enable him to formulate such Claim, or
(2) the date on which the Claimant should reasonably have
been expected to learn the facts sufficient to enable him
to formulate such Claim. For this purpose, the first date
on which any document that is filed with any governmental
organization is either given to or made available (under
law) to a Participant or beneficiary (in pay status), and
which discloses facts sufficient to enable a reasonable
person to formulate a Claim hereunder, shall be
conclusively deemed to be the date on which the Claimant
should reasonably have been expected to learn the facts
sufficient to enable him to formulate such a Claim.
Claims submitted after such period shall be deemed to have
been waived by the Claimant and shall thereafter be wholly
unenforceable.
11.5.2 No statute of limitations set forth under
either Section 413 of the ERISA, or any other applicable
provision of law, shall be deemed to be extended in any
way by the period of limitations set forth herein with
respect to this Plan's Claims Procedure.
11.6 Other Remedies. No action shall be commenced under
Section 502(a)(1)(B) of the ERISA until the Claimant shall first
have exhausted the Claims Procedure available to him hereunder,
provided that such Claimant would not have been irreparably and
materially harmed by any delay occasioned by this Claims
Procedure.
11.7 Authorized Representatives. All references in this
Article to Claimant shall include representatives who are duly
authorized as such, in writing, which authorization shall have
been delivered to the Committee at some stage of the Claims
Procedure. After such written authorization is delivered to the
Committee, copies of all subsequent communications with the
Claimant and decisions with respect to his Claim shall be
delivered to the authorized representative, as well as to the
Claimant.
ARTICLE XII
ADMINISTRATION
12.1 Allocation of Responsibility Among Fiduciaries. The
Fiduciaries shall have only those specific powers, duties,
responsibilities and obligations as are specifically given them
under the Plan. In general, the Company shall have the sole
responsibility for making the contributions necessary to provide
benefits under the Plan, and shall have the sole authority to
appoint and remove the Trustees and members of the Committee, and
to amend or terminate the Plan, in whole or in part. The
Committee shall have the sole responsibility for the
administration of the Plan, which responsibility is specifically
described in the Plan. The Trustees shall have the sole
responsibility for the administration and management of the Trust
Fund. Each Fiduciary warrants that any directions given,
information furnished, or action taken by it shall be in
accordance with the provisions of the Plan authorizing or
providing for such direction, information or action.
Furthermore, each Fiduciary may rely upon any such direction,
information or action of another Fiduciary as being proper under
the Plan, and is not required to inquire into the propriety of
any such direction, information or action. It is intended under
the Plan that each Fiduciary shall be responsible for the proper
exercise of its own powers, duties, responsibilities and
obligations under the Plan and shall not be responsible for any
act or failure to act of another Fiduciary. No Fiduciary
guarantees the Trust Fund in any manner against investment loss
or depreciation in asset value.
12.2 Appointment of Committee. The Plan shall be
administered by a Committee consisting of such persons, who shall
serve for such terms, as the Chief Executive Officer of the
Company shall determine. Members of the Committee may also act
as Trustees.
12.3 Committee Meetings. The Committee shall hold
meetings upon such notices and at such place or places, and at
such time or times as it may determine. Notices shall not be
required if waived in writing. A majority of the members of the
Committee at the time in office shall constitute a quorum for the
transaction of business. All resolutions or other actions taken
by the Committee at any meeting shall be by a vote of the
majority of those present at any such meeting and entitled to
vote. Resolutions may be adopted or other action taken without a
meeting upon written consent signed by at least a majority of the
members of the Committee. The Committee shall keep minutes of
its actions. No member of the Committee shall have any right to
vote on any matter relating solely to himself or to his rights or
benefits under the Plan. In the event of a deadlock or other
situation which prevents agreement of a majority of the Committee
members, the matter shall be decided by a majority of the Board
of Directors of the Company.
12.4 Committee Officers. The Committee shall appoint one
member as chairman of the Committee, and the chairman may appoint
a secretary who need not be a member of the Committee. The
Committee shall designate the person or persons who shall be
authorized to sign for the Committee.
12.5 Committee Expenses. All reasonable expenses of the
Committee may be paid by the Company, but if not paid by the
Company shall be paid from the Trust Fund. However, no fee or
compensation shall be paid to any member of the Committee for his
services as such.
12.6 Committee Responsibilities. The Committee shall have
the responsibility for the general administration of the Plan.
It shall have the power and duty to do all things necessary or
convenient to effect the intent and purposes of the Plan and not
inconsistent with any of the provisions hereof, whether or not
such powers and duties are specifically set forth herein, and in
amplification of the foregoing and not in limitation thereof, the
Committee shall have the power to construe the Plan, to make such
investigations as they may deem necessary, to determine all
questions arising hereunder, including particularly directions to
the Trustees on all matters necessary for it to properly
discharge its powers and duties, but subject in all cases to the
right of the Trustees to obtain and act upon the advice of their
own legal counsel. In addition, the Committee shall have the
responsibility for the reporting and disclosure requirements
under ERISA permitted to be done by plan administrators (i.e.,
filing Form 5500s, Annual Reports, summary plan descriptions, and
participant reports). Decisions of the Committee made in good
faith upon any matters within the scope of its authority shall,
unless disapproved by the Board of Directors of the Company, be
final and binding on the Company, the Trustees, Participants,
their Beneficiaries and all others. The Committee at all times,
in making and carrying out its decisions and directions, shall
act in a uniform and nondiscriminatory manner and may, from time
to time, prescribe and modify uniform rules of interpretation and
administration.
12.7 Other Powers. In addition to the foregoing, the
Committee shall have the following powers:
12.7.1 To appoint or employ such accountants, legal
counsel, specialists or other agents, persons or firms as
they deem necessary or desirable in connection with the
administration of the Plan and to delegate to such persons
any powers and duties, both ministerial and discretionary,
as the Committee deems appropriate.
12.7.2 To prescribe procedures to be followed by
Participants and Beneficiaries filing applications for
benefits.
12.7.3 To receive from the Company and from
Participants such information as shall be necessary for
the proper administration of the Plan.
12.8 Indemnification of Committee. Each member of the
Committee shall be indemnified by the Company (i.e., not from the
Trust Fund) against costs, expenses, and liabilities reasonably
incurred by him in connection with any action to which he may be
a party by reason of his service as a member of the Committee
except in relation to matters as to which he shall be adjudged in
such action to be liable for negligence or willful misconduct in
the performance of his duties. The foregoing right to
indemnification shall be in addition to such other rights as each
member of the Committee may enjoy as a matter of law or by reason
of insurance coverage of any kind, but shall not extend to costs,
expenses, and/or liabilities otherwise covered by insurance or
that would be so covered by any insurance then in force if such
insurance contained a waiver of subrogation. Rights granted
hereunder shall be in addition to and not in lieu of any rights
to indemnification to which each member of the Committee may be
entitled pursuant to the by-laws of the Company. Service as a
member of the Committee shall be deemed in partial fulfillment of
the member's function as an Employee, officer and/or director of
the Company, if he serves in such capacity as well.
12.9 Expenses of Establishing and Administering the Plan.
All expenses paid or incurred in establishing and administering
the Plan may be paid by the Company, but if not paid by the
Company, shall be paid by the Trustees from the Trust Fund.
Provided, that if expenses are paid by the Company, the Company
may withhold as reimbursement such amounts from the contribution
due the Plan for the fiscal year of the Company for which the
expenses are paid or incurred.
ARTICLE XIII
TOP-HEAVY PROVISIONS
13.1 Special Rules Applicable for Top-Heavy Plan Years.
The special rules of this Article shall apply to any Top-Heavy
Plan Year and shall supersede any conflicting provisions
elsewhere in the Plan.
13.1.1 For any Top-Heavy Plan Year, a Participant's
interest in his Participant Account shall become vested
and nonforfeitable to the extent of the following
percentages based upon his Years of Service:
Years of Service Vested Percentage
Less than 3 0
3 or more 100
This vesting schedule shall not apply to the Participant
Account of any Participant who is not credited with an
Hour of Service during the Top-Heavy Plan Year. If the
Plan becomes a Top-Heavy Plan and subsequently ceases
being a Top-Heavy Plan, the vesting schedule set forth
above shall automatically cease to apply and the vesting
schedule set forth in Section 5.6 shall automatically
apply with respect to all amounts allocated to the
Participant Account for Plan Years after the last Top-
Heavy Plan Year. This change in vesting schedules shall
apply only to the extent that Section 11.5 of the Plan and
Section 411(a)(10) of the Code are satisfied.
13.1.2 For any Top-Heavy Plan Year, the amount
allocated to each Non-Key Employee who is employed by the
Company on the last day of the Plan Year, under this Plan
and any other defined contribution plan included in the
Required Aggregation Group, shall not be less than the
lesser of 3% of his Compensation for that Plan Year, or
the largest percentage, as a percentage of the first
$200,000 of the Key Employee's Compensation for that Plan
Year, allocated to any Key Employee for that Plan Year.
The foregoing minimum benefit shall be determined without
regard to (a) contributions under the Federal Insurance
Contributions Act or similar state or federal laws, (b)
the number of Hours of Service credited to the Participant
during the Plan Year, (c) whether the Participant's
Compensation is less than a stated amount and (d) whether
the Participant made an otherwise mandatory contribution
to the Plan. If the Participant is also covered by a
defined benefit Top Heavy Plan sponsored by the Company,
the minimum benefit required by this subsection shall be
satisfied by providing the required minimum benefit under
the defined benefit plan offset by the benefits provided
under this Plan and any other defined contribution plan
maintained by the Company.
13.1.3 Only the first $200,000 (as adjusted to take
into account any cost-of-living increase adjustments
provided under Section 416(d)(2) of the Code) of a
Participant's Compensation for that Plan Year shall be
taken into account for purposes of the Plan.
13.1.4 The limitation on contributions shall be
applied by substituting "1.0" for "1.25" in computing the
defined benefit plan fraction and the defined contribution
plan fraction for purposes of 5.5.3. This rule shall not
apply, however, if the Plan is not a Super Top-Heavy Plan
and each Participant who is not a Key Employee either (a)
receives an allocation of at least 4% of his compensation
for that year under the Plan or (b) accrues the minimum
defined benefit accrual (defined in Section 416(c)(1) of
the Code as modified by Section 416(h)(2)(A)(ii)(I) Code)
for that year under any defined benefit plan maintained by
the Company or an Affiliated Company.
13.2 Definitions Relating to Top-Heavy Provisions. The
following terms, when used in this Article, shall have the
meaning set forth below, unless a different meaning is plainly
required by the context:
"Determination Date" means the last day of the preceding
Plan Year or the last day of the first Plan Year.
"Key Employee" means each Employee or former Employee (and
his Beneficiary) who at any time during the five Plan Years
ending on the Determination Date:
(a) Was an officer of the Employer or an Affiliated
Company (but only if he had Compensation greater than 50%
of the dollar amount an effect under Section 415(b)(1)(A)
of the Code for the Plan Year),
(b) Was one of the ten Employees owning the largest
interest of the Company and its Affiliated Companies (but
only if he had Compensation greater than the dollar amount
in effect under Section 415(c)(1)(A) of the Code for the
Plan Year),
(c) Owned at least 5% of the Company's outstanding
shares of stock or at least 5% of the total combined
voting power of the Company's shares of stock, or
(d) Owned at least 1% of the Company's outstanding
shares of stock or at least 1% of the total combined
voting power of the Company's shares of stock and had
Compensation of more than $150,000 from the Company and/or
any Affiliated Company.
The determination of who is a Key Employee will be made in
accordance with Section 416(i)(1) of the Code and the regulations
thereunder.
"Non-Key Employee" means any Employee or former Employee
who is not a Key Employee.
"Permissive Aggregation Group" means all qualified
employee pension benefit plans (within the meaning of ERISA) in
the Required Aggregation Group and any qualified employee pension
benefit plans sponsored by the Company or an Affiliated Company
which are not part of the Required Aggregation Group, but which
satisfy the requirements of Sections 401(a)(4) and 410 of the
Code when considered together with the Required Aggregation
Group, and which the Company elects to include in the Permissive
Aggregation Group.
"Required Aggregation Group" means the Plan and any other
qualified employee pension benefit plan sponsored by the Company
or an Affiliated Company in which a Key Employee participates, or
which enables the Plan to meet the requirements of Sections
401(a)(4) or 410 of the Code.
"Super Top-Heavy Plan" means this Plan if it would
constitute a Top-Heavy Plan if "90%" is substituted for "60%"
wherever it appears in the definition of Top-Heavy Plan and
Top-Heavy Group.
"Top-Heavy Group" means all plans of the Company and any
Affiliated Company in the Required Aggregation Group and any
other qualified employee pension benefit plan of the Company and
any Affiliated Company which the Company elects to aggregate as
part of a Permissive Aggregation Group if, on any Determination
Date, the Valuation Amount of all Key Employees' accrued benefits
under those plans exceeds 60% of the Valuation Amount of all
Participants' accrued benefits.
"Top-Heavy Plan" means this Plan if, on any Determination
Date, the Valuation Amount of Key Employees' accrued benefits
exceeds 60% of all Participants' accrued benefits.
"Top-Heavy Plan Year" means any Plan Year during which the
Plan is a Top-Heavy Plan or part of a Top-Heavy Group.
"Valuation Amount" means, in the case of a defined benefit
plan, the present value of the cumulative accrued benefits and,
in the case of a defined contribution plan, the Participant's
account balance adjusted for contributions due as of the
Determination Date. Valuation Amount shall be determined as of
the most recent valuation date which is within the 12-month
period ending on the Determination Date. For purposes of
determining the present value of cumulative accrued benefits and
account balances, distributions made during the five Plan Years
ending on the Determination Date shall be taken into account.
The determination of Valuation Amount will be made in accordance
with Section 416(g) of the Code and the regulations thereunder.
ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. Notwithstanding any other provisions
of the Plan, the Committee shall administer the Plan in
conformity with the applicable laws of the State of Utah and of
the United States (including ERISA) and all rules and regulations
from time to time promulgated under the authority of such laws.
14.2 Information Returns. The Company shall furnish the
Committee all data and information which is necessary to enable
the Committee to file returns and reports required by the
Internal Revenue Service and the Department of Labor.
14.3 Company Action. Any action required or permitted to
be taken by the Company may be taken on behalf of the Company by
any officer of the Company.
14.4 Company Records. Records of the Company as to an
Employee's or Participant's period of employment, termination of
employment and the reason therefor, leaves of absence,
re-employment and compensation will be conclusive on all persons,
unless determined by the Committee to be incorrect.
14.5 No Guarantee of Interests. Neither the Trustees, the
Committee nor the Company in any way guarantees the Trust Fund
from loss or depreciation, nor do they guarantee any payment to
any person. The liability of the Trustees, the Committee and the
Company to make any payments hereunder is limited to the
available assets of the Trust Fund.
14.6 Interpretations and Adjustments. To the extent
permitted by law, an interpretation of the Plan and a decision on
any matter within the Committee's discretion made in good faith
is binding on all persons. A misstatement or other mistake of
fact shall be corrected when it becomes known, and the Committee
shall make such adjustment on account thereof as it considers
equitable and practicable.
14.7 Uniform Rules. In the administration of the Plan,
uniform rules will be applied to all Participants similarly
situated.
14.8 Evidence. Evidence required of anyone under the Plan
may be by certificate, affidavit, document or other information
which the person acting on it considers pertinent and reliable
and signed, made or presented by the proper party or parties.
14.9 Waiver of Notice. Any notice required under the Plan
may be waived by the person entitled to notice.
14.10 Gender and Number. Except where otherwise
clearly indicated by the context, the masculine and the neuter
shall include the feminine and the neuter, the singular shall
include the plural, and vice-versa.
IN WITNESS WHEREOF, the Company has caused the Plan to be
executed by its duly authorized officers this ____ day of
_____________________, 1992.
SMITH'S FOOD & DRUG CENTERS, INC.
By
Its
ATTEST:
FIRST AMENDMENT
TO
SMITH'S FOOD & DRUG CENTERS, INC. EMPLOYEE PROFIT SHARING PLAN
WHEREAS, the Smith's Food & Drug Centers, Inc. Employee
Profit Sharing Plan (the "Plan") was established effective
January 3, 1993;
WHEREAS, in order to receive a favorable determination
letter, the Internal Revenue Service has required that the Plan
be amended;
WHEREAS, the Company desires to amend the Plan;
NOW, THEREFORE, Section 7.10 of the Plan is hereby amended
and restated, effective January 3, 1993, to read in its entirety
as follows:
7.10 Rollover Transfers and Withholding.
Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a distributee's election under
this Section 7.10, a distributee may elect, at the time and
in the manner prescribed by the Committee, to have any
portion of an eligible rollover distribution paid directly
to an eligible retirement plan specified by the distributee
in a direct rollover.
7.10.1 An eligible rollover distribution is
any distribution of all of any portion of the balance
to the credit of the distributee, except that an
eligible rollover distribution does not include: any
distribution that is one of a series of substantially
equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of 10
years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the
Code; and the portion of any distribution that is not
includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with
respect to employer securities).
7.10.2 An eligible retirement plan is an
individual retirement account described in Section
408(a) of the Code, an individual retirement annuity
described in Section 408(b) of the Code, an annuity
plan described in Section 403(a) of the Code or a
qualified trust described in Section 401(a) of the
Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement
account or individual retirement annuity.
7.10.3 A distributee includes an Employee or
former Employee. In addition, the Employee's or former
Employee's surviving spouse, and the Employee's or
former Employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations
order, as defined in Section 414(p) of the Code, are
distributees with regard to the interest of the spouse
or former spouse.
7.10.4 A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the
distributee.
7.10.5 Within a reasonable time (i.e., no
earlier than 90 days) prior to making an eligible
rollover distribution, the Committee shall provide the
distributee with the written explanation described in
Section 402(f) of the Code. To the extent required by
the Code and regulations thereunder, the Committee
shall direct the Trustee to withhold income tax on
distributions from the Plan.
IN WITNESS WHEREOF, the Company has caused this instrument
to be executed by its duly authorized officers this 2nd day of
August, 1993.
SMITH'S FOOD & DRUG CENTERS, INC.
By:
_______________________________
Its
___________________________
ATTEST:
________________________
SECOND AMENDMENT
TO
SMITH'S FOOD & DRUG CENTERS, INC. EMPLOYEE PROFIT SHARING PLAN
WHEREAS, the Smith's Food & Drug Centers, Inc. Employee
Profit Sharing Plan (the "Plan") was established effective
January 3, 1993;
WHEREAS, the Company desires to amend the Plan to clarify
the hours to be credited as Hours of Service;
NOW, THEREFORE, subsections 2.2.2 and 2.2.6 of the Plan
are hereby amended and restated, effective January 3, 1993, to
read in their entirety as follows:
2.2.2 Each hour for which an Employee is
paid, or entitled to payment, by the Company or an
Affiliated Company on account of a period of time
during which no duties are performed (irrespective
of whether the employment relationship has
terminated) due to vacation, holiday, illness,
incapacity (including disability), lay off, jury
duty, military duty or leave of absence. No more
than 501 Hours of Service shall be credited under
this subsection 2.2.2 for any single continuous
period (whether or not such period occurs in a
single computation period). In addition, no Hours
of Service shall be credited for payments made or
due under a plan maintained solely for the purpose
of complying with applicable workmen's
compensation, unemployment compensation or
disability insurance laws. Hours under this
subsection 2.2.2 shall be calculated and credited
pursuant to Section 2530.200b-2 of the Department
of Labor Regulations which are incorporated herein
by this reference.
. . .
2.2.6 Notwithstanding anything else to the
contrary, for purposes only of allocating
contributions and forfeitures under Section 5.2,
the following shall apply:
(a) The hours to be credited as Hours of Service
pursuant to this Section 2.2 shall only be hours for which
an Employee is paid, or entitled to payment, by the
Company and such hours shall be credited to the Plan Year
in which the payment is made. No hours will be credited
with respect to payments on account of disability, whether
or not made or due under a plan maintained solely for the
purpose of complying with applicable disability insurance
laws. Hours of Service for salaried Employees shall be
determined on the basis of 45 hours per week. A salaried
Employee who is employed for less than a full week shall
be credited with the pro rata portion of such week during
which he is employed by the Company.
(b) The Hours of Service credited to a Participant
during a Plan Year shall not exceed 2,080.
IN WITNESS WHEREOF, the Company has caused this instrument
to be executed by its duly authorized officers this _____ day of
_____________.
SMITH'S FOOD & DRUG CENTERS, INC.
By
Its
ATTEST:
___________________________
EXHIBIT 10.8
July 16, 1993
SMITH'S FOOD & DRUG CENTERS, INC.
P.O. Box 30550
Salt Lake City, Utah 84130
Attention: Mr. Richard J. Osborne
Assistant Treasurer
Gentlemen:
Following our annual review of your file, we are pleased to
confirm the committed line of credit which we extend in your
favor per the following details:
COMMITMENT TOTAL: USD 15,000,000 - Clean advances up
to 180 days evidenced by promissory
notes.
INTEREST RATE: Our most competitive rates to
be negotiated at the time of
utilization.
COMMITMENT FEE: A commitment fee of 1/4 of 1% per
annum on the unused portion, computed on
a 360 day basis for the actual days
elapsed, is payable calendar quarterly
in arrears.
DURATION OF FACILITY: Committed for a period of eighteen
months plus one day to include an
"evergreen" clause for the automatic
renewal of same each six months, barring
notice of cancellation by yourselves or
ourselves of the evergreen feature. For
example, and retaining the previous
trigger dates, the commitment currently
expires on October 31, 1994, but on
October 31, 1993, the expirations
extends to April 30, 1995 automatically.
Thereafter, on April 30, 1994, the
expiry date automatically pushes out to
October 31, 1995, and so on, so that at
no time will there be less than one year
and one day of availability (unless
cancellation notice is given of the
evergreen feature).
Additionally we are pleased to advance to you an additional
up to USD 5,000,000 for periods of up to 30 days, as you may from
time to time have need, and with interest rates usually as
described above. This $5MM availability is not a commitment and
may be withdrawn by us at any time.
Please indicate your acceptance of the terms and conditions
of this letter by acknowledgement as indicated below, signed by
an authorized officer, and returning to us the enclosed executed
duplicate.
We consider your existing promissory notes to continue to be
valid, with their relevant grids. As to your Corporate
Resolution to Borrow, unless you advise us otherwise, we consider
to remain valid that which you provided as of 4 June 1992.
This letter effectively supersedes our previous Credit
Agreement Letter dated June 3, 1992, as acknowledged by you.
It is indeed our pleasure to have served Smith's now for
some twelve years, and we look forward to a continued mutually
beneficial relationship.
Sincerely,
BANCA DI ROMA - San Francisco
RICHARD G. DIETZ
97271
The above terms and conditions
are hereby accepted.
SMITH'S FOOD & DRUG CENTERS, INC.
By: ______________________________
Its __________________________
Dated ___________________
Smith's Food & Drug Centers, Inc.
Page 4
EXHIBIT 10.9
October 15, 1993
SMITH'S FOOD & DRUG CENTERS, INC.
1550 South Redwood Road
Salt Lake City, Utah 84104
Attn: Mr. Casey Jones
Director of Capital Development and Banking
Gentlemen:
We are pleased to confirm to you by this letter agreement
(the "Agreement") that a new unsecured revolving credit facility
has been placed at the disposal of SMITH'S FOOD & DRUG CENTERS,
INC. (the "Company") for general corporate purposes under the
following terms and conditions. This facility replaces the
existing $15,000,000 revolving credit facility with Credit Suisse
dated September 15, 1992.
1. THE REVOLVING CREDIT
1.1 Amount and General Terms: Subject to the terms hereof,
we will make loans to the Company as you may request from time to
time from the date hereof (the "Effective Date") to June 30, 1996
(the "Commitment Termination Date"), up to but not exceeding
$15,000,000.00 in aggregate principal amount at any time
outstanding (the "Commitment"). The Company may borrow, repay,
and reborrow hereunder, from the date of its acceptance of this
Agreement until the commitment Termination Date, either the full
amount of the Commitment or any lesser sum which is $1,000,000 or
a multiple thereof, by means of the borrowing options outlined
below, provided that all loans will be repaid to us on the
Commitment Termination Date.
1.2 Borrowing Options and Interest Rates: Interest on the
principal balance of the loan, from time to time outstanding,
will be payable at the Company's option at the following rates
per annum:
(a) For periods of one, two, three or six
months, London Interbank Offered Rate (LIBOR) plus
a margin of 50.0 basis points.
(b) For periods of one to twenty-nine days,
Credit Suisse Base Rate. "Base Rate" means the
higher of (1) the base commercial lending rate
announced by us from time to time or (2) the rate
of interest quoted to us from time to time for the
purchase by us from other banks or dealers of
United States Federal Funds on an overnight basis
in an amount comparable to the principal amount of
the relevant loan plus 50 basis points. Any
change in such Base Rate shall be effective on the
date specified in the public announcement of such
change.
(c) For periods of one to twenty-nine days,
bid option at negotiated rates.
Interest is payable on the last business day of the interest
period of the relevant borrowing and if such interest period is
longer than three months, at intervals of three months after the
first day thereof, and at a maturity of the relevant borrowing.
Interest shall be computed on the actual number of days elapsed
on a 360-day year basis.
Overdue payments of principal and interest shall bear
interest, payable on demand, at a rate equal to the Base Rate
plus 1% per annum until paid in full.
All borrowing under this Commitment will be evidenced by one
Revolving Promissory Note (attached) duly executed by the
Company.
1.3 Borrowing Notices, Payments and Prepayments:
(a) Request for Base Rate borrowing and bid
option should be made before 11:00 A.M. Los
Angeles time on the date of such request.
(b) Request for LIBOR borrowing should be
made three business days prior to the intended
drawing as it is customary that the rate
applicable to the specific borrowing period be
fixed two London business days preceding the date
of borrowing.
All loans will be paid free and clear of all taxes now
imposed, or those that will affect any change in the basis of
taxation of any amounts payable to the Bank (other than Federal,
State and Local income taxes imposed on the Bank).
Loans based on Base Rate may be prepaid without penalty.
