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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 8, 1996
REGISTRATION NO. 333-14953
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT
NO.1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
SMITH'S FOOD & DRUG CENTERS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 87-0258768
- ------------------------------- --------------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1550 SOUTH REDWOOD ROAD
SALT LAKE CITY, UTAH 84104
(801) 974-1400
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(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------------
MICHAEL C. FREI
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
SMITH'S FOOD & DRUG CENTERS, INC.
1550 SOUTH REDWOOD ROAD
SALT LAKE CITY, UTAH 84104
(801) 974-1400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------------
COPIES TO:
THOMAS C. SADLER, ESQ.
LATHAM & WATKINS
633 WEST FIFTH STREET
SUITE 4000
LOS ANGELES, CALIFORNIA 90071
(213) 485-1234
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS
SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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ADDITIONAL PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Class B Common Stock, par value
$.01 per share . . . . . . . . . . . . . . . . . . . . . . . 25,360(a) $27.50 (a) $697,400(a) $212(a)
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</TABLE>
(a) The registration fees of $25,043, were paid in connection with the original
filing of the Registration Statement of October 28, 1996 based on an amount to
be registered of 3,201,470 shares of Class B Common Stock with a proposed
maximum offering price per unit of $25.813. The registration fees of $212 were
paid in connection with this filing based on an additional amount to be
registered of 25,360 shares of Class B Common Stock with a proposed maximum
offering price per unit of $27.50.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1996
PROSPECTUS
3,226,830 SHARES
SMITH'S FOOD & DRUG CENTERS, INC.
CLASS B COMMON STOCK
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The shares of Class B Common Stock, par value $.01 per share (the
"Class B Common Stock") of Smith's Food & Drug Centers, Inc. ("Smith's" or the
"Company") which may be offered hereby are held by certain stockholders of the
Company (the "Selling Stockholders") who received such shares in connection
with the Company's recent acquisition of Smitty's Supermarkets, Inc. See
"Selling Stockholders." The Company will not receive any of the proceeds from
the sale of any shares offered hereby. The Selling Stockholders received such
shares of Class B Common Stock in a private placement transaction and the
Company has agreed to file and maintain a shelf registration statement relating
to such shares in order to permit the Selling Stockholders to resell such
securities from time-to-time in public transactions. In connection with this
offering, the Company will bear expenses estimated at $130,755.
The Class B Common Stock is listed on the New York Stock Exchange under
the symbol "SFD." On November 6, 1996, the last reported sales price for the
Class B Common Stock was $27.625 per share. See "Price Range of Class B Common
Stock."
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SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN
RISK FACTORS THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS,
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Any distribution of the shares covered by this Prospectus may be
effected from time to time in one or more transactions (which may involve block
transactions) on the New York Stock Exchange in negotiated transactions or a
combination of such methods of sale, at fixed prices, at market prices
prevailing at the time of sale, at prices related to the prevailing market
prices or at negotiated prices. The Selling Stockholders will effect any such
transactions with or through one or more broker-dealers which may act as agent
or principal. Any such broker-dealer may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Stockholders
and/or the purchaser of the shares for whom it may act as agent or to whom they
may sell as principals or both. With respect to any shares sold by a Selling
Stockholder, the Selling Stockholder and/or any broker-dealer affecting the
sales may be deemed to be an "underwriter" within the meaning of Section 2(11)
of the Securities Act of 1933, as amended, (the "Securities Act"), and any
commissions received by the broker-dealer and any profit on the resale of shares
as principal may be deemed to be underwriting discounts or commissions under the
Securities Act. Additionally, the Selling Stockholders may pledge or make gifts
of their shares and the shares may also be sold by the pledgees or transferees.
See "Plan of Distribution."
The date of this Prospectus is November __, 1996.
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IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES
OF CLASS B COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-3 (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") under the Securities Act, with respect to the Class B Common
Stock. The Company is subject to the reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder, and in accordance
therewith files reports, and other information with the Commission. Such
reports and other information filed by the Company with the Commission can be
inspected without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at the regional offices of the Commission located at Seven World Trade Center,
Suite 1300, New York, New York 10048; 500 West Madison Street, Chicago,
Illinois 60601; and 5670 Wilshire Boulevard, Suite 500, Los Angeles, California
90036. Copies of such materials can also be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W. Washington, D.C. 20549, at
prescribed rates. The Class B Common Stock of the Company is listed on the New
York Stock Exchange and reports, proxy statements and other information
concerning the Company can also be inspected at the office of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Smith's with the Commission under the
Exchange Act are incorporated herein by reference: (i) Smith's Annual Report on
Form 10-K for its fiscal year ended December 30, 1995; (ii) Smith's current
reports on Form 8-K dated February 20, 1996 and May 7, 1996, (iii) Smith's
Quarterly Report on Form 10-Q for its fiscal quarter ended June 29, 1996, and
(iv) Smith's 1996 Proxy Statement for its Annual Meeting of Stockholders. In
addition, all documents filed by Smith's with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the termination of the offering made hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein, or in any other subsequently filed document that also is, or is deemed
to be incorporated by reference herein, modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of documents incorporated herein by reference (excluding
exhibits unless such exhibits are specifically incorporated herein by
reference) may be obtained without charge upon request from Smith's Food & Drug
Centers, Inc. at 1550 South Redwood Road, Salt Lake City, Utah 84104, telephone
number (801) 974-1400, Attn: Michael C. Frei, General Counsel and Secretary.
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<PAGE> 5
THE COMPANY
The Company is a leading supermarket company in the Intermountain and
Southwestern regions of the United States, operating 150 stores located in Utah
(36), Arizona (58), Nevada (23), New Mexico (19) and Idaho, Texas and Wyoming
(collectively, 14). Substantially all of Smith's stores offer one-stop
shopping convenience through a food and drug combination format which features
a full-line supermarket with drug and pharmacy departments and some or all of
the following specialty departments: delicatessens, hot prepared food sections,
in-store bakeries, video rental shops, floral shops, one-hour photo processing
labs, full-service banking and frozen yogurt shops. The Company's food and
drug combination stores averaged approximately 63,000 square feet and $420,000
per week in sales volume in fiscal 1995. The Company has recently opened four
price impact warehouse stores and also operates two conventional supermarkets.
Through its 48 years of operations, the Company believes it has developed a
valuable and strategically located store base, strong name recognition,
customer loyalty and a reputation for quality and service.
RECENT DEVELOPMENTS
In May 1996, the Company consummated a series of transactions designed
to enhance stockholder value and liquidity:
o Acquisition of Smitty's Supermarkets, Inc. On May 23, 1996, the
Company acquired Smitty's Supermarkets, Inc. ("Smitty's") a regional
supermarket operator with 26 stores in the Phoenix and Tucson
markets, in a stock-for-stock exchange (the "Merger"). The Merger
significantly enhanced the Company's market position in Arizona.
Smitty's was controlled by affiliates of The Yucaipa Companies
("Yucaipa"), a private investment group specializing in the
supermarket industry. The consideration received by the stockholders
of Smitty's in the Merger consisted of 3,038,877 shares of Class B
Common Stock. At the time the Merger was consummated, the Company
caused Smitty's and its subsidiaries to repay in full approximately
$103 million of existing indebtedness. The foregoing debt
refinancing transactions of Smitty's are referred to herein
collectively as the "Smitty's Refinancing."
o California Disposition. The Company has completed the sale or lease
of 23 stores, five non-operating properties and its primary
distribution facility in Southern California and has closed its
remaining stores there (the "California Divestiture"). Management
determined that because of the attractive growth prospects in the
Company's principal markets and the competitive environment in
Southern California, it would redeploy Company resources from
California into other markets. The Company is also in the process of
disposing of its remaining closed stores and excess land in
California (the "California Asset Disposition," and together with the
California Divestiture, the "California Disposition").
o New Senior Management. At the time of the Merger, the Company
entered into a five-year management services agreement (the
"Management Services Agreement") with Yucaipa. Ronald W. Burkle, the
managing general partner of Yucaipa, was appointed as Chief Executive
Officer of the Company. In addition, Allen R. Rowland recently
joined Smith's as President and Chief Operating Officer. Mr. Rowland
was employed by Albertson's, Inc. for 25 years and had senior
executive responsibilities for all of the principal regions in which
Smith's operates.
o Recapitalization. The Company also consummated certain
recapitalization transactions in May 1996, including, (i) the
purchase of approximately 50% of its outstanding Class A Common
Stock, par value $.01 per share ("Class A Common Stock" and, together
with the Class B Common Stock, the "Common Stock") and its
outstanding Class B Common Stock (excluding shares issued to the
stockholders of Smitty's in the Merger) for $36.00 in cash per share
(the "Tender Offer"), (ii) the funding of a new senior credit
facility (the "New Credit Facility") with a group of lenders which
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provided $805 million aggregate principal amount of new term loans
(the "New Term Loans") and a $190 million revolving credit facility
(the "New Revolving Facility") and (iii) the issuance of $575 million
aggregate principal amount of the Company's 11 1/4% Senior
Subordinated Notes due 2007 (the "Notes"). In connection with the
Tender Offer, the Company also purchased a portion of certain
outstanding stock options held by management and a portion of its
outstanding Series I Preferred Stock.
The Tender Offer, the purchase of certain management stock options and
Series I Preferred Stock, the incurrence of indebtedness under the New Credit
Facility and the Notes, and the refinancing of its existing indebtedness, are
collectively referred to herein as the "Recapitalization." The
Recapitalization, the Merger and the Smitty's Refinancing are collectively
referred to herein as the "Transactions."
The Company's executive offices are located at 1550 South Redwood Road,
Salt Lake City, Utah 84104, and its telephone number is (801) 974-1400.
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RISK FACTORS
Prospective investors should carefully consider the following factors, in
addition to the other matters described in this Prospectus, before purchasing
the Class B Common Stock offered by this Prospectus.
SUBSTANTIAL LEVEL OF INDEBTEDNESS
The Company has a substantial amount of outstanding indebtedness. At June
29, 1996, the consolidated indebtedness of the Company was $1,427.6 million.
The Company's level of indebtedness could have important consequences to the
holders of Class B Common Stock, including the following: (i) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of the principal of and interest on its indebtedness; (ii) the ability
of the Company to obtain additional financing may be materially limited or
impaired; and (iii) the Company's level of indebtedness may reduce the
Company's flexibility to respond to changing business and economic conditions.
However, the Company believes that to date its level of indebtedness has not
impaired its ability to obtain needed capital nor has it reduced the Company's
flexibility to respond to business or economic conditions. Subject to certain
limitations contained in its outstanding debt instruments, the Company or its
subsidiaries may incur additional indebtedness to (i) finance working capital,
(ii) fund capital expenditures or acquisitions or (iii) provide funds for
certain general corporate purposes. There can be no assurance, however, that
in the future the Company will be able to satisfy its cash requirements from
cash flow or borrowings. In such event, the Company could be required to adopt
one or more alternatives, such as reducing or delaying capital expenditures,
restructuring its indebtedness, selling assets, or selling additional shares of
capital stock. There can be no assurance that any of such actions could be
successfully accomplished.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The terms and conditions of the New Credit Facility and the indenture (the
"Indenture") governing the Notes impose restrictions that limit or prohibit,
among other things, the payment of cash dividends, incurrence of additional
indebtedness, creation of liens, asset sales, and certain investments,
acquisitions and capital expenditures. The terms of the New Credit Facility
also require the Company to maintain or meet specified financial ratios and
tests.
The ability of the Company to comply with the terms of the New Credit
Facility or the Indenture can be affected by events beyond the Company's
control, including events such as prevailing economic conditions, changes in
consumer preferences and changes in the competitive environment, which could
have the effect of impairing the Company's operating performance. There can be
no assurance that the Company will be able to comply with the provisions of the
such debt instruments, including compliance with the financial ratios and tests
contained in the New Credit Facility. Breach of any of these covenants or the
failure to fulfill the obligations thereunder and the lapse of any applicable
grace periods would result in an event of default under the applicable debt
instruments, and the holders of such indebtedness could declare all amounts
outstanding under their debt instruments to be due and payable immediately.
There can be no assurance that the assets or cash flow of the Company would be
sufficient to repay in full borrowings under its outstanding debt instruments
whether upon maturity or if such indebtedness were to be accelerated upon an
event of default or a change of control, or that the Company would be able to
refinance or restructure its payments on such indebtedness.
ABILITY TO ACHIEVE ANTICIPATED COST SAVINGS
Management of the Company has estimated that approximately $25 million of
annualized net cost savings (as compared to such costs for the pro forma
combined fiscal year ended December 30, 1995) can be achieved over a three-year
period as a result of integrating the Arizona operations of Smith's and
Smitty's. The estimates of potential cost savings contained in this Prospectus
are forward looking statements that are
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inherently uncertain. Actual cost savings, if any, could differ materially
from those projected. All of these forward looking statements are based on
estimates and assumptions made by management of the Company, which although
believed to be reasonable, are inherently uncertain and difficult to predict;
therefore, undue reliance should not be placed upon such estimates. There can
be no assurance that the savings anticipated in these forward looking
statements will be achieved. The following important factors, among others,
could cause the Company not to achieve the cost savings contemplated or
otherwise cause the Company's results of operations to be adversely affected in
future periods: (i) continued or increased competitive pressures from existing
competitors and new entrants, including price-cutting strategies; (ii)
unanticipated costs related to the Transactions and the integration strategy;
(iii) loss or retirement of key members of management or the termination of the
Management Services Agreement with Yucaipa; (iv) inability to negotiate more
favorable terms with suppliers, or to improve working capital management; (v)
increases in interest rates or the Company's cost of borrowing or a default
under any material debt agreement; (vi) inability to develop new stores in
advantageous locations or to successfully convert existing stores; (vii)
prolonged labor disruption; (viii) deterioration in general or regional
economic conditions; (ix) adverse state or federal legislation or regulation
that increases the costs of compliance, or adverse findings by a regulator with
respect to existing operations; (x) loss of customers as a result of the
conversion of store formats; (xi) adverse determinations in connection with
pending or future litigations or other material claims against the Company;
(xii) inability to achieve future sales levels or other operating results that
support the cost savings, and (xiii) the unavailability of funds for capital
expenditures. Many of such factors are beyond the control of the Company. In
addition, there can be no assurance that unforeseen costs and expenses or other
factors will not offset the projected cost savings in whole or in part.
COMPETITION
The supermarket industry is highly competitive and characterized by narrow
profit margins. The Company's competitors include national and regional
supermarket chains, independent and specialty grocers, drug and convenience
stores and the newer "alternative format" food stores, including
warehouse-style supermarkets, club stores, deep discount drug stores and
"supercenters." The Company's competitors continue to open new stores in the
Company's existing markets. In addition, new competitors have entered the
Company's markets in the past and could do so in the future. Supermarket
chains generally compete on the basis of price, location, quality of products,
service, product variety and store condition. The Company regularly monitors
its competitors' prices and adjusts its prices and marketing strategy as
management deems appropriate in light of existing conditions. Some of the
Company's competitors have greater financial resources than the Company and
could use those resources to implement strategies which could adversely affect
the Company's competitive position. The Company's ability to respond to
competitive pressures could be adversely affected by its highly leveraged
financial condition.
CONTROL OF THE COMPANY
The Company's Class A Common Stock and Series I Preferred Stock are each
entitled to ten votes per share and the Company's Class B Common Stock is
entitled to one vote per share. Members of the Smith Group (as defined below)
have beneficial ownership, in the aggregate, of approximately 23.4% of the
outstanding Common Stock and 32.7% of the outstanding Series I Preferred Stock
of the Company, representing approximately 43.0% of the aggregate voting power
of the Company's capital stock, and certain affiliates of Yucaipa have
beneficial ownership of approximately 14.7% of the total outstanding Common
Stock of the Company, representing approximately 1.4% of the aggregate voting
power of the Company's outstanding capital stock. Pursuant to a standstill
agreement (the "Standstill Agreement") entered into by certain Smith family
members (the "Smith Group"), certain affiliates of Yucaipa (the "Yucaipa
Group") and the Company, the Smith Group and the Yucaipa Group have the right
to each nominate two directors so long as each holds at least 8% of the
outstanding Common Stock and the right to nominate one director so long as each
holds at least 5% of the outstanding Common Stock. As a result of the
ownership structure of the Company and the contractual rights described above,
the voting and management control of the Company is
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highly concentrated. The Smith Group continues to have effective control of
the Company and will effectively be able to direct the actions of the Company
with respect to matters such as the payment of dividends, material acquisitions
and dispositions and other significant corporate transactions.
NEW SENIOR MANAGEMENT AND BOARD OF DIRECTORS
Pursuant to the Recapitalization, the Company's 12 person Board of
Directors was reduced to seven members, five of which are newly elected.
Jeffrey P. Smith remains as Chairman of the Board but resigned as Chief
Executive Officer of the Company. Ronald W. Burkle, the managing general
partner of Yucaipa, was appointed Chief Executive Officer of the Company and
Allen R. Rowland continues his recent appointment as President and Chief
Operating Officer. As a result, the Company's senior executive officers and a
majority of the members of the Board of Directors are new appointees. There
can be no assurance that the changes in the Company's Board of Directors or
senior management will not adversely affect the Company's operating
performance. Mr. Burkle provides his services as Chief Executive Officer
pursuant to the Management Services Agreement between the Company and Yucaipa;
however, such agreement does not require Mr. Burkle to spend any specified
amount of time on Company affairs. Yucaipa receives an annual fee of $1
million for providing the services of Mr. Burkle and the other partners and
employees of Yucaipa. The Management Services Agreement may be terminated by
the Company's Board of Directors on 90 days' notice or by either party upon the
occurrence of certain events. If the Company seeks to terminate the Management
Services Agreement, subject to limited exceptions, it is required to pay
Yucaipa a termination fee of between $5 million and $10 million, depending on
the time of termination. Yucaipa also received certain fees in connection with
the consummation of the Recapitalization.
CONTINGENT LIABILITIES RELATING TO CALIFORNIA DIVESTITURE
In connection with closing stores in California and otherwise redeploying
assets, the Company has assigned leases and subleased stores and other
facilities to third parties, including (i) a sublease to Ralphs Grocery
Company, an affiliate of Yucaipa, of the Company's Riverside, California
distribution center and dairy plant and (ii) the assignment or sublease of 10
stores to various supermarket companies (including nine to Ralphs) in
connection with the California Divestiture. Since the Company will generally
remain either primarily or secondarily liable for the underlying lease
obligations with respect to these stores and other facilities, the Company has
a contingent liability to the extent the Company's sublessees or assignees
default in the performance of their obligations under their respective sublease
or underlying lease.
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PRICE RANGE OF CLASS B COMMON STOCK
The Company's Class B Common Stock is listed on the New York Stock
Exchange under the symbol "SFD." The following table sets forth the high and
low closing sale prices for the Company's Class B Common Stock for the calendar
quarters indicated as reported by the New York Stock Exchange Composite Tape.
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YEAR HIGH LOW
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FISCAL 1994
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First Quarter . . . . . . . . . . . . . . . . . $ 24 1/8 $ 20 1/8
Second Quarter . . . . . . . . . . . . . . . . . 22 18 1/8
Third Quarter . . . . . . . . . . . . . . . . . 24 3/4 18 1/2
Fourth Quarter . . . . . . . . . . . . . . . . . 26 3/4 22 5/8
FISCAL 1995
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First Quarter . . . . . . . . . . . . . . . . . $ 27 5/8 $23
Second Quarter . . . . . . . . . . . . . . . . . 24 19 1/4
Third Quarter . . . . . . . . . . . . . . . . . 20 1/4 18 1/8
Fourth Quarter . . . . . . . . . . . . . . . . . 27 3/4 19 3/8
FISCAL 1996
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First Quarter . . . . . . . . . . . . . . . . . $31 $ 23 1/4
Second Quarter . . . . . . . . . . . . . . . . . 28 3/8 21 7/8
Third Quarter . . . . . . . . . . . . . . . . . 29 1/2 23 3/4
Fourth Quarter (through November 6) . . . . . . 28 1/2 25 3/4
</TABLE>
The last reported sale price of the Class B Common Stock on the New York
Stock Exchange Composite Tape as of a recent date is set forth on the cover
page of this Prospectus.
DIVIDEND POLICY
The Company currently intends to retain any future earnings for
reinvestment in the development of its business and does not anticipate paying
any cash dividends on its Common Stock in the foreseeable future. The payment
of dividends in the future will be dependent on various factors which the Board
of Directors will evaluate from time to time, principally including whether the
Company, after paying any proposed dividend, will have sufficient cash for its
operating needs, servicing debt and reserving an appropriate amount of funds
for the Company's expansion opportunities. There can be no assurance when or
whether the Board might decide to resume paying dividends on its Common Stock.
Such a decision would be dependent upon the Company's financial condition,
results of operations, capital requirements and such other factors as the
Company's Board of Directors deems relevant. The Company is severely
restricted by the terms of its New Credit Facility and Indenture from paying
cash dividends or other distributions.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Class B Common
Stock by the Selling Stockholders in the offering.
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UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
The following unaudited pro forma combined statements of operations of the
Company for the 52 weeks ended December 30, 1995 and the 26 weeks ended June
29, 1996 give effect to (a) the Transactions and the application of the
proceeds therefrom and (b) the California Disposition, in each case as if such
transactions occurred on January 1, 1995 with respect to the pro forma
operating and other data for the 52 weeks ended December 30, 1995 and as of
December 31, 1995 with respect to the pro forma operating and other data for
the 26 weeks ended June 29, 1996. Such pro forma information: (i) eliminates
the results of operations of the Company's California retail division for the
52 weeks ended December 30, 1995 and for the 26 weeks ended June 29, 1996 from
Smith's results of operations for such periods and (ii) combines the operating
results of Smith's for the 52 weeks ended December 30, 1995 and the operating
results of Smith's as of and for the 26 weeks ended June 29, 1996, in each case
pro forma for the elimination of the Company's California retail division, with
the operating results of Smitty's for the 52 weeks ended January 14, 1996 and
the operating results of Smitty's for the 24 weeks ended April 7, 1996,
respectively.
As indicated above, the Unaudited Pro Forma Combined Statements of
Operations give effect to the California Divestiture and the California Asset
Disposition. In connection with the California Divestiture, Smith's entered
into agreements to sell or lease 23 stores and related equipment and five
non-operating properties. These transactions generated net cash proceeds of
$99.8 million. The remaining stores in California have been closed. In
connection with the California Divestiture, the Company recorded a $140 million
(pre-tax) California divestiture charge (the "California Divestiture Charge")
for the year ended December 30, 1995. The California Divestiture Charge
reflected (i) a provision for anticipated future lease obligations, (ii) the
anticipated cost to the Company of closing its California stores and
distribution center (primarily termination payments and inventory), and (iii)
certain asset valuation adjustments. The asset valuation adjustments included
in the California Divestiture Charge reflected the reduction in net realizable
values for the equipment in all of the Company's California stores and
distribution center and for the land and buildings associated with those
properties being sold or leased. Pursuant to the California Asset Disposition,
the Company intends to accelerate the disposition of its non-operating stores
and excess land in California. As a result of the adoption of this strategy,
the Company recorded pre-tax restructuring charges of approximately $201.6
million (the "California Asset Disposition Charge") to reflect (i) the
difference between the anticipated cash proceeds from the accelerated
dispositions (based on appraisals obtained following the completion of the
Merger and Recapitalization) and the Company's existing book values for such
assets and (ii) other charges in connection with the Company's decision to
close the California region. INVESTORS ARE CAUTIONED THAT ALTHOUGH THE COMPANY
HAS ENTERED INTO AGREEMENTS TO DISPOSE OF AN ADDITIONAL TWO NONOPERATING STORES
AND TWO PARCELS OF EXCESS LAND IN CALIFORNIA, SUBJECT TO CERTAIN CONDITIONS,
FOR APPROXIMATELY $14.1 MILLION AND THE ASSUMPTION OF CERTAIN LEASE
LIABILITIES, IT HAS NOT ENTERED INTO ANY OTHER CONTRACTS TO SELL ASSETS IN
CONNECTION WITH THE CALIFORNIA ASSET DISPOSITION AND THAT THERE CAN BE NO
ASSURANCE AS TO THE TIMING OR THE AMOUNT OF NET PROCEEDS, IF ANY, WHICH THE
COMPANY WILL ACTUALLY RECEIVE FROM SUCH DISPOSITIONS.
The pro forma adjustments to give effect to the California Disposition and
the Transactions are based upon currently available information and upon
certain assumptions that management believes are reasonable. The statement of
results of operations used to derive the adjustments to eliminate the
California results of operations differs from a complete statement in that
allocations for interest expense and certain services provided by the Company,
including, but not limited to, portions of legal assistance, employee benefits
administration, treasury, accounting, auditing, tax functions and real estate,
have not been made. The Merger was accounted for by the Company as a purchase
of Smitty's by Smith's and Smitty's assets and liabilities were recorded at
their estimated fair market values at the date of the Merger. The adjustments
included in the Unaudited Pro Forma Combined Statements of Operations represent
the Company's preliminary determination of these adjustments based upon
available information. There can be no assurance that the actual adjustments
will not differ significantly from the pro forma adjustments reflected in the
pro forma
8
<PAGE> 12
financial information. The Unaudited Pro Forma Combined Statements of
Operations are not necessarily indicative of either future results of
operations or results that might have been achieved if the foregoing
transactions had been consummated as of the indicated dates. The Unaudited Pro
Forma Combined Statements of Operations should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical consolidated financial statements of Smith's and
Smitty's, together with the related notes thereto, incorporated by reference
herein.
The Unaudited Pro Forma Combined Statements of Operations do not reflect
(i) any of the net annual cost savings which management believes are achievable
by the end of the third full year of operations following the Merger, (ii)
expenses of $12.3 million incurred in connection with the purchase of certain
management stock options as part of the Recapitalization, (iii) the anticipated
costs to be incurred in connection with the integration of operations in
Arizona following the Merger, (iv) a $3.1 million severance payment to the
Company's Chairman and former Chief Executive Officer or (v) an extraordinary
charge of $41.8 million ($69.6 million charge net of a $27.8 income tax
benefit) incurred in conjunction with the extinguishment of debt. The
Unaudited Pro Forma Combined Statements of Operations included herein also do
not reflect the California Divestiture Charge or the California Asset
Disposition Charge.
9
<PAGE> 13
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
52 WEEKS ENDED
------------------------------------------------------------
JANUARY 14,
DECEMBER 30, 1995 1996 PRO FORMA
------------------------------------------------------------ COMBINED FOR
SMITH'S ADJUSTMENTS PRO FORMA SMITTY'S ADJUSTMENTS CALIFORNIA
HISTORICAL CALIFORNIA FOR CALIFORNIA (HISTORICAL) FOR DISPOSITION
AUDITED DISPOSITION(A) DISPOSITION (UNAUDITED) TRANSACTIONS AND TRANSACTIONS
---------- -------------- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Net sales . . . . . . . . $ 3,083.7 $ (674.6) $ 2,409.1 $ 584.3 $ $ 2,993.4
Cost of goods sold . . . 2,386.7 (516.2) 1,870.5 419.6 2,290.1
----------- ---------- ------------ ---------- -------- ----------
697.0 (158.4) 538.6 164.7 703.3
Expenses:
Operating, selling and
administrative . . . 461.4 (145.6) 315.8 136.0 .4(b) 452.2
Depreciation and
amortization . . . . 105.0 (27.0) 78.0 12.3 1.8(c)
1.7(d) 93.8
Restructuring charges . 140.0 (140.0)
Interest . . . . . . . 60.0 60.0 18.4 64.7(e) 143.1
Amortization of debt
issuance costs . . . .4 .4 1.0 7.9(e) 9.3
----------- ---------- ------------ ---------- -------- ----------
Income (loss) before
income taxes . . . . . (69.8) 154.2 84.4 (3.0) (76.5) 4.9
Income tax expense
(benefit) . . . . . . . (29.3) 63.2 33.9 (0.7) (29.5)(f) 3.7
----------- ---------- ------------ ---------- -------- ----------
Net income (loss)(i) . . $ (40.5) $ 91.0 $ 50.5 $ (2.3) $ (47.0) $ 1.2
=========== ========== ============ ========== ======== ==========
Net income (loss) per
common share(i)(j) . . $ (1.62) $ 2.00 $ (2.30) $ .08
=========== =========== ========== =========
Weighted average common
shares outstanding . . 25,031,000 25,284,000 1,001,000 15,730,000
=========== =========== ========== ==========
Ratio of earnings to
fixed charges(k)(l) . . . -- 2.27x 1.03x
</TABLE>
See Notes to Unaudited Pro Forma Combined Statement of Operations.
10
<PAGE> 14
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
24 WEEKS
ENDED
29 WEEKS ENDED APRIL 7,
JUNE 29, 1996 1996 PRO FORMA
------------------------------------------------------------ COMBINED FOR
SMITH'S ADJUSTMENTS FOR PRO FORMA SMITTY'S ADJUSTMENTS CALIFORNIA
HISTORICAL CALIFORNIA FOR CALIFORNIA (HISTORICAL) FOR DISPOSITION
AUDITED DISPOSITION(A) DISPOSITION (UNAUDITED) TRANSACTIONS AND TRANSACTIONS
---------- -------------- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Net sales . . . . . . . . $ 1,383.2 $ (73.1) $1,310.1 $ 289.3 $ $ 1,599.4
Cost of goods sold . . . 1079.9 (62.9) 1,017.0 207.5 1,224.5
----------- -------- -------- ---------- ------ ----------
303.3 (10.2) 293.1 81.8 374.9
Expenses:
Operating, selling and
administrative . . . 241.7 (37.4) 204.3 64.7 .2 (b)
(17.7)(g) 251.5
Depreciation and
amortization . . . . 44.1 (2.3) 41.8 6.2 .9 (c)
.9 (d) 49.8
Restructuring charges . 201.6 (201.6)
Interest . . . . . . . 37.1 37.1 7.9 25.7 (e) 70.7
Amortization of debt
issuance costs . . . .9 .9 0.4 3.3 (e) 4.6
----------- -------- -------- ---------- ------ ----------
Income (loss) before
income taxes and
extraordinary charge . (222.1) 231.1 9.0 2.6 (13.3) (1.7)
Income tax expense
(benefit) . . . . . . . (88.0) 91.7 3.7 (4.8)(f) (1.1)
----------- -------- -------- ---------- ------ ----------
Income (loss) before
extraordinary charge(i) (134.1) $ 139.4 $ 5.3 $ 2.6 $ (8.5) $ (0.6)
Extraordinary charge,
net of tax benefit . . 41.8 41.8 (41.8)(h)
----------- -------- -------- ---------- ------ ----------
Net income (loss)(i) . . $ (175.9) $ 139.4 $ (36.5) $ 2.6 $ 33.3 $ (0.6)
=========== ======== ======== ========== ====== ==========
Income (loss) per common
share:
Income (loss) before
extraordinary
charges(i)(j) . . . $ (5.78) $ 0.22 $ 2.60 $ (0.04)
Extraordinary charge . (1.80) (1.77) -- --
----------- -------- ---------- ----------
Net income (loss)(i)(j) $ (7.58) $ (1.55) $ 2.60 $ (0.04)
=========== ======== ========== ==========
Weighted average
common shares
outstanding . . . . . . 23,184,000 23,596,000 1,009,000 15,777,000
=========== ========== ========= ==========
Ratio of earnings to
fixed charges(k)(l) . . -- 1.22x --
</TABLE>
See Notes to Unaudited Pro Forma Combined Statement of Operations.
11
<PAGE> 15
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(a) Reflects the elimination of the 1995 and the 26 weeks ended June 29, 1996
operating results for the California stores, excess real estate and
distribution center which were sold, leased or closed, and the reversal of
the restructuring charges recorded, in connection with the California
Divestiture and California Asset Disposition (collectively the "California
Disposition").
(b) Represents fees payable to Yucaipa pursuant to the Management Services
Agreement ($1.0 million for the 52 weeks ended December 30, 1995 and $.5
million for the 26 weeks ended June 29, 1996) and the elimination of the
historical Yucaipa management fees ($.6 million for the 52 weeks ended
December 30, 1995 and $.3 million for the 26 weeks ended June 29, 1996)
paid by Smitty's.
(c) Represents an increase in depreciation expense associated with the $5.4
million write-up of Smitty's property and equipment to adjust net book
value to estimated fair market value.
(d) Reflects the amortization of excess costs over net assets acquired in the
Merger ($2.8 million for the 52 weeks ended December 30, 1995 and $1.4
million for the 26 weeks ended June 29, 1996) and the elimination of
Smitty's historical amortization ($1.1 million for the 52 weeks ended
December 30, 1995 and $.5 million for the 26 weeks ended June 29, 1996).
Amortization has been allocated on the straight line basis over a period of
40 years.
(e) The following table presents a reconciliation of pro forma interest expense
and amortization of debt issuance costs:
<TABLE>
<CAPTION>
52 WEEKS 26 WEEKS
ENDED ENDED
DECEMBER 30, 1995 JUNE 29, 1996
------------------ --------------
(dollars in millions)
<S> <C> <C>
Interest expense:
Smitty's . . . . . . . . . . . . . . . . . . . . $ 18.4 $ 7.9
Pro forma Smith's . . . . . . . . . . . . . . . . 60.0 37.1
------- --------
78.4 45.0
------- --------
Plus: Interest on:
New Term Loans . . . . . . . . . . . . . . . . 71.5 35.4
Bank fees . . . . . . . . . . . . . . . . . . . 0.3 0.3
Notes . . . . . . . . . . . . . . . . . . . . . 64.7 32.3
Less: Interest on:
Old bank term loans:
Pro forma Smith's . . . . . . . . . . . . . . (59.5) (21.6)
Smitty's . . . . . . . . . . . . . . . . . . (3.1) (1.9)
Bank fees . . . . . . . . . . . . . . . . . . . (0.4) (0.1)
Smitty's Notes . . . . . . . . . . . . . . . . (6.5) (3.0)
Accretion of Smitty's Debentures . . . . . . . (2.3) (1.1)
Interest on new debt since Recapitalization
and Merger . . . . . . . . . . . . . . . . . - (14.6)
------- --------
Pro forma adjustment . . . . . . . . . . . . . . 64.7 25.7
------- --------
Pro forma interest expense . . . . . . . . . . . . $ 143.1 $ 70.7
======= ========
Historical amortization of debt issuance costs . . $ 1.4 $ 1.3
Plus:
Financing fees . . . . . . . . . . . . . . . . 9.3 3.7
Less:
Historical financing costs: . . . . . . . . . . (1.4) (.4)
------- --------
Pro forma adjustment . . . . . . . . . . . . . . 7.9 3.3
------- --------
Pro forma amortization of debt issuance costs . . . $ 9.3 $ 4.6
======= ========
</TABLE>
(f) The pro forma adjustment to income tax benefit is based upon an assumed
blended rate of 39% applied to the pro forma net loss adjusted for
permanent differences between book and tax income. The tax benefits
recognized in the Unaudited Pro Forma Combined Statements of Operations are
more likely than not to be realized due to the expected future reversal of
taxable temporary differences and the existence of taxable income in each
of the prior three carryback years available.
(g) Reflects the elimination of (i) expenses of $12.3 million incurred in
connection with the purchase of certain management stock options as part of
the Recapitalization, (ii) expenses of $2.3 million related to the
integration of Smitty's into the Company's operations and (iii) a severance
payment to the Company's Chairman and former Chief Executive Officer of
$3.1 million.
(h) Reflects the elimination of the extraordinary charge of $69.6 million for
costs incurred in connection with the extinguishment of debt, net of a
$27.8 million income tax benefit.
12
<PAGE> 16
(i) The Unaudited Pro Forma Statements of Operations for the 52 weeks ended
December 30, 1995 and 26 weeks ended June 29, 1996 do not reflect (i) the
California Divestiture Charge of $140.0 million, (ii) the California Asset
Disposition Charge of $201.6 million, (iii) expenses of $12.3 million
incurred in connection with the purchase of certain management stock
options as part of the Recapitalization, (iv) expenses of $2.3 million
related to the integration of Smitty's into the Company's operations, (v) a
severance payment to the Company's Chairman and former Chief Executive
Officer of $3.1 million, and (vi) the extraordinary charge of $69.6 million
for costs incurred in connection with the extinguishment of debt, net of a
$27.8 million income tax benefit.
(j) Net income (loss) per common share has been computed using the weighted
average number of shares of Smith's Common Stock outstanding after giving
effect to the issuance of 3,038,877 shares of Class B Common Stock of the
Company to the stockholders of Smitty's as consideration in the Merger and
the purchase of 50% of the outstanding Smith's Common Stock (excluding
shares issuable in the Merger) in the Tender Offer. Common stock
equivalents in the form of stock options do not have an impact on the
weighted average number of common shares, with the exception of the
weighted average common shares outstanding for the 26 weeks ended June 29,
1996 after giving effect to the California Disposition.
(k) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of income (loss) before income taxes and fixed charges.
"Fixed charges" consist of interest on all indebtedness, amortization of
deferred financing costs, and one-third of rental expense (the portion of
annual rental expense deemed by the Company to be representative of the
interest factor). For the 52 weeks ended December 30, 1995 (historical),
the Company's earnings were inadequate to cover fixed charges by $69.8
million. For the 26 weeks ended June 29, 1996 (historical), the Company's
earnings were inadequate to cover fixed charges by $222.1 million. See
"Selected Historical Financial Data of Smith's" and the notes thereto.