Prepayment of loans granted on a LIBOR basis will be subject to a
prepayment penalty equal to the amount of any loss incurred by us
in liquidating and/or re-employing the amounts borrowed by us to
fund the loans, plus related reasonable expenses.
1.4 Commitment Fees. From and after the date hereof, until
the Commitment Termination Date, the Company will pay us a
commitment fee equal to 25.0 basis points per annum on the
average daily undisbursed amount of the Commitment, from the
Effective Date up to and including the Commitment Termination
Date, payable quarterly in arrears, commencing on December 31,
1993. The commitment fee shall be calculated on the basis of
actual days elapsed and a year of 360 days.
All disbursements and payments hereunder are to be made in
U.S. dollars in immediately available funds. All payments by or
on behalf of the Company to us under this Agreement shall be made
prior or 12:00 P.M. Los Angeles time on the date due to us at
offices at 12 East 49th Street, New York, NY 10017 (Attn: Loan
Department).
2. YIELD PROTECTION AND ILLEGALITY
2.1 Additional Costs. In the event that by reason of the
provisions of Federal Reserve Board Regulation D as presently in
effect or by reason of any amendment or change in said regulation
or in any other applicable banking law or regulations or the
interpretation thereof or by reason of any requirements or
directives of any governmental authority whatsoever, we incur
reserve costs on, or on account of, any advance or commitment, we
shall inform the Company accordingly and shall from time to time
charge the Company for such reserve costs.
2.2 Capital Adequacy. In addition, the Company agrees to
pay us on demand such amounts as we reasonably determine are
necessary to compensate us for any increased costs or reduction
in rates of return attributable to this Agreement and resulting
from the applications of any law, regulation, directive or
request becoming effective after the date of this Agreement
(regardless if earlier promulgated or announced) and applicable
to the Bank regarding any reserve, assessment, capital adequacy
or capital maintenance or similar requirement relating to this
Agreement.
2.3 Illegality. Notwithstanding any other provision in
this Agreement, in the event that it becomes unlawful for us to
honor our obligations to make or maintain LIBOR loans hereunder,
the we shall promptly notify the Company thereof and our
obligation to make, maintain or to convert into LIBOR loans
hereunder shall be suspended until such time as we may again make
and maintain LIBOR loans. In such event, we shall make every
effort to provide an alterative hereunder to such LIBOR loans
which is reasonably comparable thereto.
3. REPRESENTATIONS AND WARRANTIES
The Company hereby represents to us that:
3.1 Corporate Organization and Authority. (i) The Company
has the power, authority and capacity to execute, deliver and
perform this Agreement and all other documents executed in
connection herewith and (ii) this Agreement and the documents
executed in connection herewith constitute the valid and binding
obligations of the Company and are enforceable in accordance with
their respective terms.
3.2 Financial Condition. The Company represents and
warrants that the financial statements of the Company dated March
31, 1991 furnished to the Bank fairly present the Company's
financial position as of the date of such statements and the
results of its operations and the changes in such financial
position for the period then ended in accordance with generally
accepted accounting principles consistently applied. As of the
date of this Agreement and the date of any borrowing hereunder,
the Company represents that no material adverse change has
occurred since March 31, 1991, with respect to the ability of the
Company to perform under this facility.
The Company will furnish the Bank audited financial
statements within 120 days after the closing of the Company's
fiscal year, and unaudited financial statements within 60 days
after the closing of each of the first three fiscal quarters.
The Company will also provide any additional information as the
Bank may reasonably request and will allow the Bank reasonable
access to its books and records.
Accompanying the annual financial statements, the Company
will provide an opinion of an independent certified public
accountant of recognized national standing, which opinion shall
state that said consolidated financial statements fairly present
the consolidated financial condition and results of operations of
the Company as at the end of, and for, such fiscal year, and a
certificate of such accountants stating that, in making the
examination necessary for their opinion, they obtained no
knowledge, except as specifically stated, of any Default.
Promptly after the Company knows or has reason to know that
any Default has occurred or any event which with notice or lapse
of time or both would become an Event of Default, a notice of
such Default describing the same in reasonable detail and,
together with such notice or as soon thereafter as possible, a
description of the action that the Company has taken and proposes
to take with respect thereto; and
The Company will furnish, at the time it furnishes each set
of financial statements, a certificate of a senior financial
officer of the Company (i) to the effect that no Default has
occurred and is continuing (or, if any Default has occurred and
is continuing, describing the same in reasonable detail and
describing the action that the Company has taken and proposes to
take with respect thereto) and (ii) setting forth in reasonable
detail the computations necessary to determine whether the
Company is in compliance with the covenants per 4.1.
3.3 Restriction on Fundamental Changes. The Company will
not, and will not permit any of its subsidiaries to, enter into
any transaction of merger or consolidation or liquidate, wind up
or dissolve itself or convey, sell, lease, transfer or otherwise
dispose of all or substantially all its assets to any other
Person, except in the ordinary course of its business, provided
that the Company may merge with another Person if (i) the Company
is the corporation surviving such merger and (ii) immediately
after giving effect to such merger, no Default shall have
occurred and be continuing.
4 COVENANTS
4.1 Financial Covenants. The Company covenants and agrees
that so long as this facility shall remain available, and until
the full and final payment of all indebtedness incurred
hereunder, it will, unless we waive compliance in writing:
(a) Maintain a Fixed Charge Coverage ratio of not less
than 1.5 to 1, measured at the end of each fiscal
quarter. "Fixed Charge Coverage" means the sum of net
income plus income taxes plus fixed charges (interest
plus net rents) divided by fixed charges.
(b) Maintain a Tangible Net Worth of not less than the
sum of $400 million, plus 30% of net income after taxes
on a quarterly basis, plus 100% of any increase in
shareholder's equity other than the quarterly income
increases, measured at the end of each fiscal quarter,
commencing with the quarter ending September 30, 1992.
(c) Maintain a Leverage Ratio not to exceed 2.0 to 1,
measured at the of each fiscal quarter. As used
herein, "Leverage Ratio" means the ratio of total debt
to tangible net worth. Total debt includes all
borrowed money and lease obligations (including capital
leases and operating leases, the latter to be
calculated as six times the annual amount owed.)
4.2 Negative Pledge. The Company will cause the payment
obligations under this Agreement at all times to rank at least
equally and rateably in all respects with all its other unsecured
and unsubordinated indebtedness, and the Company will not, nor
will it permit any of its subsidiaries to, create, incur, assume
or suffer to exist any Lien upon any of its inventory, whether
now owned or hereafter acquired, unless the benefit of the
relevant security, or of alternative security satisfactory to us,
is at the same time and in a manner satisfactory to us extended
equally and rateably to the loans made and/or to be made and all
other sums payable by the Company under this Agreement.
5. EVENTS OF DEFAULT
In the event of any of the following defaults, the Bank may
without presentment, demand, protest or notice of any kind, all
of which are hereby expressly waived by the Company, declare the
principal of all drawings plus accrued interest to be immediately
due and payable and terminate this line of credit:
5.1 Failure to pay principal, interest or fees under this
Agreement within 10 days after such becomes due.
5.2 Failure to comply with any other covenants or
obligation in this Agreement for 30 days.
5.3 If any material representation made by the Company to
us concerning the Company's business or financial condition shall
prove to have been incorrect when made.
5.4 If the Company shall default in the performance or
observance of any provision or covenant contained within any
existing loan agreement other than this Agreement which the
Company may have in effect with any other lender, other than to
us, during the tenor of this Agreement, and such default shall
continue unremedied for a period of 20 calendar days.
5.5 If the Company shall admit its inability to pay its
debts as they mature, or shall make an assignment for the benefit
of any of its creditors, or proceedings are instituted by or
against the Company under any bankruptcy, reorganization or
insolvency law or other law for the relief of debtors.
5.6 If the Company shall suffer final judgment for the
payment of money aggregating in excess of US$5,000,000 and shall
not discharge the same within a period of 30 days unless, pending
further proceedings, execution has not been commenced or if
commenced has been effectively stayed.
5.7 The Company shall fail to meet any of its obligations
under the Employment Retirement Income Security Act of 1974
("ERISA") or notice of a proceeding to terminate any "plan" under
ERISA to appoint a trustee of a "plan" is not dismissed within 60
days of such notice.
Upon the occurrence of any of the above listed events of
default, we may, without prior notice, set off and apply any and
all deposits maintained with us and any other indebtedness owing
by us to the Company against any and all obligations of the
Company hereunder.
6 EXPENSES
The Company agrees to reimburse us for all out-of-pocket
expenses that we may incur relating to any default, dispute or
enforcement of these terms and conditions or of the Revolving
Promissory Note, including reasonable attorneys' fees, and all
costs of collection.
The party prevailing with respect to any action brought by
the other party with respect to the enforceability of this
Agreement in any court of competent jurisdiction shall be
reimbursed by the non-prevailing party for all reasonable costs
and expenses, including reasonable attorney fees, with respect to
this Agreement.
7. DOCUMENTATION
Our obligation to extend credit under this line of credit is
conditioned upon the receipt of all of the following documents,
dated as of a recent date and in a form and substance
satisfactory to us:
- A certified copy of a Resolution of the Board of
Directors of the Company authorizing the execution,
delivery, and performance of all documents relative to
the commitment contemplated herein, and the making of
the credit. Such Resolution will be certified by the
Secretary or any other appropriate officer of the
Company.
- A certified copy of the Articles of Incorporation
and By-laws of the Company
- Specimen Signature Records of the Company
- Revolving Promissory Note (enclosed)
8. MISCELLANEOUS
8.1 This Agreement is governed by California law, and may
not be amended except by instrument in writing signed by the
Company and us.
8.2 We may assign, negotiate, pledge or otherwise
hypothecate all or any portion of this Agreement, or grant
participation herein or in any of our rights and security
hereunder.
8.3 Nothing herein shall prohibit us from pledging or
assigning the Revolving Promissory Note to any Federal Reserve
Bank in accordance with applicable law.
If the foregoing meets with your approval, please sign and
return to us the enclosed copy of this letter agreement to
signify your agreement with the terms and conditions stipulated
therein.
It is our pleasure to make this line available to you, and
we look forward to a long and mutually satisfactory relationship.
Very truly yours,
CREDIT SUISSE
David J. Worthington Edward Siegel
Member of Senior Management Associate
Credit Suisse Telephone No.: (213) 955-8200
800 Wilshire Blvd. Telex No.: 67227
Los Angeles, CA 90017 Telefax No. (213) 955-8245
Read, Agreed & Accepted:
By: ______________________
Title: ___________________
SMITH'S FOOD & DRUG CENTERS, INC.
Telephone No.: __________________________
Telex No.: __________________________
Telefax No.: __________________________
REVOLVING PROMISSORY NOTE
October 15, 1993
US$15,000,000.00
FOR VALUE RECEIVED, SMITH'S FOOD & DRUG CENTERS, INC., a
Delaware Corporation (the "Company"), hereby promises to pay to
Credit Suisse, (the "Bank"), or order, at the office of the Bank
at 12 East 49th Street, New York, N.Y. 10017 the principal sum of
US$15,000,000 (USDOLLAR FIFTEEN MILLION) or such lesser amount as
shall equal the aggregate unpaid principal amount of the loans
made by the Bank to the Company under the letter agreement dated
as of October 15, 1993 between the Company and the Bank (the
"Agreement"), in lawful money of the United States of America and
in immediately available funds, on the dates and in the amounts
specified in the Agreement and to pay interest on the principal
amount of each such loan, at such office, in like money and
funds, for the period commencing on the date of such loan until
such loan shall be paid in full, at the rates per annum and on
the dates provided in the Agreement.
The books and accounts of the Bank shall be conclusive
evidence, absent manifest error, of the amounts of all loans,
interest, fees and other charges advanced, due, outstanding or
paid pursuant to the Agreement and this Note.
This Note is the Revolving Promissory Note referred to in
the Agreement under Section 1.2 and evidences loans made by the
Bank thereunder. This Note is entitled to the benefits of the
Agreement, which Agreement, among other things, contains
provisions for acceleration of the maturity hereof upon the
happening of certain stated events. This Note shall remain valid
and in force despite the fact that there may be times when no
indebtedness is owing hereunder.
If payment is not made when due, then the unpaid principal
and any accrued interest which are past due shall bear interest
at the Bank's Base Rate (as defined in the Agreement) plus 1% per
annum until paid in full.
Presentment, demand, protest and diligence and notices of
protest, dishonor and non-payment of this Note and all notices of
every kind are hereby waived by the Company and each endorser,
guarantor and surety of this Note.
This Note shall be governed by and construed in accordance
with the laws of the State of California.
SMITH'S FOOD & DRUG CENTERS, INC.
By: ______________________________
Its __________________________
EXHIBIT 10.11
July 22, 1993
Mr. Paul Tezak
Vice President
Smith's Food & Drug Centers, Inc.
1550 South Redwood Road
Salt Lake City, Utah 84104
Dear Paul:
On behalf of West One Bank, Idaho, I am pleased to extend the following
financing commitment to Smith's Food & Drug Centers, Inc.
Borrower: Smith's Food & Drug Centers, Inc.
Lender/Bank: West One Bank, Idaho
Committed Credit
Facility: Fifteen Million Dollars ($15,000,000)
unsecured committed revolving line of credit. The line
of credit shall be evidenced by two notes, the West One
Bank, Idaho Reference Rate Promissory Note and the
Negotiated Rate Promissory Note, which notes shall
replace the two Fifteen Million Dollars ($15,000,000)
notes, the West One Bank, Idaho Reference Rate
Promissory Note and the Negotiated Rate Promissory
Note, dated June 1, 1992. At no time shall the
aggregate amount outstanding under the Committed Credit
Facility exceed Fifteen Million Dollars ($15,000,000).
Maturity: May 31, 1995
Interest Rate: One of two options to be decided upon by Borrower
on the date of each requested advance:
a. Negotiated rate and term to be
agreed upon at the time of each requested advance.
No advance shall exceed a maximum term of 180
days.
b. West One Bank, Idaho Reference
Rate as that rate may change from time to time.
Fee: .125% Non-Usage fee calculated on the
unused daily balance of the Committed Credit Facility
which fee shall be payable quarterly in arrears.
Covenants: The commitment of the Bank to provide the
financing described herein is conditioned upon the
following:
a. Receipt by Bank of Borrower's
audited fiscal year-end financial statement within
90 days of each fiscal year-end.
b. Receipt by Bank of Borrower's
quarterly company prepared financial statements or
10-Q's within 60 days of each fiscal quarter end.
c. Receipt by Bank of Borrower's
quarterly compliance certificate within 60 days of
each fiscal quarter end.
d. Borrower shall maintain
stockholders equity of no less than Four Hundred
Fifty Million Dollars ($450,000,000).
e. Borrower shall maintain a
Debt/Net Worth ratio of no greater than 3.00:1.
Debt/Net Worth ratio calculated as total
liabilities divided by stockholders equity.
f. Borrower shall maintain a cash
flow ratio of no less than 1.50:1. Cash flow
ratio calculated as (earnings before interest &
taxes + rent expense - sublease) divided by (rent
expense - sublease + interest expense).
Uncommitted Credit
Facility: Five Million Dollars ($5,000,000) unsecured
uncommitted revolving line of credit. The line of
credit shall be evidenced by a note, the Promissory
Note, which note shall replace the Five Million Dollars
($5,000,000) Promissory Note dated June 1, 1992. It is
understood and agreed that advances on the Uncommitted
Credit Facility are at the sole option and discretion
of Bank.
Interest Rate: Negotiated rate and term to be agreed upon at the
time of each requested advance. No advance shall
exceed a maximum term of 180 days. Contractual rate,
(ie. or bid rate) cannot exceed West One Bank, Idaho
reference rate.
Fee: None.
This financing commitment shall expire on August 6, 1993 unless accepted by
Borrower and received by Bank on or before that date.
Sincerely,
George Welch
Vice President
Corporate Banking Utah
(801) 534-6071
This financing commitment and all terms and conditions herein are
understood, agreed to, and accepted this ____ day of ____________, 199__.
SMITH'S FOOD & DRUG CENTERS, INC.
By: _____________________
Its _________________
CORPORATE RESOLUTION AUTHORIZING BORROWINGS
I, the undersigned Secretary of Smith's Food & Drug, Inc. (herein called
the "Corporation"), hereby certify as follows: The corporation is
organized and existing under and by virtue of the laws of the State of
Delaware has its principal office at 1550 South Redwood Road, Salt Lake
City, Utah.
I further certify that at a meeting of the Directors of the Corporation (or
by other duly authorized corporate action in lieu of a meeting), duly and
regularly called andheld on April 29, 1993, at which a quorum was present
and voting, the following resolutions were unanimously adopted:
Be it resolved that any one (1) of the following named officers or
employees of this Corporation, whose actual signatures are shown below:
NAME TITLE ACTUAL SIGNATURE
Matthew G. Tezak Senior Vice President, CFO
_________________________________
Richard Osborne Assistant Treasurer
_________________________________
Casey Jones Director of Banking
_________________________________
Paul Tezak Vice President, Finance & Treasurer
_________________________________
acting for and on behalf of this Corporation and as its act and deed, be
and they are hereby authorized and empowered:
Borrow. To borrow without limitation from West One Bank, Idaho,
N.A. (herein called the "Bank"), on such terms as may be agreed
upon between the officers and employees and the Bank, such sum or
sums of money as in their judgment should be borrowed.
Execute Notes. To execute and deliver to the Bank the promissory
note or notes of the Corporation, on the Bank's forms, at such
rates of interest and on such terms as may be agreed upon,
evidencing the sums of money so borrowed or any indebtedness of
the Corporation to the Bank, and also to execute and deliver to
the Bank any renewal or renewals of the notes, or any of them, or
any part thereof.
Negotiate. To draw, endorse, and discount with the Bank drafts,
trade acceptances, promissory notes, or other evidences of
indebtedness payable to or belonging to the Corporation or in
which Corporation may have an interest, and either to receive
cash for the same or to cause such other disposition of the
proceeds derived therefrom as they may deem advisable.
Further Acts. To do and perform such other acts and things and
to execute and deliver such other documents, including limited
authorizations to other corporate officers or employees to
perform any acts, as may in their discretion be deemed reasonably
necessary or proper in order to carry into effect any of the
provisions of these Resolutions.
BE IT FURTHER RESOLVED, that these Resolutions shall remain in full force
and effect until written notice of the revocation thereof shall have been
delivered to and received by the Bank. Any such notice shall not affect
any agreements in effect or committed at the time notice is given.
I FURTHER CERTIFY that the persons named above are principal officers of
the Corporation and occupy the positions set opposite their respective
names; that the foregoing Resolutions now stand of record on the books of
the Corporation; that they are in full force and effect and have not been
modified or revoked in any manner whatsoever.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the seal of
the Corporation as of April 29, 1993.
Secretary' Signature
_____________________________________
Michael C. Frei
(corporate seal if any) Senior Vice
President &
Corporate Secretary
NEGOTIATED RATE PROMISSORY NOTE
$15,000,000.00 June 1, 1993
FOR VALUE RECEIVED, Smith's Food & Drug Centers, Inc. ("Borrower") does
hereby promise to pay to the order of West One Bank, Idaho ("Bank") at its
Corporate Banking Office at 101 South Capitol Boulevard, Boise, Idaho
83702, in lawful money of the United States of America and in immediately
available funds, the principal amount of Fifteen Million ($15,000,000.00)
Dollars or such lesser amount that may be advanced by Bank from time to
time to or for the benefit of Borrower from and after the date of this note
through the final maturity date of May 31, 1995. Interest shall commence
to accrue with respect to each borrowing at the Negotiated Rate on the date
of each borrowing, calculated on a 360-day basis and shall be payable, in
like funds, on the earlier of the maturity date of the borrowing or the
final maturity date.
All borrowings and all payments made on account of principal shall be
recorded on the Bank's ledger. Each such record of any borrowing hereunder
shall be conclusive evidence that such borrowing was made by Bank to
Borrower. The principal and interest balance due as stated on the Bank's
ledger shall be the sole criteria for computation of principal and interest
balances.
Provided the resulting unpaid balance does not exceed the maximum amount
stated above, advances may be made at the oral or written request of
Matthew Tezak, or Paul Tezak, or Casey Jones, or Richard Osborne, any one
acting alone, who is authorized to request borrowings, to agree on rate, to
set the maturity of each borrowing, and to direct the disposition of any
such borrowings until written notice of the revocation of such authority is
received by the Bank.
Failure to pay any principal or interest when due, or failure to comply
with any provision of this note entitles the holder to declare, at its
option, the entire remaining unpaid balance of principal and accrued
interest immediately due and payable, without presentment, protest, or
further demand or notice of any kind, all of which are hereby expressly
waived. Any unpaid balance, after maturity, including principal and
interest and late charges, shall bear interest at a rate per annum equal to
West One Bank, Idaho Reference Rate, which rate is changed from time to
time and is effective as of the date of such change, plus 2 percent.
Borrower promises to pay all costs of collection, including reasonable
attorneys' fees, whether or not suit is commenced.
SMITH'S FOOD & DRUG CENTERS, INC.
By: _____________________________
Its _________________________
WEST ONE BANK, IDAHO REFERENCE RATE PROMISSORY NOTE
June 1, 1993
$15,000,000.00
FOR VALUE RECEIVED, Smith's Food & Drug Centers, Inc. ("Borrower") does
hereby promise to pay to the order of West one Bank, Idaho ("Payee") at its
office at 101 South Capitol Boulevard, Boise, Idaho 83702, in lawful money
of the United States of America, in immediately available funds, the
principal amount of Fifteen Million Dollars ($15,000,000.00)or the total
unpaid principal amount advanced by Bank from time to time to or for the
benefit of or at the request of Borrower from and after the date of this
note through the final maturity date of May 31, 1995, together with
interest thereon at the time and rate specified in this note.
Provided the resulting unpaid balance does not exceed the maximum amount
stated above, advances may be made at the oral or written request of
Matthew Tezak, or Paul Tezak, or Casey Jones, or Richard Osborne, any one
acting alone, who is authorized to request advances and to direct the
disposition of any such advances until written notice of the revocation of
such authority is received by the Payee.
All advances and all payments made on account of principal shall be
recorded on the Bank's ledger. Each such record of any advance hereunder
shall be conclusive evidence that the advance was made by Bank to Borrower.
The principal and interest balance due as reflected on the Bank's ledger
shall be the sole criteria for computation of principal and interest
balances.
Each advance under the note shall bear interest from the date of such
advance until payment in full at a rate equal to the rate of interest
publicly announced from time to time by West one Bank, Idaho, as its West
One bank, Idaho Reference Rate. Interest shall be computed on the basis of
a 365 or 366 day year and actual days elapsed. Any change in the interest
rate of this note shall take effect at the opening of business of the day
specified in the public announcement of a change in said West One Bank,
Idaho Reference Rate. Accrued interest shall be payable monthly on the
last day of each month commencing June 30, 1993, and on the last day of
each successive month thereafter, and upon payment in full of principal of
this note on the final maturity date.
Failure to pay any principal or interest when due, or failure to comply
with any provision of any document executed by the undersigned, entitles
the holder to declare, at its option, the entire remaining unpaid balance
of principal and accrued interest immediately due and payable, without
presentment, protest, or further demand or notice of any kind, all of which
are hereby expressly waived. Any unpaid balance, after maturity, including
principal and interest and late charges, shall bear interest at a rate per
annum equal to said West One Bank, Idaho Reference Rate, plus 2 percent.
Borrower promises to pay all costs of collection, including reasonable
attorney's fees, whether or not suit is commenced.
SMITH'S FOOD & DRUG CENTERS, INC.
By: _________________________
Its _____________________
PROMISSORY NOTE
June 1, 1993
$5,000,000.00
FOR VALUE RECEIVED, Smith's Food & Drug Centers, Inc. ("Borrower") does
hereby promise to pay to the order of West One Bank, Idaho ("Bank") at its
Corporate Banking Office at 101 South Capitol Boulevard, Boise, Idaho
83702, in lawful money of the United States of America and in immediately
available funds, the principal amount of Five Million ($5,000,000.00)
Dollars or such lesser amount that may be advanced by Bank from time to
time to or for the benefit of Borrower from and after the date of this note
through the maturity date established by Bank and Borrower each time
Borrower requests and Bank agrees to make a loan. Interest shall commence
to accrue with respect to each borrowing at a rate negotiated by Bank and
Borrower at the time of each borrowing, calculated on a 360-day basis and
shall be payable, in like funds, on the maturity date established by Bank
and Borrower at the time of each borrowing.
All borrowings and all payments made on account of principal shall be
recorded on the Bank's ledger. Each such record of any borrowing hereunder
shall be conclusive evidence that such borrowing was made by Bank to
Borrower. The principal and interest balance due as stated on the Bank's
ledger shall be the sole criteria for computation of principal and interest
balances.
Provided the resulting unpaid balance does not exceed the maximum amount
stated above, advances may be made at the oral or written request of
Matthew Tezak, or Paul Tezak, or Richard Osborne, or Casey Jones, any one
acting alone, who is authorized to request borrowings, to agree on rate, to
set the maturity of each borrowing, and to direct the disposition of any
such borrowings until written notice of the revocation of such authority is
received by the Bank.
Failure to pay any principal or interest when due, or failure to comply
with any provision of this note entitles the holder to declare, at its
option, the entire remaining unpaid balance of principal and accrued
interest immediately due and payable, without presentment, protest, or
further demand or notice of any kind, all of which are hereby expressly
waived. Any unpaid balance, after maturity, including principal and
interest and late charges,shall bear interest at a rate per annum equal to
West One Bank, Idaho, Reference Rate, which rate is changed from time to
time and is effective as of the date of such change, plus 2 percent.
Borrower promises to pay all costs of collection, including reasonable
attorney's fees, whether or not suit is commenced.
It is understood and agreed that this note does not in any manner obligate
the Bank to lend to Borrower and that all borrowings are made at the sole
discretion of Bank.
SMITH'S FOOD & DRUG CENTERS, INC.
By: _______________________
Its ___________________
EXHIBIT 10.17
Execution Copy
Smith's Food & Drug Centers, Inc.