13
<PAGE> 17
SELECTED HISTORICAL FINANCIAL DATA OF SMITH'S
The following table sets forth selected historical financial data of Smith's
for the five fiscal years ended December 30, 1995 which have been derived from
the financial statements of Smith's audited by Ernst & Young LLP, independent
auditors. The selected historical financial data of Smith's for the 26 weeks
ended July 1, 1995 and June 29, 1996 have been derived from unaudited interim
financial statements of Smith's which, in the opinion of management, reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of such data. The following information should be read in
conjunction with the Unaudited Pro Forma Combined Statements of Operations,
included herein, and the historical consolidated financial statements of Smith's
and related notes thereto, incorporated by reference herein.
<TABLE>
<CAPTION>
52 WEEKS 53 WEEKS 52 WEEKS 52 WEEKS 52 WEEKS 26 WEEKS 26 WEEKS
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 28, JANUARY 2, JANUARY 1, DECEMBER 31, DECEMBER 30, JULY 1, JUNE 29,
1991 1993 1994 1994 1995 1995 1996
------------ ---------- ---------- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA: (DOLLARS IN MILLIONS)
Net sales . . . . . . . . . . $2,217.4 $2,649.9 $2,807.2 $2,981.4 $3,083.7 $1,517.1 $1,383.2
Gross profit . . . . . . . . 498.6 611.6 637.2 669.1 697.0 340.8 303.3
Operating, selling and
administrative expenses . . 344.4 419.7 430.3 440.8 461.4 229.5 241.7
Depreciation and amortization 50.5 67.8 82.2 94.5 105.0 50.4 44.1
Interest expense . . . . . . 30.3 36.1 44.6 53.7 60.5 30.1 37.1
Restructuring charges(a) . . -- -- -- -- 140.0 -- 201.6
Net income (loss) . . . . . . $ 45.1 $ 53.7 $ 45.8 $ 48.8 $ (40.5) $ 18.5 $ (175.9)
Ratio of earnings to fixed
charges(b) . . . . . . . . 3.02x 3.06x 2.55x 2.18x -- 1.8x --
BALANCE SHEET DATA (END OF
PERIOD):
Working capital . . . . . . . $ 30.7 $ 91.2 $ 160.4 $ 62.3 $ 162.7 $ 75.8 $ 188.3
Total assets . . . . . . . . 1,196.7 1,486.1 1,654.3 1,653.5 1,686.2 1,657.4 1,854.3
Total debt(c) . . . . . . . . 395.4 612.7 725.5 718.9 746.2 729.6 1,427.6
Redeemable preferred stock . 8.5 7.5 6.5 5.4 4.3 5.0 3.3
Common stockholders' equity . $ 474.4 $ 515.4 $ 542.2 $ 475.3 $ 416.7 $ 481.9 $ (139.8)
OTHER DATA:
Stores open at end of period 109 119 129 137 154 145 147
Capital expenditures . . . . $ 281.6 $ 288.0 $ 322.3 $ 146.7 $ 149.0 $ 65.7 $ 65.0
Cash provided by (used in)
operating activities . . . 61.9 84.6 118.6 203.6 140.6 58.9 (33.9)
Cash used in investing
activities . . . . . . . . (277.4) (286.6) (164.4) (127.4) (146.3) (63.1) (30.3)
Cash provided by (used in)
financing activities . . . $ 212.8 $ 203.1 $ 92.3 $ (123.9) $ 7.5 $ 3.4 $ 93.5
</TABLE>
(a) Reflects charges in connection with the California Disposition.
(b) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of income (loss) before income taxes and fixed charges.
"Fixed charges" consist of interest on all indebtedness, amortization of
deferred financing costs, and one-third of rental expense (the portion of
annual rental expense deemed by the Company to be representative of the
interest factor). For the 52 weeks ended December 30, 1995, the Company's
earnings were inadequate to cover fixed charges by $69.8 million. However,
such earnings include non-cash charges of $105.4 million, primarily
consisting of depreciation and amortization, and restructuring charges of
$140.0 million. For the 26 weeks ended June 29, 1996, the Company's
earnings were inadequate to cover fixed charges by $222.1 million.
However, such earnings include non-cash charges of $45.0 million, primarily
consisting of depreciation and amortization, and restructuring charges of
$201.6 million.
(c) Total debt includes long-term debt, current maturities of long-term debt
and obligations under capital leases.
14
<PAGE> 18
SELLING STOCKHOLDERS
An aggregate of 3,226,830 of the shares of Class B Common Stock may be
offered by the Selling Stockholders from time-to-time. The following table sets
forth, as of November 6, 1996, the name of each Selling Stockholder, and for
each, the number of shares of Class B Common Stock owned beneficially at the
commencement of this offering, the maximum number of shares which may be offered
for sale and, unless otherwise indicated, the number of shares to be owned
beneficially after the offering (assuming all shares available for offer have
been sold). Each share of Class B Common Stock is entitled to one vote per
share on all matters to be voted upon by stockholders of the Company.
<TABLE>
<CAPTION>
CLASS B COMMON STOCK
NUMBER OF SHARES OF BENEFICIALLY OWNED
CLASS B COMMON STOCK NUMBER OF SHARES AFTER THE OFFERING
BENEFICIALLY OWNED OF CLASS B COMMON --------------------------
NAME BEFORE THE OFFERING(a) STOCK OFFERED NUMBER OF SHARES PERCENT
------------------------------------- ------------------- ----------------- ---------------- -------
<S> <C> <C> <C> <C>
Yucaipa Smitty's Partners, L.P.(b) 300,667 300,667 300,667(c) 2.8%
Yucaipa Smitty's Partners II, L.P.(b) 136,793 136,793 136,793(c) 1.3
Yucaipa Arizona Partners, L.P.(b) 547,130 547,130 547,130(c) 5.1
Yucaipa SSV Partners L.P.(b) 1,140,816 1,140,816 1,140,816(c) 10.7
The Yucaipa Companies(b) 200,000 200,000 200,000(c) 1.9
Arbco Group Associates, L.P.(d) 7,786 7,786 -- *
Bahrain International Bank (E.C.) 50,206 50,206 -- *
BT Securities Corporation(e) 530,198 7,529 522,669 5.0
Crescent Mach I, L.P. 9,035 9,035 -- *
CS First Boston Corporation(f) 155,924 155,924 -- *
CS First Boston Fund Investments
1994, L.P.(f) 476,738 476,738 -- *
Franklin Age High Income Fund 45,177 45,177 -- *
Kayne Anderson Non-traditional
Investing, L.P.(d) 7,786 7,786 -- *
New England High Income Fund 752 752 -- *
Prestwick Capital Partners, L.P. 4,862 4,862 -- *
Prospect Street High Income
Portfolio, Inc. 1,505 1,505 -- *
Prudential High Yield Fund, Inc.(g) 13,553 13,553 -- *
State Street Research and Management
Company 752 752 -- *
State Street Research High Income Fund 9,788 9,788 -- *
SunAmerica Income Funds - SunAmerica
High Income Fund(h) 1,505 1,505 -- *
SunAmerica Series Trust -
High-Yield Bond Portfolio(h) 1,505 1,505 -- *
Transamerica Life Companies 55,534 55,534 -- *
Turnberry Capital Partners, L.P. 34,832 34,832 -- *
Turnberry Offshore Capital
Partners, L.P. 2,119 2,119 -- *
United Congregation Mesorah
Corporation 14,536 14,536 -- *
</TABLE>
* Less than one percent.
(a) Except as otherwise indicated, each beneficial owner has the sole power to
vote, as applicable, and to dispose of all shares of Class B Common Stock
owned by such beneficial owner.
(b) Yucaipa is the general partner of Yucaipa Smitty's Partners, L.P., Yucaipa
Smitty's Partners II, L.P., Yucaipa Arizona, L.P. and Yucaipa SSV Partners,
L.P. Ronald W. Burkle is the Chief Executive Officer and a director of the
Company, the controlling general partner of Yucaipa and a limited partner
in Yucaipa Arizona Partners, L.P. and Yucaipa SSV Partners, L.P. Linda
McLoughlin Figel is a director of the Company, a general partner of Yucaipa
and a limited partner in Yucaipa SSV Partners, L.P. Share amounts and
percentages for Yucaipa do not include shares issuable upon exercise of the
Yucaipa Warrants issued to Yucaipa at the time of the Merger, which
entitles Yucaipa to purchase 1,842,505 shares of non-voting Class C Common
Stock, par value $.01 per share ("Class C Common Stock"), at an initial
exercise price of $50.00 per share, subject to certain adjustments as set
forth in the Warrant Agreement between the Company and Yucaipa. Such
shares of Class C Common Stock will be convertible into an equal number of
shares of Class B Common Stock following the transfer of such shares by
Yucaipa to any person or entity not affiliated with Yucaipa.
(c) Yucaipa and its affiliated partnerships have included shares in this
Prospectus pursuant to the terms of a registration rights agreement with
the Company. Yucaipa has advised the Company that it does not currently
intend to sell its shares of Class B Common Stock but that, it may, from
time-to-time, pledge such shares in the ordinary course of business.
(d) KAIM Non-traditional, L.P., is the investment advisor to Arbco Group
Associates, L.P., and Kayne Anderson Non-traditional Investing, L.P., and
as such has sole voting power with respect to the 15,572 shares of Class B
Common Stock.
(e) BT Securities Corporation and its affiliates have from time to time
provided financial advisory, investment banking or banking services to the
Company and its affiliates. In addition, affiliates of BT Securities
Corporation are administrative agent, co-arranger and lenders under the
New Credit Facility.
(f) CS First Boston Corporation ("CSFB") has from time to time provided
financial advisory and/or financial intermediary services to the Company
and its affiliates. CS First Boston Fund Investments 1994, L.P. is an
affiliate of CSFB. CSFB has sole voting power with respect to 618,895
shares of Class B Common Stock held by it and CS First Boston Fund
Investments 1994, LP and shares voting power with an affiliate, CS
Holding, with respect to 13,767 shares of Class B Common Stock.
15
<PAGE> 19
(g) The Prudential Investment Corporation ("Prudential") is the investment
adviser to the Prudential High Yield Income Fund, Inc. ("Prudential High
Yield") and as such has sole voting power with respect to the 13,553
shares of Class B Common Stock. Prudential disclaims beneficial ownership
of the shares held by Prudential High Yield.
(h) SunAmerica Asset Management Corp. is the investment advisor to the
SunAmerica Income Funds - SunAmerica High Income Funds and the SunAmerica
Series Trust - High-Yield Bond Portfolio and as such has sole voting power
with respect to the 3,010 shares of Class B Common Stock.
16
<PAGE> 20
PLAN OF DISTRIBUTION
Any distribution of the shares covered by this Prospectus may be effected
from time to time in one or more transactions (which may involve block
transactions) on the New York Stock Exchange, in negotiated transactions or a
combination of such methods of sale, at fixed prices, at market prices
prevailing at the time of sale, at prices related to the prevailing market
prices or at negotiated prices. The Selling Stockholders will effect any such
transactions with or through one or more broker-dealers which may act as agent
or principal. Any such broker-dealer may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling
Stockholders and/or the purchaser of the shares for whom it may act as agent or
to whom they may sell as principals or both. With respect to any shares sold
by a Selling Stockholder, the Selling Stockholder and/or any broker-dealer
affecting the sales may be deemed to be an "underwriter" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by the
broker-dealer and any profit on the resale of shares as principal may be deemed
to be underwriting discounts or commissions under the Securities Act.
Additionally, the Selling Stockholders may pledge or make gifts of their shares
and the shares may also be sold by the pledgee or transferees. As contemplated
by the registration rights agreement executed concurrently with the
consummation of the Merger, the Company shall (i) pay substantially all of the
expenses incurred by the Selling Stockholders and the Company incident to the
sale of the shares, but excluding any underwriting discounts, commissions or
transfer taxes, (ii) provide customary indemnification to each Selling
Stockholder and (iii) keep the Registration Statement continuously effective
for at least two years from the date of the consummation of the Merger.
In order to comply with the securities laws of certain states, if
applicable, the Class B Common Stock may be sold in such jurisdiction only
through registered or licensed brokers or dealers. In addition, in certain
states the Class B Common Stock may not be sold unless it has been registered
or qualified for sale or an exemption from registration or qualification
requirements is available and is complied with.
LEGAL MATTERS
The validity of the shares of Class B Common Stock offered hereby will be
passed upon for the Company by Latham & Watkins, Los Angeles, California.
EXPERTS
The consolidated financial statements of Smith's Food & Drug Centers, Inc.
at December 30, 1995 and December 31, 1994 and for each of three years in the
period ended December 30, 1995 incorporated by reference in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
17
<PAGE> 21
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SHARES OF CLASS B COMMON STOCK
OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES OF CLASS B
COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
_________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information . . . . . . . . . . . . 1
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . . . . 1
The Company . . . . . . . . . . . . . . . . . 2
Risk Factors . . . . . . . . . . . . . . . . 4
Price Range of Class B Common Stock . . . . . 7
Dividend Policy . . . . . . . . . . . . . . . 7
Use of Proceeds . . . . . . . . . . . . . . . 7
Unaudited Pro Forma Combined Statements of
Operations . . . . . . . . . . . . . . 8
Selected Historical Financial Data of Smith's 14
Selling Stockholders . . . . . . . . . . . . 15
Plan of Distribution . . . . . . . . . . . . 17
Legal Matters . . . . . . . . . . . . . . . . 17
Experts . . . . . . . . . . . . . . . . . . . 17
</TABLE>
----------
PROSPECTUS
----------
3,226,830 SHARES
SMITH'S FOOD & DRUG
CENTERS, INC.
CLASS B COMMON STOCK
November , 1996
<PAGE> 22
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the shares of Class B Common Stock.
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,255
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . . . . . . --
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . 30,000
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
Printing and engraving expenses . . . . . . . . . . . . . . . . . . . . . 20,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,500
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $130,755
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Smith's is a Delaware corporation and its Certificate of Incorporation and
Bylaws provide for indemnification of its officers and directors to the fullest
extent permitted by law. Pursuant to Section 102(b)(7) of the Delaware General
Corporation Law (the "DGCL") the Certificate of Incorporation of Smith's
eliminates the personal liability of its directors to Smith's or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liabilities related to breach of duty of loyalty, actions not in
good faith, and certain other liabilities.
Section 145 of the DGCL permits the indemnification by a Delaware
corporation of its directors, officers, employees and agents in connection with
actions, suits or proceedings brought against them by a third party or in the
right of the corporation, by reason of the fact that they were or are such
directors, officers, employees or agents, against liabilities and expenses
incurred in any such action, suit or proceeding.
The directors and officers of Smith's are insured against certain
liabilities under directors' and officers' liability insurance.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
A list of exhibits filed with this Registration Statement on Form S-3
is set forth in the Index to Exhibits on page E-1, and is incorporated
herein by reference.
(b) Financial Statement Schedules
Not Applicable.
II-1
<PAGE> 23
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions, or otherwise, the
registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrants of expenses incurred or paid by a director, officer or controlling
person of the registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless
in the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by them is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
II-2
<PAGE> 24
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(d) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Salt Lake City, State of Utah, on
November 8, 1996.
SMITH'S FOOD & DRUG CENTERS, INC.
By /s/ ALLEN R. ROWLAND
-------------------------------------
Allen R. Rowland
PRESIDENT AND CHIEF OPERATING OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
* Chairman of the Board November 8, 1996
- ------------------------------------------------
Jeffrey P. Smith
* Chief Executive Officer November 8, 1996
- ------------------------------------------------
Ronald W. Burkle
ALLEN R. ROWLAND President and Chief November 8, 1996
- ------------------------------------------------ Operating Officer
Allen R. Rowland
</TABLE>
II-4
<PAGE> 26
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
* Senior Vice President and November 8, 1996
- ------------------------------------------------ Chief Financial Officer
Matthew G. Tezak (Principal Financial and
Accounting Officer)
* Director November 8, 1996
- ------------------------------------------------
Fred L. Smith
* Director November 8, 1996
- ------------------------------------------------
Linda McLoughlin Figel
* Director November 8, 1996
- ------------------------------------------------
Bruce Karatz
* Director November 8, 1996
- ------------------------------------------------
Bertram R. Zweig
*By: ALLEN R. ROWLAND
--------------------------------------------
Allen R. Rowland
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 27
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
1.1 Form of Underwriting Agreement (to be incorporated by
reference at the time of an offering).
2.1 Recapitalization Agreement and Plan of Merger dated as
of January 29, 1996 by and among the Company, Cactus
Acquisition, Inc., Smitty's Supermarkets, Inc. and The
Yucaipa Companies (incorporated by reference to Exhibit
2.1 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995).
+3.1 Amended and Restated Certificate of Incorporation.
+3.2 Amended and Restated Bylaws.
+4.1 Indenture dated as of May 23, 1996 by and between
the Company and Fleet National Bank of Connecticut,
as Trustee, with respect to the Notes.
5.1 Opinion of Latham & Watkins regarding the legality
of the Class B Common Stock, including consent.
+10.1 Registration Rights Agreement by and among the Company
and the holders of the Company's Common Stock named
therein.
+10.2 Management Services Agreement by and between the
Company and The Yucaipa Companies.
+10.3 Warrant Agreement by and between the Company and The
Yucaipa Companies.
10.4 Credit Agreement dated as of May 23, 1996 by and among the
Company, Bankers Trust Company and The Chase Manhattan Bank, as
Arrangers, the lenders named therein and Bankers Trust Company,
as Administrative Agent.
23.1 Consent of Latham & Watkins (included in the opinion
filed as Exhibit 5.1 to the Registration Statement).
23.2 Consent of Ernst & Young LLP, independent auditors.
24.1 Power of Attorney (included on signature page to the
Registration Statement).
+27.1 Financial Data Schedule.
</TABLE>
- ---------------------------
+ Previously filed
Index to Exhibits
-1-
<PAGE> 1
Exhibit 5.1
[LATHAM & WATKINS LETTERHEAD]
November 8, 1996
Smith's Food & Drug Centers, Inc.
1550 South Redwood Road
Salt Lake City, UT 84104
Re: Smith's Food & Drug Centers, Inc.
Registration Statement on Form S-3
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-3
filed with the Securities and Exchange Commission on October 28, 1996 (as
amended or supplemented, the "Registration Statement") by Smith's Food & Drug
Centers, Inc., a Delaware corporation (the "Company"), with respect to the
offer and sale of up to 3,226,830 shares of its Class B Common Stock, par value
$.01 per share (the "Class B Common Stock"), by certain selling stockholders
from time to time, as set forth in the prospectus contained in the Registration
Statement (the "Prospectus") and as to be set forth in one or more supplements
to the Prospectus (each a "Prospectus Supplement"), you have requested our
opinion with respect to the matters set forth below. Capitalized terms used
herein without definition have the meanings given to them in the Registration
Statement.
In our capacity as counsel to you in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization, issuance and sale of
the Class B Common Stock, and for purposes of this opinion, have assumed such
proceedings will be timely completed in the manner presently proposed. In
addition, we have made such legal and factual examinations and inquiries,
including an examination of originals or copies certified or otherwise
identified to our
<PAGE> 2
Smith's Food & Drug Centers, Inc.
November 8, 1996
Page 2
satisfaction of such documents, corporate records and instruments, as we have
determined necessary or appropriate for purposes of rendering this opinion.
In our examination, we have assumed the genuineness of all
signatures, the legal capacity of all persons executing documents, the
authenticity of all documents submitted to us as originals and the conformity
to authentic original documents of all documents submitted to us as copies.
We are opining herein as to the effect on the subject
transaction only of the federal laws of the United States, the internal laws of
the State of New York and the General Corporation Law of the State of Delaware,
and we express no opinion with respect to the applicability thereto, or the
effect thereon, of the laws of any other jurisdiction or, in the case of the
United States or Delaware, any other laws, or as to any matters of municipal
law or the laws of any local agencies within any state. The opinions contained
herein are as of the date hereof.
Based upon the foregoing, and in reliance thereon, we are of
the opinion that, as of the date hereof, the shares of Class B Common Stock are
validly issued, fully paid and non-assessable.
We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus included therein.
Very truly yours,
LATHAM & WATKINS
<PAGE> 1
EXHIBIT 10.4
EXECUTION COPY
================================================================================
$995,000,000
CREDIT AGREEMENT
DATED AS OF MAY 23, 1996
AMONG
SMITH'S FOOD & DRUG CENTERS, INC.,
AS BORROWER,
THE LENDERS LISTED HEREIN,
AS LENDERS,
BANKERS TRUST COMPANY
AND
THE CHASE MANHATTAN BANK, N.A.,
AS ARRANGERS,
CHASE SECURITIES INC.,
AS SYNDICATION AGENT,
AND
BANKERS TRUST COMPANY,
AS ADMINISTRATIVE AGENT
================================================================================
<PAGE> 2
SMITH'S FOOD & DRUG CENTERS, INC.
CREDIT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement . . . . . . . . . . . . 46
1.3 Other Definitional Provisions and Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2.1 Commitments; Making of Loans; the Register; Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2.2 Interest on the Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments; General Provisions Regarding
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
2.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
2.6 Special Provisions Governing Eurodollar Rate Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
2.7 Increased Costs; Taxes; Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
2.8 Obligation of Lenders and Issuing Lenders to Mitigate . . . . . . . . . . . . . . . . . . . . . . . . . . 84
2.9 Replacement of Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 3. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
3.1 Issuance of Letters of Credit and Revolving Lenders' Purchase of Participations Therein . . . . . . . . . 85
3.2 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit. . . . . . . . . . . . . . . . . . . . 90
3.4 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
3.5 Indemnification; Nature of Issuing Lenders' Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
3.6 Increased Costs and Taxes Relating to Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
4.1 Conditions to Term Loans and Initial Revolving Loans and Swing Line Loans . . . . . . . . . . . . . . . . 97
4.2 Conditions to All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
4.3 Conditions to Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries . . . . . . . . . . . . . . 110
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
5.2 Authorization of Borrowing, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
5.3 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
5.4 No Material Adverse Change; No Restricted Junior Payments . . . . . . . . . . . . . . . . . . . . . . . . 114
5.5 Title to Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
5.6 Litigation; Adverse Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
5.7 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
5.8 Performance of Agreements; Materially Adverse Agreements; Material Contracts . . . . . . . . . . . . . . . 115
5.9 Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
5.10 Securities Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
5.11 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
5.12 Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
5.13 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
5.14 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
5.15 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
5.16 Matters Relating to Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
5.17 Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
5.18 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
5.19 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
5.20 Real Property Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
6.1 Financial Statements and Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
6.2 Corporate Existence, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
6.3 Payment of Taxes and Claims; Tax Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
6.4 Maintenance of Properties; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
6.5 Inspection; Lender Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
6.6 Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
6.7 Environmental Disclosure and Inspection; Remedial Action Regarding Hazardous Materials . . . . . . . . . . 130
6.8 Execution of Subsidiary Guaranty and Personal Property Collateral Documents by Future Subsidiaries . . . . 132
6.9 Additional Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
6.10 Interest Rate Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
SECTION 7. COMPANY'S NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
7.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
7.2 Liens and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
7.3 Investments; Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
7.4 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
7.5 Restricted Junior Payments; Other Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 148
7.6 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
</TABLE>
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7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions . . . . . . . . . . . . . . . . . . . . . 154
7.8 Consolidated Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
7.9 Restriction on Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
7.10 Sales and Lease-Backs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
7.11 Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
7.12 Transactions with Shareholders and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
7.13 Disposal of Subsidiary Stock; Restrictions on Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 160
7.14 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
7.15 Amendments or Waivers of Certain Related Agreements; Amendments of Documents Relating to Subordinated
Indebtedness; Designation of "Designated Senior Indebtedness" . . . . . . . . . . . . . . . . . . . . . . 161
7.16 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
SECTION 8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
8.1 Failure to Make Payments When Due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
8.2 Default in Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
8.3 Breach of Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
8.4 Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
8.5 Other Defaults Under Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 163
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
8.8 Judgments and Attachments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
8.9 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
8.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
8.11 Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
8.12 Invalidity of Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
8.13 Failure of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
8.14 Failure to Consummate the Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
8.15 Action Under Related Financing Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
SECTION 9. AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
9.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
9.2 Powers and Duties; General Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
9.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness . . . . . . . . . . . 170
9.4 Right to Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
9.5 Successor Agent and Swing Line Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
9.6 Collateral Documents and Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
10.1 Assignments and Participations in Loans and Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 172
10.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
</TABLE>
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10.3 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
10.4 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
10.5 Ratable Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
10.6 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
10.7 Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
10.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
10.9 Survival of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 182
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . 182
10.11 Marshalling; Payments Set Aside . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
10.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
10.13 Obligations Several; Independent Nature of Lenders' Rights . . . . . . . . . . . . . . . . . . . . . . . . 183
10.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
10.15 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
10.16 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
10.17 Consent to Jurisdiction and Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
10.18 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
10.19 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
10.20 Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
Signature pages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
</TABLE>
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EXHIBITS
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I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV-A FORM OF TRANCHE A TERM NOTE
IV-B FORM OF TRANCHE B TERM NOTE
IV-C FORM OF TRANCHE C TERM NOTE
IV-D FORM OF TRANCHE D TERM NOTE
V FORM OF REVOLVING NOTE
VI FORM OF SWING LINE NOTE
VII FORM OF COMPLIANCE CERTIFICATE
VIII FORM OF OPINION OF LATHAM & WATKINS
IX FORM OF OPINION OF O'MELVENY & MYERS
X FORM OF ASSIGNMENT AGREEMENT
XI FORM OF AUDITOR'S LETTER
XII FORM OF FINANCIAL CONDITION CERTIFICATE
XIII FORM OF COLLATERAL ACCOUNT AGREEMENT
XIV FORM OF PLEDGE AGREEMENT
XV FORM OF SECURITY AGREEMENT
XVI FORM OF TRADEMARK SECURITY AGREEMENT
XVII FORM OF SUBSIDIARY GUARANTY
XVIII FORM OF MORTGAGE
XIX FORM OF LANDLORD'S ACKNOWLEDGEMENT AND CONSENT AGREEMENT
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SCHEDULES
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2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
2.4B STORES UNDER DEVELOPMENT
3.1C EXISTING LETTERS OF CREDIT
4.1B CERTAIN RECENT DEVELOPMENTS
4.1I REAL PROPERTY ASSETS
5.1 SUBSIDIARIES OF COMPANY
5.2C REGISTRATION STATEMENTS, CONSENTS AND APPROVALS
5.11 EMPLOYEE BENEFIT PLANS
5.12 CERTAIN FEES
5.13 ENVIRONMENTAL MATTERS
5.18 CERTAIN PERMITS
5.20 SURPLUS LEASED PROPERTIES; SURPLUS OWNED PROPERTIES; EXCESS CALIFORNIA LAND; CALIFORNIA STORES
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2 CERTAIN EXISTING LIENS
7.3 CERTAIN EXISTING INVESTMENTS
7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
7.7 NON-CALIFORNIA PROPERTIES TO BE SOLD AFTER CLOSING
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SMITH'S FOOD & DRUG CENTERS, INC.
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of May 23, 1996 and entered
into by and among SMITH'S FOOD & DRUG CENTERS, INC., a Delaware corporation
("COMPANY"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF
(each individually referred to herein as a "LENDER" and collectively as
"LENDERS"), BANKERS TRUST COMPANY ("BANKERS") and THE CHASE MANHATTAN BANK,
N.A. ("CHASE"), as arrangers for Lenders (in such capacity, each individually
referred to herein as an "ARRANGER" and collectively as "ARRANGERS"), CHASE
SECURITIES INC. ("CHASE SECURITIES"), as syndication agent (in such capacity,
"SYNDICATION AGENT"), and BANKERS, as administrative agent for Lenders (in such
capacity, "AGENT").
R E C I T A L S
WHEREAS, Merger Sub (this and other capitalized terms used in
these recitals without definition being used as defined in subsection 1.1) has
been formed by Company for the purpose of acquiring Smitty's by merging Merger
Sub with and into Smitty's, with Smitty's being the surviving corporation (the
"MERGER");
WHEREAS, each share of Smitty's common stock outstanding
immediately prior to the Merger will be converted in the Merger into 3.011803
shares of Company's Class B Common Stock, for an aggregate consideration
payable to the Smitty's shareholders of 3,038,888 shares of Company's Class B
Common Stock;
WHEREAS, each share of Merger Sub's common stock outstanding
immediately prior to the Merger will be converted in the Merger into one share
of common stock of the surviving corporation in the Merger, and all of such
surviving corporation's shares will be owned by Company;
WHEREAS, concurrently with the consummation of the Merger,
Company intends to (i) purchase approximately 13,400,000 shares in the
aggregate of Company's Class A Common Stock and Class B Common Stock (excluding
shares of Class B Common Stock issued or issuable in connection with the Merger
but including certain Existing Management Stock Options) representing 50% in
the aggregate of all shares of Class A Common Stock and Class B Common Stock
outstanding on a fully diluted basis, at a cash price not to exceed $36.00 per
share for an aggregate payment of
1
<PAGE> 9
approximately $465,000,000, (ii) authorize a new Class C Common Stock and issue
a warrant to Yucaipa to purchase shares of such Class C Common Stock
representing approximately 10% of the aggregate shares of Company's Common
Stock on a fully-diluted basis (the "YUCAIPA WARRANT") and (iii) redeem
approximately 3,000,000 shares of Company's Redeemable Preferred Stock for an
aggregate redemption payment not exceeding $1,000,000;
WHEREAS, concurrently with the consummation of the Merger,
Company intends to (i) prepay and obtain the release of any collateral securing
all of its outstanding Indebtedness under the Existing Company Credit Lines in
the aggregate principal amount of $10,000,000 and terminate any commitments to
extend credit thereunder and (ii) prepay and obtain the release of any
collateral securing approximately $233,200,000 in aggregate principal amount of
existing mortgage Indebtedness and approximately $410,000,000 in aggregate
principal amount of existing unsecured senior Indebtedness (collectively, the
"COMPANY EXISTING DEBT PREPAYMENTS");
WHEREAS, concurrently with the consummation of the Merger,
Company intends to cause Smitty's to (i) prepay and obtain the release of any
collateral securing all of its outstanding Indebtedness under the Existing
Smitty's Credit Agreement in the aggregate principal amount of $33,600,000 and
terminate any commitments to extend credit thereunder and (ii) prepay in full
approximately $50,000,000 in principal amount of Existing Smitty's Subordinated
Notes and approximately $19,300,000 in accreted value of Existing Smitty's
Discount Debentures (collectively, the "SMITTY'S EXISTING DEBT PREPAYMENTS");
WHEREAS, to effect the Smitty's Existing Debt Prepayments,
Smitty's is soliciting consents from the holders of Existing Smitty's Discount
Debentures to certain amendments to the Existing Smitty's Discount Debenture
Indenture and offering to purchase all of the Existing Smitty's Discount
Debentures for $19,300,000 in cash, plus accrued interest thereon, plus for
each Existing Smitty's Discount Debenture accepted for purchase, a premium and
a consent payment as described in the Smitty's Debt Purchase Offers;
WHEREAS, to effect the Smitty's Existing Debt Prepayments,
Smitty's is also soliciting consents from the holders of the Existing Smitty's
Subordinated Notes to certain amendments to the Existing Smitty's Subordinated
Note Indenture and offering to purchase all of the Existing Smitty's
Subordinated Notes for $50,000,000 in cash, plus accrued interest thereon, plus
for each Existing Smitty's Subordinated Note accepted for purchase, a premium
and a consent payment as described in the Smitty's Debt Purchase Offers
(together with the offer and solicitation with respect to the Existing Smitty's
Discount Debentures, the "SMITTY'S DEBT PURCHASE OFFERS");
WHEREAS, Company has received aggregate net cash proceeds of
not less than $67,200,000 from the disposition of certain of its California
properties;
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<PAGE> 10
WHEREAS, in order to finance (i) its purchase of approximately
13,400,000 shares of its Class A Common Stock and Class B Common Stock pursuant
to the Equity Tender Offer (including certain Existing Management Stock
Options) for an aggregate purchase price not exceeding $465,000,000, (ii) its
payment of Company Existing Debt Prepayments of up to $653,200,000, (iii) its
payment of Smitty's Existing Debt Prepayments of up to $102,900,000, (iv) its
redemption of approximately 3,000,000 shares of its Redeemable Preferred Stock
for an aggregate redemption payment not exceeding $1,000,000 and (v) its
payment of up to $160,700,000 in fees, expenses, premiums, accrued interest and
other costs in connection therewith and other transactions contemplated by the
Loan Documents and the Related Agreements (such fees, costs, expenses and
premiums being referred to herein as the "TRANSACTION COSTS"), Company will (a)
issue the Senior Subordinated Notes for aggregate gross proceeds of not less
than $575,000,000, (b) utilize not less than $67,200,000 in net cash proceeds
from the disposition of certain of its California properties, and (c) utilize
the proceeds of up to $805,000,000 in Term Loans;
WHEREAS, in addition to the Revolving Loans made to Company on
the Closing Date, Company has requested that Revolving Lenders provide a
revolving credit facility which shall allow for the making of Revolving Loans
and the issuance of Letters of Credit to meet the working capital requirements
and general corporate purposes of Company and its Subsidiaries;
WHEREAS, Company desires to secure all of the Obligations
hereunder and under the other Loan Documents by granting to Agent, on behalf of
Lenders, a first priority Lien on certain of its real, personal and mixed
property, including without limitation a pledge of all of the capital stock of
each of its Subsidiaries (other than any Inactive Subsidiaries); and
WHEREAS, all of the Subsidiaries (other than any Inactive
Subsidiaries) of Company have agreed to guarantee the Obligations hereunder and
under the other Loan Documents and to secure their guaranties by granting to
Agent, on behalf of Lenders, a first priority Lien on certain of their
respective real, personal and mixed property, including without limitation a
pledge of all of the capital stock of each of their respective Subsidiaries;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Company, Lenders,
Arrangers, Syndication Agent, Co-Agents and Agent agree as follows:
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SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the
following meanings:
"ACQUISITION" means the consummation of the Merger in
accordance with the terms of the Recapitalization and Merger Agreement, which
shall result in Company owning all of the outstanding capital stock of
Smitty's.
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate
Determination Date with respect to an Interest Period for a Eurodollar Rate
Loan, the rate per annum obtained by dividing (i) the arithmetic average
(rounded upward to the nearest 1/16 of one percent) of the offered quotations,
if any, to first class banks in the interbank Eurodollar market by Reference
Lenders for U.S. dollar deposits of amounts in same day funds comparable to the
respective principal amounts of the Eurodollar Rate Loans of Reference Lenders
for which the Adjusted Eurodollar Rate is then being determined with maturities
comparable to such Interest Period as of approximately 10:00 A.M. (New York
time) on such Interest Rate Determination Date by (ii) a percentage equal to
100% minus the stated maximum rate of all reserve requirements (including,
without limitation, any marginal, emergency, supplemental, special or other
reserves) applicable on such Interest Rate Determination Date to any member
bank of the Federal Reserve System in respect of "Eurocurrency liabilities" as
defined in Regulation D (or any successor category of liabilities under
Regulation D); provided that if any Reference Lender fails to provide Agent
with its aforementioned quotation then the Adjusted Eurodollar Rate shall be
determined based on the quotation(s) provided to Agent by the other Reference
Lender(s).
"AFFECTED LENDER" has the meaning assigned to that term in
subsection 2.6C.
"AFFILIATE", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means (i) the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities or by contract or otherwise, or (ii) the ownership of more than 10%
of the voting securities of that Person; provided that Bankers Trust New York
Corporation, Chase and each of their respective Affiliates (as defined above)
shall not be considered to be an "Affiliate" of Company or any of its
Subsidiaries; and provided further that Yucaipa shall be deemed an Affiliate of
Company so long as (a) the Management Agreement is in effect or (b) Yucaipa,
together with its Affiliates (as
4
<PAGE> 12
defined above), is permitted to designate one or more members of Company's
Board of Directors pursuant to the terms of the Standstill Agreement or any
successor agreement.
"AGENT" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
administrative Agent appointed pursuant to subsection 9.5A.
"AGREEMENT" means this Credit Agreement dated as of May 23,
1996, as it may be amended, supplemented or otherwise modified from time to
time.
"AMOUNT OF UNFUNDED BENEFIT LIABILITY" means, with respect to
any Pension Plan, (i) if set forth on the most recent actuarial valuation
report with respect to such Pension Plan, the amount of unfunded benefit
liabilities (as defined in Section 4001(a)(18) of ERISA) and (ii) otherwise,
the excess of (a) the greater of the current liability (as defined in Section
412(l)(7) of the Internal Revenue Code) or the actuarial present value of the
accrued benefits with respect to such Pension Plan over (b) the market value of
the assets of such Pension Plan.
"APPLICABLE BASE RATE MARGIN" means, as of any date of
determination, (i) 1.25% per annum in the event that (a) the Interest Coverage
Ratio is equal to or greater than 2.00:1.00 and (b) the aggregate outstanding
principal amount of Term Loans is less than $755,000,000; (ii) notwithstanding
clause (i), 1.00% per annum in the event that (a) the Interest Coverage Ratio
is equal to or greater than 2.50:1.00 and (b) the aggregate outstanding
principal amount of Term Loans is less than $680,000,000; and (iii) 1.50% per
annum in the event that neither of the foregoing clauses (i) nor (ii) is
applicable, including for the period from the Closing Date until a Margin
Determination Certificate is delivered pursuant to subsection 6.1(xviii)
establishing that either of clause (i) or clause (ii) is applicable.
"APPLICABLE EURODOLLAR MARGIN" means, as of any date of
determination, (i) 2.50% per annum in the event that (a) the Interest Coverage
Ratio is equal to or greater than 2.00:1.00 and (b) the aggregate outstanding
principal amount of Term Loans is less than $755,000,000; (ii) notwithstanding
clause (i), 2.25% per annum in the event that (a) the Interest Coverage Ratio
is equal to or greater than 2.50:1.00 and (b) the aggregate outstanding
principal amount of Term Loans is less than $680,000,000; and (iii) 2.75% per
annum in the event that neither of the foregoing clauses (i) nor (ii) is
applicable, including for the period from the Closing Date until a Margin
Determination Certificate is delivered pursuant to subsection 6.1(xviii)
establishing that either of clause (i) or clause (ii) is applicable.
"ARRANGERS" has the meaning assigned to that term in the
introductions to this Agreement.
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"ASSET SALE" means (i) the sale, lease (other than any lease
in the ordinary course of business consistent with past practices), assignment
or other transfer (whether voluntary or involuntary) for value (collectively, a
"transfer") by Company or any of its Subsidiaries to any Person other than
Company or any of its wholly-owned Subsidiaries of (a) any of the stock of any
of Company's Subsidiaries, (b) substantially all of the assets of any division
or line of business of Company or any of its Subsidiaries, or (c) any other
assets (whether tangible or intangible) of Company or any of its Subsidiaries,
excluding (1) any Cash Equivalents or inventory sold in the ordinary course of
business, (2) any such transfer to the extent that the aggregate value of the
stock or assets transferred in any single transaction or related series of
transactions is equal to $50,000 or less, or $1,000,000 or less in the
aggregate in any Fiscal Year for all such excluded transfers and all excluded
occurrences described in the succeeding clause (ii), and (3) any transfer in an
arm's-length transaction by Company or a Subsidiary of Company to a Developer
of a Development Site constituting a Development Investment permitted under
subsection 7.3(vi) or constituting a California Development Investment
permitted under subsection 7.3(x); or (ii) the occurrence of any complete or
partial loss, damage or destruction of any assets of Company or any of its
Subsidiaries giving rise to insurance proceeds, excluding any such occurrence
to the extent that the aggregate value of the assets lost, destroyed or damaged
in any single occurrence or related series of occurrences is equal to $50,000
or less, or $1,000,000 or less in the aggregate in any Fiscal Year for all such
excluded occurrences and all excluded transfers described in clause
(i)(2) above.
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in
substantially the form of Exhibit X annexed hereto.
"AUDITOR'S LETTER" means a letter, substantially in the form
of Exhibit XI annexed hereto, executed by Company and delivered to Company's
independent certified public accountants pursuant to subsection 4.1R.
"BANKERS" has the meaning assigned to that term in the
introductions to this Agreement.
"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy", as now and hereafter in effect, or any successor
statute.
"BASE RATE" means, at any time, the higher of (x) the Prime
Rate or (y) the rate which is 1/2 of 1% in excess of the Federal Funds
Effective Rate.
"BASE RATE LOANS" means Loans bearing interest at rates
determined by reference to the Base Rate as provided in subsection 2.2A.
"BUSINESS DAY" means any day excluding Saturday, Sunday and
any day which is a legal holiday under the laws of the State of New York or the
State of Utah or
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is a day on which banking institutions located in such states are authorized or
required by law or other governmental action to close.
"CALIFORNIA ASSET SALE" means any Asset Sale of California
Development Investments, Excess California Land and/or California Stores.
"CALIFORNIA DEVELOPMENT INVESTMENTS" means (a) a loan by
Company or a Subsidiary of Company to a Developer, the proceeds of which are to
be used to finance the development of Excess California Land and/or California
Stores; (b) a cash contribution by Company or a Subsidiary of Company to the
capital of a Developer, the proceeds of which are used to finance the
development of Excess California Land and/or California Stores; (c) a
contribution by Company or a Subsidiary of Company to the capital of a
Developer of any interest of Company or such Subsidiary in one or more parcels
of Excess California Land and/or California Stores; or (d) Consolidated Capital
Expenditures incurred in connection with Excess California Land and California
Stores; provided that in each case Company reasonably believes, taking into
account the amount of such loan, contribution or expenditure, that such loan,
contribution or expenditure will improve its ability to sell or lease such
property on economic terms more favorable to Company. The amount of any
California Development Investment (i) referred to in clauses (a), (b) and (c)
above shall be the amount of cash so loaned or so contributed or the fair
market value of the parcel or parcels of real property so contributed, which
fair market value shall be determined, without regard to the proposed
investment, at the time of such contribution, in good faith by Company, in each
case minus the amount of cash received by Company or any of its Subsidiaries
with respect to such loan or contribution, whether by repayment or purchase of
such loan or contribution, and (ii) referred to in clause (d) above shall be
the amount of Consolidated Capital Expenditures incurred minus the amount of
Net Asset Sale Proceeds received by Company or any of its Subsidiaries from the
sale of such Excess California Land or California Stores but in any event not
in excess of the Consolidated Capital Expenditures incurred with respect to
such property.
"CALIFORNIA STORES" means Company's existing Southern
California store operations which Company anticipates selling after the Closing
Date in connection with Company's discontinuance of its California operations,
which stores are identified as such on Schedule 5.20C annexed hereto.
"CAPITAL LEASE", as applied to any Person, means any lease of
any property (whether real, personal or mixed) by that Person as lessee that,
in conformity with GAAP, is accounted for as a capital lease on the balance
sheet of that Person.
"CASH" means money, currency or a credit balance in a Deposit
Account.
"CASH EQUIVALENTS" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and
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<PAGE> 15
principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier 1 capital (as defined in such regulations) of not
less than $100,000,000; (v) shares of any money market mutual fund that (a) has
at least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's; and (vi) repurchase agreements with respect to, and which are fully
secured by a security interest in, obligations of the type described in clause
(i) or clause (ii) above and are with any commercial bank described in clause
(iv) above.
"CERCLA" has the meaning assigned to that term in the
definition of "Environmental Laws".
"CERTIFICATE RE NON-BANK STATUS" means a certificate in form
and substance satisfactory to Agent delivered by a Lender to Agent pursuant to
subsection 2.7B(iii) pursuant to which such Lender certifies, under penalty of
perjury, that it is not (i) a "bank" as such term is defined in subsection
881(c)(3) of the Internal Revenue Code; (ii) a 10 percent shareholder of
Company within the meaning of Section 871(h)(3)(B) or Section 881(c)(3)(B) of
the Internal Revenue Code; or (iii) a "controlled" foreign corporation related
to Company within the meaning of Section 864(d)(4) of the Internal Revenue
Code.
"CHANGE OF CONTROL" means (i) any Person (other than a
Permitted Holder) or any group (within the meaning of Section 13(d)(3) of the
Exchange Act) of Persons (other than any Permitted Holders), shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Exchange Act), directly or
indirectly, in one or more transactions, of Securities of Company (or other
Securities convertible into such Securities) representing 25% or more of the
combined voting power of all Securities of Company entitled to vote in the
election of directors, other than Securities having such power only by reason
of the happening of a contingency, or (ii) a change in the composition of the
Board of Directors of Company
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has occurred such that a majority of the members of the Board of Directors are
not Continuing Directors.
"CHASE" has the meaning assigned to that term in the
introductions to this Agreement.
"CHASE SECURITIES" has the meaning assigned to that term in
the introductions to this Agreement.
"CLASS" means, with respect to Lenders, each class of Lenders
under this Agreement, with there being two separate classes of Lenders, i.e.,
(i) Lenders having Tranche A Term Loan Exposure and/or Revolving Loan Exposure
(taken together as a single class) and (ii) Lenders having Tranche B Term Loan
Exposure, Lenders having Tranche C Term Loan Exposure and/or Lenders having
Tranche D Term Loan Exposure (taken together as a single class).
"CLASS A COMMON STOCK" means the Class A Common Stock of
Company, par value $.01 per share.
"CLASS B COMMON STOCK" means the Class B Common Stock of
Company, par value $.01 per share.
"CLASS C COMMON STOCK" means the Non-Voting Convertible Class
C Common Stock of Company, par value $.01 per share.
"CLOSING DATE" means the date on or before June 30, 1996, on
which the initial Loans are made.
"CO-AGENTS" means those Lenders designated as "Co-Agents" by
Arrangers.
"COLLATERAL" means all of the real, personal and mixed
property (including capital stock) in which Liens are purported to be granted
pursuant to the Collateral Documents as security for the Obligations.
"COLLATERAL ACCOUNT" has the meaning assigned to that term in
the Collateral Account Agreement.
"COLLATERAL ACCOUNT AGREEMENT" means the Collateral Account
Agreement executed and delivered by Company and Agent on the Closing Date,
substantially in the form of Exhibit XIII annexed hereto, as such Collateral
Account Agreement may hereafter be amended, supplemented or otherwise modified
from time to time.
"COLLATERAL DOCUMENTS" means the Pledge Agreements, the
Security Agreements, the Trademark Security Agreements, the Collateral Account
Agreement,
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the Mortgages and all other instruments or documents delivered by any Loan Party
pursuant to this Agreement or any of the other Loan Documents in order to grant
to Agent, on behalf of Lenders, a Lien on any real, personal or mixed property
of that Loan Party as security for the Obligations.
"COMMERCIAL LETTER OF CREDIT" means any letter of credit
payable on sight or similar instrument issued for the purpose of providing the
primary payment mechanism in connection with the purchase of any materials,
goods or services by Company or any of its Subsidiaries in the ordinary course
of business of Company or such Subsidiary.
"COMMITMENT FEE PERCENTAGE" means .50% per annum.
"COMMITMENTS" means the commitments of Lenders to make Loans
as set forth in subsection 2.1A.
"COMMON STOCK" means the Class A Common Stock, Class B Common
Stock and Class C Common Stock of Company.
"COMPANY" has the meaning assigned to that term in the
introductions to this Agreement.
"COMPANY EXISTING DEBT PREPAYMENTS" has the meaning assigned
to that term in the recitals to this Agreement.
"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form of Exhibit VII annexed hereto delivered to Agent and Lenders by
Company pursuant to subsection 6.1(iv).
"CONSOLIDATED ADJUSTED EBITDA" means, for any period, without
duplication, the sum of the amounts for such period of (i) Consolidated Net
Income, (ii) Consolidated Cash Interest Expense, (iii) provisions for taxes
based on income, (iv) total depreciation expense, (v) total amortization
expense, and (vi) other non-cash items reducing Consolidated Net Income less
other non-cash items increasing Consolidated Net Income, all of the foregoing
as determined on a consolidated basis for Company and its Subsidiaries in
conformity with GAAP.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, an
amount equal to (i) the sum of (a) the aggregate of all expenditures (whether
paid in cash or other consideration or accrued as a liability and including
that portion of Capital Leases which is capitalized on the consolidated balance
sheet of Company and its Subsidiaries) by Company and its Subsidiaries during
that period that, in conformity with GAAP, are included in "additions to
property, plant or equipment" or comparable items reflected in the consolidated
balance sheets of Company and its Subsidiaries plus (b) to the extent
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not covered by clause (i)(a) of this definition, the aggregate of all
expenditures by Company and its Subsidiaries during that period to acquire (by
purchase or otherwise) the business, property or fixed assets (other than
current assets consisting of inventory or accounts receivable) of any Person,
or the stock or other evidence of beneficial ownership of any Person that, as
a result of such acquisition, becomes a Subsidiary of Company minus (ii) the
sum of (a) Consolidated Capital Expenditures (as defined in clause (i) above)
constituting Development Investments permitted under subsection 7.3(vi) or
Capital Leases required to be recorded in connection with a Development
Investment and permitted under subsection 7.9; (b) the principal amount
permitted under subsections 7.1(iii) and 7.1(vii) to the extent relating to
equipment, fixtures and other similar property acquired after the Closing Date;
(c) an amount equal to the proceeds received by Company or any of its
Subsidiaries from a sale-leaseback transaction of a store or equipment
permitted under subsection 7.10 so long as such transaction occurs after the
Closing Date and within 180 days or, to the extent permitted by subsection
2.4B(iii)(a)(ii), one year of the completion of such store or acquisition of
such equipment and to the extent prior expenditures, up to an equivalent amount
for the asset so sold and leased back, constituted Consolidated Capital
Expenditures (as defined above) in such period or in any prior period; (d) an
amount equal to the increase in "property, plant or equipment" which results
from any required reclassification under GAAP of Operating Leases of Company
and its Subsidiaries existing as of the Closing Date to Capital Leases (other
than a reclassification that results from an amendment to such Operating
Leases); (e) expenditures in an amount not to exceed the proceeds of insurance,
condemnation awards (or payments in lieu thereof) or indemnity payments
received from third parties, so long as such expenditures were made for
purposes of replacing or repairing the assets in respect of which such
proceeds, awards or payments were received and so long as such expenditures are
made not later than 24 months of the occurrence of the damage to or loss of the
assets being replaced or repaired; (f) Consolidated Capital Expenditures (as
defined in clause (i) above) constituting California Development Investments
under clause (d) of the definition thereof permitted under subsection 7.3(x);
and (g) an amount equal to the increase in "property, plant or equipment" which
results from the transfer to Company of Related Assets in connection with
Company becoming liable with respect to Indebtedness permitted under subsection
7.1(viii); provided that, solely for purposes of the calculations made under
subsection 7.8 for the period commencing on the Closing Date and ending on
December 28, 1996, the exclusions set forth in clauses (b) and (c) of clause
(ii) above shall not be applicable in determining "Consolidated Capital
Expenditures."
"CONSOLIDATED CASH INTEREST EXPENSE" means, for any period,
total interest expense (including that portion attributable to Capital Leases
in accordance with GAAP and capitalized interest) net of any interest income
received in Cash by Company or any of its Subsidiaries on a consolidated basis
with respect to all outstanding Indebtedness of Company and its Subsidiaries,
including, without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing and net costs under Interest Rate Agreements, plus all dividends on
the
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Redeemable Preferred Stock paid or payable in Cash but excluding, however,
(i) any amounts referred to in subsection 2.3 payable to Agent and Lenders on
or before the Closing Date, (ii) any interest expenses not payable in Cash
(including amortization of discounts and of debt issuance costs), and (iii) the
fees, costs and expenses payable by Company relating to the issuance of or
consent to modifications of Indebtedness of Company or Smitty's in connection
with the Transactions.
"CONSOLIDATED EXCESS CASH FLOW" means, for any Fiscal Year, an
amount equal to (i) the sum (without duplication) of the amounts for such
Fiscal Year of (a) Consolidated Net Income; (b) any after-tax gains
attributable to returned surplus assets of any Pension Plan; (c) the amount of
Net Asset Sale Proceeds received in such Fiscal Year that are not otherwise
included in Consolidated Net Income and that are required to be used to prepay
the Term Loans and/or permanently reduce the Revolving Loan Commitments
pursuant to subsection 2.4B(iii)(a), but excluding amounts returned to Company
pursuant to the last sentence of subsection 2.4B(iv)(c) which are not used by
Company to prepay the Term Loans and/or permanently reduce the Revolving Loan
Commitments; (d) the aggregate amount of Cash proceeds (net of underwriting
discounts, similar placement fees and commissions and other reasonable costs
and expenses associated therewith) from the issuance after the Closing Date of
any debt or equity Securities of Company or any of its Subsidiaries that are
required to be used to prepay the Loans pursuant to subsections 2.4B(iii)(c)
or 2.4B(iii)(d), as the case may be, but excluding amounts returned to Company
pursuant to the last sentence of subsection 2.4B(iv)(c) which are not used by
Company to prepay the Terms Loans and/or permanently reduce the Revolving Loan
Commitments; (e) consolidated depreciation and amortization expense for such
Fiscal Year; (f) the net decrease (if any) in deferred tax assets and the net
increase (if any) in deferred tax liabilities of Company and its Subsidiaries;
(g) other non-cash charges reducing Consolidated Net Income; (h) (to the extent
not included in Consolidated Net Income) any cash extraordinary gains; (i) an
amount equal to the Net Asset Sale Proceeds excluded from mandatory prepayments
required to be made under subsection 2.4B(iii)(a) pursuant to clauses (i) and
(iii) of the first proviso thereof; provided that such Net Asset Sale Proceeds
which meet the following requirements ("Excluded Proceeds") shall not be added
pursuant to this clause (i): (x) they have not been reinvested as permitted
pursuant to such clauses (i) and (iii) and (y) the period for permitted
reinvestment pursuant to such clauses (i) and (iii) extends beyond the last
date of the Fiscal Year; (j) all Cash proceeds received by Company or any of its
Subsidiaries in payment or repayment of any Development Investment or
California Development Investment previously made by Company or such
Subsidiary; (k) an amount equal to the Excluded Proceeds from the previous
Fiscal Year; and (l) cash proceeds which result in reductions in long-term
assets minus (ii) the sum (without duplication) of the amounts for such Fiscal
Year of (a) Consolidated Capital Expenditures permitted under subsection 7.8
made during such Fiscal Year; (b) payments of principal made in respect of any
outstanding Indebtedness of Company or any of its Subsidiaries to the extent
such payments are permanent reductions in Funded Debt and not prohibited under
subsection 7.5 other than any such payments in
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respect of the Specified Mortgage Notes; (c) the net increase (if any) in
deferred tax assets and the net decrease (if any) in deferred tax liabilities;
(d) the amount of all Development Investments permitted under subsection
7.3(vi) or California Development Investments permitted under subsection
7.3(x) which are paid or payable in cash and are made during such Fiscal Year;
(e) other non-cash charges increasing Consolidated Net Income; (f) cash
payments which result in reductions in reserves and/or long term liabilities
in such Fiscal Year; (g) cash payments made by Company after the Closing Date
to redeem the Redeemable Preferred Stock in accordance with subsection 7.5;
and (h) for Fiscal Year 1996, $10,000,000, all of the foregoing as determined
on a consolidated basis for Company and its Subsidiaries in conformity with
GAAP.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum
(without duplication) of the amounts for such period of (i) Consolidated Cash
Interest Expense, (ii) Consolidated Rental Payments, (iii) scheduled principal
payments attributable to any Indebtedness of Company and its Subsidiaries and
(iv) cash payments made by Company after the Closing Date to redeem the
Redeemable Preferred Stock, all of the foregoing as determined on a
consolidated basis for Company and its Subsidiaries in conformity with GAAP.
"CONSOLIDATED NET INCOME" means, for any period, the net
income (or loss) of Company and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period determined in conformity with
GAAP; provided that there shall be excluded (without duplication) (i) the
income (or loss) of any Person (other than a Subsidiary of Company) in which
any other Person (other than Company or any of its Subsidiaries) has a joint
interest, except to the extent of the amount of dividends or other
distributions actually paid to Company or any of its Subsidiaries by such
Person during such period, (ii) the income (or loss) of any Person accrued
prior to the date it becomes a Subsidiary of Company or is merged into or
consolidated with Company or any of its Subsidiaries or that Person's assets
are acquired by Company or any of its Subsidiaries, (iii) the income of any
Subsidiary of Company to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) any after-tax gains or losses attributable
to Asset Sales or returned surplus assets of any Pension Plan, (v)
Restructuring Charges incurred during such period, and (vi) (to the extent not
included in clauses (i) through (v) above) any net extraordinary gains or net
non-cash extraordinary losses; provided further there shall be included as a
reduction to net income the aggregate amount of cash payments made by Company
during such period in connection with the matters referenced in clauses (ii),
(iii) and (iv) of the definition of Restructuring Charges to the extent that
such cash payments reduce the reserves or other non-cash charges established in
connection with the matters referenced in such clauses (ii), (iii) and (iv).
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<PAGE> 21
"CONSOLIDATED NET WORTH" means, as at any date of
determination, (i) the capital stock and additional paid-in capital plus (ii)
retained earnings (or minus accumulated deficits) of Company and its
Subsidiaries on a consolidated basis determined in conformity with GAAP plus
(iii) Restructuring Charges for the period from and including the Closing Date
to such date of determination.
"CONSOLIDATED RENTAL PAYMENTS" means, for any period, the
aggregate amount of all rents paid or payable by Company and its Subsidiaries
on a consolidated basis during that period under all Operating Leases to which
Company or any of its Subsidiaries is a party as lessee (net of sublease
income).
"CONSOLIDATED TOTAL DEBT" means, as at any date of
determination, the aggregate stated balance sheet amount of all Indebtedness of
Company and its Subsidiaries plus the Redeemable Preferred Stock, determined on
a consolidated basis in accordance with GAAP.
"CONTINGENT OBLIGATION", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another if
the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under Hedge Agreements. Contingent Obligations shall
include, without limitation, (a) the direct or indirect guaranty, endorsement
(otherwise than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such Person of
the obligation of another, (b) the obligation to make take-or-pay or similar
payments if required regardless of non-performance by any other party or
parties to an agreement, and (c) any liability of such Person for the
obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of any agreement
described under subclauses (X) or (Y) of this sentence, the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
"CONTINUING DIRECTORS" means, as of any date of determination,
any member of the Board of Directors of Company who (i) was a member of such
Board of Directors
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<PAGE> 22
on the Closing Date (after the consummation of the Transactions including
without limitation the Merger) or (ii) was nominated for election or elected to
such Board of Directors either with the affirmative vote of a majority of the
directors who were either members of such Board of Directors on the Closing
Date or whose nomination or election was previously so approved.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument
to which that Person is a party or by which it or any of its properties is
bound or to which it or any of its properties is subject.
"COVERED PERIOD" means the period from the date hereof to and
including the Transfer Date, but excluding the period, if any, prior to the
Transfer Date, during which (A) Indemnitee or its Affiliate has obtained and
then remains in possession and control of the Mortgaged Property or Covered
Real Property, as the case may be, and (B) neither Company nor any of its
Affiliates is in possession or control of such property or engaging in any
Hazardous Materials Activity on or at such property.
"COVERED REAL PROPERTY" has the meaning assigned to that term
in subsection 6.9.
"CURRENCY AGREEMENT" means any foreign exchange contract,
currency swap agreement, futures contract, option contract, synthetic cap or
other similar agreement or arrangement to which Company or any of its
Subsidiaries is a party.
"DEFERRED COMPENSATION AGREEMENTS" means those certain
deferred compensation agreements entered into by and between the Company and
certain of its current and former employees as in effect on the Closing Date
(or as amended in a form acceptable to Arrangers), including those certain
deferred compensation agreements entered into by and between Company and James
A. Acton, Robert D. Bolinder, Richard C. Bylski, Michael C. Frei, James W.
Hallsey, Larry R. McNeill, Harry M. Moskal, Matthew G. Tezak, Paul D. Tezak,
Frederick F. Urbanek and Kenneth A. White.
"DEFERRED TRADE PAYABLES" means promissory notes (whether
interest bearing or non-interest bearing) executed by Company or any of its
Subsidiaries in favor of such entity's suppliers to finance the purchase price
and delivery costs of inventory in connection with such entity's opening or
acquisition of new stores or remodeling of existing stores.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or
like account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
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"DEVELOPER" means any Person which owns, leases or otherwise
controls or intends to acquire an interest in a Development Site.
"DEVELOPMENT INVESTMENT" means (a) a loan by Company or a
Subsidiary of Company to a Developer, the proceeds of which are to be used to
finance a Development Project of such Developer, (b) a cash contribution by
Company or a Subsidiary of Company to the capital of a Developer, the proceeds
of which are to be used to finance a Development Project of such Developer, or
(c) a contribution by Company or a Subsidiary of Company to the capital of a
Developer of an interest of Company or such Subsidiary in a Development Site,
but in any event excluding any California Development Investments. The amount
of any Development Investment shall be the amount of cash so loaned or
contributed or the fair market value of the interest of a Development Site so
contributed, which fair market value shall be determined, without regard to the
proposed investment, at the time of such contribution in good faith by
resolution of the Board of Directors of Company, in each case minus the amount
of cash received by Company or any of its Subsidiaries in repayment of such
Development Investment.
"DEVELOPMENT PROJECT" means a project for the development by
or at the direction of a Developer of a Development Site, including the
construction, remodeling, expansion or renovation of a store thereon, which
store is to be leased to and operated by Company or one of its Subsidiaries.
"DEVELOPMENT SITE" means, with respect to a Development
Investment, real property which is identified by Company or one of its
Subsidiaries as the intended location for a store or a shopping center and
related improvements to be constructed, remodeled, expanded or renovated by or
at the direction of the Developer thereof, which in each case shall include a
store intended to be leased to and operated by Company or one of its
Subsidiaries, and with respect to a California Development Investment, any
Excess California Land or California Store.
"DOLLARS" and the sign "$" mean the lawful money of the United
States of America.
"ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized
under the laws of the United States or any state thereof; (ii) a savings and
loan association or savings bank organized under the laws of the United States
or any state thereof; (iii) a commercial bank organized under the laws of any
other country or a political subdivision thereof; provided that (x) such bank
is acting through a branch or agency located in the United States or (y) such
bank is organized under the laws of a country that is a member of the
Organization for Economic Cooperation and Development or a political
subdivision of such country; and (iv) any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which extends
credit or buys loans as one of its businesses including, but not limited to,
insurance companies, mutual funds
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<PAGE> 24
and lease financing companies; and (B) any Lender and any Affiliate of any
Lender; provided that no Affiliate of Company shall be an Eligible Assignee.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as
defined in Section 3(3) of ERISA (i) which is, or, at any time within the five
calendar years immediately preceding the date hereof, was at any time,
maintained or contributed to by the Loan Parties or any of their respective
ERISA Affiliates or (ii) with respect to which any Loan Party retains any
liability, including any potential joint and several liability as a result of
an affiliation with an ERISA Affiliate or a party that would be an ERISA
Affiliate except for the fact the affiliation ceased more than five calendar
years prior to the date hereof.
"ENVIRONMENTAL CLAIM" means any accusation, allegation, notice
of violation, notice of potential liability, claim, demand, abatement order or
other order or direction (conditional or otherwise) by any governmental
authority or any Person for any damage, including, without limitation, personal
injury (including sickness, disease or death), tangible or intangible property
damage, contribution, indemnity, indirect or consequential damages, damage to
the environment, nuisance, pollution, contamination or other adverse effects on
the environment, or for fines, penalties or restrictions, in each case
relating to, resulting from or in connection with Hazardous Materials and
relating to Company, any of its Subsidiaries, any of their respective
Affiliates or any Facility.
"ENVIRONMENTAL LAWS" means all present or future statutes,
ordinances, orders, rules, regulations, plans, policies or decrees and the like
relating to (i) environmental matters, including, without limitation, those
relating to fines, injunctions, penalties, damages, contribution, cost recovery
compensation, losses or injuries resulting from the Release or threatened
Release of Hazardous Materials, (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials, or (iii) occupational safety
and health, industrial hygiene, land use or the protection of human, plant or
animal health or welfare, in any manner applicable to Company or any of its
Subsidiaries or any of their respective properties, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act "CERCLA" (42 U.S.C. Section 9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air
Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. Section 2601 et seq.), the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. Section 136 et seq.), the Occupational Safety and
Health Act (29 U.S.C. Section 651 et seq.) and the Emergency Planning and
Community Right-to-Know Act (42 U.S.C. Section 11001 et seq.), each as amended
or supplemented, and any analogous future or present local, state and federal
statutes and regulations promulgated pursuant thereto, each as in effect as of
the date of determination.
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"ENVIRONMENTAL LOSSES" means any and all losses, liabilities,
damages (whether actual, consequential, punitive, or otherwise denominated),
demands, claims, actions, judgments, causes of action, assessments, penalties,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements), of any and every kind or character, foreseeable and
unforeseeable, liquidated and contingent, proximate and remote, suffered or
incurred by any Indemnitee, arising out of or as a result of: (I) any
Hazardous Materials Activity that occurs or is alleged to have occurred on or
prior to the date hereof or during the Covered Period; (II) any violation on or
prior to the date hereof or during the Covered Period of any applicable
Environmental Laws relating to the Mortgaged Property or Covered Real Property
or to the ownership, use, occupancy or operation thereof; (III) any
investigation, inquiry, order, hearing, action, or other proceeding by or
before any governmental agency in connection with any Hazardous Materials
Activity that occurs or is alleged to have occurred on or prior to the date
hereof or during the Covered Period; or (IV) any claim, demand or cause of
action, or any action or other proceeding, whether meritorious or not, brought
or asserted against any Indemnitee which directly or indirectly relates to,
arises from or is based on any of the matters described in clauses (i), (ii),
or (iii), or any allegation of any such matters.
"EQUITY TENDER OFFER" means Company's purchase pursuant to the
Equity Tender Offer Materials of approximately 13,400,000 shares in the
aggregate of Company's Class A Common Stock and Class B Common Stock (excluding
shares of Class B Common Stock issued or issuable in connection with the
Merger), representing 50% in the aggregate of all shares of Class A Common
Stock and Class B Common Stock outstanding on a fully diluted basis, at a cash
price not to exceed $36.00 per share for an aggregate payment, for all such
shares and for the Existing Management Stock Options, of approximately
$465,000,000.
"EQUITY TENDER OFFER MATERIALS" means the Proxy Statement and
Offer to Purchase for Cash 50% of the Outstanding Shares of Class A Common
Stock and Class B Common Stock at $36 per share dated April 25, 1996 and other
materials enclosed therewith.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
"ERISA AFFILIATE" as applied to any Person, means (i) any
corporation which is, or was at any time within the five calendar years
immediately preceding the date hereof, a member of a controlled group of
corporations within the meaning of Section 414(b) of the Internal Revenue Code
of which that Person is, or was at any time within the five calendar years
immediately preceding the date hereof, a member; (ii) any trade or business
(whether or not incorporated) which is, or was at any time within the five
calendar years immediately preceding the date hereof, a member of a group of
trades or businesses under common control within the meaning of Section 414(c)
of the Internal
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Revenue Code of which that Person is, or was at any time within the five
calendar years immediately preceding the date hereof, a member; and (iii) any
member of an affiliated service group within the meaning of Section 414(m) or
(o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause
(ii) above is, or was at any time within the five calendar years immediately
preceding the date hereof, a member.
"ERISA EVENT" means (i) a "reportable event" within the
meaning of Section 4043 of ERISA and the regulations issued thereunder with
respect to any Pension Plan (excluding those for which the provision for 30-day
notice to the PBGC has been waived by regulation); (ii) the failure to meet the
minimum funding standard of Section 412 of the Internal Revenue Code with
respect to any Pension Plan (whether or not waived in accordance with Section
412(d) of the Internal Revenue Code) or the failure to make by its due date a
required installment under Section 412(m) of the Internal Revenue Code with
respect to any Pension Plan or the failure to make any required contribution to
a Multiemployer Plan; (iii) the provision by the administrator of any Pension
Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate
such plan in a distress termination described in Section 4041(c) of ERISA; (iv)
the withdrawal by any of the Loan Parties or any of their respective ERISA
Affiliates from any Pension Plan with two or more contributing sponsors or the
termination of any such Pension Plan resulting in liability pursuant to Section
4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to
terminate any Pension Plan, or the occurrence of any event or condition which
might reasonably be expected to constitute grounds under ERISA for the
termination of, or the appointment of a trustee to administer, any Pension
Plan; (vi) the imposition of liability on any of the Loan Parties or any of
their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA
or by reason of the application of Section 4212(c) of ERISA; (vii) the
withdrawal of any of the Loan Parties or any of their respective ERISA
Affiliates in a complete or partial withdrawal (within the meaning of Sections
4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential
liability therefor, or the receipt by any of the Loan Parties or any of their
respective ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that
it intends to terminate or has terminated under Section 4041A or 4042 of ERISA;
(viii) the occurrence of an act or omission which could reasonably be expected
to give rise to the imposition on any of the Loan Parties or any of their
respective ERISA Affiliates of fines, penalties, taxes or related charges under
Chapter 43 of the Internal Revenue Code or under Section 409 or 502(c), (i) or
(l), or 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the
assertion of a material claim (other than (a) routine claims for benefits, (b)
any claims (and any resulting liabilities) in an aggregate amount not exceeding
$3,500,000 (and then only to the extent of such excess) made by the United
Food and Commercial Workers Union Employees Benefit Fund for Southern
California, or any affected union, with respect to contributions allegedly
owed by Company to such fund as a result of Company's sale and closure in 1996
of certain of its operations in California, and (c) solely for the purpose of
subsection 8.10, claims (and any resulting
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liabilities) under or with respect to the Deferred Compensation Agreements to
the extent not in excess of $30,000,000 (and then only to the extent of such
excess) against any Employee Benefit Plan other than a Multiemployer Plan or
the assets thereof, or against any of the Loan Parties or any of their
respective ERISA Affiliates in connection with any Employee Benefit Plan; (x)
receipt from the Internal Revenue Service of notice of the failure of any
Pension Plan (or any other Employee Benefit Plan intended to be qualified
under Section 401(a) of the Internal Revenue Code) to qualify under Section
401(a) of the Internal Revenue Code, or the failure of any trust forming part
of any Pension Plan to qualify for exemption from taxation under Section 501(a)
of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to
Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA
with respect to any Pension Plan.
"EURODOLLAR RATE LOANS" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"EVENT OF DEFAULT" means each of the events set forth in
Section 8.
"EXCESS CALIFORNIA LAND" means Company's existing real
property holdings in the State of California which were being held by Company
for future development, and which sites are identified as such on Schedule
5.20C annexed hereto.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"EXCLUDED SITE" means, as of any date, provided that there
shall not then exist a Potential Event of Default or an Event of Default, all
of the following, excluding any fee interest in Real Property Assets on which
Agent shall have been granted a Lien in accordance with the terms hereof: (a)
any fee interest in undeveloped land acquired by Company or any of its
Subsidiaries for the development of a grocery store, so long as less than one
year has elapsed since the date such fee interest was first acquired by
Company or any of its Subsidiaries (the "Acquisition Date"), (b) any fee
interest in Real Property Assets owned by Company or any of its Subsidiaries
consisting of a grocery store under construction, so long as less than one year
has elapsed since the date such construction commenced, and (c) any fee
interest in a grocery store, the construction of which is complete, which fee
interest was not previously a Covered Real Property, so long as not more than
180 days has elapsed since the date of completion of such construction;
provided that the maximum length of time that a property may be characterized
as an Excluded Site is two years from its Acquisition Date; provided further
that if on any date there are more than five (5) properties that meet the
foregoing definition of "Excluded Site", only the five (5) such properties with
the earliest Acquisition Dates (and on which Agent shall not have been granted
a Lien in accordance with the terms hereof) shall constitute "Excluded Sites".
"Excluded Site" shall also include as of the Closing Date any Real Property
Asset identified as such on Schedule 4.1I annexed hereto which Company or any
of its Subsidiaries are in the
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process of selling, subleasing or otherwise disposing of such Real Property
Asset; provided that any such Real Property Asset shall cease to be an
"Excluded Site" if not so sold or leased within 120 days of the Closing Date.
"EXISTING COMPANY CREDIT LINES" means those certain unsecured
credit lines between Company and certain financial institutions, in the maximum
aggregate committed amount of $100,000,000.
"EXISTING COMPANY IRB'S" means Company's (i) $2,850,000 in
initial aggregate principal amount of 8.85% Industrial Development Revenue
Bonds (Smith's Food King Properties, Inc. Project) due 2000 (the "BRIGHAM CITY
BONDS"), (ii) $2,470,000 in initial aggregate principal amount of Industrial
Development Revenue Bonds, Series 1985 due 2010 (the "NORTH OGDEN BONDS") and
(iii) $3,800,000 in initial aggregate principal amount of Industrial
Development Revenue Bonds, Series 1985 (Provo-Smith's Associates Project) due
2010 (the "PROVO BONDS"), in each case issued pursuant to the applicable
Existing Company IRB Indenture.
"EXISTING COMPANY IRB INDENTURES" means (i) the Indenture of
Trust dated September 1, 1980 between Brigham City, Utah, and First Security
Bank of Utah, N.A., as trustee, pursuant to which the Brigham City Bonds were
issued, (ii) the Indenture of Trust dated as of December 1, 1985 between North
Ogden City, Utah, and Zions First National Bank, as trustee, pursuant to which
the North Ogden Bonds were issued, and (iii) the Indenture of Trust dated as
of December 1, 1985 between Provo City, Utah, and Zions First National Bank,
as trustee, pursuant to which the Provo Bonds were issued, in each case as
amended prior to the Closing Date.
"EXISTING LETTERS OF CREDIT" means the Letters of Credit
listed in Schedule 3.1C annexed hereto.
"EXISTING MANAGEMENT STOCK OPTIONS" means the outstanding
stock options granted to certain employees of Company under Company's 1989
Stock Option Plan prior to the Closing Date, as set forth on Schedule 4.2 to
the Recapitalization and Merger Agreement, which, upon payment of an exercise
price of $19 per share, are exercisable into an aggregate of approximately
1,700,000 shares of Company's Class B Common Stock.