Note Agreement
Dated as of November 1, 1993
Re: $81,000,000 6.44% Senior Notes, Series 1993-E,
Due December 1, 2005,
$21,000,000 6.54% Senior Notes, Series 1993-F,
Due December 1, 2007,
$35,000,000 6.69% Senior Notes, Series 1993-G,
Due December 1, 2010
and
$13,000,000 6.94% Senior Notes, Series 1993-H,
Due December 1, 2015
Table of Contents
(Not a part of the Agreement)
Section Heading Page
Section 1. Description of Notes and Commitment 1
Section 1.1. Description of Notes 1
Section 1.2. Commitment, Closing Date 2
Section 1.3. Other Agreements 3
Section 2. Prepayment of Notes 3
Section 2.1. Required Prepayments 3
Section 2.2. Optional Prepayment with Premium 4
Section 2.3. Prepayment of Notes upon Change of Control 5
Section 2.4. Notice of Optional Prepayments 8
Section 2.5. Application of Prepayments 8
Section 2.6. Direct Payment 8
Section 3. Representations 8
Section 3.1. Representations of the Company 8
Section 3.2. Representations of the Purchaser
Section 4. Closing Conditions 9
Section 4.1. Conditions 9
Section 4.2. Waiver of Conditions 10
Section 5. Company Covenants 11
Section 5.1. Corporate Existence, Etc 11
Section 5.2. Insurance 11
Section 5.3. Taxes, Claims for Labor and Materials; Compliance with
Laws 11
Section 5.4. Maintenance, Etc 12
Section 5.5. Nature of Business 12
Section 5.6. Consolidated Tangible Net Worth 12
Section 5.7. Limitations on Indebtedness 12
Section 5.8. Limitation on Liens 14
Section 5.9. Mergers, Consolidations and Sales of Assets 16
Section 5.10.Redesignation of Subsidiaries 20
Section 5.11.Repurchase of Notes 21
Section 5.12.Transactions with Affiliates 21
Section 5.13.Termination of Pension Plans 21
Section 5.14.Reports and Rights of Inspection 21
Section 6. Events of Default and Remedies Therefor 24
Section 6.1. Events of Default 24
Section 6.2. Notice to Holders 26
Section 6.3. Acceleration of Maturities 26
Section 6.4. Rescission of Acceleration 27
Section 7. Amendments, Waivers and Consents 28
Section 7.1. Consent Required 28
Section 7.2. Solicitation of Holders 28
Section 7.3. Effect of Amendment or Waiver; Scope of Consent 29
Section 8. Interpretation of Agreement; Definitions 29
Section 8.1. Definitions 29
Section 8.2. Accounting Principles 40
Section 8.3. Directly or Indirectly 40
Section 9. Miscellaneous 40
Section 9.1. Registered Notes 40
Section 9.2. Exchange of Notes 40
Section 9.3. Loss, Theft, Etc. of Notes 41
Section 9.4. Expenses, Stamp Tax Indemnity 41
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative 42
Section 9.6. Notices 42
Section 9.7. Successors and Assigns 42
Section 9.8. Substitution of Purchaser 42
Section 9.9. Survival of Covenants and Representations 43
Section 9.10.Severability 43
Section 9.11.Governing Law 43
Section 9.12.Submission to Jurisdiction 43
Section 9.13.Reproduction of Documents 43
Section 9.14.Captions 44
Signature 45
Attachments to Note Agreement:
Schedule I _ Names and Addresses of Purchasers and Amounts of
Commitments
Schedule II _ Description of Funded Debt, Capitalized Leases, Liens
Securing Funded Debt and Intangibles included in
Consolidated Tangible Net Worth as of the Closing Date
Schedule III _ Description of Restricted Subsidiaries and Unrestricted
Subsidiaries of the Company
Exhibit A-1 _ Form of 6.44% Senior Notes, Series 1993-E, due
December 1, 2005
Exhibit A-2 _ Form of 6.54% Senior Notes, Series 1993-F, due
December 1, 2007
Exhibit A-3 _ Form of 6.69% Senior Notes, Series 1993-G, due
December 1, 2010
Exhibit A-4 _ Form of 6.94% Senior Notes, Series 1993-H due December
1, 2015
Exhibit B _ Representations and Warranties of the Company
Exhibit C _ Description of Special Counsel's Closing Opinion
Exhibit D _ Description of Closing Opinion of Independent Counsel
to the Company
Exhibit E _ Description of Closing Opinion of the General Counsel
to the Company
Exhibit F _ Subordination Provisions Applicable to Subordinated
Funded Debt
Smith's Food & Drug Centers, Inc.
1550 South Redwood Road
Salt Lake City, Utah 84104
Note Agreement
Re: $81,000,000 6.44% Senior Notes, Series 1993-E,
Due December 1, 2005,
$21,000,000 6.54% Senior Notes, Series 1993-F,
Due December 1, 2007,
$35,000,000 6.69% Senior Notes, Series 1993-G,
Due December 1, 2010
and
$13,000,000 6.94% Senior Notes, Series 1993-H,
Due December 1, 2015
Dated as of
November 1, 1993
To the Purchaser named in Schedule I
hereto which is a signatory of this
Agreement
Ladies and Gentlemen:
The undersigned, Smith's Food & Drug Centers, Inc., a Delaware
corporation (the "Company"), agrees with you as follows:
Section1.Description of Notes and Commitment.
Section1.1.Description of Notes. (a) The Company will authorize the issue
and sale of its 6.44% Senior Notes, Series 1993-E, due December 1, 2005
(the "Series 1993-E Notes") in an aggregate principal amount equal to
$81,000,000, its 6.54% Senior Notes, Series 1993-F, due December 1, 2007
(the "Series 1993-F Notes") in an aggregate principal amount equal to
$21,000,000, its 6.69% Senior Notes, Series 1993-G, due December 1, 2010
(the "Series 1993-G Notes") in an aggregate principal amount equal to
$35,000,000 and its 6.94% Senior Notes, Series 1993-H, due December 1, 2015
(the "Series 1993-H Notes") in an aggregate principal equal to $13,000,000.
The Series 1993-E Notes, the Series 1993-F Notes, the Series 1993-G Notes
and the Series 1993-H Notes are hereinafter collectively referred to as the
"Notes".
(b) The Series 1993-E Notes will be dated the date of issue, will
bear interest from such date at the rate of 6.44% per annum, payable semi-
annually on the first day of each June and December in each year
(commencing on the first such day after the date of issue) and at maturity
and will bear interest on overdue principal (including any overdue optional
prepayment of principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest at the Overdue Rate
after the date due, whether by acceleration or otherwise, until paid. The
Series 1993-E Notes shall mature on December 1, 2005 and shall be
substantially in the form attached hereto as Exhibit A-1. The
Series 1993-F Notes will be dated the date of issue, will bear interest
from such date at the rate of 6.54% per annum payable semi-annually on the
first day of each June and December in each year (commencing on the first
such day after the date of issue) and at maturity and will bear interest on
overdue principal (including any overdue required or optional prepayment of
principal) and premium, if any, and (to the extent legally enforceable) on
any overdue installment of interest at the Overdue Rate after the date due,
whether by acceleration or otherwise, until paid. The Series 1993-F Notes
shall mature on December 1, 2007 and shall be substantially in the form
attached hereto as Exhibit A-2. The Series 1993-G Notes will be dated the
date of issue, will bear interest from such date at the rate of 6.69% per
annum, payable semi-annually on the first day of each June and December in
each year (commencing on the first such day after the date of issue) and at
maturity and will bear interest on overdue principal (including any overdue
required or optional prepayment of principal) and premium, if any, and (to
the extent legally enforceable) on any overdue installment of interest at
the Overdue Rate after the date due, whether by acceleration or otherwise,
until paid. The Series 1993-G Notes shall mature on December 1, 2010 and
shall be substantially in the form attached hereto as Exhibit A-3. The
Series 1993-H Notes will be dated the date of issue, will bear interest
from such date at the rate of 6.94% per annum, payable semiannually on the
first day of each June and December in each year (commencing on the first
such day after the date of issue) and at maturity and will bear interest on
overdue principal (including any overdue required or optional prepayment of
principal) and premium, if any, and (to the extent legally enforceable) on
any overdue installment of interest at the overdue rate after the date due,
whether by acceleration or otherwise, until paid. The Series 1993-H Notes
will mature on December 1, 2015 and shall be substantially in the form
attached hereto as Exhibit A-4. Interest on the Notes shall be computed on
the basis of a 360-day year of twelve 30-day months. The Notes are not
subject to prepayment or redemption at the option of the Company prior to
their expressed maturity dates except on the terms and conditions and in
the amounts and with the premium, if any, set forth in 2 of this
Agreement. The term "Notes" as used herein shall include each Note
delivered pursuant to this Agreement and the separate agreements with the
other purchasers named in Schedule I. You and the other purchasers named
in Schedule I are hereinafter sometimes referred to as the "Purchasers".
The terms which are capitalized herein shall have the meanings set forth in
8.1.
Section1.2.Commitment, Closing Date. Subject to the terms and conditions
hereof and on the basis of the representations and warranties hereinafter
set forth, the Company agrees to issue and sell to you, and you agree to
purchase from the Company, Notes of the series and in the principal amount
set forth opposite your name on Schedule I hereto at a price of 100% of the
principal amount thereof on the Closing Date.
The Notes will be delivered to you on December 1, 1993 (the "Closing
Date"). Delivery of the Notes on the Closing Date will be made at the
offices of Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois
60603, against payment therefor in Federal Reserve or other funds current
and immediately available at the principal office of Zions First National
Bank in the amount of the purchase price at 10:00 A.M., Salt Lake City,
Utah time. The Notes delivered to you will be delivered to you in the form
of a single registered Note for the full amount of your purchase (unless
different denominations are specified by you), registered in your name or
in the name of such nominee, as may be specified in Schedule I attached
hereto and in substantially the form attached hereto as Exhibit A-1,
Exhibit A-2, Exhibit A-3 or Exhibit A-4, as the case may be.
Section1.3.Other Agreements. Simultaneously with the execution and
delivery of this Agreement, the Company is entering into similar agreements
with the other Purchasers under which such other Purchasers agree to
purchase from the Company the principal amount of Notes set opposite such
Purchasers' names in Schedule I, and your obligation and the obligations of
the Company hereunder are subject to the execution and delivery of the
similar agreements by the other Purchasers. This Agreement and said
similar agreements with the other Purchasers are herein collectively
referred to as the "Agreements". The obligations of each Purchaser shall
be several and not joint and no Purchaser shall be liable or responsible
for the acts of any other Purchaser.
Section2.Prepayment of Notes.
No prepayment of the Notes may be made except to the extent and in the
manner expressly provided in this Agreement.
Section2.1.Required Prepayments. In addition to paying the entire
outstanding principal amount and the interest due on the Notes on the
maturity dates thereof, the Company agrees it will prepay and apply and
there shall become due and payable the following sums in respect of the
aggregate principal indebtedness evidenced by the Notes:
Series 1993-E Notes
Applicable Amount of
Required Payment Dates Required Principal Payments
December 1, 2001 $16,200,000
December 1, 2002 $16,200,000
December 1, 2003 $16,200,000
December 1, 2004 $16,200,000
Series 1993-F Notes
Applicable Amount of
Required Payment Dates Required Principal Payments
December 1, 2003 $4,200,000
December 1, 2004 $4,200,000
December 1, 2005 $4,200,000
December 1, 2006 $4,200,000
Series 1993-G Notes
Applicable Amount of
Required Payment Dates Required Principal Payments
December 1, 2006 $7,000,000
December 1, 2007 $7,000,000
December 1, 2008 $7,000,000
December 1, 2009 $7,000,000
Series 1993-H Notes
Applicable Amount of
Required Payment Dates Required Principal Payments
December 1, 2011 $2,600,000
December 1, 2012 $2,600,000
December 1, 2013 $2,600,000
December 1, 2014 $2,600,000
No premium shall be payable in connection with any required prepayment
made pursuant to this 2.1. Any payment of less than all of any series of
Notes pursuant to the provisions of any other section hereof shall not
relieve the Company of the obligation to make required payments or
prepayments on such series of Notes in accordance with the terms of this
2.1.
In the event that the Company shall prepay less than all of the Notes
pursuant to 2.2 hereof, the amounts of the prepayments required by this
2.1 shall be reduced in the same proportion that the principal amount of
the Notes outstanding immediately preceding such partial prepayment has
been reduced by such partial prepayment to the end that the remaining
prepayments required to be made pursuant to the provisions of this 2.1 on
the Notes remaining outstanding will result in the same proportionate rate
of prepayment as if the Notes had not been so prepaid.
Section2.2.Optional Prepayment with Premium. In addition to the payments
required by 2.1, upon compliance with 2.4, the Company shall be entitled,
at any time and from time to time, to prepay the outstanding Notes, either
in whole or in part (but if in part then in a minimum principal amount of
$500,000) by payment of the principal amount of the Notes, or portion
thereof to be prepaid, and accrued interest thereon to the date of such
prepayment, together with a premium equal to the Make-Whole Amount,
determined as of two Business Days prior to the date of such prepayment
pursuant to this 2.2.
Section2.3.Prepayment of Notes upon Change of Control. (a) In the event
that any Change of Control (as hereinafter defined) shall occur or the
Company shall have knowledge of any proposed Change of Control, the Company
will give written notice (the "Company Notice") of such fact in the manner
provided in 9.6 hereof to the holders of the Notes. The Company Notice
shall be delivered promptly upon receipt of such knowledge by the Company
and in any event no later than three Business Days following the occurrence
of any Change of Control. The Company Notice shall (1) describe the facts
and circumstances of such Change of Control in reasonable detail, (2) make
reference to this 2.3 and the right of the holders of the Notes to require
prepayment on the terms and conditions provided for in this 2.3, (3) offer
in writing to prepay the outstanding Notes, together with accrued interest
to the date of prepayment and a premium equal to the then applicable Make-
Whole Amount and (4) specify a date for such prepayment (the "Change of
Control Prepayment Date"), which Change of Control Prepayment Date shall be
not more than 90 days nor less than 30 days following the date of such
Company Notice. Each holder of the then outstanding Notes shall have the
right to accept such offer and require prepayment in full of the Notes held
by such holder by written notice to the Company (a "Noteholder Notice")
given not later than 20 days after receipt of the Company Notice. Not
later than two Business Days prior to the Change of Control Prepayment
Date, the Company shall provide each holder of a Note which has so accepted
such offer of prepayment written notice of the premium, if any, payable in
connection with such prepayment and, whether or not any premium is payable,
a reasonably detailed computation of the Make-Whole Amount including a copy
of "Page 500" on the Telerate Service or the Statistical Release used in
connection with such computation. The Company shall on the Change of
Control Prepayment Date prepay in full all of the Notes held by holders
which have so accepted such offer of prepayment. The prepayment price of
the Notes payable upon the occurrence of any Change of Control shall be an
amount equal to 100% of the outstanding principal amount of the Notes so to
be prepaid and accrued interest thereon to the date of such prepayment,
together with a premium equal to the then applicable Make-Whole Amount
determined as of two Business Days prior to such Change of Control
Prepayment Date.
(b) Without limiting the foregoing, notwithstanding any failure on
the part of the Company to give the Company Notice herein required as a
result of the occurrence of a Change of Control, each holder of the Notes
shall have the right by delivery of written notice to the Company to
require the Company to prepay, and the Company will prepay in full, such
holder's Notes, together with accrued interest thereon to the date of
prepayment and a premium equal to the then applicable Make-Whole Amount;
provided that such holder of the Notes shall so notify the Company of its
election to require the Company to prepay its Notes in accordance with this
2.3(b) within 90 days after such holder has actual knowledge of any such
Change of Control. Notice of any required prepayment pursuant to this
2.3(b) shall be delivered by any holder of the Notes which was entitled
to, but did not receive, such Company Notice to the Company after such
holder has actual knowledge of such Change of Control. On the date (the
"Change of Control Delayed Prepayment Date") designated in such holder's
notice (which shall be not more than 90 days nor less than 30 days
following the date of such holder's notice), the Company shall prepay in
full all of the Notes held by such holder, together with accrued interest
thereon to the date of prepayment and a premium equal to the then
applicable Make-Whole Amount. If the holder of any Note gives any notice
pursuant to this 2.3(b), the Company shall give a Company Notice within
three Business Days of receipt of such notice and identify the Change of
Control Delayed Prepayment Date to all holders of the Notes and each of
such holders shall then and thereupon have the right to accept the
Company's offer to prepay in full the Notes held by such holder and require
prepayment of such Notes by delivery of a Noteholder Notice within 20 days
following receipt of such Company Notice; provided only that any date for
prepayment of such holder's Notes shall be the Change of Control Delayed
Prepayment Date. Not later than two Business Days prior to the Change of
Control Delayed Prepayment Date, the Company shall provide each holder of a
Note which has so accepted such offer of prepayment written notice of the
premium, if any, payable in connection with such prepayment and, whether or
not any premium is payable, a reasonably detailed computation of the Make-
Whole Amount including a copy of "Page 500" on the Telerate Service or the
Statistical Release used in connection with such computation. On the
Change of Control Delayed Prepayment Date, the Company shall prepay in full
the Notes of each holder thereof which has accepted such offer of
prepayment at a prepayment price equal to 100% of the outstanding principal
amount of the Notes so to be prepaid and accrued interest thereon to the
date of such prepayment, together with a premium equal to the then
applicable Make-Whole Amount determined as of two Business Days prior to
the date of such prepayment pursuant to this 2.3(b).
(c) As used in this 2.3, a "Change of Control" of the Company shall
occur when (1)(i) the Company enters into a binding written commitment with
an Acquiring Person to permit such Acquiring Person to acquire, directly or
indirectly, beneficial ownership of more than 50% of the total voting power
of the Voting Stock of the Company then outstanding, or (ii) there has been
a successful completion of a tender offer or exchange offer that results in
an Acquiring Person, directly or indirectly, beneficially owning more than
50% of the total voting power of the Voting Stock of the Company then
outstanding, or (iii) an Acquiring Person, directly or indirectly, becomes
the beneficial owner of more than 50% of the total voting power of the
Voting Stock of the Company then outstanding or (iv) there has been a
merger between the Company and any other Person, a consolidation of the
Company with any other Person, or an acquisition of any other Person by the
Company or a Subsidiary of the Company, if immediately after such event, an
Acquiring Person shall then hold more than 50% of the total voting power of
the Voting Stock of the Company outstanding immediately after giving effect
to such merger, consolidation or acquisition, or (v) the capital stock of
the Company is no longer Publicly Traded, if in connection therewith and
after giving effect thereto the aggregate voting power of the Voting Stock
of the Company owned or controlled by the Smith Control Group is less than
90% of the aggregate voting power of the Voting Stock of the Company owned
or controlled by the Smith Control Group immediately prior to the last date
such capital stock was Publicly Traded and (2) immediately after giving
effect thereto either (i) the long-term debt rating of such Acquiring
Person, or, with respect to clause (c)(1)(v), the Company, shall be below
"BBB-" by Standard & Poor's Corporation or "Baa3" by Moody's Investors
Service, Inc. or (ii) if the long-term debt of such Acquiring Person, or,
with respect to clause (c)(1)(v), the Company, shall for any reason
whatsoever not be rated by Standard & Poor's Corporation and Moody's
Investors Service, Inc. then, within 90 days after the occurrence of any
event described in clause (c)(1), such Acquiring Person, or, with respect
to clause (c)(1)(v), the Company, shall not have received a rating on each
series of the Notes of at least "BBB-" by Standard & Poor's Corporation or
"Baa3" by Moody's Investors Service, Inc.
The term "Acquiring Person" shall mean a "person" or "group of
persons" within the meaning of Section 13(d) and 14(d) of the Securities
and Exchange Act of 1934, as amended; provided that notwithstanding the
foregoing, "Acquiring Person" shall not be deemed to include any member of
the Smith Control Group unless such member has, directly or indirectly,
disposed of, sold or otherwise transferred to, or encumbered or restricted
(whether by means of voting trust agreement or otherwise) for the benefit
of, an Acquiring Person, all or any portion of the voting power of the
Voting Stock of the Company directly or indirectly owned or controlled by
such member or such member directly or indirectly acquiesces in, consents
to or votes all or any portion of the voting power of the Voting Stock of
the Company directly or indirectly owned or controlled by such member for
the taking of any action which, directly or indirectly, constitutes or
would result in a Change of Control, in which event such member of the
Smith Control Group shall be deemed to constitute an Acquiring Person to
the extent of the voting power of the Voting Stock of the Company owned or
controlled by such member.
The term "Management" shall mean, without duplication, all officers
and directors and shareholders of the Company's Class A stock who are not
within the definition of Smith Family and who are employed on a full-time
basis by the Company on the date immediately preceding the date of any such
Change of Control.
The term "Publicly Traded" shall mean the trading of any capital stock
of the Company in any over-the-counter securities market (including the
National Association of Securities Dealers Automated Quotations System) or
the listing for trading of any capital stock of the Company on the NASDAQ
National Market System or any regionally or nationally recognized
Securities exchange.
The term "Smith Control Group" shall mean collectively, the Smith
Family and Management.
The term "Smith Family" shall mean all, or any combination of, or any
of the spouse of D. Glen Smith, each of his three sons, Jeffrey P. Smith,
Richard D. Smith and Fred L. Smith and any trusts established for the
benefit of the natural children or stepchildren of Jeffrey P. Smith,
Richard D. Smith or Fred L. Smith; provided that the power to vote any
shares of the Company's stock held in such trusts shall have been granted
to all, or any combination of, or any of Jeffrey P. Smith, Richard D.
Smith, Fred L. Smith or the spouse of D. Glen Smith.
Section2.4.Notice of Optional Prepayments. The Company will give notice of
any prepayment of the Notes pursuant to 2.2 to each holder thereof not
less than 30 days nor more than 60 days before the date fixed for such
optional prepayment specifying (a) such date, (b) the principal amount of
the holder's Notes to be prepaid on such date, (c) that a premium may be
payable, (d) the date when such premium will be calculated, (e) the
estimated premium, (f) whether or not a premium is payable, a reasonably
detailed calculation of the Make-Whole Amount including a copy of "Page
500" on the Telerate Service or the Statistical Release used in connection
with such computation, and (g) the accrued interest applicable to the
prepayment. Such notice of prepayment shall also certify all facts, if
any, which are conditions precedent to any such prepayment. Notice of
prepayment having been so given, the aggregate principal amount of the
Notes specified in such notice, together with accrued interest thereon and
the premium, if any, payable with respect thereto shall become due and
payable on the prepayment date specified in said notice. Not later than
two Business Days prior to the prepayment date specified in such notice,
the Company shall provide each holder of a Note written notice of the
premium, if any, payable in connection with such prepayment and, whether or
not any premium is payable, a reasonably detailed computation of the Make-
Whole Amount including a copy of "Page 500" on the Telerate Service or the
Statistical Release used in connection with such computation.
Section2.5.Application of Prepayments. Except in the case of prepayment of
the Notes pursuant to 2.3, all partial prepayments shall be applied on all
outstanding Notes ratably in accordance with the unpaid principal amounts
thereof.
Section2.6.Direct Payment. Notwithstanding anything to the contrary
contained in this Agreement or the Notes, in the case of any Note owned by
you or your nominee or owned by any subsequent Institutional Holder which
has given written notice to the Company requesting that the provisions of
this 2.6 shall apply, the Company will pay punctually when due the
principal thereof, interest thereon and premium, if any, due with respect
to said principal, without any presentment thereof, directly to you, to
your nominee or to such subsequent Institutional Holder at your address or
your nominee's address set forth in Schedule I hereto or such other address
as you, your nominee or such subsequent Institutional Holder may from time
to time designate in writing to the Company or, if a bank account with a
United States bank is designated for you or your nominee on Schedule I
hereto or in any written notice to the Company from you, from your nominee
or from any such subsequent Institutional Holder, the Company will make
such payments in immediately available Federal funds to such bank account,
marked for attention as indicated, or in such other manner or to such other
account in any United States bank as you, your nominee or any such
subsequent Institutional Holder may from time to time direct in writing.
Section3.Representations.
Section3.1.Representations of the Company. The Company represents and
warrants that all representations and warranties set forth in Exhibit B are
true and correct as of the date hereof and are incorporated herein by
reference with the same force and effect as though herein set forth in
full.
Section3.2.Representations of the Purchaser. (a) You represent, and in
entering into this Agreement the Company understands, that you are
acquiring the Notes for the purpose of investment and not with a view to
the distribution thereof, and that you have no present intention of
selling, negotiating or otherwise disposing of the Notes; it being
understood, however, that the disposition of your property shall at all
times be and remain within your control.
(b) You further represent that: (1) no part of the funds to be used
by you to purchase the Notes constitutes assets allocated to any separate
account maintained by you; or (2) no part of the funds to be used by you to
purchase the Notes constitutes assets allocated to any separate account
maintained by you such that the application of such funds constitutes a
prohibited transaction under Section 406 of ERISA; or (3) all or a part of
such funds constitute assets of one or more separate accounts, trusts or a
commingled pension trust maintained by you, and you have disclosed to the
Company the names of such employee benefit plans whose assets in such
separate account or accounts or pension trusts exceed 10% of the total
assets or are expected to exceed 10% of the total assets of such account or
accounts or trusts as of the date of such purchase and the Company has
advised you in writing (and in making the representations set forth in this
clause (3) you are relying on such advice) that the Company is not a party-
in-interest nor are the Notes employer securities with respect to the
particular employee benefit plan disclosed to the Company by you as
aforesaid (for the purpose of this clause (3), all employee benefit plans
maintained by the same employer or employee organization are deemed to be a
single plan). As used in this 3.2(b), the terms "separate account,"
"party-in-interest," "employer securities," and "employee benefit plan"
shall have the respective meanings assigned to them in ERISA.
Section4.Closing Conditions.
Section4.1.Conditions. Your obligation to purchase the Notes on the
Closing Date set forth opposite your name on Schedule I hereto shall be
subject to the performance by the Company of its agreements hereunder which
by the terms hereof are to be performed at or prior to the time of delivery
of the Notes and to the following further conditions precedent:
(a) Closing Certificate. You shall have received a certificate
dated the Closing Date, signed by Robert D. Bolinder as Executive Vice
President, Corporate Planning and Development or Matthew G. Tezak as
Senior Vice President and Chief Financial Officer of the Company, the
truth and accuracy of which shall be a condition to your obligation to
purchase the Notes proposed to be sold to you and to the effect that
(1) the representations and warranties of the Company set forth in
Exhibit B hereto are true and correct on and with respect to the
Closing Date, (2) the Company has performed all of its obligations
hereunder which are to be performed on or prior to the Closing Date,
and (3) no Default or Event of Default has occurred and is continuing.