"EXISTING SMITTY'S CREDIT AGREEMENT" means that certain Credit
Agreement dated as of June 29, 1994 among Smitty's, SSV Acquisition Sub, Inc.,
Smitty's Super Valu, Inc., Chase, as agent, and other financial institutions
named therein, as amended prior to the Closing Date.
"EXISTING SMITTY'S DISCOUNT DEBENTURES" means Smitty's
$29,025,000 in initial aggregate face amount ($19,300,000 in estimated accreted
value on the Closing
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Date) of 13.75% Senior Discount Debentures due 2006 issued pursuant to the
Existing Smitty's Discount Debenture Indenture.
"EXISTING SMITTY'S DISCOUNT DEBENTURE INDENTURE" means the
indenture dated as of June 15, 1994, between Smitty's and United States Trust
Company of New York, as trustee, pursuant to which the Existing Smitty's
Discount Debentures were issued, as amended on or prior to the Closing Date,
including without limitation the supplemental indenture thereto executed
pursuant to and as described in Smitty's Debt Purchase Offers (such
supplemental indenture being the "Smitty's Discount Debenture Supplement").
"EXISTING SMITTY'S SINKING FUND BONDS" means $13,000,000 in
initial aggregate principal amount of 10.50% First Mortgage Sinking Fund Bonds,
Series 1986 due July 31, 2016 issued by Saint Lawrence Holding Company pursuant
to the Existing Smitty's Sinking Fund Bond Indenture, as such bonds may be
amended from time to time to the extent permitted under subsection 7.15B.
"EXISTING SMITTY'S SINKING FUND BOND INDENTURE" means the
indenture dated as of July 16, 1986 between Saint Lawrence Holding Company and
First Interstate Bank of Arizona, N.A., as trustee, as supplemented by that
certain First Supplemental Indenture dated as of July 16, 1986 by and between
Saint Lawrence Holding Company and First Interstate Bank of Arizona, N.A., as
trustee, pursuant to which the Existing Smitty's Sinking Fund Bonds were
issued, as amended prior to the Closing Date and as such indenture may be
amended from time to time to the extent permitted under subsection 7.15B.
"EXISTING SMITTY'S SUBORDINATED NOTES" means the $50,000,000
in initial aggregate principal amount of 12.75% Senior Subordinated Notes due
2004 issued by Smitty's Super Valu, Inc. pursuant to the Existing Smitty's
Subordinated Note Indenture.
"EXISTING SMITTY'S SUBORDINATED NOTE INDENTURE" means the
indenture dated as of June 15, 1994, among Smitty's Super Valu, Inc., Saint
Lawrence Holding Company, as subsidiary guarantor, and United States Trust
Company of New York, as trustee, pursuant to which the Existing Smitty's
Subordinated Notes were issued, as amended on or prior to the Closing Date,
including without limitation the supplemental indenture thereto executed
pursuant to and as described in Smitty's Debt Purchase Offers (such
supplemental indenture being the "Smitty's Subordinated Note Supplement").
"FACILITIES" means any and all real property (including,
without limitation, all buildings, fixtures or other improvements located
thereon) now, hereafter or heretofore owned, leased, operated or used by
Company or any of its Subsidiaries or any of their respective predecessors or
Affiliates.
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"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the quotations
for such day on such transactions received by Agent from three Federal funds
brokers of recognized standing selected by Agent.
"FINANCIAL PLAN" has the meaning assigned to that term in
subsection 6.1(xiii).
"FISCAL PERIOD" means a fiscal period of Company and its
Subsidiaries, consisting of a four-week period or five-week period, as the case
may be.
"FISCAL QUARTER" means a fiscal quarter of Company and its
Subsidiaries, consisting of a 13-week period or, in the case of the first
Fiscal Quarter of any Fiscal Year which has 53 weeks, a 14-week period.
"FISCAL YEAR" means the fiscal year of Company and its
Subsidiaries, consisting of a 52- or 53-week period, ending on the date which
is the Saturday closest to December 31.
"FLOOD HAZARD PROPERTY" means a Mortgaged Property located in
an area designated by the Federal Emergency Management Agency as having special
flood or mud slide hazards.
"FUNDED DEBT", as applied to any Person, means all
Indebtedness of that Person which by its terms or by the terms of any
instrument or agreement relating thereto matures more than one year from, or is
directly renewable or extendable at the option of the debtor to a date more
than one year from (including an option of the debtor under a revolving credit
or similar agreement obligating the lender or lenders to extend credit over a
period of one year or more from), the date of the creation thereof.
"FUNDING AND PAYMENT OFFICE" means (i) the office of Agent and
Swing Line Lender located at One Bankers Trust Plaza, 130 Liberty Street, New
York, New York 10006 or (ii) such other office of Agent and Swing Line Lender
as may from time to time hereafter be designated as such in a written notice
delivered by Agent and Swing Line Lender to Company and each Lender.
"FUNDING DATE" means the date of the funding of a Loan.
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"GAAP" means, subject to the limitations on the application
thereof set forth in subsection 1.2, generally accepted accounting principles
set forth in opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of determination.
"GOVERNMENTAL AUTHORIZATION" means any permit, license,
authorization, plan, directive, consent order or consent decree of or from any
federal, state or local governmental authority, agency or court.
"HAZARDOUS MATERIALS" means (i) any chemical, material or
substance at any time defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
waste", "restricted hazardous waste", "infectious waste", "toxic substances",
"pollutant", "contaminant" or any formulations intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity,
"TCLP toxicity" or "EP toxicity" or words of similar import under any
applicable Environmental Laws or publications promulgated pursuant thereto;
(ii) any oil, petroleum, petroleum fraction or petroleum derived substance;
(iii) any drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (iv) any flammable substances or explosives; (v) any radioactive
materials; (vi) asbestos in any form; (vii) urea formaldehyde foam insulation;
(viii) electrical equipment which contains any oil or dielectric fluid
containing polychlorinated biphenyls; (ix) pesticides; and (x) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority or which may or could pose a hazard to
the health and safety of the owners, occupants or any Persons in the vicinity
of the Facilities.
"HAZARDOUS MATERIALS ACTIVITY" means any use, storage,
holding, existence, release (including any spilling, leaking, pumping, pouring,
emitting, emptying, dumping, disposing into the environment, and the continuing
migration into or through soil, surface water, or groundwater), emission,
discharge, generation, processing, abatement, removal, disposition, handling or
transportation to or from the Mortgaged Property or Covered Real Property, as
the case may be, of any Hazardous Materials from, under, in, into or on such
property or surrounding property, including, without limitation, the movement
or migration of any Hazardous Materials from surrounding property or
groundwater in, into or onto such property and any residual Hazardous Materials
contamination on or under such property.
"HEDGE AGREEMENT" means an Interest Rate Agreement or a
Currency Agreement designed to hedge against fluctuations in interest rates or
currency values, respectively.
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"INACTIVE SUBSIDIARY" means any Subsidiary of Company that
does not engage in any significant business activity and is designated as such
on Schedule 5.1 annexed hereto; provided, however, that all Inactive
Subsidiaries in the aggregate shall not own assets with an aggregate fair
market value in excess of $3,000,000 and shall not generate aggregate annual
revenues in excess of $3,000,000; and provided further that no Inactive
Subsidiary shall have any Subsidiary other than an Inactive Subsidiary.
"INDEBTEDNESS", as applied to any Person, means (i) all
indebtedness for borrowed money, (ii) that portion of obligations with respect
to Capital Leases that is properly classified as a liability on a balance sheet
in conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed
money, (iv) any obligation owed for all or any part of the deferred purchase
price of property or services (excluding any such obligations incurred under
ERISA), which purchase price is (a) due more than twelve months from the date
of incurrence of the obligation in respect thereof or (b) evidenced by a note
or similar written instrument, and (v) all indebtedness secured by any Lien on
any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person. Obligations under Interest Rate
Agreements and Currency Agreements constitute (X) in the case of Hedge
Agreements, Contingent Obligations, and (Y) in all other cases, Investments,
and in neither case constitute Indebtedness.
"INDEMNITEE" has the meaning assigned to that term in
subsection 10.3.
"INTELLECTUAL PROPERTY" means all patents, trademarks,
tradenames, copyrights, technology, know-how and processes used in or necessary
for the conduct of the business of Company and its Subsidiaries as currently
conducted that are material to the condition (financial or otherwise), business
or operations of Company or any of its Subsidiaries.
"INTEREST COVERAGE RATIO" means, as at any date of
determination, the ratio of (i) Consolidated Adjusted EBITDA to (ii)
Consolidated Cash Interest Expense for the four Fiscal Quarters ending as of
the last day of the Fiscal Quarter immediately preceding the Fiscal Quarter
during which such date of determination occurs except that if the date of
determination is the last day of a Fiscal Quarter, the four Fiscal Quarters
tested shall include the preceding three Fiscal Quarters and the Fiscal Quarter
then ending; provided that the Interest Coverage Ratio shall be calculated, for
any date of determination (i) on or prior to December 28, 1996, for the
one-Fiscal Quarter Period ending on September 28, 1996; (ii) on or prior to
April 5, 1997, for the two-Fiscal Quarter Period ending on December 28, 1996;
and (iii) on or prior to July 5, 1997, for the three-Fiscal Quarter Period
ending on April 5, 1997.
"INTEREST PAYMENT DATE" means (i) with respect to any Base
Rate Loan, each February 1, May 1, August 1 and November 1 of each year,
commencing on the
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first such date to occur after the Closing Date, and (ii) with respect to any
Eurodollar Rate Loan, the last day of each Interest Period applicable to such
Loan; provided that in the case of each Interest Period of longer than three
months "Interest Payment Date" shall also include each date that is three
months after the commencement of such Interest Period.
"INTEREST PERIOD" has the meaning assigned to that term in
subsection 2.2B.
"INTEREST RATE AGREEMENT" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement to which Company or any of its Subsidiaries is
a party.
"INTEREST RATE DETERMINATION DATE" means, with respect to any
Interest Period, the second Business Day prior to the first day of such
Interest Period.
"INTEREST RATE EXCHANGERS" means Lenders or Affiliates of
Lenders parties to the Interest Rate Agreements permitted under subsection
7.4(iii).
"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended to the date hereof and from time to time hereafter, and any
successor statute.
"INVENTORY" means, with respect to any Person as of any date
of determination, all goods, merchandise and other personal property which are
then held by such Person for sale or lease, including raw materials and work in
process.
"INVESTMENT" means (i) any direct or indirect purchase or
other acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (other than a Person that prior
to such purchase or acquisition was a wholly-owned Subsidiary of Company) or
(ii) any direct or indirect loan, advance (other than (x) advances to employees
for moving, entertainment and travel expenses, (y) loans to employees in
connection with purchase of a home upon relocation, (z) drawing accounts and
similar expenditures, in each case in the ordinary course of business) or
capital contribution by Company or any of its Subsidiaries to any other Person
(other than a wholly-owned Subsidiary of Company), including all indebtedness
and accounts receivable from that other Person that are not current assets or
did not arise from sales to that other Person in the ordinary course of
business. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.
"IP COLLATERAL" means, collectively, the Collateral under the
Trademark Security Agreements.
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"ISSUING LENDER" means, with respect to any Letter of Credit,
the Lender which agrees or is otherwise obligated to issue such Letter of
Credit, determined as provided in subsection 3.1B(ii).
"JOINT VENTURE" means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal form;
provided that in no event shall any corporate Subsidiary of any Person be
considered to be a Joint Venture to which such Person is a party.
"LC SUBSIDIARY" means any Subsidiary of Company or any of its
Subsidiaries which is a limited liability company, including without limitation
Sugarhouse Land Co., L.C. and Treasure Valley Land Company, L.C.
"LENDER" and "LENDERS" means the persons identified as
"Lenders" and listed on the signature pages of this Agreement, together with
their successors and permitted assigns pursuant to subsection 10.1, and the
term "Lenders" shall include Swing Line Lender unless the context otherwise
requires; provided that the term "Lenders", when used in the context of a
particular Commitment, shall mean Lenders having that Commitment.
"LETTER OF CREDIT" or "LETTERS OF CREDIT" means Commercial
Letters of Credit and Standby Letters of Credit issued or to be issued by
Issuing Lenders for the account of Company or any wholly-owned Subsidiary of
Company pursuant to subsection 3.1 and the Existing Letters of Credit.
"LETTER OF CREDIT USAGE" means, as at any date of
determination, the sum of (i) the maximum aggregate amount which is or at any
time thereafter may become available for drawing under all Letters of Credit
then outstanding plus (ii) the aggregate amount of all drawings under Letters
of Credit honored by Issuing Lenders and not theretofore reimbursed by Company
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B).
"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"LOAN" or "LOANS" means one or more of the Term Loans,
Revolving Loans or Swing Line Loans or any combination thereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the
Subsidiary Guaranty, the Collateral Documents and the Letters of Credit (and
any applications for,
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<PAGE> 35
or reimbursement agreements or other documents or certificates executed by
Company in favor of an Issuing Lender relating to, the Letters of Credit).
"LOAN PARTY" means each of Company and any of Company's
Subsidiaries from time to time executing a Loan Document, and "LOAN PARTIES"
means all such Persons, collectively.
"MANAGEMENT AGREEMENT" means that certain Management Services
Agreement dated as of May 23, 1996 between Company and Yucaipa in the form
delivered to Agent prior to the execution of this Agreement and as it may be
amended from time to time thereafter to the extent permitted under subsection
7.15A.
"MARGIN DETERMINATION CERTIFICATE" means an Officers'
Certificate of Company delivered with the financial statements required
pursuant to subsection 6.1(ii) or 6.1(iii) setting forth in reasonable detail
the Interest Coverage Ratio which is applicable as of the date on which such
Officers' Certificate is delivered and the aggregate principal amount of
outstanding Term Loans as of the date which corresponds to the date of
determination of such Interest Coverage Ratio.
"MARGIN STOCK" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as in
effect from time to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect
upon the business, operations, properties, assets, condition (financial or
otherwise) or prospects of Company and its Subsidiaries, taken as a whole, or
(ii) the material impairment of the ability of any Loan Party to perform, or
the impairment of the ability of Agent or Lenders to enforce, the Obligations
or any of the Loan Documents.
"MERGER" means the merger of Merger Sub with and into Smitty's
in accordance with the terms of the Recapitalization and Merger Agreement, with
Smitty's being the surviving corporation in such Merger.
"MERGER SUB" means Cactus Acquisition, Inc., a Delaware
corporation and a wholly-owned Subsidiary of Company existing prior to the
Merger.
"MORTGAGE" means any deed of trust, mortgage, security
agreement and fixture filing relating to any fee or leasehold interest of any
Loan Party in real property, which shall be substantially in the form of
Exhibit XVIII annexed hereto, in each case (i) with appropriate insertions and
deletions based upon the nature of the real property interest (i.e., fee or
leasehold) to be encumbered thereby and (ii) containing such schedules and
including such additional provisions and other deviations from such Exhibit as
are satisfactory to Agent and not inconsistent with the provisions of
subsection 6.9 or as are necessary to conform such Exhibit to applicable local
law, and which shall be dated the date of delivery thereof and made by such
Loan Party as trustor or
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mortgagor, as the case may be, in favor of Agent, as beneficiary or mortgagee,
delivered for the purpose of securing all Obligations hereunder, as the same
may be amended, supplemented or otherwise modified from time to time.
"MORTGAGED PROPERTY" has the meaning assigned to that term in
subsection 4.1I.
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is
a "multiemployer plan" as defined in Section 3(37) of ERISA.
"NET ASSET SALE PROCEEDS" means, with respect to any Asset
Sale, Cash payments (including any Cash received by way of deferred payment
pursuant to, or by monetization of, a note receivable or otherwise, but only as
and when so received) received from such Asset Sale, net of any bona fide
direct costs incurred in connection with such Asset Sale, including without
limitation (i) income taxes reasonably estimated to be actually payable within
two years of the date of such Asset Sale as a result of any gain recognized in
connection with such Asset Sale and (ii) payment of the outstanding principal
amount of, premium or penalty, if any, and interest on any Indebtedness (other
than the Loans) that is secured by a Lien on the stock or assets in question
and that is required to be repaid under the terms thereof as a result of such
Asset Sale.
"NON-RECOURSE INDEBTEDNESS" means, as applied to any Person,
all Indebtedness of that Person secured by Liens on specified assets of that
Person under the terms of which (i) no recourse may be had against that or any
other Person for the payment of the principal of or interest or premium on such
Indebtedness or for any claim based thereon; provided that if such Person is an
entity formed for the sole purpose of owning and/or developing one or more
store sites or other real property and owns no assets other than those subject
to the Lien by the lender of such Indebtedness and conducts no business other
than owning such asset, recourse may be had against such Person; and (ii) the
enforcement of all obligations relating to such Indebtedness is limited to
foreclosure or other actions with respect to such specified assets, in each
case other than customary exceptions for fraud, waste or environmental
indemnification.
"NOTE OFFERING MATERIALS" means the Registration Statement of
Company on Form S-3 (Registration No. 33-333-01601) filed with the Securities
and Exchange Commission on March 8, 1996, with exhibits thereto, as amended by
Amendment No. 1 thereto filed with the Securities and Exchange Commission on
April 17, 1996, with exhibits thereto; as amended by Amendment No. 2 thereto
filed with the Securities and Exchange Commission on April 26, 1996, with
exhibits thereto and as amended by Amendment No. 3 thereto filed with the
Securities and Exchange Commission on May 6, 1996, with exhibits thereto, as
amended by Amendment No. 4 thereto filed with the Securities and Exchange
Commission on May 14, 1996, with exhibits thereto, and as amended by Amendment
No. 5 thereto filed with the Securities and Exchange Commission on May 16,
1996, with exhibits thereto.
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"NOTES" means one or more of the Tranche A Term Notes, Tranche
B Term Notes, Tranche C Term Notes, Tranche D Term Notes, Revolving Notes or
Swing Line Note or any combination thereof.
"NOTICE OF BORROWING" means a notice substantially in the form
of Exhibit I annexed hereto delivered by Company to Agent pursuant to
subsection 2.1B with respect to a proposed borrowing.
"NOTICE OF CONVERSION/CONTINUATION" means a notice
substantially in the form of Exhibit II annexed hereto delivered by Company to
Agent pursuant to subsection 2.2D with respect to a proposed conversion or
continuation of the applicable basis for determining the interest rate with
respect to the Loans specified therein.
"NOTICE OF ISSUANCE OF LETTER OF CREDIT" means a notice
substantially in the form of Exhibit III annexed hereto delivered by Company to
Agent pursuant to subsection 3.1B(i) with respect to the proposed issuance of a
Letter of Credit.
"OBLIGATIONS" means all obligations of every nature of each
Loan Party from time to time owed to Agent, Lenders or any of them under the
Loan Documents, whether for principal, interest, reimbursement of amounts drawn
under Letters of Credit, fees, expenses, indemnification or otherwise.
"OFFICERS' CERTIFICATE" means, as applied to any corporation,
a certificate executed on behalf of such corporation by its chairman of the
board (if an officer) or its president or one of its executive or senior vice
presidents and by its chief financial officer or its treasurer; provided that
every Officers' Certificate with respect to the compliance with a condition
precedent to the making of any Loans hereunder shall include (i) a statement
that the officer or officers making or giving such Officers' Certificate have
read such condition and any definitions or other provisions contained in this
Agreement relating thereto, (ii) a statement that, in the opinion of the
signers, they have made or have caused to be made such examination or
investigation as is necessary to enable them to express an informed opinion as
to whether or not such condition has been complied with, and (iii) a statement
as to whether, in the opinion of the signers, such condition has been complied
with; and provided further that any Officers' Certificate required pursuant to
subsection 2.4B(iii) may be executed by any one of the officers referred to in
this definition.
"OPERATING LEASE" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the lessee at
any time) of any property (whether real, personal or mixed) that is not a
Capital Lease other than any such lease under which that Person is the lessor.
"OWNER TRUSTEE" means State Street Bank & Trust Company, as
owner trustee under the Smith's Food & Drug Centers, Inc. 1994-A Pass Through
Trusts.
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"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue
Code or Section 302 of ERISA.
"PERMITTED ENCUMBRANCES" means the following types of Liens
(excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of
the Internal Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges
or claims the payment of which is not, at the time, required by
subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens of
banks and rights of set-off, statutory Liens of carriers,
warehousemen, mechanics, repairmen, workmen, materialmen and of
growers on Inventory consisting of agricultural products, and other
Liens imposed by law, in each case incurred in the ordinary course of
business (a) for amounts not yet overdue or (b) for amounts that are
overdue and that (in the case of any such amounts overdue for a period
in excess of 5 days) are being contested in good faith by appropriate
proceedings, so long as (1) such reserves or other appropriate
provisions, if any, as shall be required by GAAP shall have been made
for any such contested amounts, and (2) in the case of a Lien with
respect to any portion of the Collateral, such contest proceedings
conclusively operate to stay the sale of any portion of the Collateral
on account of such Lien;
(iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government contracts, trade contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money), so long
as no foreclosure, sale or similar proceedings have been commenced
with respect to any portion of the Collateral on account thereof;
(iv) any attachment or judgment Lien not constituting an
Event of Default under subsection 8.8;
(v) licenses, concession agreements, leases or subleases
entered into with or granted to third parties in accordance with any
applicable terms of the Collateral Documents and not interfering in
any material respect with the ordinary conduct of the business of
Company or any of its Subsidiaries or resulting in a material
diminution in the value of any Collateral as security for the
Obligations;
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(vi) easements, rights-of-way, restrictions,
encroachments, and other minor defects or irregularities in title, in
each case which do not and will not interfere in any material respect
with the ordinary conduct of the business of Company or any of its
Subsidiaries or result in a material diminution in the value of any
Collateral as security for the Obligations;
(vii) any (a) interest or title of a lessor or sublessor
(other than any Loan Party) under any lease permitted by subsection
7.9, (b) restriction or encumbrance that the interest or title of such
lessor or sublessor may be subject to (including without limitation
ground leases or other prior leases of the demised premises,
mortgages, mechanics liens, tax liens and easements), or (c)
subordination of the interest of the lessee or sublessee under such
lease to any restriction or encumbrance referred to in the preceding
clause (b);
(viii) Liens arising from filing UCC financing statements
relating solely to leases permitted by this Agreement;
(ix) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in
connection with the importation of goods;
(x) any zoning or similar law or right reserved to or
vested in any governmental office or agency (including, without
limitation, rights granted under redevelopment or financial assistance
agreements with redevelopment agencies) to control or regulate the use
of any real property;
(xi) Liens securing obligations (other than obligations
representing Indebtedness for borrowed money) under operating,
reciprocal easement or similar agreements entered into in the ordinary
course of business of Company and its Subsidiaries; and
(xii) licenses of patents, trademarks and other
intellectual property rights granted by Company or any of its
Subsidiaries in the ordinary course of business and not interfering in
any material respect with the ordinary conduct of the business of
Company or such Subsidiary.
"PERMITTED HOLDERS" means (i) Yucaipa or any entity controlled
thereby or any of the partners thereof, (ii) the Smith's Group or (iii) any of
the Permitted Transferees.
"PERMITTED TRANSFEREES" means, with respect to any Person, (i)
any Affiliate of such Person, (ii) the heirs, executors, administrators,
testamentary trustees, legatees or beneficiaries of any such Person or (iii) a
trust, the beneficiaries of which, or a corporation or partnership, the
stockholders or general or limited partners of which,
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include only such Person or his or her spouse or lineal descendants, in each
case to whom such Person has transferred the beneficial ownership of any
Securities of Company.
"PERSON" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability companies,
limited liability partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
(whether federal, state or local, domestic or foreign, and including political
subdivisions thereof) and agencies or other administrative or regulatory bodies
thereof.
"PLEDGE AGREEMENT" means each Pledge Agreement executed and
delivered by Company and Subsidiaries of Company (other than the Inactive
Subsidiaries) on the Closing Date and to be executed and delivered by
Subsidiaries of Company from time to time in accordance with subsection 6.8,
each substantially in the form of Exhibit XIV annexed hereto, as such Pledge
Agreement may thereafter be amended, supplemented or otherwise modified from
time to time and "Pledge Agreements" means all such Pledge Agreements,
collectively.
"PLEDGED COLLATERAL" means, collectively, the "Pledged
Collateral" as defined in the Pledge Agreements.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that,
after notice or lapse of time or both, would constitute an Event of Default.
"PREFERRED STOCK" means the Redeemable Preferred Stock of
Company.
"PRIME RATE" means the rate that Bankers announces from time
to time as its prime lending rate, as in effect from time to time. The Prime
Rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer. Bankers or any other Lender may make
commercial loans or other loans at rates of interest at, above or below the
Prime Rate.
"PRO RATA SHARE" means, on any date of determination, (i) with
respect to all payments, computations and other matters relating to a Type of
Term Loan Commitment or a Type of Term Loan of any Lender, the percentage
obtained by dividing (x) the Term Loan Exposure of such Type of that Lender on
such date by (y) the aggregate Term Loan Exposure of such Type of all Lenders
on such date, (ii) with respect to all payments, computations and other matters
relating to the Revolving Loan Commitment or the Revolving Loans of any Lender
or any Letters of Credit issued or participations therein purchased by any
Lender or any participations in any Swing Line Loans purchased by any Lender,
the percentage obtained by dividing (x) the Revolving Loan Exposure of that
Lender on such date by (y) the aggregate
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Revolving Loan Exposure of all Lenders on such date, and (iii) for all other
purposes with respect to each Lender, the percentage obtained by dividing (x)
the sum of the Term Loan Exposure of all Types of that Lender on such date plus
the Revolving Loan Exposure of that Lender on such date by (y) the sum of the
aggregate Term Loan Exposure of all Types of all Lenders on such date plus the
aggregate Revolving Loan Exposure of all Lenders on such date, in any such case
as the applicable percentage may be adjusted by assignments permitted pursuant
to subsection 10.1. The initial Pro Rata Share of each Lender for purposes of
the preceding sentence is set forth opposite the name of that Lender in
Schedule 2.1 annexed hereto.
"PROXY STATEMENT" means a proxy statement and form of proxy in
connection with the votes of the stockholders of Company with respect to (i)
the Recapitalization and Merger Agreement and the transactions contemplated
thereby, including the issuance of its Class B Common Stock to the existing
shareholders of Smitty's in connection with the Acquisition and the Equity
Tender Offer, (ii) Company's Amended and Restated Certificate of Incorporation,
(iii) election of the Board of Directors of Company and (iv) ratification of
selection of Company's independent auditors for 1996, together with any
amendments thereof or supplements thereto, in the form or forms mailed to
Company's stockholders.
"PTO" means the United States Patent and Trademark Office or
any successor or substitute office in which filings are necessary or, in the
opinion of Agent, desirable in order to create or perfect Liens on any IP
Collateral.
"PUBLIC OFFERING" means the issuance of up to $575,000,000 in
initial aggregate principal amount of Senior Subordinated Notes in a public
offering registered under the Securities Act and as described in the Prospectus
dated May 16, 1996.
"REAL PROPERTY ASSET" means, at any time of determination, any
interest in land, buildings, improvements and fixtures attached thereto or used
in the operation thereof, then owned or leased (as lessee) by any Loan Party.
"RECAPITALIZATION AND MERGER AGREEMENT" means that certain
Recapitalization Agreement and Plan of Merger dated as of January 29, 1996 by
and among Company, Merger Sub, Smitty's and Yucaipa, as amended prior to the
Closing Date and in the form delivered to Agent and Lenders prior to their
execution of this Agreement.
"REDEEMABLE PREFERRED STOCK" means Series I Preferred Stock of
Company, par value $.01 per share, with the terms set forth in Company's
Articles of Incorporation in effect prior to the Closing Date.
"REFERENCE LENDERS" means Bankers and Chase.
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"REFUNDED SWING LINE LOANS" has the meaning assigned to that
term in subsection 2.1A(vi).
"REGIONAL DIVISION" means each of the regional divisions
designated by the management of Company for internal reporting purposes
consistent with past practices of Company, and which in any event shall be
captioned as (i) Utah-Idaho, (ii) Phoenix, (iii) Tucson, (iv) Albuquerque and
(v) Las Vegas.
"REGISTER" has the meaning assigned to that term in subsection
2.1D.
"REGISTRATION RIGHTS AGREEMENT" means that certain
Registration Rights Agreement dated as of May 23, 1996 by and among Company and
holders of Company's Common Stock named therein in the form delivered to Agent
prior to the execution of this Agreement and as it may be amended from time to
time thereafter to the extent permitted under subsection 7.15A.
"REGULATION D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"REIMBURSEMENT DATE" has the meaning assigned to that term in
subsection 3.3B.
"RELATED AGREEMENTS" means, collectively, the Recapitalization
and Merger Agreement, the Equity Tender Offer Materials, the Note Offering
Materials, the Proxy Statement, the Restated Certificate of Incorporation of
Company as filed with the Secretary of State of the State of Delaware on the
Closing Date, the Senior Subordinated Note Indenture, the Smitty's Discount
Debenture Supplement, the Smitty's Subordinated Note Supplement, the
Registration Rights Agreement, the Smitty's Stockholders' Agreement, the
Standstill Agreement, the Management Agreement, the Yucaipa Warrant and Smith's
Shareholder Agreement and all other agreements or instruments delivered
pursuant to or in connection with any of the foregoing.
"RELATED ASSETS" means any of the properties located in
California and leased by Company from Owner Trustee which properties are
designated as obsolete, uneconomic for use or surplus to Company's needs by
Company and are transferred to Company or a third party to effect the sale of
such properties pursuant to subsection 7.1(viii) or subsection 7.7(xi).
"RELATED FINANCING DOCUMENTS" means the Senior Subordinated
Note Indenture, the Existing Smitty's Subordinated Note Indenture, the Existing
Smitty's Discount Debenture Indenture and all other agreements or instruments
delivered pursuant to or in connection with any of the foregoing, including any
purchase agreements or registration rights agreements.
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"RELEASE" means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the indoor or
outdoor environment (including, without limitation, the abandonment or disposal
of any barrels, containers or other closed receptacles containing any Hazardous
Materials), or into or out of any Facility, including the movement of any
Hazardous Material through the air, soil, surface water, groundwater or
property.
"REPLACED LENDER" has the meaning assigned to such term in
subsection 2.9.
"REPLACEMENT LENDER" has the meaning assigned to such term in
subsection 2.9.
"REQUISITE CLASS LENDERS" means, at any time, (i) for the
Class of Lenders having Tranche A Term Loan Exposure and/or Revolving Loan
Exposure, Lenders having or holding at least 66 and 2/3% of the sum of the
aggregate Tranche A Term Loan Exposure of all Lenders plus the aggregate
Revolving Loan Exposure of all Lenders, and, (ii) for the Class of Lenders
having Tranche B Term Loan Exposure, Tranche C Term Loan Exposure and/or
Tranche D Term Loan Exposure, Lenders having or holding at least 66 and 2/3%
of the sum of the aggregate Tranche B Term Loan Exposure of all Lenders plus
the aggregate Tranche C Term Loan Exposure of all Lenders plus the aggregate
Tranche D Term Loan Exposure of all Lenders.
"REQUISITE LENDERS" means Lenders having or holding a majority
of the sum of the aggregate Tranche A Term Loan Exposure of all Tranche A Term
Lenders plus the aggregate Tranche B Term Loan Exposure of all Tranche B Term
Lenders plus the aggregate Tranche C Term Loan Exposure of all Tranche C Term
Lenders plus the aggregate Tranche D Term Loan Exposure of all Tranche D Term
Lenders plus the aggregate Revolving Loan Exposure of all Revolving Lenders.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Company now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of Company now
or hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Company now or hereafter outstanding, and (iv)
any payment or prepayment of principal of, premium, if any, or interest on, or
redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any Subordinated
Indebtedness.
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"RESTRUCTURING CHARGES" means, for any period which ends
subsequent to the Closing Date, the sum (without duplication) of (i) costs
incurred by Company and its Subsidiaries with respect to the integration of the
operations of Company and its Subsidiaries with the operations of Smitty's and
its Subsidiaries; provided that the aggregate amount of such cash and non-cash
charges and costs that are excluded from Consolidated Net Income under clause
(v) of the definition thereof and that are included in Consolidated Net Worth
under clause (iii) of the definition thereof for all periods shall not exceed
$15,000,000; (ii) non-cash charges and costs reserved for as a result of
adjustments to recognize expenses incurred in connection with the Deferred
Compensation Agreements; provided that the aggregate amount of all such
non-cash charges and costs that are excluded from Consolidated Net Income under
clause (v) of the definition thereof and that are included in Consolidated Net
Worth under clause (iii) of the definition thereof for all periods shall not
exceed $30,000,000; (iii) cash and non-cash severance charges relating to the
termination of employment of certain senior members of the management of
Company in connection with the Transactions which is undertaken within 24
months thereafter; provided that the aggregate amount of all such cash
severance charges that are excluded from Consolidated Net Income under clause
(v) of the definition thereof and that are included in Consolidated Net Worth
under clause (iii) of the definition thereof for all periods shall not exceed
$5,000,000 and the aggregate amount of all such cash and non-cash severance
charges that are so excluded from Consolidated Net Income or included in
Consolidated Net Worth shall not exceed $10,000,000; (iv) non-cash charges
representing additions to reserves for insurance liabilities required to be
made as a result of an actuarial review of Company's insurance liabilities in
connection with the Transactions; provided that the aggregate amount of such
non-cash charges that are excluded from Consolidated Net Income under clause
(v) of the definition thereof and that are included in Consolidated Net Worth
under clause (iii) of the definition thereof for all periods shall not exceed
$5,000,000; and (v) cash and non-cash restructuring charges and/or non-cash FAS
121 charges incurred by Company and its Subsidiaries with respect to the
write-down or write-off of Excess California Land or California Stores
subsequent to the Closing Date, including the write-down or write-off of prior
tax benefits associated therewith; provided that the aggregate amount of cash
charges that are excluded from Consolidated Net Income under clause (v) of the
definition thereof and that are included in Consolidated Net Worth under clause
(iii) of the definition thereof for all periods shall not exceed $65,000,000
and that such cash charges relate to payments to be made during the twenty-year
period following the Closing Date.
"REVOLVING LOAN COMMITMENT" means the commitment of a Lender
to make Revolving Loans to Company pursuant to subsection 2.1A(v), to issue
and/or purchase participations in Letters of Credit pursuant to Section 3 and
to purchase participations in Swing Line Loans pursuant to subsection 2.1A(vi),
and "REVOLVING LOAN COMMITMENTS" means such commitments of all Lenders in the
aggregate.
"REVOLVING LOAN COMMITMENT TERMINATION DATE" means August 31,
2002.
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"REVOLVING LOAN EXPOSURE" means, with respect to any Lender as
of any date of determination (i) prior to the termination of the Revolving Loan
Commitments, that Lender's Revolving Loan Commitment and (ii) after the
termination of the Revolving Loan Commitments, the sum of (a) the aggregate
outstanding principal amount of the Revolving Loans of that Lender plus (b) in
the event that Lender is an Issuing Lender, the aggregate Letter of Credit
Usage in respect of all Letters of Credit issued by that Lender (in each case
net of any funded participations purchased by other Lenders in such Letters of
Credit or any unreimbursed drawings thereunder) plus (c) the aggregate amount
of all funded participations purchased by that Lender in any outstanding
Letters of Credit or any unreimbursed drawings under any Letters of Credit plus
(d) in the case of Swing Line Lender, the aggregate outstanding principal
amount of all Swing Line Loans (net of any funded participations therein
purchased by other Lenders) plus (e) the aggregate amount of all funded
participations purchased by that Lender in any outstanding Swing Line Loans.
"REVOLVING LOANS" means the Loans made by Lenders to Company
pursuant to subsection 2.1A(v).
"REVOLVING NOTES" means (i) the promissory notes of Company
issued pursuant to subsection 2.1E(v) on the Closing Date and (ii) any
promissory notes issued by Company pursuant to the last sentence of subsection
10.1B(i) in connection with assignments of the Revolving Loan Commitments and
Revolving Loans of any Lenders, in each case substantially in the form of
Exhibit V annexed hereto, as they may be amended, supplemented or otherwise
modified from time to time.
"SECURITIES" means any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, and any successor statute.
"SECURITY AGREEMENT" means each Security Agreement executed
and delivered by Company and Subsidiaries of Company (other than the Inactive
Subsidiaries) on the Closing Date and to be executed and delivered by
Subsidiaries of Company from time to time in accordance with subsection 6.8,
each substantially in the form of Exhibit XV annexed hereto, as each such
Security Agreement may thereafter be amended, supplemented or otherwise
modified from time to time and "Security Agreements" means all such Security
Agreements, collectively.
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"SENIOR DEBT INDENTURES" means any or all of (i) the Existing
Smitty's Sinking Fund Bond Indenture and (ii) indentures pursuant to which the
mortgage notes listed on Schedule 7.1 annexed hereto were issued, as amended
prior to the Closing Date and as such may be amended from time to time to the
extent permitted under subsection 7.15B.
"SENIOR INDEBTEDNESS" means any or all of the Existing
Smitty's Sinking Fund Bonds, the mortgage notes listed on Schedule 7.1 annexed
hereto and Indebtedness permitted pursuant to subsection 7.1(viii).
"SENIOR SUBORDINATED NOTES" means up to $575,000,000 in
initial aggregate principal amount of 11 1/4% Senior Subordinated Notes due
2007 of Company issued pursuant to the Senior Subordinated Note Indenture, as
such notes may be amended from time to time to the extent permitted under
subsection 7.15B.
"SENIOR SUBORDINATED NOTE INDENTURE" means the indenture dated
as of May 23, 1996 between Company and Fleet National Bank of Connecticut, as
Trustee, pursuant to which the Senior Subordinated Notes were issued, as such
indenture may be amended from time to time to the extent permitted under
subsection 7.15B.
"SMITH'S GROUP" means Jeffrey P. Smith, Richard D. Smith, Fred
L. Smith, Ida Smith, The Dee Glen Smith Marital Trust I, Trust for the Children
of Jeffrey Paul Smith, Trust for the Children of Richard Dee Smith, and Trust
for the Children of Fred Lorenzo Smith.
"SMITH'S SHAREHOLDER AGREEMENT" means that certain
Stockholders' Agreement dated as of May 23, 1996 by and among Smitty's, Jeffrey
P. Smith, Richard D. Smith, Fred L. Smith, Ida Smith, the Dee Glenn Smith
Marital Trust, Trust for the Children of Jeffrey Paul Smith, Trust for the
Children of Richard Dee Smith, and Trust for the Children of Fred Lorenzo
Smith, in the form delivered to Agent prior to the execution of this Agreement
and as it may be amended from time to time thereafter to the extent permitted
under subsection 7.15A.
"SMITTY'S" means Smitty's Supermarkets, Inc., a Delaware
corporation.
"SMITTY'S DEBT PURCHASE OFFERS" has the meaning assigned to
such term in the recitals to this Agreement.
"SMITTY'S DISCOUNT DEBENTURE SUPPLEMENT" has the meaning
assigned to such term in the definition of "Existing Smitty's Discount
Debenture Indenture."
"SMITTY'S EXISTING DEBT PREPAYMENTS" has the meaning assigned
to that term in the recitals to this Agreement.
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"SMITTY'S PRINCIPAL STOCKHOLDERS" means, collectively, the
investment partnerships which own shares in Smitty's for which Yucaipa acts as
the general partner.
"SMITTY'S STOCKHOLDERS' AGREEMENT" means that certain
Stockholders' Agreement dated as of January 29, 1996 by and among Company,
Smitty's Principal Stockholders and other stockholders of Smitty's named
therein, as amended prior to the Closing Date, in the form delivered to Agent
prior to the execution of this Agreement and as it may thereafter be amended
from time to time thereafter to the extent permitted under subsection 7.15A.
"SMITTY'S SUBORDINATED NOTE SUPPLEMENT" has the meaning
assigned to such term in the definition of "Existing Smitty's Subordinated Note
Indenture".
"SOLVENT" means, with respect to any Person, that as of the
date of determination both (A) (i) the then fair saleable value of the property
of such Person is (y) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (z) not less than the amount that
will be required to pay the probable liabilities on such Person's then existing
debts as they become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to such Person;
(ii) such Person's capital is not unreasonably small in relation to its
business or any contemplated or undertaken transaction; and (iii) such Person
does not intend to incur, or believe (nor should it reasonably believe) that it
will incur, debts beyond its ability to pay such debts as they become due; and
(B) such Person is "solvent" within the meaning given that term and similar
terms under applicable laws relating to fraudulent transfers and conveyances.
For purposes of this definition, the amount of any contingent liability at any
time shall be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"SPECIFIED MORTGAGE NOTES" means the approximately $15,400,000
in outstanding aggregate principal amount of Series II mortgage Indebtedness
listed on Schedule 7.1 annexed hereto, which Indebtedness is secured by
Company's facility #699 located in Tolleson, Arizona.
"STANDBY LETTER OF CREDIT" means any standby letter of credit
or similar instrument issued for the purpose of supporting (i) Indebtedness of
Company or any of its Subsidiaries in respect of industrial revenue or
development bonds or financings, (ii) workers' compensation liabilities of
Company or any of its Subsidiaries, (iii) the obligations of third party
insurers of Company or any of its Subsidiaries arising by virtue of the laws of
any jurisdiction requiring third party insurers, (iv) obligations with respect
to Capital Leases or Operating Leases of Company or any of its Subsidiaries,
and (v) performance, payment, deposit or surety obligations of Company or any
of its Subsidiaries, in any case if required by law or governmental rule or
regulation or in accordance with custom and practice in the industry; provided
that Standby Letters of
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Credit may not be issued for the purpose of supporting trade payables or any
Indebtedness constituting "antecedent debt" (as that term is used in Section
547 of the Bankruptcy Code).
"STANDSTILL AGREEMENT" means that certain Standstill Agreement
dated as of January 29, 1996 by and among Company, Yucaipa, the Smitty's
Principal Stockholders and certain stockholders of Company named therein, as
amended prior to the Closing Date in the form delivered to Agent prior to the
execution of this Agreement and as it may be amended from time to time
thereafter to the extent permitted under subsection 7.15A.
"SUBORDINATED INDEBTEDNESS" means the Indebtedness of Company
evidenced by the Senior Subordinated Notes and any other Indebtedness of
Company subordinated in right of payment to the Obligations pursuant to
documentation containing maturities, amortization schedules, covenants,
defaults, remedies, subordination provisions and other material terms in form
and substance satisfactory to Agent and Requisite Lenders.
"SUBSIDIARY" means, with respect to any Person, any
corporation, partnership, limited liability company, association, joint venture
or other business entity of which more than 50% of the total voting power of
shares of stock or other ownership interests entitled (without regard to the
occurrence of any contingency) to vote in the election of the Person or Persons
(whether directors, managers, trustees or other Persons performing similar
functions) having the power to direct or cause the direction of the management
and policies thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
"SUBSIDIARY GUARANTOR" means any Subsidiary of Company that
executes and delivers a counterpart of the Subsidiary Guaranty on the Closing
Date or from time to time thereafter pursuant to subsection 6.8.
"SUBSIDIARY GUARANTY" means the Subsidiary Guaranty executed
and delivered by existing Subsidiaries of Company (other than the Inactive
Subsidiaries) on the Closing Date and to be executed and delivered by
additional Subsidiaries of Company from time to time thereafter in accordance
with subsection 6.8, substantially in the form of Exhibit XVII annexed hereto,
as such Subsidiary Guaranty may hereafter be amended, supplemented or otherwise
modified from time to time.
"SUPPLEMENTAL COLLATERAL AGENT" has the meaning assigned to
that term in subsection 9.1D.
"SURPLUS LEASED PROPERTIES" means all of (i) the California
Stores in which Company owns a leasehold interest and (ii) the other Real
Property Assets in which
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Company or any of its Subsidiaries owns a leasehold interest and in which
Company and any of its Subsidiaries are not operating and are identified as
such on Schedule 5.20 annexed hereto.
"SURPLUS OWNED PROPERTIES" means all of (i) the California
Stores owned by Company, and (ii) the Real Property Assets owned by Company or
any of its Subsidiaries in which Company and any of its Subsidiaries are not
operating which are identified as such on Schedule 5.20 annexed hereto.
"SWING LINE LENDER" means Bankers, or any Person serving as a
successor Agent hereunder, in its capacity as Swing Line Lender hereunder.
"SWING LINE LOAN COMMITMENT" means the commitment of Swing
Line Lender to make Swing Line Loans to Company pursuant to subsection
2.1A(vi).
"SWING LINE LOANS" means the Loans made by Swing Line Lender
to Company pursuant to subsection 2.1A(vi).
"SWING LINE NOTE" means (i) the promissory note of Company
issued pursuant to subsection 2.1E(vi) on the Closing Date and (ii) any
promissory note issued by Company to any successor Agent and Swing Line Lender
pursuant to the last sentence of subsection 9.5B, in each case substantially in
the form of Exhibit VI annexed hereto, as it may be amended, supplemented or
otherwise modified from time to time.
"SYNDICATION AGENT" has the meaning assigned to that term in
the introductions to this Agreement.
"TAX" or "TAXES" means any present or future tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied, collected,
withheld or assessed; provided that "TAX ON THE OVERALL NET INCOME" of a Person
shall be construed as a reference to a tax imposed by the jurisdiction in which
that Person is organized or in which that Person's principal office (and/or, in
the case of a Lender, its lending office) is located or in which that Person
(and/or, in the case of a Lender, its lending office) is deemed to be doing
business on all or part of the net income, profits or gains (whether worldwide,
or only insofar as such income, profits or gains are considered to arise in or
to relate to a particular jurisdiction, or otherwise) of that Person (and/or,
in the case of a Lender, its lending office).
"TERM LOAN COMMITMENT" or "TERM LOAN COMMITMENTS" means such
commitments of Lenders in the aggregate to make the Term Loans pursuant to
subsection 2.1A in the aggregate.
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"TERM LOAN EXPOSURE" means, with respect to a Lender of a Type
of Term Loan as of any date of determination, (i) prior to the termination of
all of a Lender's Commitment with respect to the Term Loans of such Type, that
Lender's Term Loan Commitment of such Type (or any portion thereof that has not
been terminated) plus the outstanding principal amount of the Term Loan of such
Type of that Lender, and (ii) after the termination of all of a Lender's
Commitment with respect to the Term Loans of such Type, the outstanding
principal amount of the Term Loan of such Type of that Lender.
"TERM LOANS" means one or more of the Tranche A Term Loans,
the Tranche B Term Loans, the Tranche C Term Loans or the Tranche D Term Loans.
"TERM NOTES" means (i) the promissory notes of Company
evidencing the Term Loans of a Type of Term Loan issued pursuant to subsection
2.1E on the Closing Date, and (ii) any promissory notes issued by Company
pursuant to the last sentence of subsection 10.1B(i) in connection with
assignments of the Term Loan Commitments of such Type or of the Term Loans of
such Type, in each case substantially in the form of Exhibit IV-A annexed
hereto in the case of Tranche A Term Loans (the "Tranche A Term Note"), Exhibit
IV-B annexed hereto in the case of Tranche B Term Loans (the "Tranche B Term
Note"), Exhibit IV-C annexed hereto in the case of Tranche C Term Loans (the
"Tranche C Term Note") and Exhibit IV-D annexed hereto in the case of Tranche D
Term Loans (the "Tranche D Term Note"), as they may be amended, supplemented or
otherwise modified from time to time.
"TITLE INSURANCE POLICIES" means (i) ALTA loan title insurance
policies with respect to the Real Property Assets subject to a Mortgage
identified as "major facilities" on Part IV of Schedule 4.1I annexed hereto;
and (ii) CLTA loan title insurance policies with respect to the other Real
Property Assets identified on Part IV of the Schedule 4.1I annexed hereto, in
each case issued by a title insurance company reasonably satisfactory to Agent,
in the amounts reasonably satisfactory to Agent with respect to each particular
Real Property Asset subject to a Mortgage, in each case, assuring Agent that
the applicable Mortgage creates a valid and enforceable first priority lien on
the respective Real Property Asset subject to such Mortgage, free and clear of
all defects and encumbrances except Permitted Encumbrances, which Title
Insurance Policies shall be in form and substance reasonably satisfactory to
Agent and shall include an endorsement for any matters that Agent may
reasonably request and for future advances under this Agreement, the Notes and
the other Loan Documents, and shall provide for affirmative insurance and such
reinsurance as Agent may request, all of the foregoing in form and substance
reasonably satisfactory to Agent.
"TOTAL UTILIZATION OF REVOLVING LOAN COMMITMENTS" means, as at
any date of determination, the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans plus (ii) the aggregate principal amount of all
outstanding Swing Line Loans plus (iii) the Letter of Credit Usage.
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"TRADEMARK SECURITY AGREEMENT" means each Trademark Security
Agreement executed and delivered by Company and Subsidiaries of Company (other
than the Inactive Subsidiaries) on the Closing Date and to be executed and
delivered by Subsidiaries of Company from time to time in accordance with
subsection 6.8, each substantially in the form of Exhibit XVI annexed hereto,
as such Trademark Security Agreement may thereafter be amended, supplemented or
otherwise modified from time to time and "Trademark Security Agreements" means
all such Trademark Security Agreements, collectively.
"TRANCHE A TERM LENDER" or "TRANCHE A TERM LENDERS" means the
Lender or Lenders having a Tranche A Term Loan Commitment or having a Tranche A
Term Loan outstanding.
"TRANCHE A TERM LOAN COMMITMENT" means the commitment of a
Tranche A Term Lender to make a Tranche A Term Loan to Company pursuant to
subsection 2.1A(i), and "TRANCHE A TERM LOAN COMMITMENTS" means such
commitments of all Tranche A Term Lenders in the aggregate.
"TRANCHE A TERM LOANS" means the Loans made by Tranche A Term
Lenders to Company pursuant to subsection 2.1A(i).
"TRANCHE B TERM LENDER" or "TRANCHE B TERM LENDERS" means the
Lender or Lenders having a Tranche B Term Loan Commitment or having a Tranche B
Term Loan outstanding.
"TRANCHE B TERM LOAN COMMITMENT" means the commitment of a
Tranche B Term Lender to make a Tranche B Term Loan to Company pursuant to
subsection 2.1A(ii), and "TRANCHE B TERM LOAN COMMITMENTS" means such
commitments of all Tranche B Term Lenders in the aggregate.
"TRANCHE B TERM LOANS" means the Loans made by Tranche B Term
Lenders to Company pursuant to subsection 2.1A(ii).
"TRANCHE C TERM LENDER" or "TRANCHE C TERM LENDERS" means the
Lender or Lenders having a Tranche C Term Loan Commitment or having a Tranche C
Term Loan outstanding.
"TRANCHE C TERM LOAN COMMITMENT" means the commitment of a
Tranche C Term Lender to make a Tranche C Term Loan to Company pursuant to
subsection 2.1A(iii), and "TRANCHE C TERM LOAN COMMITMENTS" means such
commitments of all Tranche C Term Lenders in the aggregate.
"TRANCHE C TERM LOANS" means the Loans made by Tranche C Term
Lenders to Company pursuant to subsection 2.1A(iii).
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"TRANCHE D TERM LENDER" or "TRANCHE D TERM LENDERS" means the
Lender or Lenders having a Tranche D Term Loan Commitment or having a Tranche D
Term Loan outstanding.
"TRANCHE D TERM LOAN COMMITMENT" means the commitment of a
Tranche D Term Lender to make a Tranche D Term Loan to Company pursuant to
subsection 2.1A(iv), and "TRANCHE D TERM LOAN COMMITMENTS" means such
commitments of all Tranche D Term Lenders in the aggregate.
"TRANCHE D TERM LOANS" means the Loans made by Tranche D Term
Lenders to Company pursuant to subsection 2.1A(iv).
"TRANSACTIONS" means the Acquisition, the Merger, the Equity
Tender Offer, the Company Existing Debt Prepayments, the Smitty's Existing Debt
Prepayments, the Public Offering and the transactions contemplated by the Loan
Documents and the Related Agreements.
"TRANSACTION COSTS" has the meaning assigned to that term in
the recitals to this Agreement.
"TRANSFER DATE" means the date on which Agent (or its
Affiliate) acquires that title previously held by Company (or its Affiliate) to
any Mortgaged Property or Covered Real Property, as the case may be, pursuant
to power of sale or judicial foreclosure of the lien of the Mortgage, or by
receipt of a deed in lieu of such foreclosure, and any and all redemption
rights of Company (or its Affiliate) have expired, unless within a period of
ninety-one (91) days after the date on which such title vests in Agent (or its
Affiliate) a bankruptcy or other insolvency proceeding is filed by or against
Company (or its Affiliate). If Company (or its Affiliate) should remain in or
reacquire possession of such Mortgaged Property or Covered Real Property, as
the case may be, after the Transfer Date, or if Company (or its Affiliate)
should engage in any Hazardous Materials Activity on or at such property after
the Transfer Date, the Transfer Date shall be deemed to be the date after which
neither Company nor any of its Affiliates is any longer in possession of such
property and Company and its Affiliates have ceased to engage in any Hazardous
Materials Activity on or at such property.
"TYPE" means a Term Loan, a Revolving Loan or a Swing Line
Loan (each of which is a "Type" of Loan) and with respect to a Term Loan, a
Tranche A Term Loan, a Tranche B Term Loan, a Tranche C Term Loan or a Tranche
D Term Loan (each of which is a "Type" of Term Loan).
"UCC" means the Uniform Commercial Code (or any similar or
equivalent legislation) as in effect in any applicable jurisdiction.
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"YUCAIPA" means The Yucaipa Companies, a California general
partnership, or any successor thereto (i) which is an Affiliate of Ronald W.
Burkle, (ii) which has been established for the sole purpose of changing the
form of The Yucaipa Companies from that of a partnership to that of a limited
liability company or such other form acceptable to Arrangers in their sole
discretion and (iii) the form and structure of which has been approved by
Arrangers in their sole discretion.
"YUCAIPA INVESTORS" means Ronald W. Burkle, Yucaipa SSV
Partners, L.P., Yucaipa Smitty's Partners, L.P., Yucaipa Smitty's Partners II,
L.P., Yucaipa Arizona Partners, L.P., The Yucaipa Companies and any other
entity formed after the Closing Date which is an Affiliate of Ronald W. Burkle.
"YUCAIPA WARRANT" has the meaning assigned to that term in the
recitals to this Agreement.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS
UNDER AGREEMENT.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Company to Lenders pursuant to clauses (i), (ii)
and (iii) of subsection 6.1 shall be prepared in accordance with GAAP as in
effect at the time of such preparation (and delivered together with the
reconciliation statements provided for in subsection 6.1(v)). Calculations in
connection with the definitions, covenants and other provisions of this
Agreement shall (i) utilize accounting principles and policies in conformity
with those used to prepare the financial statements referred to in subsection
5.3, or (ii) if any amendments to the provisions set forth in Sections 1, 6 or
7 are made pursuant to negotiations conducted by operation of the following
sentence, accounting principles and policies in effect at the time of the
effectiveness of such amendments. Notwithstanding the foregoing, if any
changes in accounting principles from those used in the preparation of the
financial statements referred to in subsection 5.3 hereafter occasioned by the
promulgation of rules, regulations, pronouncements or opinions by or required
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants (or successors thereto or agencies with similar
functions) result in a change in the method of calculation of financial
covenants, standards or terms found in Sections 1, 6 and 7 hereof, the parties
hereto agree to enter into negotiations in order to amend such provisions so as
to equitably reflect such changes with the desired result that the criteria
for evaluating Company's financial condition shall be the same after such
changes as if such changes had not been made. During the period of such
negotiations, but in no event for a period longer than 60 days, Company shall
not be required to deliver the additional financial statements required
pursuant to subsection 6.1(v). After the parties agree on amendments to the
provisions of Sections 1, 6 and 7 necessitated by
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such changes, Company shall not be required to deliver the additional financial
statements required pursuant to subsection 6.1(v) with respect to such changes.
1.3 OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION.
A. Any of the terms defined herein may, unless the
context otherwise requires, be used in the singular or the plural, depending on
the reference.
B. References to "Sections" and "subsections" shall be
to Sections and subsections, respectively, of this Agreement unless otherwise
specifically provided.
C. The use herein of the word "include" or "including",
when following any general statement, term or matter, shall not be construed to
limit such statement, term or matter to the specific items or matters set forth
immediately following such word or to similar items or matters, whether or not
nonlimiting language (such as "without limitation" or "but not limited to" or
words of similar import) is used with reference thereto, but rather shall be
deemed to refer to all other items or matters that fall within the broadest
possible scope of such general statement, term or matter.
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 COMMITMENTS; MAKING OF LOANS; THE REGISTER; NOTES.
A. COMMITMENTS. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Company
herein set forth, each Lender hereby severally agrees to make the Loans
described in subsections 2.1A(i), 2.1A(ii), 2.1A(iii), 2.1A(iv) and 2.1A(v), as
applicable, and Swing Line Lender hereby agrees to make the Loans described in
subsection 2.1A(vi).
(i) Tranche A Term Loans. Each Tranche A Term Lender
severally agrees to lend to Company on the Closing Date an amount not
exceeding its Pro Rata Share of the aggregate amount of the Tranche A
Term Loan Commitments to be used for the purposes identified in the
first sentence of subsection 2.5A. The amount of each Tranche A Term
Lender's Tranche A Term Loan Commitment is set forth opposite its name
on Schedule 2.1 annexed hereto and the aggregate amount of the Tranche
A Term Loan Commitments is $325,000,000; provided that the Tranche
A Term Loan Commitments of Tranche A Term Lenders shall be adjusted to
give effect to any assignments of the Tranche A Term Loan Commitments
pursuant to subsection 10.1B. Each Tranche A Term Lender's Tranche A
Term Loan Commitment shall expire immediately and without further
action on the earlier of (x) the date on which the Recapitalization
and Merger Agreement is terminated in accordance with Article 10
thereof and (y) June 30, 1996 if the initial Term Loans are not made
on or before that date.
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Company may make only one borrowing on the Closing Date under the
Tranche A Term Loan Commitments. Amounts borrowed under this
subsection 2.1A(i) and subsequently repaid or prepaid may not be
reborrowed.
(ii) Tranche B Term Loans. Each Tranche B Term Lender
severally agrees to lend to Company on the Closing Date an amount not
exceeding its Pro Rata Share of the aggregate amount of the Tranche B
Term Loan Commitments to be used for the purposes identified in
subsection 2.5A. The amount of each Tranche B Term Lender's Tranche B
Term Loan Commitment is set forth opposite its name on Schedule
2.1annexed hereto and the aggregate amount of the Tranche B Term Loan
Commitments is $160,000,000; provided that the Tranche B Term Loan
Commitments of Tranche B Term Lenders shall be adjusted to give effect
to any assignments of the Tranche B Term Loan Commitments pursuant to
subsection 10.1B. Each Tranche B Term Lender's Tranche B Term Loan
Commitment shall expire immediately and without further action on the
earlier of (x) the date on which the Recapitalization and Merger
Agreement is terminated in accordance with Article 10 thereof and (y)
June 30, 1996 if the initial Term Loans are not made on or before that
date. Company may make only one borrowing on the Closing Date under
the Tranche B Term Loan Commitments. Amounts borrowed under this
subsection 2.1A(ii) and subsequently repaid or prepaid may not be
reborrowed.
(iii) Tranche C Term Loans. Each Tranche C Term Lender
severally agrees to lend to Company on the Closing Date an amount not
exceeding its Pro Rata Share of the aggregate amount of the Tranche C
Term Loan Commitments to be used for the purposes identified in
subsection 2.5A. The amount of each Tranche C Term Lender's Tranche C
Term Loan Commitment is set forth opposite its name on Schedule
2.1annexed hereto and the aggregate amount of the Tranche C Term Loan
Commitments is $160,000,000; provided that the Tranche C Term Loan
Commitments of Tranche C Term Lenders shall be adjusted to give effect
to any assignments of the Tranche C Term Loan Commitments pursuant to
subsection 10.1B. Each Tranche C Term Lender's Tranche C Term Loan
Commitment shall expire immediately and without further action on the
earlier of (x) the date on which the Recapitalization and Merger
Agreement is terminated in accordance with Article 10 thereof and (y)
June 30, 1996 if the initial Term Loans are not made on or before that
date. Company may make only one borrowing on the Closing Date under
the Tranche C Term Loan Commitments. Amounts borrowed under this
subsection 2.1A(iii) and subsequently repaid or prepaid may not be
reborrowed.
(iv) Tranche D Term Loans. Each Tranche D Term Lender
severally agrees to lend to Company on the Closing Date an amount not
exceeding its Pro Rata Share of the aggregate amount of the Tranche D
Term Loan Commitments to be used for the purposes identified in
subsection 2.5A. The amount of each
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Tranche D Term Lender's Tranche D Term Loan Commitment is set forth
opposite its name on Schedule 2.1annexed hereto and the aggregate
amount of the Tranche D Term Loan Commitments is $160,000,000;
provided that the Tranche D Term Loan Commitments of Tranche D Term
Lenders shall be adjusted to give effect to any assignments of the
Tranche D Term Loan Commitments pursuant to subsection 10.1B. Each
Tranche D Term Lender's Tranche D Term Loan Commitment shall expire
immediately and without further action on the earlier of (x) the date
on which the Recapitalization and Merger Agreement is terminated in
accordance with Article 10 thereof and (y) June 30, 1996 if the
initial Term Loans are not made on or before that date. Company may
make only one borrowing on the Closing Date under the Tranche D Term
Loan Commitments. Amounts borrowed under this subsection 2.1A(iv) and
subsequently repaid or prepaid may not be reborrowed.
(v) Revolving Loans. Each Revolving Lender severally
agrees, subject to the limitations set forth below with respect to the
maximum amount of Revolving Loans permitted to be outstanding from
time to time, to lend to Company from time to time during the period
from the Closing Date to but excluding the Revolving Loan Commitment
Termination Date an aggregate amount not exceeding its Pro Rata Share
of the aggregate amount of the Revolving Loan Commitments to be used
for the purposes identified in subsection 2.5B. The original amount
of each Revolving Lender's Revolving Loan Commitment is set forth
opposite its name on Schedule 2.1 annexed hereto and the aggregate
original amount of the Revolving Loan Commitments is $190,000,000;
provided that the Revolving Loan Commitments of Revolving Lenders
shall be adjusted to give effect to any assignments of the Revolving
Loan Commitments pursuant to subsection 10.1B; and provided further
that the amount of the Revolving Loan Commitments shall be reduced
from time to time by the amount of any reductions thereto made
pursuant to subsections 2.4B(ii) and 2.4B(iii). Each Revolving
Lender's Revolving Loan Commitment shall expire on the Revolving Loan
Commitment Termination Date and all Revolving Loans and all other
amounts owed hereunder with respect to the Revolving Loans and the
Revolving Loan Commitments shall be paid in full no later than that
date; provided that each Revolving Lender's Revolving Loan Commitment
shall expire immediately and without further action on the earlier of
(x) the date on which the Recapitalization and Merger Agreement is
terminated in accordance with Article 10 thereof and (y) June 30, 1996
if the initial Term Loans are not made on or before that date.
Amounts borrowed under this subsection 2.1A(v) may be repaid and
reborrowed to but excluding the Revolving Loan Commitment Termination
Date.
Anything contained in this Agreement to the contrary
notwithstanding, the Revolving Loans and the Revolving Loan
Commitments shall be subject to the following limitations in the
amounts and during the periods indicated:
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(a) in no event shall the Total Utilization of
Revolving Loan Commitments at any time exceed the Revolving
Loan Commitments then in effect; and
(b) for 30 consecutive days during the
twelve-month period immediately following the Closing Date and
thereafter during each twelve-month period that immediately
follows Company's most recent compliance with this
subparagraph (b), the sum of (1) the aggregate outstanding
principal amount of all Revolving Loans plus (2) the aggregate
outstanding principal amount of all Swing Line Loans shall not
exceed $75,000,000.
(vi) Swing Line Loans. Swing Line Lender hereby agrees,
subject to the limitations set forth below with respect to the maximum
amount of Swing Line Loans permitted to be outstanding from time to
time, to make a portion of the Revolving Loan Commitments available to
Company from time to time during the period from the Closing Date to
but excluding the Revolving Loan Commitment Termination Date by making
Swing Line Loans to Company in an aggregate amount not exceeding the
amount of the Swing Line Loan Commitment to be used for the purposes
identified in subsection 2.5B, notwithstanding the fact that such
Swing Line Loans, when aggregated with Swing Line Lender's outstanding
Revolving Loans and Swing Line Lender's Pro Rata Share of the Letter
of Credit Usage then in effect, may exceed Swing Line Lender's
Revolving Loan Commitment. The original amount of the Swing Line Loan
Commitment is $30,000,000; provided that any reduction of the
Revolving Loan Commitments made pursuant to subsection 2.4B(ii) or
2.4B(iii) which reduces the aggregate Revolving Loan Commitments to an
amount less than the then current amount of the Swing Line Loan
Commitment shall result in an automatic corresponding reduction of the
Swing Line Loan Commitment to the amount of the Revolving Loan
Commitments, as so reduced, without any further action on the part of
Company, Agent or Swing Line Lender. The Swing Line Loan Commitment
shall expire on the Revolving Loan Commitment Termination Date and all
Swing Line Loans and all other amounts owed hereunder with respect to
the Swing Line Loans shall be paid in full no later than that date;
provided that the Swing Line Loan Commitment shall expire immediately
and without further action on the earlier of (x) the date on which the
Recapitalization and Merger Agreement is terminated in accordance with
Article 10 thereof and (y) June 30, 1996 if the initial Term Loans are
not made on or before that date. Amounts borrowed under this
subsection 2.1A(vi) may be repaid and reborrowed to but excluding the
Revolving Loan Commitment Termination Date.
Anything contained in this Agreement to the contrary
notwithstanding, the Swing Line Loans and the Swing Line Loan
Commitment shall be subject to the following limitations in the
amounts and during the periods indicated:
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(a) in no event shall the Total Utilization of
Revolving Loan Commitments at any time exceed the Revolving
Loan Commitments then in effect; and
(b) for 30 consecutive days during the
twelve-month period immediately following the Closing Date and
thereafter during each twelve-month period that immediately
follows Company's most recent compliance with this
subparagraph (b), the sum of (1) the aggregate outstanding
principal amount of all Revolving Loans plus (2) the aggregate
outstanding principal amount of all Swing Line Loans shall not
exceed $75,000,000.
With respect to any Swing Line Loans which have not been
voluntarily prepaid by Company pursuant to subsection 2.4B(i)(a),
Swing Line Lender (i) may, at any time in its sole and absolute
discretion, and (ii) shall, at least once every seven days, deliver to
Agent (with a copy to Company), no later than 1:00 P.M. (New York City
time) on the first Business Day in advance of the proposed Funding
Date, a notice requesting Revolving Lenders to make Revolving Loans
that are Base Rate Loans on such Funding Date in an amount equal to
the amount of such Swing Line Loans (the "REFUNDED SWING LINE LOANS")
outstanding on the date such notice is given which Swing Line Lender
requests Revolving Lenders to prepay. Anything contained in this
Agreement to the contrary notwithstanding, (i) the proceeds of such
Revolving Loans made by Revolving Lenders other than Swing Line Lender
shall be immediately delivered by Agent to Swing Line Lender (and not
to Company) and applied to repay a corresponding portion of the
Refunded Swing Line Loans and (ii) on the day such Revolving Loans are
made, Swing Line Lender's Pro Rata Share of the Refunded Swing Line
Loans shall be deemed to be paid with the proceeds of a Revolving Loan
made by Swing Line Lender, and such portion of the Swing Line Loans
deemed to be so paid shall no longer be outstanding as Swing Line
Loans and shall no longer be due under the Swing Line Note of Swing
Line Lender but shall instead constitute part of Swing Line Lender's
outstanding Revolving Loans and shall be due under the Revolving Note
of Swing Line Lender. Company hereby authorizes Agent and Swing Line
Lender to charge Company's accounts with Agent and Swing Line Lender
(up to the amount available in each such account) in order to
immediately pay Swing Line Lender the amount of the Refunded Swing
Line Loans to the extent the proceeds of such Revolving Loans made by
Revolving Lenders, including the Revolving Loan deemed to be made by
Swing Line Lender, are not sufficient to repay in full the Refunded
Swing Line Loans. If any portion of any such amount paid (or deemed
to be paid) to Swing Line Lender should be recovered by or on behalf
of Company from Swing Line Lender in bankruptcy, by assignment for the
benefit of creditors or otherwise, the loss of the amount so
recovered shall be ratably shared among all Revolving Lenders in the
manner contemplated by subsection 10.5.
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Immediately upon funding of the Swing Line Loans by the Swing
Line Lender, each Revolving Lender shall be deemed to, and hereby
agrees to, have purchased a participation in such outstanding Swing
Line Loans in an amount equal to its Pro Rata Share of the unpaid
amount of such Swing Line Loans together with accrued interest
thereon. Upon one Business Day's notice from Swing Line Lender, each
Revolving Lender shall deliver to Swing Line Lender an amount equal to
its respective participation in same day funds at the Funding and
Payment Office. In the event any Revolving Lender fails to make
available to Swing Line Lender the amount of such Revolving Lender's
participation as provided in this paragraph, Swing Line Lender shall
be entitled to recover such amount on demand from such Revolving
Lender together with interest thereon at the rate customarily used by
Swing Line Lender for the correction of errors among banks for three
Business Days and thereafter at the Base Rate. In the event Swing
Line Lender receives a payment of any amount in which other Revolving
Lenders have funded their purchase of a participation as provided in
this paragraph, Swing Line Lender shall promptly distribute to each
such other Revolving Lender its Pro Rata Share of such payment. Any
such distribution shall be made to a Revolving Lender at its primary
address set forth below its name on the appropriate signature page
hereof or at such other address as such Revolving Lender may request.
Anything contained herein to the contrary notwithstanding,
each Revolving Lender's obligation to make Revolving Loans for the
purpose of repaying any Refunded Swing Line Loans pursuant to the
second preceding paragraph and each Revolving Lender's obligation to
fund a purchase of a participation in any unpaid Swing Line Loans
pursuant to the immediately preceding paragraph shall be absolute and
unconditional and shall not be affected by any circumstance, including
without limitation (a) any set-off, counterclaim, recoupment, defense
or other right which such Revolving Lender may have against Swing Line
Lender, Company or any other Person for any reason whatsoever; (b) the
occurrence or continuation of an Event of Default or a Potential Event
of Default; (c) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of
Company or any of its Subsidiaries; (d) any breach of this Agreement
or any other Loan Document by any party thereto; or (e) any other
circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing; provided that such obligations of each Revolving
Lender are subject to the satisfaction of one of the following (X)
Swing Line Lender believed in good faith that all conditions under
Section 4 to the making of the applicable Swing Line Loans to be
refunded were satisfied at the time Swing Line Loans were made, (Y)
the satisfaction of any such condition not satisfied had been waived
in accordance with subsection 10.6 or (Z) such Revolving Lender had
actual knowledge, by receipt of any notices required to be delivered
to Revolving Lenders pursuant to subsection 6.1(ix) or otherwise,
that any such condition had not been satisfied and such Revolving
Lender failed to notify Swing Line Lender
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and Agent in writing that it had no obligation to make Revolving
Loans until such condition was satisfied (any such notice to be
effective as of the date of receipt thereof by Swing Line Lender
and Agent).
B. BORROWING MECHANICS. Term Loans or Revolving Loans made on
any Funding Date (other than Revolving Loans made pursuant to a request by
Swing Line Lender pursuant to subsection 2.1A(vi) for the purpose of repaying
any Swing Line Loans or Revolving Loans made pursuant to subsection 3.3B for
the purpose of reimbursing any Issuing Lender for the amount of a drawing under
a Letter of Credit issued by it) that are made as (i) Eurodollar Rate Loans
shall be in an aggregate minimum amount of $5,000,000 and integral multiples of
$1,000,000 in excess of that amount or (ii) Base Rate Loans shall be in an
aggregate minimum amount of $2,000,000 and integral multiples of $500,000 in
excess of that amount. Swing Line Loans made on any Funding Date shall be in
an aggregate minimum amount of $500,000 and integral multiples of $250,000 in
excess of that amount. Whenever Company desires that Lenders make Term Loans
or Revolving Loans it shall deliver to Agent a Notice of Borrowing no later
than 1:00 P.M. (New York City time) at least three Business Days in advance of
the proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least
one Business Day in advance of the proposed Funding Date (in the case of a Base
Rate Loan). Whenever Company desires that Swing Line Lender make a Swing Line
Loan, it shall deliver to Agent a Notice of Borrowing no later than 1:00 P.M.
(New York City time) on the proposed Funding Date. The Notice of Borrowing
shall specify (i) the proposed Funding Date (which shall be a Business Day),
(ii) the amount and Type of Loans requested, (iii) in the case of Swing Line
Loans and any Loans made on the Closing Date, that such Loans shall be Base
Rate Loans, (iv) in the case of Term Loans and Revolving Loans, whether such
Loans shall be Base Rate Loans or Eurodollar Rate Loans, and (v) in the case of
any Loans requested to be made as Eurodollar Rate Loans, the initial Interest
Period requested therefor. Term Loans and Revolving Loans may be continued as
or converted into Base Rate Loans and Eurodollar Rate Loans in the manner
provided in subsection 2.2D. In lieu of delivering the above-described Notice
of Borrowing, Company may give Agent telephonic notice by the required time of
any proposed borrowing under this subsection 2.1B; provided that such notice
shall be promptly confirmed in writing by delivery of a Notice of Borrowing to
Agent on or before the applicable Funding Date.
Notwithstanding anything contained herein to the contrary,
during the period commencing on (and including) the Closing Date and ending on
the earlier of (i) the one-month anniversary of the date on which the first
Eurodollar Rate Loan is made under this Agreement and (ii) the date Agent sends
notice to Company indicating that Lenders' primary syndication has been
concluded, (a) Company may only request Base Rate Loans and Eurodollar Rate
Loans with an Interest Period of one month and (b) the last day of the Interest
Period applicable to any Eurodollar Rate Loan shall be the one-month
anniversary of the date on which the first Eurodollar Rate Loan is made under
this Agreement.