(b) Legal Opinions. You shall have received from Chapman and
Cutler, your special counsel in this transaction, from Ray, Quinney &
Nebeker, independent counsel for the Company and from Michael C. Frei,
Esq., General Counsel to the Company, their respective opinions dated
the Closing Date, in form and substance satisfactory to you, and
covering the matters set forth in Exhibits C, D and E, respectively,
hereto.
(c) Company's Existence and Authority. On or prior to the
Closing Date, you shall have received, in form and substance
satisfactory to you and your special counsel, such documents and
evidence with respect to the Company as you may reasonably request in
order to establish the existence and good standing of the Company and
the authorization of the transactions contemplated by this Agreement;
provided that any certificates of public officials delivered pursuant
to this 4.1(c) shall be dated no more than two weeks prior to the
Closing Date.
(d) Related Transactions. The Company shall have consummated
the sale of the entire principal amount of the Notes scheduled to be
sold on the Closing Date pursuant to the Agreements.
(e) Private Placement Number. On or prior to the Closing Date,
special counsel to the Purchasers of the Notes shall have received
from Standard & Poor's CUSIP Service Bureau, as agent for the National
Association of Insurance Commissioners, private placement numbers for
each series of the Notes.
(f) Funding Instructions. At least three Business Days prior to
the Closing Date, you shall have received written instructions
executed by a Responsible Officer of the Company known to you
directing the manner of the payment of funds and setting forth (1) the
name and address of the transferee bank, (2) such transferee bank's
ABA number, (3) the account name and number into which the purchase
price for the Notes is to be deposited, and (4) the name and telephone
number of the account representative responsible for verifying receipt
of such funds.
(g) Legality of Investment. The Notes to be purchased by you
shall be a legal investment for you under the laws of each
jurisdiction to which you may be subject (without resort to any so-
called "basket provisions" to such laws).
(h) Satisfactory Proceedings. All proceedings taken in
connection with the transactions contemplated by this Agreement, and
all documents necessary to the consummation thereof, shall be
reasonably satisfactory in form and substance to you and your special
counsel, and you shall have received a copy (executed or certified as
may be appropriate) of all legal documents or proceedings taken in
connection with the consummation of said transactions.
Section4.2.Waiver of Conditions. If on the Closing Date the Company fails
to tender to you the Notes to be issued to you on such date or if the
conditions specified in 4.1 have not been fulfilled, you may thereupon
elect to be relieved of all further obligations under this Agreement.
Without limiting the foregoing, if the conditions specified in 4.1 have
not been fulfilled, you may waive compliance by the Company with any such
condition to such extent as you may in your sole discretion determine.
Nothing in this 4.2 shall operate to relieve the Company of any of its
obligations hereunder or to waive any of your rights against the Company.
Section5.Company Covenants.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
Section5.1.Corporate Existence, Etc. The Company will preserve and keep in
full force and effect, and will cause each Significant Restricted
Subsidiary to preserve and keep in full force and effect, its corporate
existence and all licenses and permits necessary to the proper conduct of
its business, provided that the foregoing shall not prevent any transaction
permitted by 5.9.
Section5.2.Insurance. The Company will maintain, and will cause each
Significant Restricted Subsidiary to maintain, insurance coverage by
financially sound and reputable insurers and in such forms and amounts and
against such risks as are maintained by prudent corporations of established
reputation engaged in the same or a similar business, owning and operating
similar properties and, in the case of the Company, having a consolidated
net worth determined in accordance with GAAP similar to the Consolidated
Net Worth of the Company at the time in question.
Section5.3.Taxes, Claims for Labor and Materials; Compliance with Laws.
(a) The Company will promptly pay and discharge, and will cause each
Restricted Subsidiary promptly to pay and discharge, all taxes, assessments
and governmental charges or levies imposed upon the Company or such
Restricted Subsidiary, respectively, or upon or in respect of all or any
part of the property or business of the Company or such Restricted
Subsidiary, all trade accounts payable in accordance with usual and
customary business terms, and all claims for work, labor or materials,
which are due and which if unpaid might become a Lien upon any property of
the Company or such Restricted Subsidiary; provided the Company or such
Restricted Subsidiary shall not be required to pay any such tax,
assessment, charge, levy, account payable or claim if (1) the validity,
applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent (i) the forfeiture or
sale of any property of the Company or such Restricted Subsidiary the
forfeiture or sale of which could materially affect adversely the
properties, business, prospects, ongoing profitability or condition
(financial or otherwise) of the Company and its Restricted Subsidiaries or
(ii) any material interference with the use thereof by the Company or such
Restricted Subsidiary, and (2) the Company or such Restricted Subsidiary
shall set aside on its books, adequate reserves with respect thereto.
(b) The Company shall promptly comply and shall cause each Restricted
Subsidiary to comply with all laws, ordinances or governmental rules and
regulations to which it is subject including, without limitation, the
Occupational Safety and Health Act of 1970, as amended and ERISA, the
violation of which could materially affect adversely the properties,
business, prospects, ongoing profitability or condition (financial or
otherwise) of the Company and its Restricted Subsidiaries.
(c) The Company shall promptly comply and shall cause each Restricted
Subsidiary to comply in all material respects with all applicable
Environmental Laws, now in existence or applicable in the future, if,
individually or in the aggregate, failure to comply therewith would
materially affect adversely the properties, business, prospects, ongoing
profitability or condition (financial or otherwise) of the Company and its
Restricted Subsidiaries.
(d) The Company will not, and will not permit any of its Restricted
Subsidiaries to, cause or allow any Hazardous Substance to be present at
any time on, in, under or above any real property or any part thereof in
which the Company or any Restricted Subsidiary has a direct interest
(including, without limitation, ownership thereof or any arrangement for
the lease, rental or other use thereof, or the retention of any mortgage or
security interest therein or thereon), except in a manner and to the extent
that it is in compliance in all material respects with all applicable
Environmental Laws and in a manner that will not materially affect
adversely the properties, business, prospects, ongoing profitability or
condition (financial or otherwise) of the Company and its Restricted
Subsidiaries.
Section5.4.Maintenance, Etc. The Company will maintain, preserve and keep,
and will cause each Restricted Subsidiary to maintain, preserve and keep,
its properties which are used or useful in the conduct of its business
(whether owned in fee or a leasehold interest) in good repair and working
order and from time to time will make all necessary repairs, replacements,
renewals and additions so that at all times the efficiency thereof shall be
maintained.
Section5.5.Nature of Business. Neither the Company nor any Restricted
Subsidiary will engage in any business if, as a result, the nature of the
business, taken on a consolidated basis, which would then be engaged in by
the Company and its Restricted Subsidiaries would be substantially
different than distributing, either at retail or wholesale, food and drug
store products, and operating businesses involving the manufacture,
distribution or sale of consumer products and services.
Section5.6.Consolidated Tangible Net Worth. The Company will at all times
keep and maintain Consolidated Tangible Net Worth at an amount not less
than the sum of (a) $350,000,000 plus (b) 20% of Consolidated Net Income
computed on a cumulative basis for each of the elapsed fiscal years ending
after December 28, 1991; provided that notwithstanding that Consolidated
Net Income for any such elapsed fiscal year may be a deficit figure, no
reduction as a result thereof shall be made in the sum to be maintained
pursuant hereto.
Section5.7.Limitations on Indebtedness. (a) The Company will not create,
assume, guarantee or otherwise incur or in any manner be or become liable
in respect of any Funded Debt and will not permit any Restricted Subsidiary
to, create, assume, guarantee or otherwise incur or in any manner be or
become liable in respect of any Indebtedness, except:
(1) Funded Debt evidenced by the Notes;
(2) Funded Debt of the Company and Indebtedness of Restricted
Subsidiaries outstanding as of the Closing Date and described on
Schedule II hereto;
(3) additional Funded Debt of the Company and Indebtedness of
its Restricted Subsidiaries provided that at the time of creation,
issuance, assumption, guarantee or incurrence thereof and after giving
effect thereto and to the application of the proceeds thereof:
(i) the ratio of Net Income Available for Fixed Charges for
the immediately preceding four consecutive fiscal quarter period
to Pro Forma Fixed Charges for such four consecutive fiscal
quarter period (assuming such additional Funded Debt to be so
created, issued, assumed, guaranteed or incurred is to be
outstanding for the entirety of such four fiscal quarters) shall
be not less than 1.45 to 1.00;
(ii) in the case of the issuance of any Funded Debt of the
Company secured by Liens solely permitted by 5.8(j) or the
issuance of Indebtedness of a Restricted Subsidiary (other than
Indebtedness of a Restricted Subsidiary secured by Liens
permitted by 5.8(g)), the sum of (A) all Funded Debt of the
Company secured by Liens solely permitted by 5.8(j) and (B) the
aggregate amount of all Indebtedness of Restricted Subsidiaries
incurred in accordance with the provisions of this clause (ii)
would not exceed 10% of Consolidated Tangible Capitalization; and
(iii) no Default or Event of Default would exist;
(4) Subordinated Funded Debt of the Company to a Wholly-owned
Restricted Subsidiary; and
(5) Funded Debt of a Restricted Subsidiary to the Company or to
another Restricted Subsidiary.
(b) Funded Debt issued or incurred in accordance with the limitations
of 5.7(a)(2) may be renewed, extended or refunded (without any increase in
principal amount remaining unpaid at the time of such renewal, extension or
refunding), provided that at the time of such renewal, extension or
refunding and after giving effect thereto (1) no Default or Event of
Default would exist and (2) and the Company would be permitted by the
provisions of 5.7(a)(3)(i) to incur at least $1.00 of additional Funded
Debt.
(c) The Company may acquire any corporation with existing
Indebtedness and designate such corporation as a Restricted Subsidiary,
provided that at the time of acquisition of such corporation and
immediately after giving effect thereto (1) no Default or Event of Default
would exist and (2) the Company would be permitted by the provisions of
5.7(a)(3)(i) to incur at least $1.00 of additional Funded Debt.
Section5.8.Limitation on Liens. The Company will not, and will not permit
any Restricted Subsidiary to, create or incur, or suffer to be incurred or
to exist, any Lien on its or their property or assets, whether now owned or
hereafter acquired, or upon any income or profits therefrom, or transfer
any property for the purpose of subjecting the same to the payment of
obligations in priority to the payment of its or their general creditors,
or acquire or agree to acquire, or permit any Restricted Subsidiary to
acquire, any property or assets upon conditional sales agreements or other
title retention devices, except:
(a) Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of mechanics
and materialmen, provided that payment thereof is not at the time
required by 5.3;
(b) Liens of or resulting from any judgment or award, the time
for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Company or a Restricted Subsidiary
shall at any time in good faith be prosecuting an appeal or proceeding
for a review and in respect of which a stay of execution pending such
appeal or proceeding for review shall have been secured and for which
the Company or such Restricted Subsidiary shall have set aside on its
books, adequate reserves with respect thereto;
(c) Liens incidental to the conduct of business or the ownership
of properties and assets (including Liens in connection with worker's
compensation, unemployment insurance and other like laws,
warehousemen's and attorneys' liens and statutory landlords' liens)
and Liens to secure the performance of bids, tenders or trade
contracts, or to secure statutory obligations, surety or appeal bonds
or other Liens of like general nature incurred in the ordinary course
of business and not in connection with the borrowing of money,
provided in each case the obligation secured is not overdue or, if
overdue, is being contested in good faith by appropriate actions or
proceedings;
(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real properties, which are necessary for the conduct of the
activities of the Company and its Restricted Subsidiaries or which
customarily exist on properties of corporations engaged in similar
activities and similarly situated and which do not in any event
materially impair their use in the operation of the business of the
Company and its Restricted Subsidiaries;
(e) leases on real property owned by the Company or any
Restricted Subsidiary wherein the Company or such Restricted
Subsidiary is the lessor; provided that (1) the rentals payable under
any such lease are for fair rental value and (2) any such lease is
entered into in (i) an "arm's length" transaction and (ii) the
ordinary course of the Company's or such Restricted Subsidiary's
business;
(f) Liens existing as of the Closing Date and described on
Schedule II hereto;
(g) Liens created or incurred after the Closing Date given to
secure the payment of the purchase price incurred in connection with
the acquisition, construction or improvement of fixed assets useful
and intended to be used in carrying on the business of the Company or
a Restricted Subsidiary, including Liens existing on such fixed assets
at the time of acquisition thereof or at the time of acquisition by
the Company or a Restricted Subsidiary of any business entity then
owning such fixed assets, whether or not such existing Liens were
given to secure the payment of the purchase price of the fixed assets
to which they attach, so long as such existing Liens were not
incurred, extended or renewed in contemplation of such acquisition,
provided that (1) the Lien shall attach solely to the fixed assets
acquired, purchased, constructed or improved, (2) such Lien shall have
been created or incurred within 270 days of the date of acquisition or
purchase or the date of completion of construction or improvements, as
the case may be, (3) at the time of acquisition, construction or
improvement of such fixed assets, the aggregate amount remaining
unpaid on all Indebtedness secured by Liens on such fixed assets,
whether or not assumed by the Company or a Restricted Subsidiary,
shall not exceed an amount equal to the lesser of the total purchase
price or fair market value at the time of acquisition of such fixed
assets (as determined in good faith by the Board of Directors of the
Company), and (4) all such Indebtedness shall have been incurred
within the limitations provided in 5.7(a)(3)(i) and (iii);
(h) Liens created or incurred after the Closing Date on the
fixed assets or capital stock of any corporation at the time such
corporation becomes a Restricted Subsidiary given to secure the
payment of the purchase price incurred in connection with the
acquisition of such corporation by the Company or a Restricted
Subsidiary; provided that (1) the Lien shall attach solely to the
fixed assets or capital stock acquired or purchased, (2) such Lien
shall have been created or incurred substantially concurrently with
such acquisition or purchase, (3) at the time of such acquisition or
purchase of such corporation the aggregate amount of Indebtedness
secured by such Liens (whether or not assumed by the Company or any
Restricted Subsidiary) shall not exceed an amount equal to the lesser
of the purchase price or fair market value of such fixed assets or
capital stock at the time of such acquisition or purchase thereof (as
determined in good faith by the Board of Directors of the Company),
and (4) all Indebtedness secured by such Liens shall have been
incurred within the limitations provided in 5.7(a)(3)(i) and (iii);
(i) Liens existing on the fixed assets of any Subsidiary on the
date the Company designates such Subsidiary as a Restricted
Subsidiary; provided that all Indebtedness secured by such Liens shall
have been incurred within the applicable limitations provided in
5.7(c);
(j) Liens created or incurred after the Closing Date given to
secure Funded Debt of the Company or Indebtedness of any Restricted
Subsidiary in addition to the Liens permitted by the preceding
clauses (a) through (i) hereof; provided that all of such Indebtedness
shall have been incurred within the limitations provided in
5.7(a)(3)(i), (ii) and (iii); and
(k) any extension, renewal or replacement of any Lien permitted
by the preceding clauses (f) through (j), inclusive, hereof in respect
of the same property theretofore subject to such Lien in connection
with the extension, renewal or refunding of the Indebtedness secured
thereby; provided that (1) such Lien shall attach solely to the same
such property, (2) the principal amount of Indebtedness secured by
such Lien shall not have been increased, (3) no Default or Event of
Default would exist and (4) after giving effect to any such extension,
renewal or replacement, the Company would be permitted by the
provisions of 5.7(a)(3)(i) to incur at least $1.00 of additional
Funded Debt.
Section5.9.Mergers, Consolidations and Sales of Assets. (a) The Company
will not, and will not permit any Restricted Subsidiary to, consolidate
with or be a party to a merger with any other Person, or sell, lease or
otherwise dispose of all or substantially all of its assets; provided that:
(1) any Restricted Subsidiary may merge or consolidate with or
into the Company or any other Restricted Subsidiary so long as in any
merger or consolidation involving the Company, the Company shall be
the surviving or continuing corporation;
(2) any Restricted Subsidiary may merge or consolidate with any
other corporation so long as such Restricted Subsidiary shall be the
surviving or continuing corporation and at the time of such merger or
consolidation and immediately after giving effect thereto, (i) no
Default or Event of Default would exist and (ii) the Company would be
permitted by the provisions of 5.7(a)(3)(i) to incur at least $1.00
of additional Funded Debt;
(3) any Restricted Subsidiary may merge or consolidate into any
other corporation; provided that at the time of such merger or
consolidation and after giving effect thereto, (i) no Default or Event
of Default would exist, (ii) the Company would be permitted by the
provisions of 5.7(a)(3)(i) to incur at least $1.00 of additional
Funded Debt and (iii) the disposition of such Restricted Subsidiary's
assets or capital stock would be permitted by the provisions of
5.9(b) or (c);
(4) the Company may merge or consolidate with any other
corporation if (i) the corporation which results from such merger or
consolidation (the "surviving corporation") is organized under the
laws of any State of the United States or the District of Columbia,
(ii) the due and punctual payment of the principal of, premium, if
any, and interest on all of the Notes, according to their tenor, and
the due and punctual performance and observation of all of the
covenants in the Notes and this Agreement to be performed or observed
by the Company are expressly assumed in writing by the surviving
corporation and the surviving corporation shall furnish the holders of
the Notes an opinion of counsel satisfactory to such holders to the
effect that the instrument of assumption has been duly authorized,
executed and delivered and constitutes the legal, valid and binding
contract and agreement of the surviving corporation enforceable in
accordance with its terms, except as enforcement of such terms may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles, and (iii) at the time of such
consolidation or merger and immediately after giving effect thereto,
(A) no Default or Event of Default would exist and (B) the surviving
corporation would be permitted by the provisions of 5.7(a)(3)(i) to
incur at least $1.00 of additional Funded Debt;
(5) the Company may sell or otherwise dispose of all or
substantially all of its assets (other than stock and Indebtedness of
a Subsidiary, which may only be sold or otherwise disposed of pursuant
to 5.9(c)) to any Person for consideration which represents the fair
market value (as determined in good faith by the Board of Directors of
the Company, a copy of such determination, certified by the Secretary
or an Assistant Secretary of the Company, having been furnished to the
holders of the Notes) at the time of such sale or other disposition if
(i) the acquiring Person is a corporation organized under the laws of
any State of the United States or District of Columbia, (ii) the due
and punctual payment of the principal of, premium, if any, and
interest on all the Notes, according to their tenor, and the due and
punctual performance and observance of all of the covenants in the
Notes and in this Agreement to be performed or observed by the Company
are expressly assumed in writing by the acquiring corporation and the
acquiring corporation shall furnish the holders of the Notes an
opinion of counsel satisfactory to such holders to the effect that the
instrument of assumption has been duly authorized, executed and
delivered and constitutes the legal, valid and binding contract and
agreement of such acquiring corporation enforceable in accordance with
its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by
general equitable principles, and (iii) at the time of such sale or
disposition and immediately after giving effect thereto, (A) no
Default or Event of Default would exist and (B) the acquiring
corporation would be permitted by the provisions of 5.7(a)(3)(i) to
incur at least $1.00 of additional Funded Debt.
(b) The Company will not, and will not permit any Restricted
Subsidiary to, sell, lease, transfer, abandon or otherwise dispose of,
assets (except assets sold in the ordinary course of business for fair
market value and except as provided in 5.9(a)(5)); provided that the
foregoing restrictions do not apply to:
(1) the sale, lease, transfer or other disposition of assets of
a Restricted Subsidiary to the Company or another Restricted
Subsidiary; or
(2) the sale, lease, transfer or other disposition of any asset
of the Company or a Restricted Subsidiary the book value of which at
the time of such sale, lease, transfer or other disposition shall be
less than $5,000,000; provided that in the opinion of the Company's
Chief Executive Officer (i) the sale is for fair value and is in the
best interests of the Company and (ii) such sale, lease, transfer or
other disposition is not part of a plan by the Company to divest
itself of assets (in which event such sale, lease, transfer or other
disposition shall be made within the limitations of 5.9(b)(4) or
5.9(c)(3)); or
(3) the sale or transfer of assets of the Company or a
Restricted Subsidiary whenever it is determined in the good faith
judgment of the Company's Chief Executive Officer that such assets are
obsolete, worn out or without economic value to the Company or any of
its Restricted Subsidiaries; or
(4) the sale of assets for cash or other property to a Person or
Persons other than an Affiliate if all of the following conditions are
met:
(i) such assets (valued at net book value) do not, together
with all other assets of the Company and its Restricted
Subsidiaries previously disposed of during the same fiscal year
(other than in the ordinary course of business), exceed 10% of
Consolidated Total Assets determined as of the end of the
immediately preceding fiscal quarter;
(ii) in the opinion of the Company's Chief Executive
Officer, the sale is for fair value and is in the best interests
of the Company; and
(iii) immediately after the consummation of the transaction
and after giving effect thereto, (A) no Default or Event of
Default would exist, and (B) the Company would be permitted by
the provisions of 5.7(a)(3)(i) to incur at least $1.00 of
additional Funded Debt;
provided, however, that notwithstanding 5.9(b)(4)(i), the Company may
sell or otherwise dispose of assets (valued at net book value) which,
together with all other assets of the Company and its Restricted
Subsidiaries similarly valued and previously disposed of during the
same fiscal year, would exceed 10% of Consolidated Total Assets if
(A) the Company has otherwise satisfied the requirements of
5.9(b)(4)(ii) and (iii), (B) immediately after giving effect to such
sale or other disposition, the ratio of Consolidated Free Fixed Assets
to unsecured Consolidated Senior Funded Debt would not be less than
1.25 to 1.00, and (C) the Company shall apply an amount equal to that
portion of the proceeds from all such sales or other dispositions in
excess of 10% of Consolidated Total Assets (determined as of the end
of the immediately preceding fiscal quarter) within twelve months of
the date of such sale or other disposition (x) to the acquisition of
fixed assets useful and intended to be used in the operations of the
Company and its Restricted Subsidiaries as contemplated by 5.5 (as
determined in good faith by the Chief Executive Officer of the
Company) and having a fair market value (as determined in good faith
by the Chief Executive Officer of the Company) at least equal to that
of the assets so sold or otherwise disposed of or (y) with respect to
the sale of assets secured by Liens permitted by 5.8 hereof, first,
to the prepayment (including any applicable prepayment premium) of
Senior Funded Debt of the Company secured by such Liens and second, to
the prepayment (including any applicable prepayment premium) of
unsecured Senior Funded Debt of the Company or (z) with respect to the
sale of assets not secured by Liens permitted by 5.8, to the
prepayment (including any applicable prepayment premium) of unsecured
Senior Funded Debt of the Company, it being understood and agreed by
the Company that any such proceeds paid and applied to the prepayment
of the Notes shall be prepaid as and to the extent provided in 2.2.
Computations pursuant to this 5.9(b) shall include dispositions made
pursuant to 5.9(c) and computations pursuant to 5.9(c) shall include
dispositions made pursuant to this 5.9(b).
(c) The Company will not, and will not permit any Restricted
Subsidiary to, sell, pledge or otherwise dispose of any shares of the stock
(including as "stock" for the purposes of this Section any options or
warrants to purchase stock or other Securities exchangeable for or
convertible into stock) of a Restricted Subsidiary (said stock, options,
warrants and other Securities herein called "Subsidiary Stock") or any
Indebtedness of any Restricted Subsidiary, nor will any Restricted
Subsidiary issue, sell, pledge or otherwise dispose of any shares of its
own Subsidiary Stock, provided that the foregoing restrictions do not apply
to:
(1) the issue of directors' qualifying shares; or
(2) the issue of Subsidiary Stock to the Company or to a Wholly-
owned Restricted Subsidiary; and
(3) the sale or other disposition at one time to a Person (other
than directly or indirectly to an Affiliate) of the entire Investment
of the Company and its other Restricted Subsidiaries in any Restricted
Subsidiary if all of the following conditions are met; provided,
however, clause (ii) hereof shall only apply to the sale of
Significant Restricted Subsidiaries:
(i) such assets (valued at net book value) of the
Restricted Subsidiary do not, together with all other assets of
the Company and its Restricted Subsidiaries previously disposed
of during the same fiscal year (other than in the ordinary course
of business), exceed 10% of Consolidated Total Assets determined
as of the immediately preceding fiscal quarter;
(ii) in the opinion of the Company's Board of Directors, the
sale is for fair value and is in the best interests of the
Company;
(iii) immediately after the consummation of the transaction
and after giving effect thereto, such Restricted Subsidiary shall
have no Indebtedness of or continuing Investment in the capital
stock of the Company or of any Restricted Subsidiary and any such
Indebtedness or Investment shall have been discharged or
acquired, as the case may be, by the Company or a Restricted
Subsidiary; and
(iv) immediately after the consummation of the transaction
and after giving effect thereto, (A) no Default or Event of
Default would exist, and (B) the Company would be permitted by
the provisions of 5.7(a)(3)(i) to incur at least $1.00 of
additional Funded Debt;
provided, however, that notwithstanding 5.9(c)(3)(i), the Company may
sell or otherwise dispose of assets (valued at net book value) which,
together with all other assets of the Company and its Restricted
Subsidiaries similarly valued and previously disposed of during the
same fiscal year, would exceed 10% of Consolidated Total Assets if
(A) the Company has otherwise satisfied the requirements of
5.9(c)(3)(ii), (iii) and (iv), (B) immediately after giving effect to
such sale or other disposition, the ratio of Consolidated Free Fixed
Assets to unsecured Consolidated Senior Funded Debt would not be less
than 1.25 to 1.00, and (C) the Company shall apply an amount equal to
that portion of the proceeds from all such sales or other dispositions
in excess of 10% of Consolidated Total Assets (determined as of the
end of the immediately preceding fiscal quarter) within twelve months
of the date of such sale or other disposition (x) to the acquisition
of fixed assets useful and intended to be used in the operations of
the Company and its Restricted Subsidiaries as contemplated by 5.5
(as determined in good faith by the Chief Executive Officer of the
Company) and having a fair market value (as determined in good faith
by the Chief Executive Officer of the Company) at least equal to that
of the assets so sold or otherwise disposed of or (y) with respect to
the sale of assets secured by Liens permitted by 5.8 hereof, first,
to the prepayment (including any applicable prepayment premium) of
Senior Funded Debt of the Company secured by such Liens and second, to
the prepayment (including any applicable prepayment premium) of
unsecured Senior Funded Debt of the Company or (z) with respect to the
sale of assets not secured by Liens permitted by 5.8 hereof, to the
prepayment (including any applicable prepayment premium) of unsecured
Senior Funded Debt of the Company, it being understood and agreed by
the Company that any such proceeds paid and applied to the prepayment
of the Notes shall be prepaid as and to the extent provided in 2.2.
Computations pursuant to this 5.9(c) shall include dispositions made
pursuant to 5.9(b) and computations pursuant to 5.9(b) shall include
dispositions made pursuant to this 5.9(c).
Section5.10.Redesignation of Subsidiaries. (a) The Company may designate
any Restricted Subsidiary as an Unrestricted Subsidiary if, immediately
after giving effect thereto, (1) no Default or Event of Default would
exist, (2) the Company would be permitted by the provisions of 5.7(a)(3)
to incur at least $1.00 of additional Funded Debt and (3) such Restricted
Subsidiary would not have a continuing Investment in the capital stock or
other Securities of the Company or any other Restricted Subsidiary;
provided, however, that once a Subsidiary has its designation as a
Restricted Subsidiary withdrawn, such Subsidiary may no longer be
designated as a Restricted Subsidiary as set forth in paragraph (b) below.
(b) The Company may designate any Unrestricted Subsidiary as a
Restricted Subsidiary if, immediately after giving affect thereto, (1) such
Subsidiary is in compliance with all covenants of this Agreement applicable
to Restricted Subsidiaries, (2) no Default or Event of Default would exist,
and (3) the Company would be permitted by the provisions of 5.7(a)(3) to
incur at least $1.00 of additional Funded Debt provided, however, that once
a Subsidiary has had its designation as an Unrestricted Subsidiary
withdrawn, such Subsidiary may no longer be designated as an Unrestricted
Subsidiary as set forth in paragraph (a) above.
Each change in the designation of a Subsidiary shall be made by
resolution of the Board of Directors of the Company and the Company shall
within 30 days after such action give written notice thereof to the holders
of the Notes.
Section5.11.Repurchase of Notes. Neither the Company nor any Restricted
Subsidiary or Affiliate, directly or indirectly, may repurchase or make any
offer to repurchase any Notes unless an offer has been made to repurchase
Notes, pro rata, from all holders of the Notes at the same time and upon
the same terms. In case the Company repurchases or otherwise acquires any
Notes, such Notes shall immediately thereafter be cancelled and no Notes
shall be issued in substitution therefor. Without limiting the foregoing,
upon the purchase or other acquisition of any Notes by the Company, any
Restricted Subsidiary or any Affiliate, such Notes shall no longer be
outstanding for purposes of any section of this Agreement relating to the
taking by the holders of the Notes of any actions with respect hereto,
including, without limitation, 6.3, 6.4 and 7.1.
Section5.12.Transactions with Affiliates. The Company will not, and will
not permit any Restricted Subsidiary to, enter into or be a party to any
transaction or arrangement with any Affiliate (including, without
limitation, the purchase from, sale to or exchange of property with, or the
rendering of any service by or for, any Affiliate), except in the ordinary
course of and pursuant to the reasonable requirements of the Company's or
such Restricted Subsidiary's business and upon fair and reasonable terms no
less favorable to the Company or such Restricted Subsidiary than would be
obtained in a comparable arm's-length transaction with a Person other than
an Affiliate.
Section5.13.Termination of Pension Plans. The Company will not and will
not permit any Subsidiary to withdraw from any Multiemployer Plan or permit
any employee benefit plan maintained by it to be terminated if such
withdrawal or termination could result in withdrawal liability (as
described in Part 1 of Subtitle E of Title IV of ERISA) or the imposition
of a Lien on any property of the Company or any Subsidiary pursuant to
Section 4068 of ERISA.
Section5.14.Reports and Rights of Inspection. (a) The Company will keep,
and will cause each Restricted Subsidiary to keep, proper books of record
and account in which full and correct entries will be made of all dealings
or transactions of, or in relation to, the business and affairs of the
Company or such Restricted Subsidiary, in accordance with GAAP consistently
applied (except for changes disclosed in the financial statements furnished
to you pursuant to this 5.14(a) and concurred in by the independent public
accountants referred to in 5.14(a)(2) hereof), and will furnish to you so
long as you are the holder of any Note and to each other Institutional
Holder of the then outstanding Notes (in duplicate if so specified below or
otherwise requested), and in the case of the financial statements delivered
pursuant to paragraph 5.14(a)(2), to the Securities Valuation Office,
National Association of Insurance Commissioners, 195 Broadway, Suite 1903,
New York, New York 10007:
(1) Quarterly Statements. As soon as available and in any event
within 60 days after the end of each quarterly fiscal period (except
the last) of each fiscal year, copies of:
(i) consolidated balance sheets of the Company and its
Restricted Subsidiaries as of the close of such quarterly fiscal
period, setting forth in comparative form the consolidated
figures for the fiscal year then most recently ended,
(ii) consolidated statements of income of the Company and
its Restricted Subsidiaries for such quarterly fiscal period and
for the portion of the fiscal year ending with such quarterly
fiscal period, in each case setting forth in comparative form the
consolidated figures for the corresponding periods of the
preceding fiscal year, and
(iii) consolidated statements of cash flows of the Company
and its Restricted Subsidiaries for the portion of the fiscal
year ending with such quarterly fiscal period, setting forth in
comparative form the consolidated figures for the corresponding
period of the preceding fiscal year,
all in reasonable detail and certified as complete and correct by an
authorized financial officer of the Company;
(2) Annual Statements. As soon as available and in any event
within 120 days after the close of each fiscal year of the Company,
copies of:
(i) consolidated balance sheets of the Company and its
Restricted Subsidiaries as of the close of such fiscal year, and
(ii) consolidated statements of income and retained earnings
and cash flows of the Company and its Restricted Subsidiaries for
such fiscal year,
in each case setting forth in comparative form the consolidated
figures for the preceding fiscal year, all in reasonable detail and
accompanied by a report thereon containing an opinion unqualified as
to scope limitations imposed by the Company and otherwise without
qualification except as therein noted, of a firm of independent public
accountants of recognized national standing selected by the Company to
the effect that the consolidated financial statements present fairly,
in all material respects, the consolidated financial position of the
Company and its Restricted Subsidiaries as of the end of the fiscal
year being reported on and the consolidated results of the operations
and cash flows for said year in conformity with GAAP and that the
examination of such accountants in connection with such financial
statements has been conducted in accordance with generally accepted
auditing standards and included such tests of the accounting records
and such other auditing procedures as said accountants deemed
necessary in the circumstances;
(3) Audit Reports. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the
books of the Company or any Restricted Subsidiary and any management
letter received from such accountants with respect to such interim or
special audits;
(4) SEC and Other Reports. Promptly upon their becoming
available and in any event no later than the date on which such
information is distributed to the Company's stockholders, one copy of
each financial statement, report, notice or proxy statement sent by
the Company to stockholders generally and of each regular or periodic
report, and any final registration statement or prospectus filed by
the Company or any Subsidiary with any Securities exchange or the
Securities and Exchange Commission or any successor agency;
(5) ERISA Reports. Promptly upon the occurrence thereof,
written notice of (i) a Reportable Event with respect to any Plan;
(ii) the institution of any steps by the Company, any ERISA Affiliate,
the PBGC or any other Person to terminate any Plan; (iii) the
institution of any steps by the Company or any ERISA Affiliate to
withdraw from any Plan; (iv) a non-exempt "prohibited transaction"
within the meaning of Section 406 of ERISA in connection with any
Plan; (v) any material increase in the contingent liability of the
Company or any Restricted Subsidiary with respect to any post-
retirement welfare liability; or (vi) the taking of any action by, or
the threatening of the taking of any action by, the Internal Revenue
Service, the Department of Labor or the PBGC with respect to any of
the foregoing;
(6) Officer's Certificates. Within the periods provided in
paragraphs (1) and (2) above, a certificate of an authorized financial
officer of the Company stating that such officer has reviewed the
provisions of this Agreement and setting forth: (i) the information
and computations (in sufficient detail) required in order to establish
whether the Company was in compliance with the requirements of 5.6
through 5.9 at the end of the period covered by the financial
statements then being furnished, and (ii) whether there existed as of
the date of such financial statements and whether, to the best of such
officer's knowledge, there exists on the date of the certificate or
existed at any time during the period covered by such financial
statements any Default or Event of Default and, if any such condition
or event exists on the date of the certificate, specifying the nature
and period of existence thereof and the action the Company is taking
and proposes to take with respect thereto;
(7) Accountant's Certificates. Within the period provided in
paragraph (2) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they
have reviewed this Agreement in connection with making their audit and
not solely for the purposes of compliance with this 5.14(a)(7), and
stating further whether, in making such audit, anything came to their
attention that caused them to believe that the Company had failed in
compliance or continues to be in noncompliance with the terms,
covenants, provisions and conditions of this Agreement insofar as the
same relate, pertain to or involve accounting matters or
determinations and if such condition or event then exists, specifying
the nature and period of existence thereof;
(8) Rule 144A. Except at such times as the Company is a
reporting company under Section 13 or 15(d) of the Securities and
Exchange Act of 1934, as amended, or has complied with the
requirements for the exemption from registration under the Securities
and Exchange Act of 1934, as amended, set forth in Rule 12g3-2(b)
under such Act, such financial or other information as any holder of
the Notes or any Person designated by such holder may reasonably
determine is required to permit such holder to comply with the
requirements of Rule 144A promulgated under the Act in connection with
the resale by it of the Notes, in any such case promptly after the
same is requested; and
(9) Requested Information. With reasonable promptness, such
other data and information as you or any such Institutional Holder may
reasonably request.
(b) Without limiting the foregoing, the Company will permit you, so
long as you are the holder of any Note, and each Institutional Holder of
the then outstanding Notes (or such Persons as either you or such
Institutional Holder may designate), to visit and inspect, under the
Company's guidance, any of the properties of the Company or any Restricted
Subsidiary, to examine all of their books of account, records, reports and
other papers, to make copies and extracts therefrom and to discuss their
respective affairs, finances and accounts with their respective officers,
employees, and, after prior written notice thereof to the Company,
independent public accountants (and by this provision the Company
authorizes said accountants to discuss with you the finances and affairs of
the Company and its Restricted Subsidiaries) all at such reasonable times
and as often as may be reasonably requested. Subject to the provisions of
6.3 and 9.4 hereof, any visitation shall be at your sole expense or the
sole expense of any such Institutional Holder.
Section6.Events of Default and Remedies Therefor.
Section6.1.Events of Default. Any one or more of the following shall
constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note
when the same shall have become due and such default shall continue
for more than five Business Days; or
(b) Default shall occur in the making of any required prepayment
on any of the Notes as provided in 2.1; or
(c) Default shall occur in the making of any other payment of
the principal of any Note or premium, if any, thereon at the expressed
or any accelerated maturity date or at any date fixed for prepayment;
or
(d) Default shall occur in the observance or performance of any
covenant or agreement contained in 5.5 through 5.13 or 5.14(b); or
(e) Default shall occur in the observance or performance of any
other provision of this Agreement which is not remedied within 30 days
after the earlier of (1) the day on which a Responsible Officer of the
Company first obtains knowledge of such Default, or (2) the day on
which written notice thereof is given to the Company by the holder of
any Note; provided that in the case of any Default pursuant to this
6.1(e) which cannot with due diligence be cured within such 30-day
period, if the Company shall proceed promptly to cure the same and
thereafter prosecute the curing of such Default with due diligence,
the time within which to cure such Default shall be extended for such
period as may be necessary but in no event more than 60 additional
days; or
(f) Default shall be made in the payment when due (whether by
lapse of time, by declaration, by call for redemption or otherwise) of
the principal of or interest on any Indebtedness for borrowed money
(other than the Notes) under any indenture, agreement or other
instrument under which any Indebtedness for borrowed money of the
Company or any Restricted Subsidiary aggregating $10,000,000 or more
is outstanding and such default or event shall occur at the maturity
of, or result in the acceleration of, any Indebtedness for borrowed
money of the Company or any Restricted Subsidiary outstanding
thereunder and such acceleration shall not have been rescinded or
annulled; or
(g) Default or the happening of any event shall occur under any
indenture, agreement or other instrument under which any Indebtedness
for borrowed money of the Company or any Restricted Subsidiary
aggregating $10,000,000 or more is outstanding and such default or
event shall occur at the maturity of, or result in the acceleration
of, any Indebtedness for borrowed money of the Company or any
Restricted Subsidiary outstanding thereunder and such acceleration
shall not have been rescinded or annulled; or
(h) Any representation or warranty made by the Company herein,
or made by the Company in any statement or certificate furnished by
the Company in connection with the consummation of the issuance and
delivery of the Notes or furnished by the Company pursuant hereto, is
untrue in any material respect as of the date of the issuance or
making thereof; or
(i) Final judgment or final judgments for the payment of money
aggregating in excess of $10,000,000 (excluding for purposes of such
determination the amount of any insurance proceeds received by, or
paid on behalf of, the Company or any Restricted Subsidiary in respect
of such judgment or judgments) is or are outstanding against the
Company or any Restricted Subsidiary or against any property or assets
of either and any one of such judgments has remained unpaid,
unvacated, unbonded or unstayed by appeal or otherwise for a period of
which is the lesser of (i) 60 days from the date of its entry or
(ii) the amount of days (not less than 30 days) from the date of its
entry which are required to elapse prior to a judgment creditor in
such jurisdiction being permitted to execute upon such final judgment;
or
(j) A custodian, liquidator, trustee or receiver is appointed
for the Company or any Restricted Subsidiary or for the major part of
the property of either and is not discharged within 30 days after such
appointment; or
(k) The Company or any Significant Restricted Subsidiary becomes
insolvent or bankrupt, is generally not paying its debts as they
become due or makes an assignment for the benefit of creditors, or the
Company or any Restricted Subsidiary applies for or consents to the
appointment of a custodian, liquidator, trustee or receiver for the
Company or such Restricted Subsidiary or for the major part of the
property of either; or
(l) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Company or any Restricted Subsidiary and, if instituted
against the Company or any Restricted Subsidiary, are consented to or
are not dismissed within 30 days after such institution.
Section6.2.Notice to Holders. When any Default or Event of Default
described in the foregoing 6.1 has occurred, or if the holder of any Note
or of any other evidence of Indebtedness for borrowed money of the Company
gives any notice or takes any other action with respect to a claimed
default, the Company agrees to give notice within three Business Days of
such event to all holders of the Notes then outstanding.
Section6.3.Acceleration of Maturities. When any Event of Default described
in paragraph (a), (b) or (c) of 6.1 has happened and is continuing, any
holder of any Note may, by written notice to the Company in the manner
provided in 9.6, declare the entire principal and all interest accrued on
the Notes held by such holder to be, and such Notes shall five Business
Days from the date of such written notice become, forthwith due and
payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived and when any Event of
Default described in paragraphs (a) through (i), inclusive, of said 6.1
has happened, the holder or holders of 66-2/3% or more of the principal
amount of Notes at the time outstanding may, by written notice to the
Company in the manner provided in 9.6, declare the entire principal and
all interest accrued on all Notes to be, and all Notes shall five Business
Days from the date of such written notice become, forthwith due and
payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived. Notwithstanding the
foregoing, if at any time the Company or any Restricted Subsidiary shall
have outstanding unsecured indebtedness for borrowed money which matures
more than 365 days from the date of origin thereof (other than letters of
credit for the benefit of the Company or any Restricted Subsidiary) that
may become due and payable fewer than five Business Days from the date of
notice of acceleration thereof, then the number of Business Days after
which the Notes shall become due and payable after written notice of
acceleration thereof, pursuant to this 6.3, shall be reduced to such fewer
amount of Business Days. When any Event of Default described in
paragraph (j), (k) or (l) of 6.1 has occurred, then all outstanding Notes
shall immediately become due and payable without presentment, demand or
notice of any kind. Upon the Notes becoming due and payable as a result of
any Event of Default as aforesaid, the Company will forthwith pay to the
holders of the Notes the entire principal and interest accrued on the Notes
and, to the extent not prohibited by applicable law, an amount as
liquidated damages for the loss of the bargain evidenced hereby (and not as
a penalty) equal to the Make-Whole Amount, determined as of the date on
which the Notes shall so become due and payable; provided, however, no Make-
Whole Amount shall be due and payable if, within four Business Days after
the Notes have been declared due and payable pursuant to this 6.3, the
Company shall have satisfied the requirements of 6.4(a) through (c),
inclusive, and shall have given notice thereof in the manner set forth in
59.6 to each of the holders of the Notes then outstanding. Anything
contained in the proviso in the preceding sentence notwithstanding and
provided that this sentence shall relate exclusively to said proviso, if
the Notes shall be paid pursuant to this 6.3 without premium on or after
the fifth Business Day after the Notes have been so declared due and
payable and such payment shall for any reason whatsoever subsequently be
set aside upon the bankruptcy, insolvency, dissolution or reorganization of
the Company, the Company agrees that there shall then and thereupon become
due and owing the principal, interest and Make-Whole Amount, if any, on the
Notes heretofore so paid. No course of dealing on the part of the holder
or holders of any Notes nor any delay or failure on the part of any holder
of Notes to exercise any right shall operate as a waiver of such right or
otherwise prejudice such holder's rights, powers and remedies. The Company
further agrees, to the extent permitted by law, to pay to the holder or
holders of the Notes all costs and expenses incurred by them in the
collection of any Notes or in connection with any amendments, waivers or
consents, including, without limitation, any amendments, waivers or
consents resulting from any work-out, renegotiation or restructuring upon
any Default hereunder or thereon, including reasonable compensation to such
holder's or holders' attorneys for all services rendered in connection
therewith.
Section6.4.Rescission of Acceleration. The provisions of 6.3 are subject
to the condition that if the principal of and accrued interest on any
outstanding Note has been declared immediately due and payable by reason of
the occurrence of any Event of Default described in paragraphs (a) through
(c), inclusive, of 6.1, with respect to such Note, the holder of such Note
may, and if the principal and accrued interest on all outstanding Notes
have been declared immediately due and payable by reason of the occurrence
of any Event of Default described in paragraphs (a) through (i), inclusive,
of 6.1, the holders of 66-2/3% in aggregate principal amount of the Notes
then outstanding may, by written instrument filed with the Company, rescind
and annul such declaration and the consequences thereof, provided that at
the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of
any monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other
sums payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due and
payable solely by reason of such declaration under 6.3) shall have
been duly paid; and
(c) each and every Default and Event of Default shall have been
made good, cured or waived pursuant to 7.1;
and provided further, that no such rescission and annulment shall
(1) extend to or affect any subsequent Default or Event of Default or
impair any right consequent thereto or (2) extend to or affect any
declaration by any holder of any Note pursuant to the first sentence of
6.3 unless and to the extent such holder has rescinded and annulled such
declaration.
Section7.Amendments, Waivers and Consents.
Section7.1.Consent Required. Any term, covenant, agreement or condition of
this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), if the Company shall
have obtained the consent in writing of the holders of at least 66-2/3% in
aggregate principal amount of outstanding Notes; provided that without the
written consent of the holders of all of the Notes then outstanding, no
such amendment or waiver shall be effective (a) which will change the time
of payment (including any prepayment required by 2.1 or 2.3) of the
principal of, premium, if any, or the interest on any Note or reduce the
principal amount thereof or reduce the rate of interest thereon, or
(b) which will change the method of calculating the Make-Whole Amount, or
(c) which will change any of the provisions with respect to optional
prepayments, or (d) which will change the percentage of holders of the
Notes required to consent to any such amendment or waiver of any of the
provisions of this 7 or 6 or 5.11.
Section7.2.Solicitation of Holders. So long as there are any Notes
outstanding, the Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of
this Agreement or the Notes unless each holder of Notes (irrespective of
the amount of Notes then owned by it) shall be informed thereof by the
Company and shall be afforded the opportunity of considering the same and
shall be supplied by the Company with sufficient information to enable it
to make an informed decision with respect thereto. The Company will not,
directly or indirectly, pay or cause to be paid any remuneration, whether
by way of supplemental or additional interest, fee or otherwise, to any
holder of Notes as consideration for or as an inducement to entering into
by any holder of Notes of any waiver or amendment of any of the terms and
provisions of this Agreement or the Notes unless such remuneration is
concurrently offered, on the same terms, ratably to the holders of all
Notes then outstanding. Promptly and in any event within 30 days of the
date of execution and delivery of any such waiver or amendment, the Company
shall provide a true, correct and complete copy thereof to each of the
holders of the Notes.
Section7.3.Effect of Amendment or Waiver; Scope of Consent. (a) Any such
amendment or waiver shall apply equally to all of the holders of the Notes
and shall be binding upon them, upon each future holder of any Note and
upon the Company, whether or not such Note shall have been marked to
indicate such amendment or waiver. No such amendment or waiver shall
extend to or affect any obligation not expressly amended or waived or
impair any right consequent thereon.
(b) Any consent to an amendment or waiver given pursuant to this 7.3
by a holder of a Note which has (1) transferred or agreed to transfer all
or a portion of its Notes to the Company, any Subsidiary or any Affiliate
of the Company and (2) provided such consent as a condition to such
transfer, shall be valid and binding only upon such holder. Any amendment
or waiver which becomes effective only with such consent (and the consents
of all other holders of the Notes which were acquired under the same or
similar conditions) shall be valid and binding only upon such holder or
holders.
Section8.Interpretation of Agreement; Definitions.
Section8.1.Definitions. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings
and the following definitions shall be equally applicable to both the
singular and plural forms of any of the terms herein defined:
"Acquiring Person" shall have the meaning set forth in 2.3(c).
"Affiliate" shall mean any Person (other than a Restricted Subsidiary)
(a) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the
Company, (b) which beneficially owns or holds 5% or more of any class of
the Voting Stock of the Company or (c) 5% or more of the Voting Stock (or
in the case of a Person which is not a corporation, 5% or more of the
equity interest) of which is beneficially owned or held by the Company or a
Subsidiary. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of Voting Stock, by
contract or otherwise.
"Agreements" shall have the meaning set forth in 1.3.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks in New York, New York or Salt Lake City, Utah are
required by law to close.
"Capitalized Lease" shall mean any lease the obligation for Rentals
with respect to which is required to be capitalized on a consolidated
balance sheet of the lessee and its subsidiaries in accordance with GAAP.
"Change of Control" shall have the meaning set forth in 2.3(c).
"Change of Control Delayed Prepayment Date" shall have the meaning set
forth in 2.3(b).
"Change of Control Prepayment Date" shall have the meaning set forth
in 2.3(a).
"Closing Date" shall have the meaning set forth in 1.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations from time to time promulgated thereunder.
"Company" shall mean Smith's Food & Drug Centers, Inc., a Delaware
corporation, and any Person who succeeds to all, or substantially all, of
the assets and business of Smith's Food & Drug Centers, Inc. pursuant to
the provisions 5.9.
"Company Notice" shall have the meaning set forth in 2.3(a).
"Consolidated Free Fixed Assets" shall mean as of the date of any
determination thereof (a) Consolidated Total Assets of the Company (valued
at net book value) less (b) the sum of (1) the book value of all assets of
the Company and its Restricted Subsidiaries properly classified as "current
assets" or "intangible assets" in accordance with GAAP, (2) deferred assets
and prepaid expenses and (3) the book value of all property and assets
which are subject to Liens created, incurred, granted or assumed by the
Company or any of its Restricted Subsidiaries other than (i) Liens upon
assets described in the foregoing clause (b)(1) and (ii) Liens permitted by
5.8(a) through (e), inclusive.
"Consolidated Funded Debt" shall mean all Funded Debt of the Company
and its Restricted Subsidiaries, determined on a consolidated basis
eliminating intercompany items.
"Consolidated Net Income" for any period shall mean the gross revenues
of the Company and its Restricted Subsidiaries for such period less all
expenses and other proper charges (including taxes on income), determined
on a consolidated basis after eliminating earnings or losses attributable
to outstanding Minority Interests, but excluding in any event:
(a) any gains or losses on the sale or other disposition of
Investments or fixed or capital assets, and any taxes on such excluded
gains and any tax deductions or credits on account of any such
excluded losses;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Restricted Subsidiary accrued
prior to the date it became a Restricted Subsidiary;
(d) net earnings and losses of any corporation (other than a
Restricted Subsidiary), substantially all the assets of which have
been acquired in any manner by the Company or any Restricted
Subsidiary, realized by such corporation prior to the date of such
acquisition;
(e) net earnings and losses of any corporation (other than a
Restricted Subsidiary) with which the Company or a Restricted
Subsidiary shall have consolidated or which shall have merged into or
with the Company or a Restricted Subsidiary prior to the date of such
consolidation or merger;
(f) net earnings of any business entity (other than a Restricted
Subsidiary) in which the Company or any Restricted Subsidiary has an
ownership interest unless such net earnings shall have actually been
received by the Company or such Restricted Subsidiary in the form of
cash distributions;
(g) any portion of the net earnings of any Restricted Subsidiary
which for any reason is unavailable for payment of dividends to the
Company or any other Restricted Subsidiary;
(h) earnings resulting from any reappraisal, revaluation or
write-up of assets;
(i) any deferred or other credit representing any excess of the
equity in any Subsidiary at the date of acquisition thereof over the
amount invested in such Subsidiary;
(j) any gain arising from the acquisition of any Securities of
the Company or any Restricted Subsidiary;
(k) any reversal of any contingency reserve, except to the
extent that provision for such contingency reserve shall have been
made from income arising during such period; and
(l) any other extraordinary gain or loss.
"Consolidated Net Worth" shall mean, as of the date of any
determination thereof, the amount of the capital stock accounts (net of
treasury stock, at cost) plus (or minus in the case of a deficit) the
surplus and retained earnings of the Company and its Restricted
Subsidiaries.