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Neither Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that Agent
believes in good faith to have been given by a duly authorized officer or other
person authorized to borrow on behalf of Company or for otherwise acting in
good faith under this subsection 2.1B, and upon funding of Loans by Lenders in
accordance with this Agreement pursuant to any such telephonic notice Company
shall have effected Loans hereunder.
Company shall notify Agent prior to the funding of any Loans
in the event that any of the matters to which Company is required to certify in
the applicable Notice of Borrowing is no longer true and correct as of the
applicable Funding Date, and the acceptance by Company of the proceeds of any
Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing as modified pursuant to the notice provided for
in the first clause of this sentence (it being understood that the making of
such Loans by Lenders shall not in any way be construed as a waiver by Lenders
of any matter set forth in such notice).
Except as otherwise provided in subsections 2.6B, 2.6C and
2.6G, a Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in
lieu thereof) shall be irrevocable on and after the related Interest Rate
Determination Date, and Company shall be bound to make a borrowing in
accordance therewith.
C. DISBURSEMENT OF FUNDS. All Term Loans and Revolving Loans
under this Agreement shall be made by Lenders simultaneously and
proportionately to their respective Pro Rata Shares of the Commitments for the
particular Type of Loans requested, it being understood that no Lender shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender to make the particular Type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender's obligation
to make a Loan requested hereunder. Promptly after receipt by Agent of a
Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu
thereof), Agent shall notify each Lender or Swing Line Lender, as the case may
be, of the proposed borrowing. Each Lender shall make the amount of its Loan
available to Agent not later than 12:00 Noon (New York City time) on the
applicable Funding Date, and Swing Line Lender shall make the amount of its
Swing Line Loan available to Agent not later than 2:00 P.M.(New York City time)
on the applicable Funding Date, in each case in same day funds in Dollars, at
the Funding and Payment Office. Except as provided in subsection 2.1A(vi) or
subsection 3.3B with respect to Revolving Loans used to repay Refunded Swing
Line Loans or to reimburse any Issuing Lender for the amount of a drawing under
a Letter of Credit issued by it, upon satisfaction or waiver of the conditions
precedent specified in subsections 4.1 (in the case of Loans made on the
Closing Date) and 4.2 (in the case of all Loans), Agent shall make the proceeds
of such Loans available to Company on the applicable Funding Date by causing an
amount of same day funds in Dollars equal to the proceeds of all such Loans
received by Agent
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from Lenders or Swing Line Lender, as the case may be, to be credited to the
account of Company at the Funding and Payment Office.
Unless Agent shall have been notified by any Lender prior to
the Funding Date for any Loans that such Lender does not intend to make
available to Agent the amount of such Lender's Loan requested on such Funding
Date, Agent may assume that such Lender has made such amount available to Agent
on such Funding Date and Agent may, in its sole discretion, but shall not be
obligated to, make available to Company a corresponding amount on such Funding
Date. If such corresponding amount is not in fact made available to Agent by
such Lender, Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Agent, at the customary rate
set by Agent for the correction of errors among banks for three Business Days
and thereafter at the Base Rate. If such Lender does not pay such
corresponding amount forthwith upon Agent's demand therefor, Agent shall
promptly notify Company and Company shall immediately pay such corresponding
amount to Agent together with interest thereon, for each day from such Funding
Date until the date such amount is paid to Agent, at the rate payable under
this Agreement for Base Rate Loans of the applicable Type of Loans. Nothing in
this subsection 2.1C shall be deemed to relieve any Lender from its obligation
to fulfill its Commitments hereunder or to prejudice any rights that Company
may have against any Lender as a result of any default by such Lender
hereunder.
D. THE REGISTER.
(i) Agent shall maintain, at its address referred to in
subsection 10.8, a register for the recordation of the names and
addresses of Lenders and the Commitments and Loans of each Lender from
time to time (the "REGISTER"). The Register shall be available for
inspection by Company or any Lender at any reasonable time and from
time to time upon reasonable prior notice.
(ii) Agent shall record in the Register the Tranche A Term
Loan Commitment, the Tranche B Term Loan Commitment, the Tranche C
Term Loan Commitment, the Tranche D Term Loan Commitment and the
Revolving Loan Commitment and the Term Loans and Revolving Loans from
time to time of each Lender, the Swing Line Loan Commitment and the
Swing Line Loans from time to time of Swing Line Lender, and each
repayment or prepayment in respect of the principal amount of the Term
Loans or Revolving Loans of each Lender or the Swing Line Loans of
Swing Line Lender. Any such recordation shall be conclusive and
binding on Company and each Lender, absent manifest error; provided
that failure to make any such recordation, or any error in such
recordation, shall not affect any Lender's Commitments or Company's
Obligations in respect of the applicable Loans.
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(iii) Each Lender shall record on its internal records
(including, without limitation, the Notes held by such Lender) the
amount of the Term Loan and each Revolving Loan made by it and each
payment in respect thereof. Any such recordation shall be conclusive
and binding on Company, absent manifest error; provided that failure
to make any such recordation, or any error in such recordation, shall
not affect any Lender's Commitments or Company's Obligations in
respect of any applicable Loans; and provided, furtherthat in the
event of any inconsistency between the Register and any Lender's
records, the recordations in the Register shall govern, absent
manifest error.
(iv) Company, Agent and Lenders shall deem and treat the
Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all
purposes hereof, and no assignment or transfer of any such Commitment
or Loan shall be effective, in each case unless and until an
Assignment Agreement effecting the assignment or transfer thereof
shall have been accepted by Agent and recorded in the Register as
provided in subsection 10.1B(ii). Prior to such recordation, all
amounts owed with respect to the applicable Commitment or Loan shall
be owed to the Lender listed in the Register as the owner thereof, and
any request, authority or consent of any Person who, at the time of
making such request or giving such authority or consent, is listed in
the Register as a Lender shall be conclusive and binding on any
subsequent holder, assignee or transferee of the corresponding
Commitments or Loans.
(v) Company hereby designates Bankers to serve as
Company's agent solely for purposes of maintaining the Register as
provided in this subsection 2.1D, and Company hereby agrees that, to
the extent Bankers serves in such capacity, Bankers and its officers,
directors, employees, agents and affiliates shall constitute
Indemnitees for all purposes under subsection 10.3.
E. NOTES. Company shall execute and deliver on the Closing Date
(i) to each Tranche A Term Lender (or to Agent for that Lender) a Tranche A
Term Note substantially in the form of Exhibit IV-A annexed hereto to evidence
that Lender's Tranche A Term Loan, in the principal amount of that Lender's
Tranche A Term Loan and with other appropriate insertions, (ii) to each Tranche
B Term Lender (or Agent for that Lender) a Tranche B Term Note substantially in
the form of Exhibit IV-B annexed hereto to evidence that Lender's Tranche B
Term Loan, in the principal
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amount of that Lender's Tranche B Term Loan and with other appropriate
insertions, (iii) to each Tranche C Term Lender (or to Agent for that Lender)
a Tranche C Term Note substantially in the form of Exhibit IV-C annexed hereto
to evidence that Lender's Tranche C Term Loan, in the principal amount of that
Lender's Tranche C Term Loan and with other appropriate insertions, (iv) to
each Tranche D Term Lender (or to Agent for that Lender) a Tranche D Term Note
substantially in the form of Exhibit IV-D annexed hereto to evidence that
Lender's Tranche D Term Loan, in the principal amount of that Lender's Tranche
D Term Loan and with other appropriate insertions, (v) to each Revolving Lender
(or to Agent for that Lender) a Revolving Note substantially in the form of
Exhibit V annexed hereto to evidence that Lender's Revolving Loans, in the
principal amount of that Lender's Revolving Loan Commitment and with other
appropriate insertions, and (vi) to Swing Line Lender a Swing Line Note
substantially in the form of Exhibit VI annexed hereto to evidence Swing Line
Lender's Swing Line Loans, in the principal amount of the Swing Line Loan
Commitment and with other appropriate insertions.
2.2 INTEREST ON THE LOANS.
A. RATE OF INTEREST. Subject to the provisions of subsections
2.6 and 2.7, each Term Loan and each Revolving Loan shall bear interest on the
unpaid principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Base Rate
or the Adjusted Eurodollar Rate. Subject to the provisions of subsection 2.7,
each Swing Line Loan shall bear interest on the unpaid principal amount thereof
from the date made through maturity (whether by acceleration or otherwise) at a
rate determined by reference to the Base Rate. The applicable basis for
determining the rate of interest with respect to any Term Loan or any Revolving
Loan shall be selected by Company initially at the time a Notice of Borrowing
is given with respect to such Loan pursuant to subsection 2.1B, and the basis
for determining the interest rate with respect to any Term Loan or any
Revolving Loan may be changed from time to time pursuant to subsection 2.2D. If
on any day a Term Loan or Revolving Loan is outstanding with respect to which
notice has not been delivered to Agent in accordance with the terms of this
Agreement specifying the applicable basis for determining the rate of interest,
then for that day that Loan shall bear interest determined by reference to the
Base Rate.
(i) Subject to the provisions of subsections 2.2E and
2.7, the Tranche A Term Loans and the Revolving Loans shall bear
interest through maturity as follows:
(A) if a Base Rate Loan, then at the sum of the
Base Rate plus the Applicable Base Rate Margin; or
(B) if a Eurodollar Rate Loan, then at the sum of
the Adjusted Eurodollar Rate plus the Applicable Eurodollar
Margin.
Upon delivery of the Margin Determination Certificate
by Company to Agent pursuant to subsection 6.1(xix), the
Applicable Base Rate Margin and the Applicable Eurodollar
Margin shall automatically be adjusted in accordance with such
Margin Determination Certificate, such adjustment to become
effective on the next succeeding Business Day following the
receipt by Agent of such Margin Determination Certificate;
provided that if a Margin Determination
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Certificate is not delivered at the time required pursuant to
subsection 6.1(xviii), clause (iii) of the definitions of "Applicable
Base Rate Margin" and "Applicable Eurodollar Rate Margin", as the case
may be, shall be applicable from such time until delivery of a
succeeding Margin Determination Certificate; provided further that if
a Margin Determination Certificate erroneously indicates an applicable
margin more favorable to Company than should be afforded by the actual
calculation of the Interest Coverage Ratio, Company shall promptly pay
additional interest and letter of credit fees to correct for such
error.
(ii) Subject to the provisions of subsections 2.2E and
2.7, the Tranche B Term Loans shall bear interest through maturity as
follows:
(A) if a Base Rate Loan, then at the sum of the
Base Rate plus 2.00% per annum; or
(B) if a Eurodollar Rate Loan, then at the sum of
the Adjusted Eurodollar Rate plus 3.25% per annum.
(iii) Subject to the provisions of subsections 2.2E and
2.7, the Tranche C Term Loans shall bear interest through maturity as
follows:
(A) if a Base Rate Loan, then at the sum of the
Base Rate plus 2.50% per annum; or
(B) if a Eurodollar Rate Loan, then at the sum of
the Adjusted Eurodollar Rate plus 3.75% per annum.
(iv) Subject to the provisions of subsections 2.2E and
2.7, the Tranche D Term Loans shall bear interest through maturity as
follows:
(A) if a Base Rate Loan, then at the sum of the
Base Rate plus 2.75% per annum; or
(B) if a Eurodollar Rate Loan, then at the sum of
the Adjusted Eurodollar Rate plus 4.00% per annum.
(v) Subject to the provisions of subsections 2.2E and
2.7, the Swing Line Loans shall bear interest through maturity at the
sum of the Base Rate plus the Applicable Base Rate Margin minus the
Commitment Fee Percentage.
B. INTEREST PERIODS. In connection with each Eurodollar Rate
Loan, Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"INTEREST PERIOD") to
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be applicable to such Loan, which Interest Period shall be, at Company's
option, either a one, two, three or six month period; provided that:
(i) the initial Interest Period for any Eurodollar Rate
Loan shall commence on the Funding Date in respect of such Loan, in
the case of a Loan initially made as a Eurodollar Rate Loan, or on the
date specified in the applicable Notice of Conversion/Continuation, in
the case of a Loan converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest
Periods applicable to a Eurodollar Rate Loan continued as such
pursuant to a Notice of Conversion/Continuation, each successive
Interest Period shall commence on the day on which the next preceding
Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided that, if any Interest Period
would otherwise expire on a day that is not a Business Day but is a
day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding
Business Day;
(iv) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this subsection 2.2B, end on
the last Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the
Tranche A Term Loans shall extend beyond August 31, 2002, no Interest
Period with respect to any portion of the Tranche B Term Loans shall
extend beyond November 30, 2003, no Interest Period with respect to
any portion of the Tranche C Term Loans shall extend beyond November
30, 2004, no Interest Period with respect to any portion of the
Tranche D Term Loans shall extend beyond August 31, 2005, and no
Interest Period with respect to any portion of the Revolving Loans
shall extend beyond the Revolving Loan Commitment Termination Date;
(vi) no Interest Period with respect to any portion of any
Type of Term Loan shall extend beyond a date on which Company is
required to make a scheduled payment of principal of Term Loans of
such Type unless the sum of (a) the aggregate principal amount of Term
Loans of such Type that are Base Rate Loans plus (b) the aggregate
principal amount of Term Loans of such Type that are Eurodollar Rate
Loans with Interest Periods expiring on or before such date equals or
exceeds the principal amount required to be paid on Term Loans of such
Type on such date;
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(vii) there shall be no more than 20 Interest Periods
outstanding at any time (it being understood that Interest Periods for
different Types of Loans (including different Types of Term Loans),
whether or not such Interest Periods are for the same period and end
on the same day, constitute separate Interest Periods); and
(viii) in the event Company fails to specify an Interest
Period for any Eurodollar Rate Loan in the applicable Notice of
Borrowing or Notice of Conversion/Continuation, Company shall be
deemed to have selected an Interest Period of one month.
C. INTEREST PAYMENTS. Subject to the provisions of subsection
2.2E, interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event any Swing Line Loans or any Revolving
Loans that are Base Rate Loans are prepaid pursuant to subsection 2.4B(i),
interest accrued on such Swing Line Loans or Revolving Loans through the date
of such prepayment shall be payable on the next succeeding Interest Payment
Date applicable to Base Rate Loans (or, if earlier, at final maturity).
D. CONVERSION OR CONTINUATION. Subject to the provisions of
subsection 2.6, Company shall have the option (i) to convert at any time all or
any part of its outstanding Term Loans or Revolving Loans equal to $5,000,000
and integral multiples of $1,000,000 in excess of that amount from Loans
bearing interest at a rate determined by reference to one basis to Loans
bearing interest at a rate determined by reference to an alternative basis or
(ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate
Loan, to continue all or any portion of such Loan equal to $5,000,000 and
integral multiples of $1,000,000 in excess of that amount as a Eurodollar Rate
Loan; provided, however, that a Eurodollar Rate Loan may only be converted into
a Base Rate Loan on the expiration date of an Interest Period applicable
thereto; provided further that during the period commencing on (and including)
the Closing Date and ending on the earlier of (i) the one-month anniversary of
the date on which the first Eurodollar Rate Loan is made under this Agreement
and (ii) the date Agent sends a notice to Company indicating that Lenders'
primary syndication has been concluded, (a) no Loan may be made or continued as
or converted into a Eurodollar Rate Loan having an Interest Period of longer
than one month and (b) the last day of the Interest Period applicable to any
Eurodollar Rate Loan shall be the one-month anniversary of the date on which
the first Eurodollar Rate Loan is made under this Agreement; and provided still
further that no Loan may be made as or converted into a Base Rate Loan during
the period from December 24 of any year to and including January 7 of the
immediately succeeding year for the purpose of investing in securities bearing
interest at a rate determined by reference to any other basis for the purpose
of arbitrage or speculation.
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Company shall deliver a Notice of Conversion/Continuation to
Agent no later than 1:00 P.M. (New York City time) at least one Business Day in
advance of the proposed conversion date (in the case of a conversion to a Base
Rate Loan) and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation shall specify
(i) the proposed conversion/continuation date (which shall be a Business Day),
(ii) the amount and Type of the Loan to be converted/continued, (iii) the
nature of the proposed conversion/continuation, (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period, and (v) in the case of a conversion to, or a continuation of,
a Eurodollar Rate Loan, that no Potential Event of Default or Event of Default
has occurred and is continuing. In lieu of delivering the above-described
Notice of Conversion/Continuation, Company may give Agent telephonic notice by
the required time of any proposed conversion/continuation under this
subsection 2.2D; provided that such notice shall be promptly confirmed in
writing by delivery of a Notice of Conversion/Continuation to Agent on or
before the proposed conversion/continuation date. Upon receipt of written or
telephonic notice of any proposed conversion/continuation under this
subsection 2.2D, Agent shall promptly transmit such notice by telefacsimile or
telephone to each Lender.
Neither Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that Agent
believes in good faith to have been given by a duly authorized officer or other
person authorized to act on behalf of Company or for otherwise acting in good
faith under this subsection 2.2D, and upon conversion or continuation of the
applicable basis for determining the interest rate with respect to any Loans in
accordance with this Agreement pursuant to any such telephonic notice Company
shall have effected a conversion or continuation, as the case may be,
hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and
2.6G, a Notice of Conversion/Continuation for conversion to, or continuation
of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be
irrevocable on and after the related Interest Rate Determination Date, and
Company shall be bound to effect a conversion or continuation in accordance
therewith.
E. DEFAULT RATE. Upon the occurrence and during the continuation
of any Event of Default, the outstanding principal amount of all Loans and, to
the extent permitted by applicable law, any interest payments thereon not paid
when due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable bankruptcy laws) payable upon
demand at a rate that is 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Base
Rate Loans); provided that, in the case of Eurodollar Rate Loans, upon the
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expiration of the Interest Period in effect at the time any such increase in
interest rate is effective such Eurodollar Rate Loans shall thereupon become
Base Rate Loans and shall thereafter bear interest payable upon demand at a
rate which is 2% per annum in excess of the interest rate otherwise payable
under this Agreement for Base Rate Loans. Payment or acceptance of the
increased rates of interest provided for in this subsection 2.2E is not a
permitted alternative to timely payment and shall not constitute a waiver of
any Event of Default or otherwise prejudice or limit any rights or remedies of
Agent or any Lender.
F. COMPUTATION OF INTEREST. Interest on the Loans shall be
computed on the basis of a 360-day year, in each case for the actual number of
days elapsed in the period during which it accrues. In computing interest on
any Loan, the date of the making of such Loan or the first day of an Interest
Period applicable to such Loan or, with respect to a Base Rate Loan being
converted from a Eurodollar Rate Loan, the date of conversion of such
Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be
included, and the date of payment of such Loan or the expiration date of an
Interest Period applicable to such Loan or, with respect to a Base Rate Loan
being converted to a Eurodollar Rate Loan, the date of conversion of such Base
Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded;
provided that if a Loan is repaid on the same day on which it is made, one
day's interest shall be paid on that Loan.
2.3 FEES.
A. COMMITMENT FEES. Company agrees to pay to Agent, for
distribution to each Revolving Lender in proportion to that Revolving Lender's
Pro Rata Share, commitment fees for the period from and including the Closing
Date to and excluding the Revolving Loan Commitment Termination Date equal to
the average of the daily excess of the Revolving Loan Commitments over the
aggregate principal amount of outstanding Revolving Loans (but not any
outstanding Swing Line Loans or the Letter of Credit Usage) multiplied by the
Commitment Fee Percentage, such commitment fees to be calculated on the basis
of a 360-day year and the actual number of days elapsed and to be payable
quarterly in arrears on February 1, May 1, August 1 and November 1 of each
year, commencing on the first such date to occur after the Closing Date, and on
the Revolving Loan Commitment Termination Date.
B. OTHER FEES. Company agrees to pay to Agent such other fees in
the amounts and at the times separately agreed upon between Company and Agent.
After receipt of such other fees from Company, Agent and Arrangers agree to pay
to each Lender such portion of such other fees in the amounts and at the times
as have been separately agreed upon in writing between Agent and such Lender.
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<PAGE> 70
2.4 REPAYMENTS, PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS;
GENERAL PROVISIONS REGARDING PAYMENTS.
A. SCHEDULED PAYMENTS OF TERM LOANS.
(i) Scheduled Payments of Tranche A Term Loans. Company
shall make principal payments on the Tranche A Term Loans in
installments on the dates and in the amounts set forth below:
<TABLE>
<CAPTION>
Scheduled Repayment
Date of Tranche A Term Loans
---- -----------------------
<S> <C>
February 1, 1997 $7,500,000
May 1, 1997 11,250,000
August 1, 1997 11,250,000
November 1, 1997 11,250,000
February 1, 1998 11,250,000
May 1, 1998 13,750,000
August 1, 1998 13,750,000
November 1, 1998 13,750,000
February 1, 1999 13,750,000
May 1, 1999 16,250,000
August 1, 1999 16,250,000
November 1, 1999 16,250,000
February 1, 2000 16,250,000
May 1, 2000 16,250,000
August 1, 2000 16,250,000
November 1, 2000 16,250,000
February 1, 2001 16,250,000
May 1, 2001 15,000,000
August 1, 2001 15,000,000
November 1, 2001 15,000,000
February 1, 2002 15,000,000
May 1, 2002 13,750,000
August 31, 2002 13,750,000
==========
$325,000,000
</TABLE>
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<PAGE> 71
; provided that the scheduled installments of principal of the Tranche
A Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Term Loans in accordance with
subsection 2.4B(iv); and provided still further that the Tranche A Term
Loans and all other amounts owed hereunder with respect to the Tranche
A Term Loans shall be paid in full no later than August 31, 2002, and
the final installment payable by Company in respect of the Tranche A
Term Loans on such date shall be in an amount, if such amount is
different from that specified above, sufficient to repay all amounts
owing by Company under this Agreement with respect to the Tranche A
Term Loans.
(ii) Scheduled Payments of Tranche B Term Loans. Company
shall make principal payments on the Tranche B Term Loans in
installments in the amount of $400,000 on each August 1, November 1,
February 1 and May 1, commencing on August 1, 1996 through and
including May 1, 2002, and thereafter on the dates and in the amounts
set forth below:
<TABLE>
<CAPTION>
Scheduled Repayment
Date of Tranche B Term Loans
---- -----------------------
<S> <C>
August 1, 2002 $ 4,000,000
November 1, 2002 18,000,000
February 1, 2003 18,000,000
May 1, 2003 18,000,000
August 1, 2003 22,700,000
November 30, 2003 69,700,000
==========
$160,000,000
</TABLE>
; provided that the scheduled installments of principal of the Tranche
B Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Term Loans in accordance with
subsection 2.4B(iv); and provided still further that the Tranche B Term
Loans and all other amounts owed hereunder with respect to the Tranche
B Term Loans shall be paid in full no later than November 30, 2003, and
the final installment payable by Company in respect of the Tranche B
Term Loans on such date shall be in an amount, if such amount is
different from that specified above, sufficient to repay all amounts
owing by Company under this Agreement with respect to the Tranche B
Term Loans.
(iii) Scheduled Payments of Tranche C Term Loans. Company
shall make principal payments on the Tranche C Term Loans in
installments in the amount of $400,000 on each August 1, November 1,
February 1 and May 1,
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commencing on August 1, 1996 through and including November 1, 2003,
and thereafter on the dates and in the amounts set forth below:
<TABLE>
<CAPTION>
Scheduled Repayment
Date of Tranche C Term Loans
---- -----------------------
<S> <C>
February 1, 2004 $ 25,000,000
May 1, 2004 25,000,000
August 1, 2004 25,000,000
November 30, 2004 73,000,000
==========
$160,000,000
</TABLE>
; provided that the scheduled installments of principal of the Tranche
C Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Term Loans in accordance with
subsection 2.4B(iv); and provided still further that the Tranche C Term
Loans and all other amounts owed hereunder with respect to the Tranche
C Term Loans shall be paid in full no later than November 30, 2004 and
the final installment payable by Company in respect of the Tranche C
Term Loans on such date shall be in an amount, if such amount is
different from that specified above, sufficient to repay all amounts
owing by Company under this Agreement with respect to the Tranche C
Term Loans.
(iv) Scheduled Payments of Tranche D Term Loans. Company
shall make principal payments on the Tranche D Term Loans in
installments in the amount of $400,000 on each August 1, November 1,
February 1 and May 1, commencing on August 1, 1996 through and
including November 1, 2004, and thereafter on the dates and in the
amounts set forth below:
<TABLE>
<CAPTION>
Scheduled Repayment
Date of Tranche D Term Loans
---- -----------------------
<S> <C>
February 1, 2005 $ 29,000,000
May 1, 2005 32,000,000
August 31, 2005 85,400,000
==========
$160,000,000
</TABLE>
; provided that the scheduled installments of principal of the Tranche
D Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Term Loans in accordance with
subsection 2.4B(iv); and provided still further that the Tranche D Term
Loans and all other amounts owed hereunder with respect to the Tranche
D Term Loans shall be paid
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<PAGE> 73
in full no later than August 31, 2005, and the final installment
payable by Company in respect of the Tranche D Term Loans on such date
shall be in an amount, if such amount is different from that specified
above, sufficient to repay all amounts owing by Company under this
Agreement with respect to the Tranche D Term Loans.
B. PREPAYMENTS AND UNSCHEDULED REDUCTIONS IN REVOLVING LOAN
COMMITMENTS.
(i) Voluntary Prepayments.
(a) Company may, upon written or telephonic notice
to Agent on or prior to 12:00 Noon (New York City time) on the
date of prepayment, which notice, if telephonic, shall be
promptly confirmed in writing, at any time and from time to time
prepay any Swing Line Loan on any Business Day in whole or in
part in an aggregate minimum amount of $500,000 and integral
multiples of $250,000 in excess of that amount. Company may,
upon not less than one Business Day's prior written or
telephonic notice, in the case of Base Rate Loans, and three
Business Days' prior written or telephonic notice, in the case
of Eurodollar Rate Loans, in each case given to Agent by 12:00
Noon (New York City time) on the date required and, if given by
telephone, promptly confirmed in writing to Agent (which
original written or telephonic notice Agent will promptly
transmit by telefacsimile or telephone to each Lender), at any
time and from time to time prepay any Term Loans or Revolving
Loans on any Business Day in whole or in part in an aggregate
minimum amount of $5,000,000 and integral multiples of
$1,000,000 in excess of that amount for Eurodollar Rate Loans or
an aggregate minimum amount of $2,000,000 and integral multiples
of $500,000 in excess of that amount for Base Rate Loans;
provided, however, that a Eurodollar Rate Loan may only be
prepaid on the expiration of the Interest Period applicable
thereto. Notice of prepayment having been given as aforesaid,
the principal amount of the Loans specified in such notice shall
become due and payable on the prepayment date specified therein.
Any such voluntary prepayment shall be applied as specified in
subsection 2.4B(iv).
(b) In the event Company is entitled to replace a
non-consenting Lender pursuant to subsection 10.6B, Company
shall have the right, upon five Business Days' written notice to
Agent (which notice Agent shall promptly transmit to each of the
Lenders), to prepay all Loans, together with accrued and unpaid
interest, fees and other amounts owing to such Lender in
accordance with subsection 10.6B so long as (1) in the case of
the prepayment of the Revolving Loans of any Lender pursuant to
this subsection 2.4B(i)(b), the Revolving Loan Commitment of
such Lender is terminated concurrently with such prepayment
pursuant to subsection 2.4B(ii)(b) (at which time Schedule 2.1
shall be deemed modified to reflect the changed Revolving Loan
Commitments), and (2) in the
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case of the prepayment of the Loans of any Lender, the consents
required by subsection 10.6B in connection with the prepayment
pursuant to this subsection 2.4B(i)(b) shall have been obtained, and
at such time, such Lender shall no longer constitute a "Lender" for
purposes of this Agreement, except with respect to indemnifications
under this Agreement (including, without limitation, subsections 2.6D,
2.7, 3.6, 10.2 and 10.3), which shall survive as to such Lender.
(ii) Voluntary Reductions of Commitments.
(a) Company may, upon not less than three Business
Days' prior written or telephonic notice confirmed in writing to
Agent (which original written or telephonic notice Agent will
promptly transmit by telefacsimile or telephone to each Lender),
at any time and from time to time terminate in whole or
permanently reduce in part, without premium or penalty, the
Revolving Loan Commitments in an amount up to the amount by
which the Revolving Loan Commitments exceed the Total
Utilization of Revolving Loan Commitments at the time of such
proposed termination or reduction; provided that any such
partial reduction of the Revolving Loan Commitments shall be in
an aggregate minimum amount of $2,000,000 and integral multiples
of $500,000 in excess of that amount. Company's notice to Agent
shall designate the date (which shall be a Business Day) of such
termination or reduction and the amount of any partial
reduction, and such termination or reduction of the Revolving
Loan Commitments shall be effective on the date specified in
Company's notice and shall reduce the Revolving Loan Commitment
of each Lender proportionately to its Pro Rata Share of such
reduction.
(b) In the event Company is entitled to replace a
non-consenting Lender pursuant to subsection 10.6B, Company
shall have the right, upon five Business Days' written notice to
Agent (which notice Agent shall promptly transmit to each of the
Lenders), to terminate the entire Revolving Loan Commitment of
such Lender, so long as (1) all Loans, together with accrued and
unpaid interest, fees and other amounts owing to such Lender are
repaid, including without limitation amounts owing to such
Lender pursuant to subsection 2.6D, pursuant to subsection
2.4B(i)(b) concurrently with the effectiveness of such
termination (at which time Schedule 2.1 shall be deemed modified
to reflect such changed amounts) and (2) the consents required
by subsection 10.6B in connection with the prepayment pursuant
to subsection 2.4B(i)(b) shall have been obtained, and at such
time, such Lender shall no longer constitute a "Lender" for
purposes of this Agreement, except with respect to
indemnifications under this Agreement (including, without
limitation, subsections 2.6D, 2.7, 3.6, 10.2 and 10.3), which
shall survive as to such Lender.
(iii) Mandatory Prepayments and Mandatory Reductions of
Revolving Loan Commitments. The Loans shall be prepaid and/or the
Revolving Loan
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<PAGE> 75
Commitments shall be permanently reduced in the amounts and under the
circumstances set forth below, all such prepayments and/or reductions
to be applied as set forth below or as more specifically provided in
subsection 2.4B(iv):
(a) Prepayments and Reductions from Net Asset Sale
Proceeds. No later than the earliest to occur of (1) the third
Business Day following the date of receipt by Company or any of
its Subsidiaries of any Net Asset Sale Proceeds in respect of
any California Asset Sale in an aggregate cumulative amount
equal to or exceeding $5,000,000; (2) the 180th day following
the date of any California Asset Sale the Net Asset Sale
Proceeds of which have not been applied to the prepayment of
the Loans pursuant to the preceding clause (1) or this clause
(2); (3) the third Business Day following the date of receipt
by Company or any of its Subsidiaries of any Net Asset Sale
Proceeds in respect of any Asset Sale (other than a California
Asset Sale) in an aggregate cumulative amount equal to or
exceeding $5,000,000; (4) the 180th day following the date of
any Asset Sale other than a California Asset Sale the Net Asset
Sale Proceeds of which have not been applied to the prepayment
of the Loans pursuant to the preceding clause (3) or this
clause (4); and (5) the date of the occurrence of any Event of
Default or Potential Event of Default, Company shall prepay
the Loans and/or the Revolving Loan Commitments shall be
permanently reduced in an amount equal to such Net Asset Sale
Proceeds; provided, however that so long as no Event of
Default or Potential Event of Default shall have occurred and
be continuing, the following Net Asset Sale Proceeds received by
Company and its Subsidiaries from and after the Closing Date
need not be applied to the mandatory prepayment of the Loans
pursuant to this subsection 2.4B(iii)(a):
(i) other than (1) Net Asset Sale Proceeds
from the sale of a Related Asset, (2) Net Asset Sale
Proceeds from California Asset Sales not permitted to
be retained by Company pursuant to subsection
2.4B(iii)(a)(vi) and (3) the first $33,800,000 in Net
Asset Sale Proceeds from California Asset Sales
referred to in subsection 2.4B(iii)(a)(v), (A) Net
Asset Sale Proceeds (including Net Asset Sale Proceeds
from California Asset Sales entitled to be retained by
Company pursuant to subsection 2.4B(iii)(a)(vi)) from
the sale of a store to the extent that such Net Asset
Sale Proceeds are reinvested in new stores or the
construction or remodeling of stores within 270 days
of such sale and (B) Net Asset Sale Proceeds from the
sale of a store to the extent that such Net Asset Sale
Proceeds do not exceed the Consolidated Capital
Expenditures made to acquire or build a replacement
store in the general vicinity of the store sold within
270 days preceding the date of such sale, and, so long
as the aggregate amount of such Net Asset Sale
Proceeds so excluded from the
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mandatory prepayment provisions pursuant to subclauses
(A) and (B) of this clause (i) does not exceed
$25,000,000 in any Fiscal Year; provided that for
purposes of sub-clause (A) of this clause (i) any of
the assets listed on Schedule 2.4B annexed hereto
shall be deemed to be stores;
(ii) Net Asset Sale Proceeds from the sale
and concurrent lease-back of any store opened or
acquired after the Closing Date or any equipment
acquired after the Closing Date, in each case within
180 days of the completion of such store or the
acquisition of such equipment, in each case to the
extent and only to the extent of Consolidated Capital
Expenditures made with respect to such store or such
equipment; provided that such 180-day period shall be
extended to a one-year period if during such 180-day
period, Company gives written notice to Agent that
Company is planning to include such store or such
equipment in a sale leaseback transaction involving
(x) such store and one or more additional stores and
such additional stores are not yet opened or acquired
and/or (y) such equipment and additional equipment
which has not yet been acquired; provided, further,
that in no event shall there be more than 5 stores
subject to a one-year period as a result of their
inclusion in such sale leaseback transaction at any
time;
(iii) Net Asset Sale Proceeds from the sale
of worn-out or obsolete equipment, to the extent that
such Net Asset Sale Proceeds are reinvested in the
same or similar equipment within 90 days of such sale;
(iv) Net Asset Sale Proceeds from the
occurrence of any loss, damage or destruction of any
stores or any other facilities of Company or any of
its Subsidiaries (including any assets located
therein) giving rise to insurance proceeds, to the
extent that (A) such Net Asset Sale Proceeds are
required to be paid to a landlord and cannot be paid
to a mortgagee or other lender to Company or its
Subsidiaries in preference to payments to a landlord
under leases existing as of the Closing Date and which
proceeds are in fact paid to such landlord in
accordance with the terms of such leases; (B) such Net
Asset Sale Proceeds are reinvested to repair or
rebuild the assets so lost, damaged or destroyed
within the earlier of (1) 270 days of receipt of such
Net Asset Sale Proceeds and (2) 24 months of the
occurrence of such loss, damage or destruction; or (C)
such Net Asset Sale Proceeds do not exceed the
expenditures made by Company or any of its
Subsidiaries within the earlier of (1) 270 days of
receipt of such Net Asset Sale Proceeds and (2) 24
months of the
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occurrence of such loss, damage or destruction, to
repair or rebuild the applicable assets so lost,
damaged or destroyed;
(v) Company shall apply the first
$33,800,000 in Net Asset Sale Proceeds from California
Asset Sales other than Asset Sales of Related Assets
to the prepayment of the Loans pursuant to subsection
2.4B(iv)(b), or if at the time of receipt of such Net
Asset Sale Proceeds, no Revolving Loans or Swing Line
Loans are outstanding, Company may retain such Net
Asset Sale Proceeds; and
(vi) after the application of the first
$33,800,000 in Net Asset Sale proceeds from California
Asset Sales in accordance with clause (v) above, at
Company's option, Company may retain up to 50% of the
Net Asset Sale Proceeds from California Asset Sales
other than Asset Sales of Related Assets up to a
maximum aggregate retained amount of $25,000,000.
If, following the receipt by Company or any of
its Subsidiaries of Net Asset Sale Proceeds, Company is
required to apply or cause to be applied any portion of such
Net Asset Sale Proceeds to prepay any Indebtedness evidenced by
any of the Related Financing Documents pursuant to the
applicable Related Financing Document, then, notwithstanding
anything contained in this subsection 2.4B(iii)(a), Company
shall prepay the Loans and/or reduce the Revolving Loan
Commitments in the order set forth in this subsection
2.4B(iii)(a) so as to eliminate any obligation to prepay such
Indebtedness.
(b) Prepayments and Reductions Due to Reversion of
Surplus Assets of Pension Plans. On the date of return to
Company or any of its Subsidiaries of any surplus assets of any
pension plan of Company or any of its Subsidiaries, Company
shall prepay the Loans and/or the Revolving Loan Commitments
shall be permanently reduced in an amount (such amount being
the "NET PENSION PROCEEDS") equal to 100% of such returned
surplus assets net of transaction costs and expenses incurred
in obtaining such return, including incremental taxes payable
as a result thereof.
(c) Prepayments and Reductions Due to Issuance of
Debt Securities. No later than the first Business Day
following the date of receipt by Company or any of its
Subsidiaries of the Cash proceeds (any such proceeds, net of
underwriting discounts, similar placement fees and commissions
and other reasonable costs and expenses associated therewith,
being the "NET DEBT PROCEEDS") from the issuance of any debt
Securities of Company or any such Subsidiary (other than the
issuance of Indebtedness permitted pursuant to subsection 7.1
as in effect on the Closing Date),
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Company shall prepay the Loans and/or the Revolving Loan
Commitments shall be permanently reduced in an amount equal to
such Net Debt Proceeds.
(d) Prepayments and Reductions Due to Issuance of
Equity Securities. No later than the first Business Day
following the date of receipt by Company of the Cash proceeds
(any such proceeds, net of underwriting discounts, similar
placement fees and commissions and other reasonable costs
associated therewith, being the "NET EQUITY PROCEEDS") from the
issuance of any equity Securities of Company (other than the
issuance of Company's Class B Common Stock and the Yucaipa
Warrant on the Closing Date and other than issuances of equity
to management employees pursuant to agreements or stock option
plans permitted under subsection 7.12) (without duplication),
Company shall prepay the Loans and/or the Revolving Loan
Commitments shall be permanently reduced in an amount equal to
50% of such Net Equity Proceeds.
(e) Prepayments and Reductions from Consolidated
Excess Cash Flow. In the event that there shall be
Consolidated Excess Cash Flow for any Fiscal Year (or in the
case of Fiscal Year 1996, during the period commencing on the
Closing Date and ending on (and including) December 28, 1996),
within 100 days after the last day of such Fiscal Year,
Company shall prepay the Loans and/or the Revolving Loan
Commitments shall be permanently reduced in an amount equal to
75% of such Consolidated Excess Cash Flow.
(f) Calculations of Net Proceeds Amounts;
Additional Prepayments and Reductions Based on Subsequent
Calculations. Concurrently with any prepayment of the Loans
and/or reduction of the Revolving Loan Commitments pursuant to
subsections 2.4B(iii)(a)-(e) or within three Business Days of
the receipt of any Net Asset Sale Proceeds under subsection
2.4B(iii)(a), Company shall deliver to Agent an Officers'
Certificate demonstrating (1) the calculation of the amount
(the "NET PROCEEDS AMOUNT") of the applicable Net Asset Sale
Proceeds, Net Pension Proceeds, Net Debt Proceeds or Net Equity
Proceeds (as such latter three terms are defined in subsections
2.4B(iii)(b), (c) and (d), respectively) or the applicable
Consolidated Excess Cash Flow, as the case may be, that gave
rise to such prepayment and/or reduction; (2) with respect to
the receipt of Net Asset Sale Proceeds referred to in clauses
(i)(A), (iii) and (iv) of subsection 2.4B(iii)(a), in
reasonable detail, the intended application of such Net Asset
Sale Proceeds and the estimated costs of the reinvestment
referred to in such clauses; and (3) with respect to the
receipt of Net Asset Sale Proceeds referred to in clauses
(i)(B), (ii) and (iv) of subsection 2.4B(iii)(a), in reasonable
detail the Consolidated Capital
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Expenditures made by Company which accounts for the exclusion
of any such Net Asset Sale Proceeds from the mandatory
prepayment requirements of subsection 2.4B(iii)(a). Such
Officers' Certificate, in the case of clauses (i) and (iii),
may be amended at any time and from time to time by Company
during the 270- day or 90-day period, as applicable, following
receipt of such Net Asset Sale Proceeds. In the event that
Company shall subsequently determine that the actual Net
Proceeds Amount was greater than the amount set forth in such
Officers' Certificate or that, with respect to clauses (i),
(iii) and (iv) of subsection 2.4B(iii)(a), such Net Proceeds
Amount was not expended for the purposes specified in such
Officers' Certificate, as amended, within the time periods
specified in such clauses, Company shall promptly make an
additional prepayment of the Loans (and/or, if applicable, the
Revolving Loan Commitments shall be permanently reduced) in an
amount equal to the amount of such excess or unexpended
portion, but only to the extent such amount has not been
previously applied as a mandatory prepayment under subsection
2.4B(iii)(e), and Company shall concurrently therewith deliver
to Agent an Officers' Certificate demonstrating the derivation
of the additional Net Proceeds Amount resulting in such excess
or unexpended portion.
(g) Prepayments Due to Reductions or Restrictions
of Revolving Loan Commitments. Company shall from time to time
prepay first the Swing Line Loans and second the Revolving
Loans to the extent necessary (1) so that the Total Utilization
of Revolving Loan Commitments shall not at any time exceed the
Revolving Loan Commitments then in effect and (2) to give
effect to the limitations set forth in clause (b) of the second
paragraph of subsection 2.1A(v) and clause (b) of the second
paragraph of subsection 2.1A(vi). Any such mandatory
prepayments shall be applied as specified in subsection
2.4B(iv) and shall not reduce the amount of the Revolving
Loan Commitments then in effect.
(iv) Application of Prepayments.
(a) Application of Voluntary Prepayments by Type
of Loans and Order of Maturity. Subject to the immediately
succeeding sentence of this subsection 2.4B(iv)(a), any
voluntary prepayments pursuant to subsection 2.4B(i)(a) shall
be applied to Term Loans, Revolving Loans or Swing Line Loans
as specified by Company in the applicable notice of prepayment;
provided that in the event Company fails to specify the Loans
to which any such prepayment shall be applied, such prepayment
shall be applied first to repay outstanding Swing Line Loans to
the full extent thereof, second to repay outstanding Revolving
Loans to the full extent thereof, and third to repay
outstanding Term Loans to the full extent thereof. Any
voluntary prepayments of the Term Loans pursuant to subsection
2.4B(i)(a) shall be
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applied (x) to the Tranche A Term Loans, the Tranche B Term
Loans, the Tranche C Term Loans and the Tranche D Loans on a
pro rata basis and (y) to reduce the unpaid scheduled
installments of principal of the Term Loans set forth in
subsections 2.4A(i), 2.4A(ii), 2.4A(iii) and 2.4A(iv) on a pro
rata basis or, at Company's option, in forward order of
maturity for scheduled installments of principal occurring
within the six- month period following the month in which such
voluntary prepayments occur.
(b) Application of Mandatory Prepayments by Type
of Loans. Any amount (the "APPLIED AMOUNT") required to be
applied as a mandatory prepayment of the Loans and/or a
reduction of the Revolving Loan Commitments pursuant to
subsections 2.4B(iii)(a)-(f) shall be applied first to prepay
the Term Loans to the full extent thereof, second, to the
extent of any remaining portion of the Applied Amount, to
prepay the Swing Line Loans to the full extent thereof and to
permanently reduce the Revolving Loan Commitments by the amount
of such prepayment, third, to the extent of any remaining
portion of the Applied Amount, to prepay the Revolving Loans to
the full extent thereof and to further permanently reduce the
Revolving Loan Commitments by the amount of such prepayment,
and fourth, to the extent of any remaining portion of the
Applied Amount, to further permanently reduce the Revolving
Loan Commitments to the full extent thereof; provided however
that the first $33,800,000 in Net Asset Sale Proceeds from
California Asset Sales referenced in subsection 2.4B(iii)(a)(v)
and the Net Asset Sale Proceeds from California Asset Sales
referenced in subsection 2.4B(iii)(a)(vi) and so retained by
Company shall be applied first to prepay Swing Line Loans to
the full extent thereof without any permanent reduction of the
Revolving Loan Commitments, second to the extent of any
remaining portion of the Applied Amount, to prepay the
Revolving Loans to the full extent thereof without any
permanent reduction of the Revolving Loan Commitments and third
retained by Company if no Revolving Loans or Swing Line Loans
are then outstanding.
(c) Application of Mandatory Prepayments of Term
Loans by Order of Maturity. Any mandatory prepayments of the
Term Loans pursuant to subsection 2.4B(iii) shall be applied
(x) to the Tranche A Term Loans, the Tranche B Term Loans, the
Tranche C Term Loans and the Tranche D Term Loans on a pro rata
basis and (y) to reduce the unpaid scheduled installments of
principal of the Term Loans set forth in subsections 2.4A(i),
2.4A(ii), 2.4A(iii) and 2.4A(iv) on a pro rata basis; provided
that, at Company's election, mandatory prepayments of the
Tranche A Term Loans made with Net Asset Sale Proceeds from
California Asset Sales (other than Asset Sales of Related
Assets) in excess of the first $33,800,000 received may be
applied to reduce the unpaid scheduled
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installments of principal of the Tranche A Term Loans in
forward order of maturity up to a maximum aggregate reduction
for all such future scheduled installments of $50,000,000 at
any time; provided, further that, in the case of Tranche B
Term Loans, Tranche C Term Loans and Tranche D Term Loans,
upon receipt of any mandatory prepayments pursuant to
subsection 2.4B(iii) with respect to which Company has given
Agent written notification prior to such receipt that Company
has elected to give the Tranche B Term Lenders, the Tranche C
Term Lenders and the Tranche D Term Lenders the right to waive
such Lenders' right to receive such prepayment (the "WAIVABLE
MANDATORY PREPAYMENT"), Agent shall notify the Tranche B Term
Lenders, the Tranche C Term Lenders and the Tranche D Term
Lenders of such receipt and the amount of the prepayment to be
applied to each such Lender's Term Loans; provided, still
further that Company shall use its reasonable efforts to
notify the Tranche B Term Lenders, the Tranche C Term Lenders
and the Tranche D Term Lenders of such Waivable Mandatory
Prepayment three (3) Business Days prior to the payment to
Agent of such Waivable Mandatory Prepayments (it being
understood that Company shall have no liabilities for failing
to so notify such Lenders). In the event any such Tranche B
Term Lender, Tranche C Term Lender or Tranche D Term Lender
desires to waive such Lender's right to receive any such
Waivable Mandatory Prepayment, such Lender shall so advise
Agent no later than the close of business on the date of such
notice from Agent. In the event that any such Lender waives
such Lender's right to any such Waivable Mandatory Prepayment,
Agent shall apply (i) 100% of amount so waived constituting
Net Asset Sale Proceeds received from the sale of any Excess
California Land or California Stores and (ii) 50% of any
other amount so waived, to prepay the Tranche A Term Loans.
Agent shall return the remainder of the amount so waived, if
any, by such Lender to Company.
(d) Application of Prepayments to Base Rate Loans
and Eurodollar Rate Loans. Considering Tranche A Term Loans,
Tranche B Term Loans, Tranche C Term Loans, Tranche D Term
Loans and Revolving Loans being prepaid separately, any
prepayment thereof shall be applied first to Base Rate Loans to
the full extent thereof before application to Eurodollar Rate
Loans, in each case in a manner which minimizes the amount of
any payments required to be made by Company pursuant to
subsection 2.6D.
C. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Company
of principal, interest, fees and other Obligations hereunder, under the
Notes and under the other Loan Documents shall be made in Dollars in
same day funds,
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without defense, setoff or counterclaim, free of any restriction or
condition, and delivered to Agent not later than 1:00 P.M. (New York
City time) on the date due at the Funding and Payment Office for the
account of Lenders; funds received by Agent after that time on such
due date shall be deemed to have been paid by Company on the next
succeeding Business Day. Company hereby authorizes Agent to charge
its accounts with Agent in order to cause timely payment to be made to
Agent of all principal, interest, fees and expenses due hereunder
(subject to sufficient funds being available in its accounts for that
purpose).
(ii) Application of Payments to Principal and Interest.
Except as provided in subsection 2.2C, all payments in respect of the
principal amount of any Loan shall include payment of accrued interest
on the principal amount being repaid or prepaid, and all such payments
shall be applied to the payment of interest before application to
principal.
(iii) Apportionment of Payments. Aggregate principal and
interest payments in respect of Term Loans and Revolving Loans shall be
apportioned among all outstanding Loans to which such payments relate,
in each case proportionately to Lenders' respective Pro Rata Shares.
Agent shall promptly distribute to each Lender, at its primary address
set forth below its name on the appropriate signature page hereof or at
such other address as such Lender may request, its Pro Rata Share of
all such payments received by Agent and the commitment fees of such
Lender when received by Agent pursuant to subsection 2.3.
Notwithstanding the foregoing provisions of this subsection 2.4C(iii),
if, pursuant to the provisions of subsection 2.6C, any Notice of
Conversion/Continuation is withdrawn as to any Affected Lender or if
any Affected Lender makes Base Rate Loans in lieu of its Pro Rata
Share of any Eurodollar Rate Loans, Agent shall give effect thereto in
apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be
made hereunder shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the
computation of the payment of interest hereunder or of the commitment
fees hereunder, as the case may be; provided, however, that if the day
on which payment relating to a Eurodollar Rate Loan is due is not a
Business Day but is a day of the month after which no further Business
Day occurs in that month, then the due date thereof shall be the next
preceding Business Day.
(v) Notation of Payment. Each Lender agrees that before
disposing of any Note held by it (other than by granting participations
therein), that Lender will make a notation thereon of all Loans
evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has
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been paid; provided that the failure to make (or any error in the
making of) a notation of any Loan made under such Note shall not limit
or otherwise affect the obligations of Company hereunder or under such
Note with respect to any Loan or any payments of principal or interest
on such Note.
2.5 USE OF PROCEEDS.
A. TERM LOANS. The proceeds of the Term Loans, together with (i)
not less than $575,000,000 in aggregate gross proceeds from the issuance of the
Senior Subordinated Notes, and (ii) not less than $67,200,000 in net proceeds
from the sale of California Stores (as such amount may be reduced by
application of such proceeds to the permanent reduction of Company's existing
Indebtedness), shall be applied by Company to (i) purchase approximately
13,400,000 shares of its Class A Common Stock and Class B Common Stock,
representing 50% of shares of all Class A Common Stock and Class B Common Stock
outstanding (excluding shares of Class B Common Stock issued or issuable in
connection with the Acquisition but including certain Existing Management Stock
Options) pursuant to the Equity Tender Offer for an aggregate purchase payment
not exceeding $465,000,000, (ii) permanently repay Company's existing
Indebtedness in an amount not exceeding $653,200,000, (iii) permanently repay
Smitty's existing Indebtedness in an amount not exceeding $102,900,000, (iv)
redeem not less than approximately 3,000,000 shares of its Redeemable Preferred
Stock for an aggregate redemption payment not exceeding $1,000,000 and (v) to
pay Transaction Costs not exceeding $160,700,000.
B. REVOLVING LOANS; SWING LINE LOANS. The proceeds of the
Revolving Loans on the Closing Date shall be applied by Company as provided in
subsection 2.5A. The proceeds of any other Revolving Loans and any Swing Line
Loans shall be applied by Company for working capital and general corporate
purposes.
C. MARGIN REGULATIONS. No portion of the proceeds of any
borrowing under this Agreement shall be used by Company or any of its
Subsidiaries in any manner that might cause the borrowing or the application of
such proceeds to violate Regulation G, Regulation U, Regulation T or Regulation
X of the Board of Governors of the Federal Reserve System or any other
regulation of such Board or to violate the Exchange Act, in each case as in
effect on the date or dates of such borrowing and such use of proceeds.
2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.
Notwithstanding any other provision of this Agreement to the
contrary, the following provisions shall govern with respect to Eurodollar Rate
Loans as to the matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as
practicable after 10:00 A.M. (New York City time) on each Interest Rate
Determination Date, Agent
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shall determine (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties) the interest rate that shall apply to
the Eurodollar Rate Loans for which an interest rate is then being determined
for the applicable Interest Period and shall promptly give notice thereof (in
writing or by telephone confirmed in writing) to Company and each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event
that Agent shall have determined (which determination shall be final and
conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the interbank Eurodollar market adequate and fair means
do not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Adjusted Eurodollar Rate, Agent shall
on such date give notice (by telefacsimile or by telephone confirmed in
writing) to Company and each Lender of such determination, whereupon (i) no
Loans may be made as, or converted to, Eurodollar Rate Loans until such time as
Agent notifies Company and Lenders that the circumstances giving rise to such
notice no longer exist and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Company with respect to the Loans in respect
of which such determination was made shall be deemed to be rescinded by
Company.
C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In
the event that on any date any Lender shall have determined (which
determination shall be final and conclusive and binding upon all parties hereto
but shall be made only after consultation with Company and Agent) that the
making, maintaining or continuation of its Eurodollar Rate Loans (i) has become
unlawful as a result of compliance by such Lender in good faith with any law,
treaty, governmental rule, regulation, guideline or order (or would conflict
with any such treaty, governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply therewith would not
be unlawful) or (ii) has become impracticable, or would cause such Lender
material hardship, as a result of contingencies occurring after the date of
this Agreement which materially and adversely affect the interbank Eurodollar
market or the position of such Lender in that market, then, and in any such
event, such Lender shall be an "AFFECTED LENDER" and it shall on that day give
notice (by telefacsimile or by telephone confirmed in writing) to Company and
Agent of such determination (which notice Agent shall promptly transmit to
each other Lender). Thereafter (a) the obligation of the Affected Lender to
make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be
suspended until such notice shall be withdrawn by the Affected Lender, (b) to
the extent such determination by the Affected Lender relates to a Eurodollar
Rate Loan then being requested by Company pursuant to a Notice of Borrowing or
a Notice of Conversion/Continuation, the Affected Lender shall make such Loan
as (or convert such Loan to, as the case may be) a Base Rate Loan, (c) the
Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans
(the "AFFECTED LOANS") shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the Affected
Loans or when required by law, and (d) the Affected Loans shall automatically
convert into
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Base Rate Loans on the date of such termination. Notwithstanding the
foregoing, to the extent a determination by an Affected Lender as described
above relates to a Eurodollar Rate Loan then being requested by Company
pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation,
Company shall have the option, subject to the provisions of subsection 2.6D,
to rescind such Notice of Borrowing or Notice of Conversion/Continuation as to
all Lenders by giving notice (by telefacsimile or by telephone confirmed in
writing) to Agent of such rescission on the date on which the Affected Lender
gives notice of its determination as described above (which notice of
rescission Agent shall promptly transmit to each other Lender). Except as
provided in the immediately preceding sentence, nothing in this subsection
2.6C shall affect the obligation of any Lender other than an Affected Lender to
make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in
accordance with the terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST
PERIODS. Company shall compensate each Lender, upon written request by that
Lender (which request shall set forth in reasonable detail the basis for
requesting such amounts), for all reasonable losses, expenses and liabilities
(including, without limitation, any interest paid by that Lender to lenders of
funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss,
expense or liability sustained by that Lender in connection with the
liquidation or re-employment of such funds) which that Lender will sustain or
has sustained: (i) if for any reason (other than a default by that Lender) a
borrowing of any Eurodollar Rate Loan does not occur on a date specified
therefor in a Notice of Borrowing or a telephonic request for borrowing, or a
conversion to or continuation of any Eurodollar Rate Loan does not occur on a
date specified therefor in a Notice of Conversion/Continuation or a telephonic
request for conversion or continuation, (ii) if any prepayment or other
principal payment or any conversion of any of its Eurodollar Rate Loans occurs
on a date prior to the last day of an Interest Period applicable to that Loan,
(iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any
date specified in a notice of prepayment given by Company, or (iv) as a
consequence of any other default by Company in the repayment of its Eurodollar
Rate Loans when required by the terms of this Agreement.
E. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry
or transfer Eurodollar Rate Loans at, to, or for the account of any of its
branch offices or the office of an Affiliate of that Lender.
F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS.
Calculation of all amounts payable to a Lender under this subsection 2.6 and
under subsection 2.7A shall be made as though that Lender had actually funded
each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar
deposit bearing interest at the rate obtained pursuant to clause (i) of the
definition of Adjusted Eurodollar Rate in an amount equal to the amount of such
Eurodollar Rate Loan and having a maturity comparable to the relevant Interest
Period and through the transfer of such Eurodollar
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deposit from an offshore office of that Lender to a domestic office of that
Lender in the United States of America; provided, however, that each Lender may
fund each of its Eurodollar Rate Loans in any manner it sees fit and the
foregoing assumptions shall be utilized only for the purposes of calculating
amounts payable under this subsection 2.6 and under subsection 2.7A.
G. EURODOLLAR RATE LOANS AFTER DEFAULT. After the occurrence of
and during the continuation of a Potential Event of Default or an Event of
Default, (i) Company may not elect to have a Loan be made or maintained as, or
converted to, a Eurodollar Rate Loan after the expiration of any Interest
Period then in effect for that Loan and (ii) subject to the provisions of
subsection 2.6D, any Notice of Borrowing or Notice of Conversion/Continuation
given by Company with respect to a requested borrowing or
conversion/continuation that has not yet occurred shall be deemed to be
rescinded by Company.
2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the
provisions of subsection 2.7B, in the event that any Lender shall determine
(which determination shall, absent manifest error, be final and conclusive and
binding upon all parties hereto) that any law, treaty or governmental rule,
regulation or order, or any change therein or in the interpretation,
administration or application thereof (including the introduction of any new
law, treaty or governmental rule, regulation or order), or any determination of
a court or governmental authority, in each case that becomes effective (other
than any change in such law, treaty or governmental rule, regulation or order
which was promulgated prior to the date hereof and which becomes effective in
accordance with its terms after the date hereof) after the date hereof, or
compliance by such Lender with any guideline, request or directive issued or
made after the date hereof by any central bank, the National Association of
Insurance Commissioners ("NAIC") or other governmental or quasi-governmental
authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending
office) to any additional Tax (other than any Tax on the overall net
income of such Lender) with respect to this Agreement or any of its
obligations hereunder or any payments to such Lender (or its applicable
lending office) of principal, interest, fees or any other amount
payable hereunder;
(ii) imposes, modifies or holds applicable any reserve
(including without limitation any marginal, emergency, supplemental,
special or other reserve), special deposit, compulsory loan, FDIC
insurance or similar requirement against assets held by, or deposits or
other liabilities in or for the account of, or advances or loans by, or
other credit extended by, or any other acquisition of funds by, any
office of such Lender (other than any such reserve or other
requirements with
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respect to Eurodollar Rate Loans that are reflected in the definition
of Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect
to a Tax matter) on or affecting such Lender (or its applicable lending
office) or its obligations hereunder or the interbank Eurodollar
market;
and the result of any of the foregoing is to increase the cost to such Lender
of agreeing to make, making or maintaining Loans hereunder or to reduce any
amount received or receivable by such Lender (or its applicable lending office)
with respect thereto; then, in any such case, Company shall promptly pay to
such Lender, upon receipt of the statement referred to in the next sentence,
such additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder; provided that a Lender shall not be entitled to avail itself of the
benefit of this subsection 2.7A to the extent that any such increased cost or
reduction in amounts was incurred more than one year prior to the time it gives
notice to Company (as provided in the next sentence) of the relevant
circumstance, unless such circumstance arose or became applicable
retrospectively, in which case such Lender shall not be limited to such one
year period so long as such Lender has given such notice to Company no later
than one year from the time such circumstance became applicable to such Lender.
Such Lender shall deliver to Company (with a copy to Agent) a written
statement, setting forth in reasonable detail the basis for calculating the
additional amounts owed to such Lender under this subsection 2.7A, which
statement shall be conclusive and binding upon all parties hereto absent
manifest error.
B. WITHHOLDING OF TAXES.
(i) Payments to Be Free and Clear. Except as specifically
provided to the contrary in paragraphs (ii) and (iii) below, all sums
payable by Company under this Agreement and the other Loan Documents
shall (except to the extent required by law) be paid free and clear of,
and without any deduction or withholding on account of, any Tax (other
than a Tax on the overall net income of any Lender) imposed, levied,
collected, withheld or assessed by or within the United States of
America or any political subdivision in or of the United States of
America or any other jurisdiction from or to which a payment is made by
or on behalf of Company or by any federation or organization of which
the United States of America or any such jurisdiction is a member at
the time of payment.
(ii) Grossing-up of Payments. If Company or any other
Person is required by law to make any deduction or withholding on
account of any such Tax from any sum paid or payable by Company to
Agent or any Lender under any of the Loan Documents:
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(a) Company shall notify Agent of any such
requirement or any change in any such requirement as soon as
Company becomes aware of it;
(b) Company shall pay any such Tax before the date
on which penalties attach thereto, such payment to be made (if
the liability to pay is imposed on Company) for its own account
or (if that liability is imposed on Agent or such Lender, as
the case may be) on behalf of and in the name of Agent or such
Lender;
(c) the sum payable by Company in respect of which
the relevant deduction, withholding or payment is required
shall be increased to the extent necessary to ensure that,
after the making of that deduction, withholding or payment,
Agent or such Lender, as the case may be, receives on the due
date and retains (free from any liability in respect of any
such deduction, withholding or payment) a net sum equal to what
it would have received and so retained had no such deduction,
withholding or payment been required or made; and
(d) within 30 days after paying any sum from which
it is required by law to make any deduction or withholding, and
within 30 days after the due date of payment of any Tax which
it is required by clause (b) above to pay, Company shall
deliver to Agent evidence satisfactory to the other affected
parties of such deduction, withholding or payment and of the
remittance thereof to the relevant taxing or other authority;
provided that no such additional amount shall be required to be paid to
any Lender under clause (c) above except to the extent that any change
after the date hereof (in the case of each Lender listed on the
signature pages hereof) or after the date of the Assignment Agreement
pursuant to which such Lender became a Lender (in the case of each
other Lender) in any such requirement for a deduction, withholding or
payment as is mentioned therein shall result in an increase in the rate
of such deduction, withholding or payment from that in effect at the
date of this Agreement or at the date of such Assignment Agreement, as
the case may be, in respect of payments to such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws
of any jurisdiction other than the United States or any state
or other political subdivision thereof (for purposes of this
subsection 2.7B(iii), a "NON-US LENDER") shall deliver to Agent
for transmission to Company, on or prior to the Closing Date
(in the case of each Lender listed on the signature pages
hereof) or on or prior to the date of the Assignment Agreement
pursuant to which it becomes a Lender (in the case of each
other Lender), and at
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such other times as may be necessary in the determination of
Company or Agent (each in the reasonable exercise of its
discretion), (1) two original copies of Internal Revenue
Service Form 1001 or 4224 (or any successor forms), properly
completed and duly executed by such Lender, together with any
other certificate or statement of exemption required under the
Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to
any payments to such Lender of principal, interest, fees or
other amounts payable under any of the Loan Documents or (2) if
such Lender is not a "bank" or other Person described in
Section 881(c)(3) of the Internal Revenue Code and cannot
deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (1) above, a Certificate re Non-Bank Status
together with two original copies of Internal Revenue Service
Form W-8 (or any successor form), properly completed and duly
executed by such Lender, together with any other certificate or
statement of exemption required under the Internal Revenue Code
or the regulations issued thereunder to establish that such
Lender is not subject to deduction or withholding of United
States federal income tax with respect to any payments to such
Lender of interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms,
certificates or other evidence with respect to United States
federal income tax withholding matters pursuant to subsection
2.7B(iii)(a) hereby agrees, from time to time after the initial
delivery by such Lender of such forms, certificates or other
evidence, whenever a lapse in time or change in circumstances
renders such forms, certificates or other evidence obsolete or
inaccurate in any material respect, that such Lender shall
promptly (1) deliver to Agent for transmission to Company two
new original copies of Internal Revenue Service Form 1001 or
4224, or a Certificate re Non-Bank Status and two original
copies of Internal Revenue Service Form W-8, as the case may
be, properly completed and duly executed by such Lender,
together with any other certificate or statement of exemption
required in order to confirm or establish that such Lender is
not subject to deduction or withholding of United States
federal income tax with respect to payments to such Lender
under the Loan Documents or (2) promptly notify Agent and
Company of its inability to deliver any such forms,
certificates or other evidence.
(c) Company shall not be required to pay any
additional amount to any Non-US Lender under clause (c) of
subsection 2.7B(ii) if such Lender shall have failed to satisfy
the requirements of subsection 2.7B(iii) (a); provided that if
such Lender shall have satisfied such requirements on the
Closing Date (in the case of each Lender listed on the
signature pages hereof) or on the date of the Assignment
Agreement pursuant to which it
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became a Lender (in the case of each other Lender), nothing in
this subsection 2.7B(iii)(c) shall relieve Company of its
obligation to pay any additional amounts pursuant to clause (c)
of subsection 2.7B(ii) in the event that, as a result of any
change after the date of such satisfaction in any applicable
law, treaty or governmental rule, regulation or order, or any
change after the date of such satisfaction in the
interpretation, administration or application thereof, such
Lender is no longer properly entitled to deliver forms,
certificates or other evidence at a subsequent date
establishing the fact that such Lender is not subject to
withholding as described in subsection 2.7B(iii)(a).
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have
determined that the adoption, effectiveness, phase-in or applicability after
the date hereof of any law, rule or regulation (or any provision thereof)
regarding capital adequacy, or after the date hereof, any change therein or in
the interpretation or administration thereof by any governmental authority,
central bank, the NAIC or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its applicable lending
office) with any guideline, request or directive regarding capital adequacy
(whether or not having the force of law) of any such governmental authority,
central bank, the NAIC or comparable agency, has or would have the effect of
reducing the rate of return on the capital of such Lender or any corporation
controlling such Lender as a consequence of, or with reference to, such
Lender's Loans or Commitments or Letters of Credit or participations therein or
other obligations hereunder with respect to the Loans or the Letters of Credit
to a level below that which such Lender or such controlling corporation could
have achieved but for such adoption, effectiveness, phase-in, applicability,
change or compliance (taking into consideration the policies of such Lender or
such controlling corporation with regard to capital adequacy), then from time
to time, within five Business Days after receipt by Company from such Lender of
the statement referred to in the next sentence, Company shall pay to such
Lender such additional amount or amounts as will compensate such Lender or such
controlling corporation on an after-tax basis for such reduction; provided that
a Lender shall not be entitled to avail itself of the benefit of this
subsection 2.7C to the extent that any such reduction in return was incurred
more than one year prior to the time it gives notice to Company (as provided in
the next sentence) of the relevant circumstance, unless such circumstance arose
or became applicable retrospectively, in which case such Lender shall not be
limited to such one year period so long as such Lender has given such notice
to Company no later than one year from the time such circumstance became
applicable to such Lender. Such Lender shall deliver to Company (with a copy
to Agent) a written statement, setting forth in reasonable detail the basis of
the calculation of such additional amounts, which statement shall be conclusive
and binding upon all parties hereto absent manifest error.
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2.8 OBLIGATION OF LENDERS AND ISSUING LENDERS TO MITIGATE.
Each Lender and Issuing Lender agrees that, as promptly as
practicable after the officer of such Lender or Issuing Lender responsible for
administering the Loans or Letters of Credit of such Lender or Issuing Lender,
as the case may be, becomes aware of the occurrence of an event or the
existence of a condition that would cause such Lender to become an Affected
Lender or that would entitle such Lender or Issuing Lender to receive payments
under subsection 2.7 or subsection 3.6, it will, to the extent not inconsistent
with the internal policies of such Lender or Issuing Lender and any applicable
legal or regulatory restrictions, use reasonable efforts (i) to make, issue,
fund or maintain the Commitments of such Lender or the affected Loans or
Letters of Credit of such Lender or Issuing Lender through another lending or
letter of credit office of such Lender or Issuing Lender, or (ii) take such
other measures as such Lender or Issuing Lender may deem reasonable, if as a
result thereof the circumstances which would cause such Lender to be an
Affected Lender would cease to exist or the additional amounts which would
otherwise be required to be paid to such Lender or Issuing Lender pursuant to
subsection 2.7 or subsection 3.6 would be materially reduced and if, as
determined by such Lender or Issuing Lender in its sole discretion, the making,
issuing, funding or maintaining of such Commitments or Loans or Letters of
Credit through such other lending or letter of credit office or in accordance
with such other measures, as the case may be, would not otherwise materially
adversely affect such Commitments or Loans or Letters of Credit or the
interests of such Lender or Issuing Lender; provided that such Lender or
Issuing Lender will not be obligated to utilize such other lending or letter of
credit office pursuant to this subsection 2.8 unless Company agrees to pay all
incremental expenses incurred by such Lender or Issuing Lender as a result of
utilizing such other lending or letter of credit office as described in clause
(i) above. A certificate as to the amount of any such expenses payable by
Company pursuant to this subsection 2.8 (setting forth in reasonable detail the
basis for requesting such amount) submitted by such Lender or Issuing Lender to
Company (with a copy to Agent) shall be conclusive absent manifest error.
2.9 REPLACEMENT OF LENDER.
In the event that Company receives a notice pursuant to
subsection 2.7A, 2.7C or 3.6 or in the event of a refusal by a Lender to
consent to a proposed change, waiver, discharge or termination with respect to
this Agreement which has been approved by the Requisite Lenders as provided in
subsection 10.6, Company shall have the right, if no Potential Event of Default
or Event of Default then exists, to replace such Lender (a "REPLACED LENDER")
with one or more Eligible Assignees (collectively, the "REPLACEMENT LENDER")
acceptable to Agent, provided that (i) at the time of any replacement pursuant
to this subsection 2.9 the Replacement Lender shall enter into one or more
Assignment Agreements pursuant to subsection 10.1B (and with all fees payable
pursuant to such subsection 10.1B to be paid by the Replacement Lender)
pursuant to which the Replacement Lender shall acquire all of the outstanding
Loans and
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Commitments of, and in each case participations in Letters of Credit and Swing
Line Loans by, the Replaced Lender and, in connection therewith, shall pay to
(x) the Replaced Lender in respect thereof an amount equal to the sum of (A) an
amount equal to the principal of, and all accrued interest on, all outstanding
Loans of the Replaced Lender, (B) an amount equal to all unpaid drawings with
respect to Letters of Credit that have been funded by (and not reimbursed to)
such Replaced Lender, together with all then unpaid interest with respect
thereto at such time and (C) an amount equal to all accrued, but theretofore
unpaid, fees owing to the Replaced Lender with respect thereto, (y) the
appropriate Issuing Lender an amount equal to such Replaced Lender's Pro Rata
Share of any unpaid drawings with respect to Letters of Credit (which at such
time remains an unpaid drawing) issued by it to the extent such amount was not
theretofore funded by such Replaced Lender, and (z) Swing Line Lender an amount
equal to such Replaced Lender's Pro Rata Share of any Refunded Swing Line Loans
to the extent such amount was not theretofore funded by such Replaced Lender,
and (ii) all obligations (including without limitation all such amounts, if
any, owing under subsection 2.6D) of Company owing to the Replaced Lender
(other than those specifically described in clause (i) above in respect of
which the assignment purchase price has been, or is concurrently being, paid),
shall be paid in full to such Replaced Lender concurrently with such
replacement. Upon the execution of the respective Assignment Agreements,
recordation of such assignment in the Register by Agent pursuant to subsection
2.1D, the payment of amounts referred to in clauses (i) and (ii) above and, if
so requested by the Replacement Lender, delivery to the Replacement Lender of
the appropriate Note or Notes executed by Company, the Replacement Lender shall
become a Lender hereunder and the Replaced Lender shall cease to constitute a
Lender hereunder except with respect to indemnification provisions under this
Agreement which by the terms of this Agreement survive the termination of this
Agreement, which indemnification provisions shall survive as to such Replaced
Lender. Notwithstanding anything to the contrary contained above, no Issuing
Lender may be replaced hereunder at any time while it has Letters of Credit
outstanding hereunder unless arrangements satisfactory to such Issuing Lender
(including the furnishing of a Standby Letter of Credit in form and substance,
and issued by an issuer satisfactory to such Issuing Lender or the furnishing
of cash collateral in amounts and pursuant to arrangements satisfactory to such
Issuing Lender) have been made with respect to such outstanding Letters of
Credit.
SECTION 3. LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERS OF CREDIT AND REVOLVING LENDERS' PURCHASE OF
PARTICIPATIONS THEREIN.
A. LETTERS OF CREDIT. In addition to Company requesting that
Revolving Lenders make Revolving Loans pursuant to subsection 2.1A(v) and that
Swing Line Lender make Swing Line Loans pursuant to subsection 2.1A(vi),
Company may request, in accordance with the provisions of this subsection 3.1,
from time to time during the period from the Closing Date to but excluding the
Revolving Loan Commitment
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Termination Date, that one or more Revolving Lenders issue Letters of Credit
for the account of Company or any wholly-owned Subsidiary of Company for the
purposes specified in the definitions of Commercial Letters of Credit and
Standby Letters of Credit; provided, that if any such Letter of Credit is
issued for the account of any such Subsidiary, Company shall execute jointly
with such Subsidiary all letter of credit documentation (including, without
limitation, letter of credit application) as may be required by the applicable
Issuing Lender. Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of Company herein set forth,
any one or more Revolving Lenders may, but (except as provided in subsection
3.1B(ii)) shall not be obligated to, issue such Letters of Credit in accordance
with the provisions of this subsection 3.1; provided that Company shall not
request that any Revolving Lender issue (and no Revolving Lender shall issue):
(i) any Letter of Credit if, after giving effect to such
issuance, the Total Utilization of Revolving Loan Commitments would
exceed the Revolving Loan Commitments then in effect;
(ii) any Letter of Credit if, after giving effect to such
issuance, the Letter of Credit Usage would exceed $75,000,000;
(iii) any Standby Letter of Credit having an expiration date
later than the earlier of (a) the date which is 30 days prior to the
Revolving Loan Commitment Termination Date and (b) the date which is
one year from the date of issuance of such Standby Letter of Credit;
provided that the immediately preceding clause (b) shall not prevent
any Issuing Lender from agreeing that a Standby Letter of Credit will
automatically be extended for one or more successive periods not to
exceed one year each unless such Issuing Lender elects not to extend
for any such additional period; provided, further that such Issuing
Lender shall deliver a written notice to Agent setting forth the last
day on which such Issuing Lender may give notice that it will not
extend such Standby Letter of Credit (the "NOTIFICATION DATE" with
respect to such Standby Letter of Credit) at least ten Business Days
prior to such Notification Date; and provided, further that such
Issuing Lender shall give notice that it will not extend such Standby
Letter of Credit if it has knowledge that an Event of Default has
occurred and is continuing on such Notification Date, unless such Event
of Default has been waived in accordance with subsection 10.6;
(iv) any Commercial Letter of Credit having an expiration
date (a) later than the earlier of (X) the date which is 30 days prior
to the Revolving Loan Commitment Termination Date and (Y) the date
which is 180 days from the date of issuance of such Commercial Letter
of Credit or (b) that is otherwise unacceptable to the applicable
Issuing Lender in its reasonable discretion; or
(v) any Letter of Credit denominated in a currency other
than Dollars.