"Consolidated Senior Funded Debt" shall mean all Senior Funded Debt of
the Company and its Restricted Subsidiaries, determined on a consolidated
basis after eliminating intercompany items.
"Consolidated Tangible Capitalization" shall mean the sum of
(a) Consolidated Funded Debt, plus (b) Consolidated Tangible Net Worth.
"Consolidated Tangible Net Worth" shall mean, as of the date of any
determination thereof, the sum of:
(a) Consolidated Net Worth;
Minus
(b) the net book value, after deducting any reserves applicable
thereto, of all items of the following character which are included in
the assets of the Company and its Restricted Subsidiaries, to wit:
(1) the incremental increase in an asset resulting from any
reappraisal, revaluation or write-up of assets; and
(2) (i) unamortized debt discount and expense and
(ii) goodwill, organization or experimental expenses, patents,
patent applications, permits, trademarks, trade names,
copyrights, licenses, research and development expenses,
franchises and other like intangibles acquired by the Company or
any of its Restricted Subsidiaries after the Closing Date (other
than existing intangibles described on Schedule II hereto);
all determined in accordance with GAAP.
"Consolidated Total Assets" shall mean as of the date of any
determination thereof the total amount of all assets of the Company and its
Restricted Subsidiaries determined, on a consolidated basis, in accordance
with GAAP.
"Default" shall mean any event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute
an Event of Default.
"Environmental Law" shall mean any past, present or future Federal,
state, local or foreign statutory or common law, and any regulation, code,
plan, order, decree, judgment, court opinion, permit, grant, franchise,
concession, restriction, agreement or injunction issued, entered,
promulgated or approved under any thereof, in any such case relating to
(a) the environment or human health or safety, including without
limitation, any law relating to emissions, discharges, releases or
threatened releases of Hazardous Substances into the environment
(including, without limitation, air, surface water, groundwater or land) of
polychlorinated biphenyls, asbestos, fractious petroleum, petroleum
derivatives or by-products, or (b) the manufacture, generation, refining,
processing, distribution, management, use, sale, treatment, receipt,
storage, disposal, transport, arranging for transport, or handling of
Hazardous Substances, including without limitation the following: the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of
1984, the Hazardous Materials Transportation Act, as amended, the Federal
Water Pollution Control Act, as amended by the Clean Water Act of 1976, the
Safe Drinking Water Control Act, the Clean Air Act of 1966, as amended, the
Toxic Substances Control Act of 1976, the Occupational Safety and Health
Act of 1977, as amended, the Emergency Planning and Community Right-to-Know
Act of 1986, the National Environmental Policy Act of 1975, the Oil
Pollution Act of 1990 and any similar or implementing state law, and any
state statute and any further amendments to these laws providing for
financial responsibility for cleanup or other actions with respect to the
release or threatened release of Hazardous Substances or crude oil, or any
fraction thereof and all rules, regulations, guidance documents and
publication promulgated thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to
time. References to sections of ERISA shall be construed to also refer to
any successor sections.
"ERISA Affiliate" shall mean any corporation, trade or business that
is, along with the Company, a member of a controlled group of corporations
or a controlled group of trades or businesses, as described in
section 414(b) and 414(c), respectively, of the Code or Section 4001 of
ERISA.
"Event of Default" shall have the meaning set forth in 6.1.
"Fixed Charges" for any period shall mean on a consolidated basis the
sum of (a) all Rentals (other than Rentals on Capitalized Leases) payable
during such period by the Company and its Restricted Subsidiaries, and
(b) all Interest Charges on all Indebtedness (including the interest
component of Rentals on Capitalized Leases) of the Company and its
Restricted Subsidiaries payable during such period.
"Funded Debt" of any Person shall mean, without duplication, (a) all
Indebtedness of such Person for borrowed money or which has been incurred
in connection with the acquisition of assets in each case having a final
maturity of one or more than one year from the date of origin thereof (or
which is renewable or extendible at the option of the obligor for a period
or periods more than one year from the date of origin), including all
payments in respect thereof that are required to be made within one year
from the date of any determination of Funded Debt, whether or not the
obligation to make such payments shall constitute a current liability of
the obligor under GAAP, (b) all Rentals payable in respect of Capitalized
Leases of such Person, (c) all Guaranties by such Person and (d) all
letters of credit by such Person (other than letters of credit used to
finance purchases of inventory in the ordinary course of business or used
to finance the cost of construction of improvements to property which
property is otherwise subject to a construction contract).
"Funding Subsidiary" shall have the meaning set forth in 9.8.
"GAAP" shall mean generally accepted accounting principles applicable
in the United States at the time in question.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments
for deposit or collection) of such Person guaranteeing, or in effect
guaranteeing, any Indebtedness, dividend or other obligation of any other
Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred through
an agreement, contingent or otherwise, by such Person: (a) to purchase
such Indebtedness or obligation or any property or assets constituting
security therefor, (b) to advance or supply funds (1) for the purchase or
payment of such Indebtedness or obligation, (2) to maintain working capital
or other balance sheet conditions or otherwise to advance or make available
funds for the purchase or payment of such Indebtedness or obligation,
(c) to lease property or to purchase Securities or other property or
services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make
payment of the Indebtedness or obligation, or (d) otherwise to assure the
owner of the Indebtedness or obligation of the primary obligor against loss
in respect thereof. For the purposes of all computations made under this
Agreement, a Guaranty in respect of any Indebtedness for borrowed money
shall be deemed to be Indebtedness equal to the principal amount of such
Indebtedness for borrowed money which has been guaranteed, and a Guaranty
in respect of any other obligation or liability or any dividend shall be
deemed to be Indebtedness equal to the maximum aggregate amount of such
obligation, liability or dividend.
"Hazardous Substance" shall mean any contaminant, pollutant or toxic
or hazardous substance, and any substance that is defined or listed as a
hazardous, toxic or dangerous substance under any Environmental Law or that
is otherwise regulated or prohibited under any Environmental Law as a
hazardous, toxic or dangerous substance, including any substance which is:
(a) defined as a hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. 1317) as amended; (b) regulated as a
hazardous waste under Section 1004 or Section 3001 of the Federal Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act (42 U.S.C. 6901 et seq.), as amended; (c) defined as a hazardous
substance under Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. 9601 et seq.), as amended, or
(d) defined or regulated as a hazardous substance or hazardous waste under
any rules or regulations promulgated under any of the foregoing statutes.
"Indebtedness" of any Person shall mean and include all obligations of
such Person which in accordance with GAAP shall be classified upon a
balance sheet of such Person as liabilities of such Person, and in any
event shall include all (a) obligations of such Person for borrowed money
evidenced by bonds, debentures, notes or similar Securities or which has
been incurred in connection with the acquisition of property or assets,
(b) obligations secured by any Lien upon property, assets or services owned
by such Person, even though such Person has not assumed or become liable
for the payment of such obligations, (c) obligations created or arising
under any conditional sale or other title retention agreement with respect
to property acquired by such Person, notwithstanding the fact that the
rights and remedies of the seller, lender or lessor under such agreement in
the event of default are limited to repossession or sale of property,
(d) Rentals payable in respect of Capitalized Leases, (e) letters of credit
by such Person (other than letters of credit used to finance purchases of
inventory in the ordinary course of business or used to finance the cost of
construction of improvements to property which property is otherwise
subject to a construction contract), and (f) Guaranties of obligations of
others of the character referred to in this definition.
"Institutional Holder" shall mean any of the following Persons:
(a) any bank, savings and loan association, savings institution, trust
company or national banking association, acting for its own account or in a
fiduciary capacity, (b) any charitable foundation, (c) any insurance
company, (d) any fraternal benefit society, (e) any pension, retirement or
profit sharing trust or fund within the meaning of Title I of ERISA or for
which any bank, trust company, national banking association or investment
adviser registered under the Investment Advisers Act of 1940, as amended,
is acting as trustee or agent, (f) any investment company or business
development company, as defined in the Investment Company Act of 1940, as
amended, (g) any small business investment company licensed under the Small
Business Investment Act of 1958, as amended, (h) any broker or dealer
registered under the Securities Exchange Act of 1934, as amended, or any
investment adviser registered under the Investment Adviser Act of 1940, as
amended, (i) any government, any public employees' pension or retirement
system, or any other government agency supervising the investment of public
funds, (j) any venture capital operating company as defined in 29 CFR
2510.3-101(d), (k) any other entity all of the equity owners of which are
Institutional Holders or (l) any other Person which may be within the
definition of "qualified institutional buyer" as such term is used in
Rule 144A, as from time to time in effect, promulgated under the Securities
Act of 1933, as amended.
"Interest Charges" for any period shall mean all interest and all
amortization of debt discount and expense on any particular Indebtedness
(including, without limitation, payment-in-kind, zero coupon and other like
Securities) for which such calculations are being made. Computations of
Interest Charges on a pro forma basis for Indebtedness having a variable
interest rate shall be calculated at the rate in effect on the date of any
determination.
"Investments" shall mean all investments, in cash or by delivery of
property made, directly or indirectly, in any Person, whether by
acquisition of shares of capital stock, Indebtedness or other obligations
or Securities or by loan, advance, capital contribution or otherwise.
"Lease" shall mean any lease of real property (other than a
Capitalized Lease and any lease between the Company and a Restricted
Subsidiary or between any Restricted Subsidiaries) regardless of the
duration of the term thereof and any lease of personal property (other than
a Capitalized Lease and any lease between the Company and a Restricted
Subsidiary or between any Restricted Subsidiaries) having an original term,
including any period for which the lease may be renewed or extended at the
option of the lessor, of more than three years.
"Lien" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether
such interest is based on the common law, statute or contract, and
including but not limited to the security interest lien arising from a
mortgage, encumbrance, pledge, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes. The term "Lien"
shall include reservations, exceptions, encroachments, easements, rights-of-
way, covenants, conditions, restrictions, leases and other title exceptions
and encumbrances (including, with respect to stock, stockholder agreements,
voting trust agreements, buy-back agreements and all similar arrangements)
affecting property. For the purposes of this Agreement, the Company or a
Restricted Subsidiary shall be deemed to be the owner of any property which
it has acquired or holds subject to a conditional sale agreement,
Capitalized Lease or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person for security
purposes and such retention or vesting shall constitute a Lien.
"Make-Whole Amount" shall mean in connection with any prepayment or
acceleration of the Notes the excess, if any, of (a) the aggregate present
values as of the date of such prepayment of each dollar of principal being
prepaid (taking into account the application of such prepayment required by
2.1, if any,) and the amount of interest (exclusive of interest accrued to
the date of prepayment) that would have been payable in respect of such
dollar if such prepayment had not been made, determined by discounting such
amounts semiannually at the Reinvestment Rate from the respective dates on
which they would have been payable, over (b) 100% of the principal amount
of the Notes being prepaid at the date such Notes are to be prepaid. If
the applicable Reinvestment Rate at the time of determination of the Make-
Whole Amount is equal to or higher than 6.44% in the case of any payment or
prepayment of the Series 1993-E Notes, 6.54% in the case of any payment or
prepayment of the Series 1993-F Notes, 6.69% in the case of any payment or
prepayment of the Series 1993-G Notes or 6.94% in the case of any payment
or prepayment of the Series 1993-H Notes, the Make-Whole Amount for any
payment or prepayment of Notes of such series is zero. For purposes of any
determination of the Make-Whole Amount:
"Reinvestment Rate" shall mean .50%, plus the yield reported, as
of 10:00 a.m. (New York, New York time) on the Business Day next
preceding the date of prepayment or payment of the Notes on the
display designated as "Page 500" on the Telerate Service (or such
other display as may replace "Page 500" on the Telerate Service) for
actively traded U.S. Treasury Securities having a maturity
corresponding to the series of Notes then being prepaid or paid as of
the date of prepayment or payment or if such yield shall not be
reported as of such time or if the yields reported as of such time are
not ascertainable in accordance with the preceding clause, then the
arithmetic mean of the yields for the two columns under the heading
"Week Ending" published in the Statistical Release under the caption
"Treasury Constant Maturities" for the maturity (rounded to the
nearest month) corresponding to the Weighted Average Life to Maturity
of the principal being prepaid (taking into account the application of
such prepayment required by 2.1, if any). If no maturity exactly
corresponds to such Weighted Average Life to Maturity, yields for the
published maturity next longer than the Weighted Average Life to
Maturity and for the published maturity next shorter than the Weighted
Average Life to Maturity shall be calculated pursuant to the Telerate
Service or the Statistical Release, as the case may be, and the
Reinvestment Rate shall be interpolated from such yields on a straight-
line basis, rounding in each of such relevant periods to the nearest
month. For the purposes of calculating the Reinvestment Rate, the
most recent Statistical Release published prior to the date of
determination of the Make-Whole Amount shall be used if required by
the first sentence of the definition of Reinvestment Rate.
"Statistical Release" shall mean the then most recently published
statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve System
and which establishes yields on actively traded U.S. Government
Securities adjusted to constant maturities or, if such statistical
release is not published at the time of any determination hereunder,
then such other reasonably comparable index which shall be designated
by the holders of 66-2/3% in aggregate principal amount of the
outstanding Notes.
"Weighted Average Life to Maturity" of the principal amount of
the Notes being prepaid shall mean, as of the time of any
determination thereof, the number of years obtained by dividing the
then Remaining Dollar-Years of such principal by the aggregate amount
of such principal. The term "Remaining Dollar-Years" of such
principal shall mean the amount obtained by (1) multiplying (i) the
remainder of (A) the amount of principal that would have become due on
each scheduled payment date if such prepayment had not been made, less
(B) the amount of principal on the Notes scheduled to become due on
such date after giving effect to such prepayment and the application
thereof in accordance with the provisions of 2.1, if any, by (ii) the
number of years (calculated to the nearest one-twelfth) which will
elapse between the date of determination and such scheduled payment
date, and (2) totalling the products obtained in (1).
"Management" shall have the meaning set forth in 2.3(c).
"Minority Interests" shall mean any shares of stock of any class of a
Restricted Subsidiary (other than directors' qualifying shares as required
by law) that are not owned by the Company and/or one or more of its
Restricted Subsidiaries. Minority Interests shall be valued by valuing
Minority Interests constituting preferred stock at the voluntary or
involuntary liquidating value of such preferred stock, whichever is
greater, and by valuing Minority Interests constituting common stock at the
book value of capital and surplus applicable thereto adjusted, if
necessary, to reflect any changes from the book value of such common stock
required by the foregoing method of valuing Minority Interests in preferred
stock.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Net Income Available for Fixed Charges" for any period shall mean the
sum of (a) Consolidated Net Income during such period plus (to the extent
deducted in determining Consolidated Net Income), (b) all provisions for
any Federal, state or other income taxes made by the Company and its
Restricted Subsidiaries during such period and (c) Fixed Charges of the
Company and its Restricted Subsidiaries during such period.
"Notes" shall have the meaning set forth in 1.1.
"Noteholder Notice" shall have the meaning set forth in 2.3(a).
"Overdue Rate" shall mean (a) in the case of the Series 1993-E Notes
8.44%, (b) in the case of the Series 1993-F Notes 8.54% (c) in the case of
the Series 1993-G Notes 8.69% and (d) in the case of the Series 1993-H
Notes 8.94%.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political
subdivision thereof.
"Plan" means a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to
which the Company or any ERISA Affiliate contributed or is a member or
otherwise may have any liability.
"Pro Forma Fixed Charges" for any period shall mean, as of the date of
any determination thereof, the maximum aggregate amount of Fixed Charges
which would have become payable by the Company and its Restricted
Subsidiaries in such period determined on a pro forma basis giving effect
as of the beginning of such period to the incurrence of any Funded Debt
thereof (including Rentals on Capitalized Leases) and the concurrent
retirement of outstanding Funded Debt or termination of any Capitalized
Leases thereof.
"Purchasers" shall have the meaning set forth in 1.1.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee
is obligated to make to the lessor on termination of the Lease or
Capitalized Lease or surrender of the property) payable by the Company or a
Restricted Subsidiary, as lessee or sublessee under a Lease or Capitalized
Lease of real or personal property (less, in the case of any determination
of Fixed Charges, any rents received by the Company or such Restricted
Subsidiary as sublessor under any sublease of the same such real or
personal property). Fixed rents under any so-called "percentage leases"
shall be computed solely on the basis of the minimum rents, if any,
required to be paid by the lessee regardless of sales volume or gross
revenues.
"Reportable Event" shall have the same meaning as in ERISA.
"Responsible Officer" shall mean the Chairman of the Board and Chief
Executive Officer, the President and the Chief Operating Officer, the
Executive Vice President and Chief Financial Officer or the Senior Vice
President, Finance and Treasurer of the Company.
"Restricted Subsidiary" shall mean each Subsidiary (a) 80% or more (by
number of votes) of the Voting Stock of which is legally and beneficially
owned by the Company, (b) which conducts substantially all of its business
and has substantially all of its assets within the United States of
America, (c) which is organized under the laws of the United States or any
State thereof and (d) which has not been designated as an Unrestricted
Subsidiary on Schedule III attached hereto or in accordance with 5.10 of
this Agreement.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Senior Funded Debt" shall mean all Consolidated Funded Debt, other
than Subordinated Funded Debt.
"Significant Restricted Subsidiary" shall mean each Restricted
Subsidiary which meets any of the following conditions:
(a) the Company's and its other Restricted Subsidiaries'
Investments in such Restricted Subsidiary exceed the lesser of 1% of
the Consolidated Total Assets as of the end of the most recently
completed fiscal year or $1,000,000; or
(b) the Company's and its other Restricted Subsidiaries'
proportionate share of the total assets (after eliminating
intercompany items) of such Restricted Subsidiary determined in
accordance with GAAP exceeds the lesser of 1% of the Consolidated
Total Assets as of the end of the most recently completed fiscal year
or $1,000,000; or
(c) the Company's and its other Restricted Subsidiaries' equity
in the income from continuing operations before income taxes,
extraordinary items and cumulative effect of a change in accounting
principle of such Restricted Subsidiary exceeds the lesser of 1% of
such income of the Company and its Restricted Subsidiaries for the
most recently completed fiscal year or $1,000,000.
"Smith Family" shall have the meaning set forth in 2.3(c).
"Subordinated Funded Debt" shall mean all unsecured Funded Debt of the
Company which (a) has a final maturity later than December 1, 2015, (b) is
not subject to repayment prior to December 1, 2015, whether by means of a
sinking fund, periodic maturities, required prepayments or other analogous
payments or otherwise, (c) by its express terms prohibits optional
prepayments in whole or in part prior to December 1, 2015 and (d) is at all
times evidenced by a written instrument or instruments containing
subordination provisions substantially in the form set forth in Exhibit F
attached hereto providing for the subordination thereof to other
Indebtedness of the Company, including, without limitation, the Notes, or
such other provisions as may be approved in writing by the holders of not
less than 100% in aggregate principal amount of the outstanding Notes.
The term "subsidiary" shall mean as to any particular parent
corporation any corporation of which more than 50% (by number of votes) of
the Voting Stock shall be beneficially owned, directly or indirectly, by
such parent corporation. The term "Subsidiary" shall mean a subsidiary of
the Company.
"Unrestricted Subsidiary" shall mean any Subsidiary or Restricted
Subsidiary which is designated as an Unrestricted Subsidiary in Schedule
III attached hereto or in accordance with 5.10 of this Agreement.
"Voting Stock" shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors (or Persons performing
similar functions).
"Wholly-owned" when used in connection with any Subsidiary shall mean
a Subsidiary of which all of the issued and outstanding shares of stock
(except shares required as directors' qualifying shares) and all
Indebtedness for borrowed money of such Subsidiary shall be owned by the
Company and/or one or more of its Wholly-owned Subsidiaries.
Section8.2.Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required
to be made for the purposes of this Agreement, the same shall be done in
accordance with GAAP, to the extent applicable, except where such
principles are inconsistent with the requirements of this Agreement.
Section8.3.Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the
action in question is taken directly or indirectly by such Person.
Section9.Miscellaneous.
Section9.1.Registered Notes. The Company shall cause to be kept at its
principal office a register for the registration and transfer of the Notes,
and the Company will register or transfer or cause to be registered or
transferred, as hereinafter provided any Note issued pursuant to this
Agreement.
At any time and from time to time the holder of any Note which has
been duly registered as hereinabove provided may transfer such Note upon
surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or its attorney duly authorized in writing.
The Person in whose name any Note shall be registered shall be deemed
and treated as the owner and holder thereof for all purposes of this
Agreement. Payment of or on account of the principal, premium, if any, and
interest on any Note shall be made to or upon the written order of such
registered holder.
Section9.2.Exchange of Notes. At any time and from time to time, upon not
less than ten days' notice to that effect given by the holder of any Note
initially delivered or of any Note substituted therefor pursuant to 9.1,
this 9.2 or 9.3, and, upon surrender of such Note at its office, the
Company will deliver in exchange therefor, without expense to such holder,
except as set forth below, a Note for the same aggregate principal amount
as the then unpaid principal amount of the Note so surrendered, or Notes in
the denomination of $100,000 (or such lesser amount as shall constitute
100% of the Notes of such holder) or any amount in excess thereof as such
holder shall specify, dated as of the date to which interest has been paid
on the Note so surrendered or, if such surrender is prior to the payment of
any interest thereon, then dated as of the date of issue, registered in the
name of such Person or Persons as may be designated by such holder, and
otherwise of the same form and tenor as the Notes so surrendered for
exchange. The Company may require the payment of a sum sufficient to cover
any stamp tax or governmental charge imposed upon such exchange or
transfer.
Section9.3.Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction
of any Note, and in the case of any such loss, theft or destruction upon
delivery of a bond of indemnity in such form and amount as shall be
reasonably satisfactory to the Company, or in the event of such mutilation
upon surrender and cancellation of the Note, the Company will make and
deliver without expense to the holder thereof, a new Note, of like tenor,
in lieu of such lost, stolen, destroyed or mutilated Note. If the
Purchaser or any subsequent Institutional Holder is the owner of any such
lost, stolen or destroyed Note, then the affidavit of an authorized officer
of such owner, setting forth the fact of loss, theft or destruction and of
its ownership of such Note at the time of such loss, theft or destruction
shall be accepted as satisfactory evidence thereof and no further indemnity
shall be required as a condition to the execution and delivery of a new
Note other than the written agreement of such owner to indemnify the
Company.
Section9.4.Expenses, Stamp Tax Indemnity. Whether or not the transactions
herein contemplated shall be consummated, the Company agrees to pay
directly all of your out-of-pocket expenses in connection with the
preparation, execution and delivery of this Agreement and the transactions
contemplated hereby, including but not limited to the reasonable charges
and disbursements of Chapman and Cutler, your special counsel, duplicating
and printing costs and charges for shipping the Notes, adequately insured
to you at your home office or at such other place as you may designate, and
all such expenses relating to any amendments, waivers or consents pursuant
to the provisions hereof (whether or not the same are actually executed and
delivered), including, without limitation, any amendments, waivers, or
consents resulting from any work-out, renegotiation or restructuring
relating to the performance by the Company of its obligations under this
Agreement and the Notes. The Company also agrees to pay reasonable
attorney's fees incurred by a holder of the Notes in evaluating any
controversy and enforcing such holders rights and remedies under this
Agreement. The Company also agrees that it will pay and save you harmless
against any and all liability with respect to stamp and other taxes, if
any, which may be payable or which may be determined to be payable in
connection with the execution and delivery of this Agreement or the Notes,
whether or not any Notes are then outstanding. The Company agrees to
protect and indemnify you against any liability for any and all brokerage
fees and commissions payable or claimed to be payable to any Person in
connection with the transactions contemplated by this Agreement. Without
limiting the foregoing, the Company agrees to pay the cost of obtaining the
private placement numbers for each series of Notes and authorizes the
submission of such information as may be required by Standard & Poor's
CUSIP Service Bureau for the purposes of obtaining such numbers.
Section9.5.Powers and Rights Not Waived; Remedies Cumulative. No delay or
failure on the part of the holder of any Note in the exercise of any power
or right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies of the
holder of any Note are cumulative to, and are not exclusive of, any rights
or remedies any such holder would otherwise have.
Section9.6.Notices. All communications provided for hereunder shall be in
writing and, if to you, delivered by facsimile communication and delivered
or mailed prepaid by registered or certified mail or overnight air courier,
in each case addressed to you at your address appearing on Schedule I to
this Agreement or such other address as you or the subsequent holder of any
Note initially issued to you may designate to the Company in writing, and
if to the Company, delivered or mailed by registered or certified mail or
overnight air courier, or by facsimile communication, to the Company at
1550 South Redwood Road, Salt Lake City, Utah 84104, Attention: Executive
Vice President, Corporate Planning and Development or to such other address
as the Company may in writing designate to you or to a subsequent holder of
the Note initially issued to you; provided, however, that a notice to you
by overnight air courier shall only be effective if delivered to you at a
street address designated for such purpose in Schedule I, and a notice to
you by facsimile communication shall only be effective if made by confirmed
transmission to you at a telephone number designated for such purpose in
Schedule I, or, in either case, as you or a subsequent holder of any Note
initially issued to you may designate to the Company in writing.
Section9.7.Successors and Assigns. This Agreement shall be binding upon
the Company and its successors and assigns and shall inure to your benefit
and to the benefit of your successors and assigns, including each
successive holder or holders of any Notes.
Section9.8.Substitution of Purchaser. You shall have the right to
substitute one of your wholly-owned subsidiaries (the "Funding Subsidiary")
as the purchaser of the Notes to be purchased by you by written notice
delivered to the Company, which notice shall be signed by you and the
Funding Subsidiary, shall be accompanied by the Funding Subsidiary's
agreement to be bound by this Agreement and by a confirmation by the
Funding Subsidiary of the accuracy with respect to it of the
representations set forth in 3.2 (subject to any exception necessary to
reflect the intention, if any, of such Funding Subsidiary to transfer to
you at a subsequent date all or any portion of the Notes to be purchased by
it). The Company agrees that, upon receipt of such notice, wherever the
words "you" or "Purchaser" are used in this Agreement, such words shall be
deemed to refer to the Funding Subsidiary in lieu of you. The Company
understands that in the event the Funding Subsidiary shall purchase the
Notes, shortly after the purchase of the Notes and pursuant to a
registration statement filed under the Securities Act of 1933, as amended,
or in a transaction exempt from the registration requirements of such Act,
the Funding Subsidiary may transfer the Notes to you or one of your
affiliates, whereupon wherever the word "you" is used in this Agreement
(other than this 9.8) such words shall be deemed to refer to you or such
affiliate, as the case may be, in lieu of the Funding Subsidiary.
Section9.9.Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with
the Closing Date, shall survive the closing and the delivery of this
Agreement and the Notes.
Section9.10.Severability. Should any part of this Agreement for any reason
be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion, which remaining
portion shall remain in force and effect as if this Agreement had been
executed with the invalid or unenforceable portion thereof eliminated and
it is hereby declared the intention of the parties hereto that they would
have executed the remaining portion of this Agreement without including
therein any such part, parts or portion which may, for any reason, be
hereafter declared invalid or unenforceable.
Section9.11.Governing Law. This Agreement and the Notes issued and sold
hereunder shall be governed by and construed in accordance with internal
laws of the State of New York law without regard to its conflict of laws.
Section9.12.Submission to Jurisdiction. The Company hereby expressly
waives all right to object to jurisdiction or execution in any legal action
or proceeding relating to this Agreement or the Notes which it may now or
hereafter have by reason of its domicile or by reason of any subsequent or
other domicile. The Company agrees that any legal action or proceeding
with respect to this Agreement or any Note, or any instrument, agreement or
document mentioned or contemplated herein, or to enforce any judgment
obtained against the Company in any such legal action or proceeding against
it or any of its properties or revenues may be brought by the holder of any
Note in the courts of the State of New York or of the United States of
America located in New York, New York, as the holder of any Note may elect,
and by execution and delivery of this Agreement, the Company irrevocably
submits to each such jurisdiction for such purpose only.
In addition, the Company hereby, to the extent not prohibited by
applicable law, irrevocably and unconditionally waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions, suits or proceedings arising out of or in connection with this
Agreement or the Notes brought in any of the aforesaid courts, and hereby,
to the extent not prohibited by applicable law, further irrevocably and
unconditionally waives and agrees not to plead or claim that any such
action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
Section9.13.Reproduction of Documents. This Agreement and all related
documents, including (a) consents, waivers and modifications which may be
subsequently be executed, (b) documents received by you at the closing of
your purchase of the Notes (except the Notes themselves), and (c) financial
statements, certificates and other information previously or subsequently
furnished to you, may be reproduced by you by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other similar
process and you may destroy any original document so reproduced. The
Company agrees and stipulates that any such reproduction shall, to the
extent permitted by applicable law, be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not the reproduction was
made by you in the regular course of business) and that any enlargement,
facsimile or further reproduction of the reproduction shall likewise be
admissible in evidence.
Section9.14.Captions. The descriptive headings of the various Sections or
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this Agreement may be
executed in any number of counterparts, each executed counterpart
constituting an original but all together only one agreement.
Smith's Food & Drug Centers, Inc.
By
Its
Accepted as of December 3, 1993.
[Variation]
By
Its
[By
Its]
Smith's Food & Drug Centers, Inc.
6.44% Senior Note, Series 1993-E,
Due December 1, 2005
No. 1993-ER- PPN 83205* BH 1
____________, ____
$
Smith's Food & Drug Centers, Inc., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to
or registered assigns
on the first day of December, 2005
the principal amount of
Dollars ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-
day months) on the principal amount from time to time remaining unpaid
hereon at the rate of 6.44% per annum from the date hereof until maturity,
payable semi-annually on the first day of each June and December in each
year (commencing on the first such day after the date of issue) and at
maturity. The Company agrees to pay interest on overdue principal
(including any overdue optional prepayment of principal) and premium, if
any, and (to the extent legally enforceable) on any overdue installment of
interest, at the rate of 8.44% per annum after the due date, whether by
acceleration or otherwise, until paid.
Both the principal hereof and interest hereon are payable at the
principal office of the Company in Salt Lake City, Utah in coin or currency
of the United States of America which at the time of payment shall be legal
tender for the payment of public and private debts. If any amount of
principal, premium, if any, or interest on or in respect of this Note
becomes due and payable on any date which is not a Business Day, such
amount shall be payable on the immediately preceding Business Day.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banks in New York, New York or Salt Lake City, Utah are required by
law to close.
This Note is one of the Company's $81,000,000 aggregate principal
amount 6.44% Senior Notes, Series 1993-E, due December 1, 2005 (the
"Series 1993-E Notes") which together with the Company's $21,000,000
aggregate principal amount 6.54% Senior Notes, Series 1993-F, due
December 1, 2007 (the "Series 1993-F Notes"), the Company's $35,000,000
aggregate principal amount 6.69% Senior Notes, Series 1993-G, due
December 1, 2010 (the "Series 1993-G Notes") and the Company's $13,000,000
aggregate principal amount 6.94% Senior Notes, Series 1993-H, due
December 1, 2015 (the "Series 1993-H Notes", said Series 1993-H Notes
together with the Series 1993-E Notes the Series 1993-F Notes and the
1993-G Notes are hereinafter referred to collectively as the "Notes")
issued or to be issued under and pursuant to the terms and provisions of
the separate Note Agreements, each dated as of November 1, 1993
(collectively, the "Note Agreements"), entered into by the Company with the
original Purchasers therein referred to and this Note and the holder hereof
are entitled equally and ratably with the holders of all other Notes
outstanding under the Note Agreements to all the benefits provided for
thereby or referred to therein. Reference is hereby made to the Note
Agreements for a statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreements
may be declared due prior to their expressed maturity dates and certain
prepayments are required to be made thereon, all in the events, on the
terms and in the manner and amounts as provided in the Note Agreements.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in
the Note Agreements.
This Note is registered on the books of the Company and is
transferable only by surrender thereof at the principal office of the
Company duly endorsed or accompanied by a written instrument of transfer
duly executed by the registered holder of this Note or its attorney duly
authorized in writing. Payment of or on account of principal, premium, if
any, and interest on this Note shall be made only to or upon the order in
writing of the registered holder.
This Note and said Note Agreements are governed by and construed in
accordance with the internal laws of the State of New York without regard
to its conflict of laws.
Smith's Food & Drug Centers, Inc.
By
Its
Smith's Food & Drug Centers, Inc.
6.54% Senior Note, Series 1993-F,
Due December 1, 2007
No. 1993-FR- PPN 83205* BJ 7
____________, ____
$
Smith's Food & Drug Centers, Inc., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to
or registered assigns
on the first day of December, 2007
the principal amount of
Dollars ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-
day months) on the principal amount from time to time remaining unpaid
hereon at the rate of 6.54% per annum from the date hereof until maturity,
payable semi-annually on the first day of each June and December in each
year (commencing on the first such day after the date of issue) and at
maturity. The Company agrees to pay interest on overdue principal
(including any overdue required or optional prepayment of principal) and
premium, if any, and (to the extent legally enforceable) on any overdue
installment of interest, at the rate of 8.54% per annum after the due date,
whether by acceleration or otherwise, until paid.
Both the principal hereof and interest hereon are payable at the
principal office of the Company in Salt Lake City, Utah in coin or currency
of the United States of America which at the time of payment shall be legal
tender for the payment of public and private debts. If any amount of
principal, premium, if any, or interest on or in respect of this Note
becomes due and payable on any date which is not a Business Day, such
amount shall be payable on the immediately preceding Business Day.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banks in New York, New York or Salt Lake City, Utah are required by
law to close.
This Note is one of the Company's $21,000,000 aggregate principal
amount 6.54% Senior Notes, Series 1993-F, due December 1, 2007 (the
"Series 1993-F Notes") which together with the Company's $81,000,000
aggregate principal amount 6.44% Senior Notes, Series 1993-E, due
December 1, 2005 (the "Series 1993-E Notes"), the Company's $35,000,000
aggregate principal amount 6.69% Senior Notes, Series 1993-G, due
December 1, 2010 (the "Series 1993-G Notes") and the Company's $13,000,000
aggregate principal amount 6.94% Senior Notes, Series 1993-H, due
December 1, 2015 (the "Series 1993-H Notes", said Series 1993-H Notes
together with the Series 1993-E Notes, the Series 1993-F Notes and the
Series 1993-G Notes are hereinafter referred to collectively as the
"Notes") issued under and pursuant to the terms and provisions of the
separate Note Agreements, each dated as of November 1, 1993 (collectively,
the "Note Agreements"), entered into by the Company with the original
Purchasers therein referred to and this Note and the holder hereof are
entitled equally and ratably with the holders of all other Notes
outstanding under the Note Agreements to all the benefits provided for
thereby or referred to therein. Reference is hereby made to the Note
Agreements for a statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreements
may be declared due prior to their expressed maturity dates and certain
prepayments are required to be made thereon, all in the events, on the
terms and in the manner and amounts as provided in the Note Agreements.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in
the Note Agreements.
This Note is registered on the books of the Company and is
transferable only by surrender thereof at the principal office of the
Company duly endorsed or accompanied by a written instrument of transfer
duly executed by the registered holder of this Note or its attorney duly
authorized in writing. Payment of or on account of principal, premium, if
any, and interest on this Note shall be made only to or upon the order in
writing of the registered holder.
This Note and said Note Agreements are governed by and construed in
accordance with the internal laws of the State of New York without regard
to its conflict of laws.
Smith's Food & Drug Centers, Inc.
By
Its
Smith's Food & Drug Centers, Inc.
6.69% Senior Note, Series 1993-G,
Due December 1, 2010
No. 1993-GR__ PPN 83205* BK 4
____________, ____
$
Smith's Food & Drug Centers, Inc., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to
or registered assigns
on the first day of December, 2010
the principal amount of
Dollars ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-
day months) on the principal amount from time to time remaining unpaid
hereon at the rate of 6.69% per annum from the date hereof until maturity,
payable semi-annually on the first day of each June and December in each
year (commencing on the first such day after the date of issue) and at
maturity. The Company agrees to pay interest on overdue principal
(including any overdue optional prepayment of principal) and premium, if
any, and (to the extent legally enforceable) on any overdue installment of
interest, at the rate of 8.69% per annum after the due date, whether by
acceleration or otherwise, until paid.
Both the principal hereof and interest hereon are payable at the
principal office of the Company in Salt Lake City, Utah in coin or currency
of the United States of America which at the time of payment shall be legal
tender for the payment of public and private debts. If any amount of
principal, premium, if any, or interest on or in respect of this Note
becomes due and payable on any date which is not a Business Day, such
amount shall be payable on the immediately preceding Business Day.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banks in New York, New York or Salt Lake City, Utah are required by
law to close.
This Note is one of the Company's $35,000,000 aggregate principal
amount 6.69% Senior Notes, Series 1993-G, due December 1, 2010 (the
"Series 1993-G Notes") which together with the Company's $81,000,000
aggregate principal amount 6.44% Senior Notes, Series 1993-E, due
December 1, 2005 (the "Series 1993-E Notes"), the Company's $21,000,000
aggregate principal amount 6.54% Senior Notes, Series 1993-F, due
December 1, 2007 (the "Series 1993-F Notes") and the Company's $13,000,000
aggregate principal amount 6.94% Senior Notes, Series 1993-H, due
December 1, 2015 (the "Series 1993-H Notes", said Series 1993-H Notes
together with the Series 1993-E Notes, the Series 1993-F Notes and the
Series 1993-G Notes are hereinafter referred to collectively as the
"Notes") issued or to be issued under and pursuant to the terms and
provisions of the separate Note Agreements, each dated as of November 1,
1993 (collectively, the "Note Agreements"), entered into by the Company
with the original Purchasers therein referred to and this Note and the
holder hereof are entitled equally and ratably with the holders of all
other Notes outstanding under the Note Agreements to all the benefits
provided for thereby or referred to therein. Reference is hereby made to
the Note Agreements for a statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreements
may be declared due prior to their expressed maturity dates and certain
prepayments are required to be made thereon, all in the events, on the
terms and in the manner and amounts as provided in the Note Agreements.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in
the Note Agreements.
This Note is registered on the books of the Company and is
transferable only by surrender thereof at the principal office of the
Company duly endorsed or accompanied by a written instrument of transfer
duly executed by the registered holder of this Note or its attorney duly
authorized in writing. Payment of or on account of principal, premium, if
any, and interest on this Note shall be made only to or upon the order in
writing of the registered holder.
This Note and said Note Agreements are governed by and construed in
accordance with the internal laws of the State of New York without regard
to its conflict of laws.
Smith's Food & Drug Centers, Inc.
By
Its
Smith's Food & Drug Centers, Inc.
6.94% Senior Note, Series 1993-H,
Due December 1, 2015
No. 1993-1HR- PPN 83205* BL 2
____________, ____
$
Smith's Food & Drug Centers, Inc., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to
or registered assigns
on the first day of December, 2015
the principal amount of
Dollars ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-
day months) on the principal amount from time to time remaining unpaid
hereon at the rate of 6.94% per annum from the date hereof until maturity,
payable semi-annually on the first day of each June and December in each
year (commencing on the first such day after the date of issue) and at
maturity. The Company agrees to pay interest on overdue principal
(including any overdue optional prepayment of principal) and premium, if
any, and (to the extent legally enforceable) on any overdue installment of
interest, at the rate of 8.94% per annum after the due date, whether by
acceleration or otherwise, until paid.
Both the principal hereof and interest hereon are payable at the
principal office of the Company in Salt Lake City, Utah in coin or currency
of the United States of America which at the time of payment shall be legal
tender for the payment of public and private debts. If any amount of
principal, premium, if any, or interest on or in respect of this Note
becomes due and payable on any date which is not a Business Day, such
amount shall be payable on the immediately preceding Business Day.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banks in New York, New York or Salt Lake City, Utah are required by
law to close.
This Note is one of the Company's $13,000,000 aggregate principal
amount 6.94% Senior Notes, Series 1993-H, due December 1, 2015 (the
"Series 1993-H Notes") which together with the Company's $81,000,000
aggregate principal amount 6.44% Senior Notes, Series 1993-E, due
December 1, 2005 (the "Series 1993-E Notes"), the Company's $21,000,000
aggregate principal amount 6.54% Senior Notes, Series 1993-F, due
December 1, 2007 (the "Series 1993-F Notes") and the Company's $35,000,000
aggregate principal amount 6.69% Senior Notes, Series 1993-G, due
December 1, 2010 (the "Series 1993-G Notes", said Series 1993-G Notes
together with the Series 1993-E Notes, the Series 1993-F Notes and the
Series 1993-H Notes are hereinafter referred to collectively as the
"Notes") issued or to be issued under and pursuant to the terms and
provisions of the separate Note Agreements, each dated as of November 1,
1993 (collectively, the "Note Agreements"), entered into by the Company
with the original Purchasers therein referred to and this Note and the
holder hereof are entitled equally and ratably with the holders of all
other Notes outstanding under the Note Agreements to all the benefits
provided for thereby or referred to therein. Reference is hereby made to
the Note Agreements for a statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreements
may be declared due prior to their expressed maturity dates and certain
prepayments are required to be made thereon, all in the events, on the
terms and in the manner and amounts as provided in the Note Agreements.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in
the Note Agreements.
This Note is registered on the books of the Company and is
transferable only by surrender thereof at the principal office of the
Company duly endorsed or accompanied by a written instrument of transfer
duly executed by the registered holder of this Note or its attorney duly
authorized in writing. Payment of or on account of principal, premium, if
any, and interest on this Note shall be made only to or upon the order in
writing of the registered holder.
This Note and said Note Agreements are governed by and construed in
accordance with the internal laws of the State of New York without regard
to its conflict of laws.
Smith's Food & Drug Centers, Inc.
By
Its
EXHIBIT 13.1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales
Net sales increased 5.9% in 1993, 19.5% in 1992 and 9.2% in 1991
compared with the respective prior years. Since 1992 included 53 weeks
compared to 52 weeks in 1993 and 1991, the increase in net sales would have
been 8% in 1993 and 18% in 1992 after adjusting for the extra week. New
stores increased net sales by 6.6% in 1993, 18.8% in 1992 and 8.1% in 1991.
The fluctuation in sales increases from new stores resulted primarily from
the timing of store openings within the respective years. Same store sales
decreased 0.7% in 1993 and increased 0.7% in 1992 and 1.1% in 1991 compared
with the respective prior years. The decrease in same store sales in 1993
was caused primarily by the effect on sales in Southern California due to
the continuing recession in this market, heavy price competition in Utah
resulting from the Company's aggressive pricing program and new stores
opened by competitors. To the extent these conditions persist, the
weakness in same store sales may continue. The increases in same store
sales in 1992 and 1991 were generated as new stores opened in previous
years continued to mature in their markets and as volume increased as a
result of the Company's everyday low price policy.
The Company opened 11 stores during 1993, 12 stores during 1992 and 17
stores during 1991. Retail square footage increased to 8,501,000 square
feet at the end of 1993 (129 stores) from 7,668,000 square feet at the end
of 1992 (119 stores) and 6,773,000 square feet at the end of 1991 (109
stores). Due to market conditions and current recessionary pressures in
its expansion area, the Company is moderating its expansion plans. In 1994
and 1995, the Company anticipates opening 10 to 12 stores each year with
continuing emphasis in Southern California. New stores opened by the
Company in recent years have averaged approximately 75,000 square feet.
Stores expected to be opened during 1994 range from 45,000 to 82,000 square
feet. Future stores primarily will range from 54,000 to 66,000 square
feet, although a few larger stores will be opened where appropriate.
Gross Margin
Gross margins during 1993, 1992 and 1991 were 22.5%, 22.9% and 22.3%,
respectively. The decrease in 1993 was caused primarily by the Company's
aggressive Utah pricing program, which commenced in July 1993. To
reinforce the Company's everyday low price program, prices in Utah stores
were lowered on more than 10,000 grocery, meat and produce items.
Management anticipates that this new pricing program will enhance long term
earnings potential. However, in the near term, both gross margins and net
income are expected to be under pressure as the Company continues to build
sales volume. The improvements in gross margins in 1992 and 1991 were due
to the further maturing of new and existing store marketing areas, a shift
in product mix to private label and other higher margin products in the
Company's specialty departments and continuing improvements in backstage
efficiencies.
Gross margins also have been and are expected to be affected by the
Company's expansion program. The stores in Southern California tend to
operate at higher gross margins to offset higher real estate, operating and
labor costs. Additionally, the new 1,000,000 square foot distribution
center in Riverside, California , including a dairy processing plant, was
completed and began operations in late 1993. This new center is expected
to increase gross margins in the Southern California region through
backstage efficiencies and reduced shipping expenses. However, the Company
anticipates that new stores recently opened and the planned new stores in
Southern California will apply pressure on the Company's gross margins
until the stores become established in their respective markets.
In 1992 the Company adopted the last-in, first-out (LIFO) cost method
for valuing inventories. The adoption of LIFO did not have a material
effect on the 1992 financial statements. The pretax LIFO charge was $1.6
million in 1993. There were no LIFO charges or credits in 1992.
Operating, Selling and Administrative Expenses
Operating, selling and administrative expenses as a percent of net sales
were 15.3% in 1993, 15.8% in 1992 and 15.5% in 1991. The decrease in 1993,
resulting primarily from the Company's aggressive program to reduce
operating costs, was somewhat offset by the higher operating costs
associated with continued expansion into Southern California. The increase
in 1992 was caused mainly by the higher operating costs incurred by the
stores in the Southern California market. The Company anticipates that the
new and planned stores in Southern California will increase operating,
selling and administrative expenses as a percent of net sales until
anticipated economies of scale are realized.
Depreciation and Amortization Expenses
Depreciation and amortization expenses increased 22.0% in 1993, 38.9% in
1992 and 19.1% in 1991 over the respective prior years due to the addition
of new combination centers and distribution and processing facilities.
Interest Expense
Interest expense increased 23.5% in 1993, 19.2% in 1992 and 18.5% in
1991 compared with the respective prior years as a result of net increases
in the average long-term debt amounts for each period. However, the
increase in 1991 was partially offset by a reduction of debt from the
proceeds of the Company's public offering of Class B Common Stock in July
1991.
Income Taxes
Income taxes as a percent of income before income taxes were 42.8% in
1993, 39.1% in 1992 and 38.5% in 1991. The Omnibus Budget Reconciliation
Act of 1993 increased the Company's Federal Tax rate from 34% to 35%. As a
result of the increased tax rate, net income for 1993 was reduced by $2.75
million or $.09 per common share. This reduction consisted of $.80 million
or $.03 per common share for the rate increase on income earned in 1993 and
$1.95 million or $.06 per common share for the increase in recorded
deferred taxes. The effective tax rate, including state income taxes, for
1994 is expected to approximate 40.5%. The increase in 1992 was due
primarily to the Company's increased presence in markets that have higher
state tax rates.
Net Income
As the Company opens new stores and enters new markets, pressure on net
income is created by normal start-up costs associated with new store
openings and by the Company aggressively pursuing its everyday low price
policy in order to establish market share within each store's trading area
and build sufficient volume to effect anticipated economies of scale.
Management believes that net income in 1994 will come under pressure as the
Company continues its expansion into selected markets in Southern
California. The Company operated 26 combination stores in Southern
California at the end of 1993 and plans to open additional stores in that
market. Net income may also be affected by the relatively higher real
estate costs and operating and selling expenses (including preopening,
startup and advertising expenses) typically associated with stores in the
Southern California market. However these higher costs may be offset to
some degree, depending upon competitive conditions, by the generally higher
gross margins expected in that market. In addition, net income may continue
to be affected by price competition in its Utah market as a result of the
Company's aggressive pricing program.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased $46.4 million during 1993 and $1.1
million during 1992. The increase during 1993 primarily resulted from the
receipt of $152.7 million from a sale/leaseback transaction completed at
the end of 1993. The proceeds from the sale/leaseback transaction will be
used to finance 1994 store expansion, cash management efforts, and normal
cash activities. Working capital increased to $160.4 million at January 1,
1994 from $91.2 million at January 2, 1993, an increase of $69.2 million.
The Company's current ratio at the end of 1993 was 1.5:1 compared to 1.3:1
in 1992 and 1.1:1 in 1991. The working capital is supplemented by unused
revolving credit lines which aggregated $60 million at January 1, 1994.
Cash provided by operating activities amounted to $118.6 million and
$84.6 million for 1993 and 1992, respectively. Cash normally provided by
operating activities in each of such years was partially offset by
increases in inventory balances. The Company maintains levels of inventory
necessary to support its highvolume, everyday low price merchandising
strategy. Inventories increased $36.5 million and $51.0 million to $377.9
million and $341.4 million at the end of 1993 and 1992, respectively.
These increases in inventories were caused mainly by warehouse and store
expansion and forward buying.
Cash used in investing activities totaled $164.4 million for 1993 and
$286.6 million for 1992. Additions to property and equipment totaled
$322.3 million in 1993 and $288.0 million in 1992 reflecting the Company's
ongoing expansion program. In 1993 the Company completed the sale and
leaseback of several recently constructed stores and its new Riverside
distribution center totaling $152.7 million. There were no sale/leaseback
transactions in 1992. The Company anticipates investing approximately $150
million during 1994 for the development and construction of new food and
drug centers, remodeling of existing stores and replacing equipment.
However, the actual timing and amount of capital expenditures will depend
upon a number of factors.
Cash provided by financing activities totaled $92.3 million for 1993 and
$203.1 million for 1992. The Company obtained $262.0 million during 1993
and $252.7 million during 1992 in additional unsecured long-term borrowings
to finance additions to property and equipment. In connection with the
above referenced sale/leaseback transaction, the Company caused to be filed
on November 18, 1993 a shelf registration statement with the Securities and
Exchange Commission relating to the public offering of up to $300 million
aggregate principal amount of Pass Through Certificates. The shelf
registration was declared effective in January 1994. Quarterly cash
dividends have been paid on the Company's Class A and Class B Common Stock
since 1989.
At January 1, 1994 and January 2, 1993, the Company had outstanding
$704.0 million and $592.3 million, respectively, of long-term debt,
principally borrowed from insurance companies and other institutional
lenders. Of these amounts, $289.1 million and $325.1 million were secured
by real estate assets at the end of each respective year. The Company has
not experienced difficulty in obtaining financing at satisfactory interest
rates. Management believes that the financial resources available to it,
including proceeds from sale/leaseback transactions, amounts available
under existing and future bank lines of credit, additional long-term
financings and internally generated funds, will be sufficient to meet
planned capital expansion and working capital requirements for the
foreseeable future, including debt and lease servicing requirements. The
Company may, however, use additional sources of funds for such purposes,
including the issuance of debt or equity securities and leasing rather than
owning real estate and equipment.
INFLATION
In recent years, the impact of inflation on the Company's operating
results has been moderate, reflecting generally lower rates of inflation
in the economy. Management does not believe that the Company will be
adversely affected by any significant future inflation because of the large
number of Company-owned stores which do not have contingent or volume-
related rental obligations. While inflation has not had, and the Company
does not expect it to have, a material impact upon operating results, there
is no assurance that the Company's business will not be affected by
inflation in the future.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Dollar amounts in thousands,
except per share data 1993 1992 1991
Net sales $2,807,165 $2,649,860 $2,217,437
Cost of goods sold 2,175,061 2,042,800 1,723,848
---------- ---------- ----------
632,104 607,060 493,589
Expenses:
Operating, selling and
administrative 430,258 419,664 344,363
Depreciation and
amortization 77,099 63,216 45,510
Interest 44,627 36,130 30,319
---------- ---------- ----------
551,984 519,010 420,192
---------- ---------- ----------
Income before income taxes 80,120 88,050 73,397
Income taxes 34,300 34,400 28,300
---------- ---------- ----------
Net income $ 45,820 $ 53,650 $ 45,097
========== ========== ==========
Net income per share of
Common Stock $1.52 $1.79 $1.65
See notes to consolidated financial statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
Dollar amounts in thousands 1993 1992
ASSETS
Current Assets
Cash and cash equivalents $ 61,921 $ 15,526
Rebates and accounts receivable 20,838 16,800
Inventories 377,939 341,416
Prepaid expenses and deposits 19,634 20,616
---------- ----------
Total Current Assets 480,332 394,358
Property and Equipment
Land 282,469 277,167
Buildings 582,775 549,935
Leasehold improvements 38,866 30,668
Fixtures and equipment 538,882 436,969
---------- ----------
1,442,992 1,294,739
Less allowances for depreciation and amortization 284,363 217,101
---------- ----------
1,158,629 1,077,638
Other Assets 15,347 14,089
---------- ----------
$1,654,308 $1,486,085
========== ==========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 185,225 $ 184,106
Accrued sales and other taxes 38,763 32,138
Accrued payroll and related benefits 73,467 65,460
Current maturities of long-term debt 21,473 20,373
Current maturities of Redeemable Preferred Stock 1,046 1,046
---------- ----------
Total Current Liabilities 319,974 303,123
Long-Term Debt, less current maturities 704,014 592,311
Deferred Income Taxes 82,700 68,800
Redeemable Preferred Stock, less current maturities 5,423 6,462
Common Stockholders' Equity
Convertible Class A Common Stock (shares issued
and outstanding, 12,617,445 in 1993 and
13,403,132 in 1992) 126 134
Class B Common Stock (shares issued, 17,344,566
in 1993 and 16,558,879 in 1992) 173 165
Additional paid-in capital 285,482 285,980
Retained earnings 259,400 229,110
---------- ----------
545,181 515,389
Less cost of Common Stock in the
treasury (95,718 shares) 2,984
---------- ----------
542,197 515,389
---------- ----------
$1,654,308 $1,486,085
========== ==========
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
Class A Class B
Common Stock Common Stock Additional
Dollar amounts in thousands, Number of Par Number of Par Paid-in Retained Treasury
except per share data Shares Value Shares Value Capital Earnings Stock Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 30, 1990 15,843,764 $158 9,428,247 $ 94 $114,418 $153,488 $268,158
Net income for 1991 45,097 45,097
Issuance of Class B
Common Stock 4,690,000 47 170,810 170,857
Conversion of shares from
Class A to Class B (1,683,334) (17) 1,683,334 17
Cash dividends -- $.36 per share (9,942) (9,942)
Other 216 216
---------- ---- ---------- ---- -------- -------- -------- --------
Balance at December 28, 1991 14,160,430 141 15,801,581 158 285,444 188,643 474,386
Net income for 1992 53,650 53,650
Conversion of shares from
Class A to Class B (757,298) (7) 757,298 7
Cash dividends -- $.44 per share (13,183) (13,183)
Other 536 536
---------- ---- ---------- ---- -------- -------- -------- --------
Balance at January 2, 1993 13,403,132 134 16,558,879 165 285,980 229,110 515,389
Net income for 1993 45,820 45,820
Conversion of shares from
Class A to Class B (785,687) (8) 785,687 8
Purchase of Class B Common
Stock for the treasury $(11,074) (11,074)
Shares sold to the Employee
Stock Profit Sharing Plan (212) 3,237 3,025
Shares sold under the Employee
Stock Purchase Plan (771) 4,853 4,082
Cash dividends -- $.52 per share (15,530) (15,530)
Other 485 485
---------- ---- ---------- ---- -------- -------- -------- --------
Balance at January 1, 1994 12,617,445 $126 17,344,566 $173 $285,482 $259,400 $ (2,984) $542,197
========== ==== ========== ==== ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollar amounts in thousands 1993 1992 1991
Operating Activities
Net income $ 45,820 $ 53,650 $ 45,097
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation and amortization
(including amounts charged to
cost of goods sold) 82,173 67,781 50,495
Deferred income taxes 15,400 16,000 8,500
Other 485 536 216
Changes in operating assets
and liabilities:
Rebates and accounts receivable (4,038) (1,726) 227
Inventories (36,523) (50,989) (80,796)
Prepaid expenses and deposits (518) (10,161) (244)
Trade accounts payable 1,119 3,723 18,051
Accrued sales and other taxes 6,625 1,296 2,535
Accrued payroll and related benefits 8,007 4,478 17,823
-------- -------- --------
Cash provided by operating activities 118,550 84,588 61,904
Investing Activities
Additions to property and equipment (322,301) (287,989) (281,560)
Sale/leaseback arrangements and
other property and equipment sales 159,137 3,920 7,027
Other (1,258) (2,500) (2,885)
-------- -------- --------
Cash used in investing activities (164,422) (286,569) (277,418)
Financing Activities
Additions to long-term debt 262,000 252,748 77,007
Payments on long-term debt (149,197) (35,513) (24,124)
Redemptions of Redeemable
Preferred Stock (1,039) (939) (1,047)
Proceeds from sale of Class B
Common Stock 170,857
Purchases of Treasury Stock (11,074)
Proceeds from sales of Treasury Stock 7,107
Payment of dividends (15,530) (13,183) (9,942)
-------- -------- --------
Cash provided by financing activities 92,267 203,113 212,751
-------- -------- --------
Net increase (decrease) in cash
and cash equivalents 46,395 1,132 (2,763)
Cash and cash equivalents at
beginning of year 15,526 14,394 17,157
-------- -------- --------
Cash and cash equivalents at
end of year $ 61,921 $ 15,526 $ 14,394
======== ======== ========
See notes to consolidated financial statements
<PAGE>
Notes to Consolidated Financial Statements
NOTE A - Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Smith's Food
& Drug Centers, Inc. and its wholly-owned subsidiaries (The Company), after
the elimination of significant intercompany transactions and accounts. The
Company operates a regional supermarket and drug store chain in the
Intermountain, Southwestern, and Southern California regions of the United
States.
Definition of Accounting Period
The Company's fiscal year ends on the Saturday nearest to December 31.
Fiscal year operating results include 52 weeks for each year except 1992
which includes 53 weeks.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and short-term investments with
maturities less than three months. The amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Inventories
Inventories are valued at the lower of cost or market. In 1992 the last-
in, first-out (LIFO) cost method was adopted for valuing inventories. The
adoption of LIFO did not have a material effect on the financial
statements. Approximately 95% of inventories in 1993 and 1992 were valued
using LIFO. Other inventories were valued using the first-in, first-out
method.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are provided by the straight-line method based upon estimated useful lives.
Improvements to leased property are amortized over their estimated useful
lives or the remaining terms of the leases, whichever is shorter.
Pre-Operating and Closing Costs
Costs incurred in connection with the opening of new stores and
distribution facilities are expensed as incurred. The remaining net
investment in stores closed, less salvage value, is charged against
earnings in the period of closing and, for leased stores, a provision is
made for the remaining lease liability, net of expected sublease rental.
Interest Costs
Interest costs are expensed as incurred, except for interest costs which
have been capitalized as part of the cost of properties under development.
The Company's cash payments for interest (net of capitalized interest of
approximately $14.5 million in 1993, $8.8 million in 1992, and $8.0 million
in 1991) amounted to $39.8 million in 1993, $33.6 million in 1992, and
$27.9 million in 1991.
Income Taxes
The Company determines its deferred tax assets and liabilities based on
differences between the financial reporting and tax basis of its assets and
liabilities using the tax rates that will be in effect when the differences
are expected to reverse. Deferred income taxes result primarily from
temporary differences arising from accrued insurance claims and using
different depreciation and amortization methods for book and tax purposes.
Net Income Per Share of Common Stock
Net income per share of Common Stock is computed by dividing the net income
by the weighted average number of shares of Common Stock outstanding of
30,238,811 in 1993, 29,962,011 in 1992, and 27,397,973 in 1991. In 1993,
the weighted average number of common shares includes common stock
equivalents in the form of stock options. In 1992 and 1991, stock options
were excluded from the calculation. Stock options did not have a material
dilutive effect on the net income per share calculation in any period
reported.
Litigation
The Company is a party to certain legal actions arising out of the ordinary
course of its business. Management believes that none of these actions,
individually or in the aggregate, will have a material adverse effect on
the Company's results of operations or financial position.
Reclassifications
Certain reclassifications have been made to the 1992 financial statements
to conform with the 1993 presentation.
NOTE B - Property and Equipment
The Company depreciates its buildings over 25 to 30 years and its fixtures
and equipment over a period of 2 to 9 years and amortizes its leasehold
improvements over their estimated useful lives or the life of the lease,
whichever is shorter. Property and equipment consists of the following:
Allowances for Net Current Year
Depreciation and BookDepreciation and
Dollar amounts in thousands Cost Amortization Value Amortization
1993
Land $282,469 $282,469
Buildings 582,775 $75,663 507,112 $17,902
Leasehold improvements 38,866 8,333 30,533 1,884
Fixtures and equipment 538,882 200,367 338,515 62,387
---------- -------- ---------- -------
$1,442,992 $284,363 $1,158,629 $82,173
========== ======== ========== =======
1992
Land $ 277,167 $ 277,167
Buildings 549,935 $60,199 489,736 $15,675
Leasehold improvements 30,668 6,742 23,926 1,744
Fixtures and equipment 436,969 150,160 286,809 50,362
---------- -------- ---------- -------
$1,294,739 $217,101 $1,077,638 $67,781
========== ======== ========== =======
NOTE C - Long-Term Debt
Long-term debt consists of the following:
Dollar amounts in thousands 1993 1992
Mortgage notes, collateralized by property and
equipment with a cost of $451.4 million in 1993
and $479.2 million in 1992, due through 2011 with
interest at an average rate of 9.77% in 1993 and
9.92% in 1992 $ 301,740 $335,457
Unsecured notes, due in 2002 through 2015 with
varying annual installments starting in 2000
which accrue interest at an average rate of 7.68%
in 1993 and 8.49% in 1992 410,000 148,127
Revolving credit bank loans 70,000
Short-term bank loans refinanced in 1993 as
unsecured notes 45,000
Industrial revenue bonds, collateralized by
property and equipment with a cost of $21.0
million in 1993 and $18.8 million in 1992 due
in 1994 through 2010 plus interest at an average
rate of 6.68% in 1993 and 6.85% in 1992 8,847 9,847
Other 4,900 4,253
-------- --------
725,487 612,684
Less current maturities 21,473 20,373
-------- --------
$704,014 $592,311
======== ========
Interest rates on the revolving credit bank loans are generally lower than
the prime rate. The agreements are reviewed annually with the banks, at
which time the date each installment is due is generally extended one year.
At January 1, 1994, the Company had unused lines of credit related to
unsecured revolving credit bank loans of $60.0 million.
The Company's loan agreements contain provisions which require the Company
to maintain a specified level of consolidated net worth, fixed charge
coverage and ratio of debt to net worth.
Maturities of the Company's long-term debt for the five fiscal years
succeeding January 1, 1994 are approximately $21.5 million in 1994, $24.3
million in 1995, $25.9 million in 1996, $23.6 million in 1997 and $24.3
million in 1998.
The amounts classified as short-term bank loans and revolving credit bank
loans approximate their fair value. The fair value of the Company's long-
term debt was estimated using discounted cash flow analysis, based on the
Company's current incremental borrowing rates for similar types of debt
arrangements.
NOTE D - Redeemable Preferred Stock
The Company has 85,000,000 shares of $.01 per share par value Preferred
Stock authorized. The Company has designated 34,524,579 of these shares as
Series I Preferred Stock, of which 19,406,694 shares and 22,523,691 shares
were issued and outstanding in 1993 and 1992, respectively. The Preferred
Stock has no dividend requirement.
All shares of the Company's Series I Preferred Stock are subject to
redemption at any time at the option of the Board of Directors, in such
numbers as the Board may determine, and at a redemption price of $.33 1/3
per share. The scheduled redemptions of the Company's Redeemable Preferred
Stock are approximately $1.0 million each year until all outstanding shares
are redeemed. Upon liquidation of the Company, each share of Series I
Preferred Stock is entitled to a liquidation preference of $.33 1/3, on a
pro rata basis with any other series of Preferred Stock, before any
distribution to the holders of Class A Common Stock or Class B Common
Stock. Each Share of Series I Preferred Stock is entitled to ten votes per
share. Redeemable Series I Preferred Stock is stated at redemption value
in the balance sheets.
The amount included in the balance sheet for Redeemable Preferred Stock
approximates its fair value.
NOTE E - Common Stockholders' Equity
The voting powers, preferences and relative rights of Class A Common Stock
and Class B Common Stock are identical in all respects, except that the
holders of Class A Common Stock have ten votes per share and the holders of
Class B Common Stock have one vote per share. Each share of Class A Common
Stock is convertible at any time at the option of the holder into one share
of Class B Common Stock. The Company's Certificate of Incorporation also
provides that each share of Class A Common Stock will be converted
automatically into one share of Class B Common Stock if at any time the
number of shares of Class A Common Stock issued and outstanding shall be
less than 2,910,885. Future sales or transfers of the Company's Class A
Common Stock are restricted to the Company or immediate family members of
the original Class A Common Stockholders unless first presented to the
Company for conversion into an equal number of Class B Common Stock shares.
The Class B Common Stock has no conversion rights. At January 1, 1994
there were 20,000,000 shares of $.01 per share par value Class A Common
Stock and 100,000,000 shares of $.01 per share par value Class B Common
Stock authorized.
NOTE F - Income Taxes
Income tax expense consists of the following:
Dollar amounts in thousands 1993 1992 1991
Current:
Federal $15,715 $15,493 $17,050
State 3,185 2,907 2,750
------- ------- -------
18,900 18,400 19,800
Deferred:
Federal 13,012 13,819 7,057
State 2,388 2,181 1,443
------- ------- -------
15,400 16,000 8,500
------- ------- -------
$34,300 $34,400 $28,300
======= ======= =======
Income tax expense included a charge of $1.95 million in 1993 resulting
from applying the increased federal tax rate to deferred tax items. Cash
disbursements for income taxes were $17.3 million in 1993, $17.6 million in
1992, and $23.4 million in 1991.
The difference between income tax expense and the tax computed by applying
the statutory income tax rate to income before income taxes is as follows:
1993 1992 1991
Statutory federal income tax rate 35.0% 34.0%
34.0%
State income tax rate, net of federal
income tax effect 5.2 5.0 4.4
Job tax credits (.3) (.4)
(.5)
Effect of income tax rate increase on
deferred taxes 2.4
Other .5 .5 .6
---- ---- ----
42.8% 39.1%
38.5%
==== ==== ====
Deferred income taxes arise because of differences in the treatment of
income and expense items for financial reporting and income tax purposes.
The effect of temporary differences that give rise to deferred tax balances
are as follows:
Dollar amounts in thousands 1993 1992
Deferred tax liabilities:
Depreciation and amortization $85,078 $70,595
Other 7,203 4,218
------- -------
92,281 74,813
Deferred tax assets:
Reserves (11,243) (10,045)
Other (3,495) (2,568)
------- -------
(14,738) (12,613)
------- -------
Net current deferred tax assets (5,157) (6,600)
------- -------
Net non-current deferred tax liabilities $82,700 $68,800
======= =======
NOTE G - Fair Value of Financial Instruments
The carrying amounts and related fair values of the Company's financial
instruments are as follows:
1993 1992
Dollar amounts in thousands Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and cash equivalents $61,921 $61,921 $15,526 $15,526
Long-term debt 725,487 784,627 612,684 649,192
Redeemable Preferred Stock 6,469 6,469 7,508 7,508
NOTE H - Leases and Commitments
The Company leases property and equipment under terms which include, in
some cases, renewal options, escalation clauses or contingent rentals which
are based on sales. Total rental expense for such leases amounted to the
following:
Dollar amounts in thousands 1993 1992 1991
Minimum rentals $19,539 $18,956 $15,650
Contingent rentals 281 161 1,041
------- ------- -------
19,820 19,117 16,691
Less sublease rental income 5,506 4,906 4,705
------- ------- -------
$14,314 $14,211 $11,986
======= ======= =======
At January 1, 1994, future minimum rental commitments and sublease rental
income for all noncancellable leases with initial or remaining terms of one
year or more consisted of the following:
Less
Minimum Sublease
Rental Rental
Dollar amounts in thousands Commitments Income Total
1994 $ 20,535 $ 6,167 $ 14,368
1995 20,780 5,964 14,816
1996 35,876 5,456 30,420
1997 32,275 5,116 27,159
1998 33,630 4,921 28,709
Thereafter 586,638 25,042 561,596
-------- ------- --------
$729,734 $52,666 $677,068
======== ======= ========
At January 1, 1994 the Company had contract commitments of approximately
$15.4 million for future construction.
During 1993, the Company entered into a sale and leaseback agreement for
several recently constructed stores and the new Riverside distribution
center, the net proceeds from which totaled $152.7 million. The lease is
for a period of 25 years with annual rentals.
NOTE I - Employee Stock Plans
In 1993 the Company established a stock profit sharing plan under which
year end employees who are compensated for more than 1,000 hours during the
year are participants. Eligible employees are allocated shares of stock
based on hours of service up to 2,080 hours. Contributions are made at the
sole discretion of the Company based on its profitability. The
contribution expense in 1993 was $3.0 million.
In 1993 the Company established a stock purchase plan which permits
employees to purchase shares of the Company's Class B Common Stock through
payroll deductions at 85% of fair market value at the time of purchase.
Employees purchased 180,950 shares from the Treasury during 1993.
The Company has a Stock Option Plan which authorizes the Compensation
Committee of the Board of Directors to grant options to key employees for
the purchase of Class B Common Stock. In April 1992, the aggregate number
of shares available for grant under the plan was increased to equal 10% of
the number of shares of Class B Common Stock authorized. However, the
number of outstanding and unexercised options shall not exceed 10% of the
number of shares of Class A and Class B Common Stock outstanding. The
number of unoptioned shares of Class B Common Stock available for grant was
1,489,129 shares and 1,888,701 shares at the end of 1993 and 1992,
respectively. The options may be either incentive stock options or non-
qualified stock options. Stock options granted to key employees and
options outstanding are as follows:
Option Price Number of
per Share Shares
Balance at December 30, 1990 $19.00 813,000
Granted 19.00 191,000
Forfeited 19.00 (66,000)
----- ---------
Balance at December 28, 1991 19.00 938,000
Granted 19.00 198,500
Forfeited 19.00 (29,000)
----- ---------
Balance at January 2, 1993 19.00 1,107,500
Granted 19.00 622,000
Forfeited 19.00 (232,000)
----- ---------
Balance at January 1, 1994 $19.00 1,497,500
===== =========
The options are exercisable as follows:
Number of
Shares
January 4, 1997 25,000
June 21, 1999 516,000
March 1, 2000 30,000
January 1, 2001 162,000
September 18, 2001 20,000
December 1, 2001 30,000
January 2, 2002 79,500
January 4, 2003 59,000
June 1, 2003 1,000
December 20, 2003 515,000
---------
1,437,500
Options currently exercisable 60,000
---------
1,497,500
=========
Compensation expense for the difference between the market value of the
options on the grant date and the grant price is recognized on a straight-
line basis over the life of the options. The amount charged to operations
in 1993, 1992, and 1991 was immaterial.
NOTE J - Pension Plans
Employees whose terms of employment are determined by negotiations with
recognized collective bargaining units are covered by their respective
multi-employer defined benefit pension plans to which the Company
contributes. The costs charged to operations for these plans amounted to
approximately $3.3 million in 1993, $2.3 million in 1992, and $1.6 million
in 1991. Other information for these multi-employer plans is not available
to the Company.
The Company maintains a defined benefit pension plan for all other
permanent employees which provides for normal retirement at age 65.
Employees are eligible to join when they complete at least one year of
service and have reached age 21. The benefits are based on years of service
and stated amounts associated with those years of service. The Company's
funding policy is to contribute annually the maximum amount deductible for
federal income tax purposes. Net pension cost includes the following
components:
Dollar amounts in thousands 1993 1992 1991
Service cost - present value of
benefits earned during the period $1,869 $1,619 $1,364
Interest cost on projected benefit
obligation 1,350 1,079 776
Actual return on plan assets (1,053) (339) (1,170)
Net amortization and deferral (304) (628) 310
------ ------ ------
$1,862 $1,731 $1,280
====== ====== ======
The following table presents the plan's funded status and amounts
recognized in the Company's consolidated balance sheets:
Dollar amounts in thousands 1993 1992
Actuarial present value of accumulated benefits
based on service rendered to date:
Vested $14,623 $10,234
Non-vested 3,750 3,371
------- -------
18,373 13,605
Plan assets at fair value (primarily in equity
and fixed income funds and real estate) 17,188 13,317
------- -------
Projected benefit obligation in excess of fair
value of plan assets (1,185) (288)
Unrecognized net loss from past experience
different from that assumed and effects of
changes in assumptions 5,616 3,431
Prior service cost not yet recognized in net
periodic pension cost 188 391
Unrecognized net asset (1,304) (1,467)
------- -------
Net prepaid pension expense $3,315 $2,067
====== ======
The weighted average discount rate used to determine the actuarial present
value of the projected benefit obligation was 7.75% in 1993 and 8.5% 1992.
The expected long-term rate of return on plan assets was 9.5% in 1993,
1992, and 1991.
The Company provides a 401(k) plan for virtually all employees. The plan
is entirely funded by employee contributions which are based on employee
compensation not to exceed certain limits.
<PAGE>
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
Board of Directors and Stockholders
of Smith's Food & Drug Centers, Inc.
We have audited the accompanying consolidated balance sheets of Smith's
Food & Drug Centers, Inc. and subsidiaries as of January 1, 1994 and
January 2, 1993, and the related consolidated statements of income,
common stockholders' equity, and cash flows for each of the three fiscal
years in the period ended January 1, 1994. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Smith's Food & Drug Centers, Inc. and subsidiaries at January 1, 1994 and
January 2, 1993, and the consolidated results of their operations and
their cash flows for each of the three fiscal years in the period ended
January 1, 1994, in conformity with generally accepted accounting
principles.
ERNST & YOUNG
Salt Lake City, Utah
January 27, 1994
<PAGE>
<TABLE>
<CAPTION>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL AND OPERATING DATA
Dollar amounts in thousands, 1993 1992 1991 1990 1989
except per share data 52 Weeks 53 Weeks 52 Weeks 52 Weeks 52 Weeks
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net sales $2,807,165 $2,649,860 $2,217,437 $2,031,373 $1,731,559
Gross profit 632,104 607,060 493,589 442,318 376,816
Operating, selling
and administrative
expense 430,258 419,664 344,363 323,792 277,986
Depreciation and
amortization expense 77,099 63,216 45,510 38,217 31,009
Interest expense 44,627 36,130 30,319 25,595 26,290
Income before
income taxes 80,120 88,050 73,397 54,714 41,531
Net income 45,820 53,650 45,097 34,314 26,131
Common Stock Data
Average number of
common shares
outstanding 30,238,811 29,962,011 27,397,973 25,272,011 22,479,281
Net income per
common share $ 1.52 $ 1.79 $ 1.65 $ 1.36 $ 1.16
Dividends per
common share .52 .44 .36 .28 .10
Book value per
common share 18.15 17.20 15.83 10.61 9.53
Balance Sheet Data
Net property and
equipment $1,158,629 $1,077,638 $ 861,350 $ 637,312 $ 511,345
Total assets 1,654,308 1,486,085 1,196,689 891,716 728,482
Long-term debt,less
current maturities 704,014 592,311 375,632 326,190 257,208
Redeemable Preferred
Stock,less current
maturities 5,423 6,462 7,401 8,448 9,542
Common stockholders'
equity 542,197 515,389 474,386 268,158 240,920
Select Operating Data
Number of stores 129 119 109 95 98
Total store square
footage 8,501,000 7,668,000 6,773,000 5,580,000 5,235,000
Number of employees 18,759 19,310 18,303 15,208 15,289
</TABLE>
<PAGE>
QUARTERLY FINANCIAL DATA
(unaudited)
Dollar amounts in thousands,
except per share data First Second Third Fourth Year
Fiscal 1993
Net sales $688,239 $705,520 $686,747 $726,659 $2,807,165
Gross profit 160,350 162,538 151,226 157,990 632,104
Net income 14,007 13,999 7,911 9,903 45,820
Net income per
common share .46 .46 .26 .34 1.52
NYSE price range
High 37 1/4 33 1/4 26 1/2 22 1/2
Low 31 23 5/8 20 19
Fiscal 1992
Net sales $669,511 $640,096 $653,385 $686,868 $2,649,860
Gross profit 151,229 147,297 150,989 157,545 607,060
Net income 13,148 13,544 13,844 13,114 53,650
Net income per
common share .44 .45 .46 .44 1.79
NYSE price range
High 43 1/4 38 34 3/4 37 3/4
Low 33 3/8 27 7/8 25 3/4 32 3/4
Fiscal 1991
Net sales $532,922 $547,007 $544,026 $593,482 $2,217,437
Gross profit 116,855 120,285 121,925 134,524 493,589
Net income 10,406 10,844 12,228 11,619 45,097
Net income per
common share .41 .43 .42 .39 1.65
NYSE price range
High 41 1/2 43 3/4 42 3/8 39
Low 28 3/4 36 1/2 35 1/2 30 1/4
EXHIBIT 22.1
SUBSIDIARIES OF THE COMPANY
State of
Incorporation
Name and d/b/a or
Organization
Smith's Beverage of Wyoming, Inc.
Wyoming
Western Property Investment Group, Inc.
California
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-
K) of Smith's Food & Drug Centers, Inc. of our report dated January 27,
1994, included in the 1993 Annual Report to Stockholders of Smith's Food &
Drug Centers, Inc.
Our audits also included the financial statement schedules of Smith's Food
& Drug Centers, Inc. listed in Item 14(a). These schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial
statement schedules referred to above, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statements (Forms S-8 No.33-48627 and No.33-56966 and Form S-3, No.33-
51097) pertaining to the Smith's Food & Drug Centers, Inc. Amended and
Restated 1989 Stock Option Plan, the Smith's Food & Drug Centers, Inc. 1993
Employee Stock Purchase Plan, and the Smith's Food & Drug Centers, Inc.
Pass Through Certificates of our report dated January 27, 1994, with
respect to the consolidated financial statements incorporated herein by
reference, and our report included in the preceding paragraph with respect
to the financial statement schedules included in this Annual Report (Form
10-K) for the year ended January 1, 1994.
ERNST & YOUNG
Salt Lake City, Utah
March 23, 1994