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B. MECHANICS OF ISSUANCE.
(i) Notice of Issuance. Whenever Company desires the
issuance of a Letter of Credit, it shall deliver to the proposed
Issuing Lender (with copy to Agent if Agent is not the proposed Issuing
Lender) a Notice of Issuance of Letter of Credit substantially in the
form of Exhibit III annexed hereto no later than 1:00 P.M. (New York
City time) at least five Business Days (or such shorter period as may
be agreed to by the Issuing Lender in any particular instance), in
advance of the proposed date of issuance. The Notice of Issuance of
Letter of Credit shall specify (a) the Revolving Lender requested to
issue the Letter of Credit, (b) the proposed date of issuance (which
shall be a Business Day), (c) the face amount of the Letter of Credit,
(d) the expiration date of the Letter of Credit, (e) the name and
address of the beneficiary, (f) if such Letter of Credit is proposed to
be issued for the account of a wholly-owned Subsidiary of Company, the
name of such Subsidiary, and (g) the verbatim text of the proposed
Letter of Credit or the proposed terms and conditions thereof,
including a precise description of any documents to be presented by the
beneficiary which, if presented by the beneficiary in substantial
compliance with the terms and conditions of the Letter of Credit prior
to the expiration date of the Letter of Credit, would require the
Issuing Lender to make payment under the Letter of Credit; provided
that the Issuing Lender, in its reasonable discretion, may require
changes in the text of the proposed Letter of Credit or any such
documents; and provided, further that no Letter of Credit shall require
payment against a conforming draft to be made thereunder on the same
business day (under the laws of the jurisdiction in which the office of
the Issuing Lender to which such draft is required to be presented is
located) that such draft is presented if such presentation is made
after 10:00 A.M. (in the time zone of such office of the Issuing
Lender) on such business day.
Company shall notify the applicable Issuing Lender
(and Agent, if Agent is not such Issuing Lender) prior to the issuance
of any Letter of Credit in the event that any of the matters to which
Company is required to certify in the applicable Notice of Issuance of
Letter of Credit is no longer true and correct as of the proposed date
of issuance of such Letter of Credit, and upon the issuance of any
Letter of Credit Company shall be deemed to have re-certified, as of
the date of such issuance, as to the matters to which Company is
required to certify in the applicable Notice of Issuance of Letter of
Credit.
(ii) Determination of Issuing Lender. Upon receipt by a
proposed Issuing Lender of a Notice of Issuance of Letter of Credit
pursuant to subsection 3.1B(i) requesting the issuance of a Letter of
Credit, (a) in the event Agent is the proposed Issuing Lender, (1) if
Agent elects to issue such Letter of Credit, Agent shall promptly so
notify Company, and Agent shall be the Issuing Lender with respect
thereto and (2) if Agent, in its sole discretion, elects not to issue
such Letter of Credit, Agent shall promptly so notify Company,
whereupon Company
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may request any Arranger or Co-Agent to issue such Letter of Credit by
delivering to such Arranger or such Co-Agent a copy of the applicable
Notice of Issuance of Letter of Credit and the Arranger or Co-Agent so
requested to issue such Letter of Credit shall promptly notify Company
and Agent whether or not, in its sole discretion, it has elected to
issue such Letter of Credit, and any such Arranger or Co-Agent which so
elects to issue such Letter of Credit shall be the Issuing Lender with
respect thereto; provided that in the event that all Arrangers and all
Co-Agents shall have declined to issue such Letter of Credit,
notwithstanding the prior election of Agent not to issue such Letter of
Credit, Agent shall be obligated to issue such Letter of Credit and
shall be the Issuing Lender with respect thereto, notwithstanding the
fact that the Letter of Credit Usage with respect to such Letter of
Credit and with respect to all other Letters of Credit issued by Agent,
when aggregated with Agent's outstanding Revolving Loans and Swing
Line Loans, may exceed Agent's Revolving Loan Commitment then in
effect; and (b) in the event any other Revolving Lender is the proposed
Issuing Lender, such Revolving Lender shall promptly notify Company and
Agent whether or not, in its sole discretion, it has elected to issue
such Letter of Credit, and (1) if such Revolving Lender so elects to
issue such Letter of Credit, it shall be the Issuing Lender with
respect thereto and (2) if such Revolving Lender fails to so promptly
notify Company and Agent or declines to issue such Letter of Credit,
Company may request Agent or another Revolving Lender to be the Issuing
Lender with respect to such Letter of Credit in accordance with the
provisions of this subsection 3.1B.
(iii) Issuance of Letter of Credit. Upon satisfaction or
waiver (in accordance with subsection 10.6) of the conditions set forth
in subsection 4.3, the Issuing Lender shall issue the requested Letter
of Credit in accordance with the Issuing Lender's standard operating
procedures.
(iv) Notification to Revolving Lenders. Upon the issuance
of any Letter of Credit the applicable Issuing Lender shall promptly
notify Agent of such issuance, which notice shall be accompanied by a
copy of such Letter of Credit if such Letter of Credit is a Standby
Letter of Credit. Promptly after receipt of such notice (or, if Agent
is the Issuing Lender, together with such notice), Agent shall notify
each Revolving Lender of the amount of such Revolving Lender's
respective participation in such Letter of Credit, determined in
accordance with subsection 3.1C.
(v) Reports to Revolving Lenders. Within 15 days after
the end of each calendar quarter ending after the Closing Date, so long
as any Letter of Credit shall have been outstanding during such
calendar quarter, each Issuing Lender shall deliver to Agent, for
distribution to each other Revolving Lender, a report setting forth the
daily maximum amount available to be drawn under the Letters
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of Credit issued by such Issuing Lender that were outstanding during
such calendar quarter.
C. REVOLVING LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS OF
CREDIT. Immediately upon the issuance of each Letter of Credit, each Revolving
Lender shall be deemed to, and hereby agrees to, have irrevocably purchased
from the Issuing Lender a participation in such Letter of Credit and any
drawings thereunder in an amount equal to such Revolving Lender's Pro Rata
Share of the maximum amount which is or at any time may become available to be
drawn thereunder. Upon satisfaction of the conditions set forth in subsection
4.1, the Existing Letters of Credit shall, effective as of the Closing Date,
become Letters of Credit under this Agreement to the same extent as if
initially issued hereunder and each Revolving Lender shall be deemed to have
irrevocably purchased from the Issuing Lender of such Existing Letters of
Credit a participation in such Letters of Credit and drawings thereunder in an
amount equal to such Revolving Lender's Pro Rata Share of the maximum amount
which is or at any time may become available to be drawn thereunder. All such
Existing Letters of Credit which become Letters of Credit under this Agreement
shall be fully secured by the Collateral commencing on the Closing Date to the
same extent as if initially issued hereunder on such date.
3.2 LETTER OF CREDIT FEES.
Company agrees to pay the following amounts with respect to
Letters of Credit:
(i) with respect to each Standby Letter of Credit, (a) to
the applicable Issuing Lender, a fronting fee equal to 0.25% per annum
of the daily maximum amount available to be drawn under such Standby
Letter of Credit, but in any event not less than $500 per year per
Standby Letter of Credit and (b) to Agent, a letter of credit fee equal
to (x) the Applicable Eurodollar Margin minus the Commitment Fee
Percentage multiplied by (y) the daily maximum amount available to be
drawn under such Standby Letter of Credit, in each case payable in
arrears on and to (but excluding) each February 1, May 1, August 1 and
November 1 of each year and computed on the basis of a 360-day year for
the actual number of days elapsed;
(ii) with respect to each Commercial Letter of Credit, (a)
to the applicable Issuing Lender, a fronting fee equal to 0.25% per
annum of the daily maximum amount available to be drawn under such
Commercial Letter of Credit, but in any event not less than $500 per
year per Commercial Letter of Credit and (b) to Agent, a letter of
credit fee equal to (x) the Applicable Eurodollar Margin minus the sum
of (A) 1.0% per annum and (B) the Commitment Fee Percentage multiplied
by (y) the daily maximum amount available to be drawn under such
Commercial Letter of Credit, in each case payable in arrears on and to
(but
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excluding) each February 1, May 1, August 1 and November 1 of each year
and computed on the basis of a 360-day year for the actual number of
days elapsed; and
(iii) to the applicable Issuing Lender, with respect to the
issuance, amendment, assignment or transfer of each Letter of Credit
and each drawing made thereunder (without duplication of the fees
payable under clauses (i) and (ii) above), documentary and processing
charges in accordance with such Issuing Lender's standard schedule for
such charges in effect at the time of such issuance, amendment,
assignment, transfer or payment, as the case may be.
Promptly upon receipt by Agent of any amount described in clause (i)(b) or
(ii)(b) of this subsection 3.2, Agent shall distribute to each Revolving Lender
its Pro Rata Share of such amount. With respect to Existing Letters of Credit,
the fees described in clauses (i) and (ii) above shall accrue from and
including the Closing Date.
3.3 DRAWINGS AND REIMBURSEMENT OF AMOUNTS PAID UNDER LETTERS OF CREDIT.
A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO DRAWINGS. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to determine
that the documents and certificates required to be delivered under such Letter
of Credit have been delivered and that they substantially comply on their face
with the requirements of such Letter of Credit.
B. REIMBURSEMENT BY COMPANY OF AMOUNTS PAID UNDER LETTERS OF
CREDIT. In the event an Issuing Lender has determined to honor a drawing under
a Letter of Credit issued by it, such Issuing Lender shall immediately notify
Company and Agent, and Company shall reimburse such Issuing Lender on or before
the Business Day immediately following the date on which such drawing is honored
(the "REIMBURSEMENT DATE") in an amount in Dollars and in same day funds equal
to the amount of such drawing (whether or not Company is the account party under
such Letter of Credit); provided that, anything contained in this Agreement to
the contrary notwithstanding, (i) unless Company shall have notified Agent and
such Issuing Lender prior to 12:00 Noon (New York City time) on the date of such
drawing that Company intends to reimburse such Issuing Lender for the amount of
such drawing with funds other than the proceeds of Revolving Loans, Company
shall be deemed to have given a timely Notice of Borrowing (it being understood,
however, that such deemed Notice of Borrowing shall not be deemed to be a
representation of Company that the representations and warranties contained in
the Loan Documents are true, correct and complete in all material respects on
and as of the date of such deemed Notice of Borrowing) to Agent requesting
Revolving Lenders to make Revolving Loans that are Base Rate Loans on the
Reimbursement Date in an amount in Dollars equal to the amount of such drawing
and (ii) subject to satisfaction or waiver of the conditions specified in
subsection 4.2B, Revolving Lenders shall, on the Reimbursement Date, make
Revolving Loans that are
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Base Rate Loans in the amount of such drawing, the proceeds of which shall be
applied directly by Agent to reimburse such Issuing Lender for the amount of
such drawing; and provided, further that if for any reason proceeds of
Revolving Loans are not received by such Issuing Lender on the Reimbursement
Date in an amount equal to the amount of such drawing, Company shall reimburse
such Issuing Lender, on demand, in an amount in same day funds equal to the
excess of the amount of such drawing over the aggregate amount of such
Revolving Loans, if any, which are so received. Nothing in this subsection
3.3B shall be deemed to relieve any Revolving Lender from its obligation to make
Revolving Loans on the terms and conditions set forth in this Agreement, and
Company shall retain any and all rights it may have against any Revolving Lender
resulting from the failure of such Revolving Lender to make such Revolving Loans
under this subsection 3.3B.
C. PAYMENT BY REVOLVING LENDERS OF UNREIMBURSED DRAWINGS UNDER
LETTERS OF CREDIT.
(i) Payment by Revolving Lenders. In the event that
Company shall fail for any reason to reimburse any Issuing Lender as
provided in subsection 3.3B in an amount equal to the amount of any
drawing honored by such Issuing Lender under a Letter of Credit issued
by it, such Issuing Lender shall promptly notify each other Revolving
Lender of the unreimbursed amount of such drawing and of such other
Revolving Lender's respective participation therein based on such
Revolving Lender's Pro Rata Share. Each Revolving Lender shall make
available to such Issuing Lender an amount equal to its respective
participation, in Dollars and in same day funds, at the office of such
Issuing Lender specified in such notice, not later than 1:00 P.M. (New
York City time) on the first business day (under the laws of the
jurisdiction in which such office of such Issuing Lender is located)
after the date notified by such Issuing Lender. In the event that any
Revolving Lender fails to make available to such Issuing Lender on such
business day the amount of such Revolving Lender's participation in
such Letter of Credit as provided in this subsection 3.3C, such Issuing
Lender shall be entitled to recover such amount on demand from such
Revolving Lender together with interest thereon at the rate customarily
used by such Issuing Lender for the correction of errors among banks
for three Business Days and thereafter at the Base Rate. Nothing in
this subsection 3.3C shall be deemed to prejudice the right of any
Revolving Lender to recover from any Issuing Lender any amounts made
available by such Revolving Lender to such Issuing Lender pursuant to
this subsection 3.3C in the event that it is determined by the final
judgment of a court of competent jurisdiction that the payment with
respect to a Letter of Credit by such Issuing Lender in respect of
which payment was made by such Revolving Lender constituted gross
negligence or willful misconduct on the part of such Issuing Lender.
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(ii) Distribution to Revolving Lenders of Reimbursements
Received From Company. In the event any Issuing Lender shall have been
reimbursed by other Revolving Lenders pursuant to subsection 3.3C(i)
for all or any portion of any drawing honored by such Issuing Lender
under a Letter of Credit issued by it, such Issuing Lender shall
promptly distribute to each other Revolving Lender which has paid all
amounts payable by it under subsection 3.3C(i) with respect to such
drawing such other Revolving Lender's Pro Rata Share of all payments
subsequently received by such Issuing Lender from Company in
reimbursement of such drawing when such payments are received. Any
such distribution shall be made to a Revolving Lender at its primary
address set forth below its name on the appropriate signature page
hereof or at such other address as such Revolving Lender may request.
D. INTEREST ON AMOUNTS DRAWN UNDER LETTERS OF CREDIT.
(i) Payment of Interest by Company. Company agrees to pay
to each Issuing Lender, with respect to drawings made under any Letters
of Credit issued by it (whether or not Company is the account party
thereunder), interest on the amount paid by such Issuing Lender in
respect of each such drawing from the date of such drawing to but
excluding the date such amount is reimbursed by Company (including any
such reimbursement out of the proceeds of Revolving Loans pursuant to
subsection 3.3B) at a rate equal to (a) for the period from the date of
such drawing to but excluding the Reimbursement Date, the rate then in
effect under this Agreement with respect to Revolving Loans that are
Base Rate Loans and (b) thereafter, a rate which is 2% per annum in
excess of the rate of interest otherwise payable under this Agreement
with respect to Revolving Loans that are Base Rate Loans. Interest
payable pursuant to this subsection 3.3D(i) shall be computed on the
basis of a 360-day year for the actual number of days elapsed in the
period during which it accrues and shall be payable on demand or, if no
demand is made, on the date on which the related drawing under a Letter
of Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender.
Promptly upon receipt by any Issuing Lender of any payment of interest
pursuant to subsection 3.3D(i) with respect to a drawing under a Letter
of Credit issued by it, (a) such Issuing Lender shall distribute to
each other Revolving Lender, out of the interest received by such
Issuing Lender in respect of the period from the date of such drawing
to but excluding the date on which such Issuing Lender is reimbursed
for the amount of such drawing (including any such reimbursement out of
the proceeds of Revolving Loans pursuant to subsection 3.3B), the
amount that such other Revolving Lender would have been entitled to
receive in respect of the letter of credit fee that would have been
payable in respect of such Letter of Credit for such period pursuant to
subsection 3.2 if no drawing had been made under such Letter of Credit,
and (b) in the event such Issuing Lender shall have
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been reimbursed by other Revolving Lenders pursuant to subsection
3.3C(i) for all or any portion of such drawing, such Issuing Lender
shall distribute to each other Revolving Lender which has paid all
amounts payable by it under subsection 3.3C(i) with respect to such
drawing such other Revolving Lender's Pro Rata Share of any interest
received by such Issuing Lender in respect of that portion of such
drawing so reimbursed by other Revolving Lenders for the period from
the date on which such Issuing Lender was so reimbursed by other
Revolving Lenders to but excluding the date on which such portion of
such drawing is reimbursed by Company. Any such distribution shall be
made to a Revolving Lender at its primary address set forth below its
name on the appropriate signature page hereof or at such other address
as such Revolving Lender may request.
3.4 OBLIGATIONS ABSOLUTE.
The obligation of Company to reimburse each Issuing Lender for
drawings made under the Letters of Credit issued by it (whether or not Company
is the account party thereunder) and to repay any Revolving Loans made by
Revolving Lenders pursuant to subsection 3.3B and the obligations of Revolving
Lenders under subsection 3.3C(i) shall be unconditional and irrevocable and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of any Letter
of Credit;
(ii) the existence of any claim, set-off, defense or other
right which Company, any Subsidiary that is an account party thereunder
or any Revolving Lender may have at any time against a beneficiary or
any transferee of any Letter of Credit (or any Persons for whom any
such transferee may be acting), any Issuing Lender or other Revolving
Lender or any other Person or, in the case of a Revolving Lender,
against Company or any Subsidiary that is an account party under a
Letter of Credit, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction
(including any underlying transaction between Company or one of its
Subsidiaries and the beneficiary for which any Letter of Credit was
procured) other than the defense of payment in accordance with the
terms of this Agreement;
(iii) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) payment to the beneficiary of such Letter of Credit by
the applicable Issuing Lender under any Letter of Credit against
presentation of a draft, demand, certificate or other document which
does not comply with the terms of such Letter of Credit;
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(v) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of
Company or any of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan
Document by any party thereto (other than a breach by the applicable
Issuing Lender relating to the Letter of Credit in question);
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event
of Default shall have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).
3.5 INDEMNIFICATION; NATURE OF ISSUING LENDERS' DUTIES.
A. INDEMNIFICATION. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and of internal counsel) which such
Issuing Lender may incur or be subject to as a consequence, direct or indirect,
of (i) the issuance of any Letter of Credit by such Issuing Lender, other than
as a result of (a) the gross negligence or willful misconduct of such Issuing
Lender as determined by a final judgment of a court of competent jurisdiction
or (b) subject to the following clause (ii), the wrongful dishonor by such
Issuing Lender of a proper demand for payment made under any Letter of Credit
issued by it or (ii) the failure of such Issuing Lender to honor a drawing
under any such Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto government
or governmental authority (all such acts or omissions herein called
"GOVERNMENTAL ACTS").
B. NATURE OF ISSUING LENDERS' DUTIES. As between Company and any
Issuing Lender, Company assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by such Issuing Lender, by the
respective beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, such Issuing Lender shall not be responsible for:
(i) the form, validity, sufficiency, accuracy, genuineness or legal effect of
any document submitted by any party in connection with the application for and
issuance of any such Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the validity or
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sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any such Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) failure of the beneficiary of any
such Letter of Credit to comply fully with any conditions required in order to
draw upon such Letter of Credit;
(iv) errors, omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise, whether or not
they are in cipher; (v) errors in interpretation of technical terms; (vi) any
loss or delay in the transmission or otherwise of any document required in
order to make a drawing under any such Letter of Credit or of the proceeds
thereof; (vii) the misapplication by the beneficiary of any such Letter of
Credit of the proceeds of any drawing under such Letter of Credit; or (viii)
any consequences arising from causes beyond the control of such Issuing Lender,
including without limitation any Governmental Acts, and none of the above shall
affect or impair, or prevent the vesting of, any of such Issuing Lender's
rights or powers hereunder.
In furtherance and extension and not in limitation of the
specific provisions set forth in the first paragraph of this subsection 3.5B,
any action taken or omitted by any Issuing Lender under or in connection with
the Letters of Credit issued by it or any documents and certificates delivered
thereunder, if taken or omitted in good faith, shall not put such Issuing
Lender under any resulting liability to Company.
Notwithstanding anything to the contrary contained in this
subsection 3.5, Company shall retain any and all rights it may have against any
Issuing Lender for any liability directly attributable to the gross negligence
or willful misconduct of such Issuing Lender or to the wrongful dishonor by any
Issuing Lender of a proper demand for payment made under any Letter of Credit
issued by it, in each case, as determined by a final judgment of a court of
competent jurisdiction.
3.6 INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT.
In the event that any Issuing Lender or any Revolving Lender
shall determine (which determination shall, absent manifest error, be final and
conclusive and binding upon all parties hereto) that any law, treaty or
governmental rule, regulation or order, or any change therein or in the
interpretation, administration or application thereof (including the
introduction of any new law, treaty or governmental rule, regulation or order),
or any determination of a court or governmental authority, in each case that
becomes effective after the date hereof (other than any change in such law,
treaty or governmental rule, regulation or order which was promulgated prior to
the date hereof and which becomes effective in accordance with its terms after
the date hereof), or compliance by any Issuing Lender or any Revolving Lender
with any guideline, request or directive issued or made after the date hereof
by any central bank or other governmental or quasi-governmental authority
(whether or not having the force of law):
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(i) subjects such Issuing Lender or such Revolving Lender
(or its applicable lending or letter of credit office) to any
additional Tax (other than any Tax on the overall net income of such
Issuing Lender or Revolving Lender) with respect to the issuing or
maintaining of any Letters of Credit or the purchasing or maintaining
of any participations therein or any other obligations under this
Section 3, whether directly or by such being imposed on or suffered by
any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve
(including without limitation any marginal, emergency, supplemental,
special or other reserve), special deposit, compulsory loan, FDIC
insurance or similar requirement in respect of any Letters of Credit
issued by any Issuing Lender or participations therein purchased by any
Revolving Lender; or
(iii) imposes any other condition (other than with respect
to a Tax matter) on or affecting such Issuing Lender or such Revolving
Lender (or its applicable lending or letter of credit office) regarding
this Section 3 or any Letter of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or such Revolving Lender of agreeing to issue, issuing or maintaining
any Letter of Credit or agreeing to purchase, purchasing or maintaining any
participation therein or to reduce any amount received or receivable by such
Issuing Lender or Revolving Lender (or its applicable lending or letter of
credit office) with respect thereto; then, in any such case, Company shall
promptly pay to such Issuing Lender or Revolving Lender, upon receipt of the
statement referred to in the next sentence, such additional amount or amounts
as may be necessary to compensate such Issuing Lender or Revolving Lender for
any such increased cost or reduction in amounts received or receivable
hereunder; provided that a Revolving Lender shall not be entitled to avail
itself of the benefit of this subsection 3.6 to the extent that any such
increased cost or reduction in amounts was incurred more than one year prior to
the time it gives notice to Company (as provided in the next sentence) of the
relevant circumstance, unless such circumstance arose or became applicable
retrospectively, in which case such Revolving Lender shall not be limited to
such one year period so long as such Revolving Lender has given such notice to
Company no later than one year from the time such circumstance became
applicable to such Revolving Lender. Such Issuing Lender or Revolving Lender
shall deliver to Company a written statement, setting forth in reasonable
detail the basis for calculating the additional amounts owed to such Issuing
Lender or Revolving Lender under this subsection 3.6, which statement shall be
conclusive and binding upon all parties hereto absent manifest error.
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SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of
Letters of Credit hereunder are subject to the satisfaction of the following
conditions.
4.1 CONDITIONS TO TERM LOANS AND INITIAL REVOLVING LOANS AND SWING LINE
LOANS.
The obligations of Lenders to make the Term Loans and any
Revolving Loans and Swing Line Loans to be made on the Closing Date are, in
addition to the conditions precedent specified in subsection 4.2, subject to
prior or concurrent satisfaction of the following conditions:
A. LOAN PARTY DOCUMENTS. On or before the Closing Date, Company
shall, and shall cause each other Loan Party to, deliver to Lenders (or to
Agent for Lenders with sufficient originally executed copies, where
appropriate, for each Lender and its counsel) the following with respect to
Company or such Loan Party, as the case may be, each, unless otherwise noted,
dated the Closing Date:
(i) Certified copies of the Certificate or Articles of
Incorporation of such Person, together with a good standing certificate
from the Secretary of State of its jurisdiction of incorporation and
each other state in which such Person is qualified as a foreign
corporation to do business and, to the extent generally available, a
certificate or other evidence of good standing as to payment of any
applicable franchise or similar taxes from the appropriate taxing
authority of each of such jurisdictions, each dated a recent date prior
to the Closing Date;
(ii) Copies of the Bylaws of such Person, certified as of
the Closing Date by such Person's corporate secretary or an assistant
secretary;
(iii) Resolutions of the Board of Directors of such Person
approving and authorizing the execution, delivery and performance of
the Loan Documents and Related Agreements to which it is a party, and
to the extent applicable, approving and authorizing the Transactions
and all transactions related thereto, including without limitation the
retirement of Company's Class A Common Stock and Class B Common Stock
repurchased in the Equity Tender Offer, in each case certified as of
the Closing Date by the corporate secretary or an assistant secretary
of such Person as being in full force and effect without modification
or amendment;
(iv) Signature and incumbency certificates of the officers
of such Person executing the Loan Documents to which it is a party;
(v) Executed originals of the Loan Documents to which such
Person is a party; and
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(vi) Such other documents as Agent may reasonably request.
B. NO MATERIAL ADVERSE EFFECT. Except as set forth in Schedule
4.1B annexed hereto, since December 30, 1995, no Material Adverse Effect (in
the sole opinion of Agent) shall have occurred; and since July 30, 1995, no
event or change shall have occurred that has caused or evidences, either in any
case or in the aggregate, a material adverse effect (in the sole opinion of
Agent) upon the business, operations, properties, assets, conditions (financial
or otherwise) or prospects of Smitty's and its Subsidiaries, taken as a whole.
C. CORPORATE AND CAPITAL STRUCTURE, OWNERSHIP, MANAGEMENT, ETC.
(i) Corporate Structure. The organizational structure of
its Subsidiaries, both before and after giving effect to the
Acquisition and the Merger, shall be as set forth on Schedule 5.1
annexed hereto and be satisfactory to Agent, Arrangers and Lenders.
(ii) Capital Structure and Ownership. The capital
structure and ownership of Company, both before and after giving effect
to the Acquisition and the Merger, shall be as described in the Note
Offering Materials and be satisfactory to Agent, Arrangers and Lenders.
(iii) Management; Employment Contracts. The management
structure of Company after giving effect to the Acquisition and the
Merger, shall be as described in the Note Offering Materials and be
satisfactory to Agent, Arrangers and Requisite Lenders, and Agent shall
have received copies of, and shall be satisfied with the form and
substance of, any and all written employment contracts with senior
management of Company.
D. DEBT AND EQUITY CAPITALIZATION OF COMPANY.
(i) Class A Common Stock, Class B Common Stock and Class C
Common Stock. On or prior to the Closing Date, Company shall have
authorized the Class C Common Stock, and such amendments to its Class A
Common Stock, Class B Common Stock and Redeemable Preferred Stock as
are necessary or desirable to permit the consummation of the
Transactions, shall have obtained the requisite approval of its
shareholders thereto, and shall have filed its Restated Articles of
Incorporation with the Secretary of State of the State of Delaware
effecting such authorizations and amendments, in each case as more
particularly described in the Proxy Statement. The terms of such
Company's Class A Common Stock, Class B Common Stock, Class C Common
Stock and Redeemable Preferred Stock, as amended on or prior to the
Closing Date, shall be satisfactory to Agent and Arrangers and its
Restated Articles of Incorporation, as filed with the Secretary of the
State of Delaware, shall have been delivered to Agent.
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(ii) Equity Holdings by Yucaipa. Upon the consummation of
the Transactions, (1) the shareholders of Smitty's prior to the
Acquisition, including Yucaipa, shall collectively own and control,
directly or indirectly, not less than 3,038,888 shares of Company's
Class B Common Stock, and (2) Company shall have issued, and The
Yucaipa Companies shall have received, the Yucaipa Warrant. On or
prior to the Closing Date, Company shall have delivered to Agent an
Officers' Certificate in form and substance satisfactory to Agent
setting forth in reasonable detail the percentage of the issued and
outstanding shares of each series of Company's Common Stock
beneficially owned and controlled, directly or indirectly, by Yucaipa
and the Yucaipa Investors collectively on the Closing Date.
(iii) Redemption of Redeemable Preferred Stock. On or prior
to the Closing Date, Company shall have redeemed approximately
3,000,000 shares of its Redeemable Preferred Stock for an aggregate
redemption payment not exceeding $1,000,000 in accordance with the
provisions of Company's Restated Articles of Incorporation. Company
shall have delivered an Officer's Certificate setting forth the
aggregate amount paid therefor.
(iv) Issuance of Class B Common Stock to Yucaipa;
Consummation of the Equity Tender Offer; Amendments to Options. On or
prior to the Closing Date, (1) Company shall have obtained the
requisite approval of the holders of its Class A Common Stock and Class
B Common Stock regarding (A) the Recapitalization and Merger Agreement
and the transactions contemplated thereby, including the issuance of
3,038,888 shares of its Class B Common Stock to the existing
shareholders of Smitty's as consideration for all of the outstanding
stock of Smitty's in connection with the Acquisition, and (B) the
Amended and Restated Certification of Incorporation of Company, and (2)
Company shall have purchased approximately 13,400,000 shares of Class A
Common Stock and Class B Common Stock, which shall represent
approximately 50% of shares of all Class A Common Stock and Class B
Common Stock outstanding (excluding shares of Class B Common Stock
issued or issuable in connection with the Acquisition but including
certain Existing Management Stock Options) pursuant to the Equity
Tender Offer for an aggregate purchase amount not exceeding
$465,000,000.
(v) Senior Subordinated Notes. On or prior to the Closing
Date, Company shall have issued the Senior Subordinated Notes and shall
have received $575,000,000 in gross proceeds therefrom. The terms and
conditions of the Senior Subordinated Notes shall be substantially as
described in the Note Offering Materials and shall be satisfactory to
Agent, Arrangers and Lenders; provided that the Senior Subordinated
Notes shall be unsecured and shall not mature or provide for any
scheduled principal payments prior to the tenth anniversary of the
Closing Date; provided, further that the negative covenants and default
provisions shall be less restrictive than those contained in this
Agreement. Company shall have
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delivered to Agent a fully executed or conformed copy of the Senior
Subordinated Note Indenture.
E. RELATED AGREEMENTS.
(i) Approval of Related Agreements. Each of the Related
Agreements shall be satisfactory in form and substance to Agent and
Arrangers.
(ii) Related Agreements in Full Force and Effect. Agent
shall have received a fully executed or conformed copy of each Related
Agreement and any documents executed in connection therewith, and each
Related Agreement shall be in full force and effect and no provision
thereof shall have been modified or waived in any respect determined by
Agent to be material, in each case without the consent of Agent.
F. MATTERS RELATING TO EXISTING INDEBTEDNESS OF COMPANY, SMITTY'S
AND THEIR RESPECTIVE SUBSIDIARIES.
(i) Termination of Existing Company Credit Lines and
Related Liens; Existing Letters of Credit. On the Closing Date,
Company and its Subsidiaries shall have (a) repaid in full all
Indebtedness outstanding under the Existing Company Credit Lines (the
aggregate principal amount of such Indebtedness not to exceed
$10,000,000), (b) terminated any commitments to lend or make other
extensions of credit thereunder, (c) delivered to Agent all documents
or instruments necessary to release all Liens securing Indebtedness or
other obligations of Company and its Subsidiaries thereunder, and (d)
other than with respect to any Existing Letters of Credit, made
arrangements satisfactory to Agent with respect to the cancellation of
any letters of credit outstanding thereunder or the issuance of Letters
of Credit to support the obligations of Company and its Subsidiaries
with respect thereto.
(ii) Redemption or Repayment of Existing Mortgage
Indebtedness and Existing Unsecured Senior Indebtedness. Company shall
have (a) repaid in full the principal amount of its existing mortgage
Indebtedness other than the Specified Mortgage Notes (the aggregate
principal amount of such Indebtedness not to exceed $233,200,000) and
the principal amount of its existing unsecured senior Indebtedness (the
aggregate principal amount of such Indebtedness not to exceed
$410,000,000), which Indebtedness is identified in Part I of Exhibit A
annexed to Schedule 7.1, and (b) made arrangements with the holders of
such mortgage Indebtedness and a title insurance company regarding the
subsequent delivery and recording of all such documents or instruments
as are necessary to release all Liens securing the Indebtedness or
other obligations of Company and its Subsidiaries thereunder, such
arrangements to be satisfactory in form and substance to Agent.
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(iii) Termination of Existing Smitty's Credit Agreement and
Related Liens; Existing Letters of Credit. On the Closing Date,
Smitty's and its Subsidiaries shall have (a) repaid in full all
Indebtedness outstanding under the Existing Smitty's Credit Agreement
(the aggregate principal amount of such Indebtedness not to exceed
$33,600,000), (b) terminated any commitments to lend or make other
extensions of credit thereunder, (c) delivered to Agent all documents
or instruments necessary to release all Liens securing Indebtedness or
other obligations of Smitty's and its Subsidiaries thereunder, and (d)
other than with respect to any Existing Letters of Credit, made
arrangements satisfactory to Agent with respect to the cancellation of
any letters of credit outstanding thereunder or the issuance of Letters
of Credit to support the obligations of Smitty's and its Subsidiaries
with respect thereto.
(iv) Redemption or Repayment of Existing Smitty's
Subordinated Notes and Existing Smitty's Discount Debentures. Pursuant
to the Smitty's Debt Purchase Offers, (i) not less than 100% of the
Existing Smitty's Subordinated Notes and the Existing Smitty's Discount
Debentures shall have been purchased (the aggregate principal or
accreted amount of which Indebtedness not to exceed approximately
$50,000,000 and $19,300,000, respectively) for an aggregate purchase
price of $50,000,000 and $19,300,000, respectively, plus accrued and
unpaid interest thereon, and a premium and a consent payment as
described in the Smitty's Debt Purchase Offers, and (ii) Smitty's shall
have obtained all such consents and amendments to the Existing Smitty's
Subordinated Note Indenture and Existing Smitty's Discount Debenture
Indenture as may be required to permit the transactions described
herein. The terms and conditions of such purchases, consents and
amendments shall be substantially as described in the Smitty's Debt
Purchase Offers and shall be satisfactory to Agent, Arrangers and
Requisite Lenders.
(v) Existing Indebtedness to Remain Outstanding. Agent
shall have received an Officers' Certificate of Company stating that,
after giving effect to the transactions described in this subsection
4.1F, the Indebtedness of Loan Parties (other than Indebtedness under
the Loan Documents and the Senior Subordinated Notes) shall consist of
(a) approximately $6,300,000 in aggregate principal amount of Existing
Company IRB's, (b) approximately $11,900,000 in aggregate principal
amount of Existing Smitty's Sinking Fund Bonds, (c) the Specified
Mortgage Notes and approximately $3,900,000 in aggregate principal
amount of other mortgage notes and other Indebtedness and (d)
Indebtedness in an aggregate amount not to exceed $31,600,000 in
respect of Capital Leases. Company shall be in compliance with its
obligations under the Existing Company IRB Indentures, the Existing
Smitty's Sinking Fund Bond Indenture, such mortgage notes and other
Indebtedness and Capital Leases and Company shall have delivered to
Agent a fully executed or conformed copy of each of the Existing
Company IRB Indenture, the Existing Smitty's Sinking Fund Indenture and
the agreements or documents
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setting forth the terms and conditions of the Specified Mortgage Notes
and other Indebtedness. The terms and conditions of all such
Indebtedness shall be in form and in substance satisfactory to
Arrangers.
G. NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS; EXPIRATION
OF WAITING PERIODS, ETC. Company shall have obtained all Governmental
Authorizations and all consents of other Persons, in each case that are
necessary or advisable in connection with the Transactions or the other
transactions contemplated by the Loan Documents and the Related Agreements, and
the continued operation of the business conducted by Company and its
Subsidiaries in substantially the same manner as conducted prior to the
consummation of the Transactions, and each of the foregoing shall be in full
force and effect, in each case other than those the failure to obtain or
maintain which, either individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect. All applicable waiting periods
shall have expired without any action being taken or threatened by any
competent authority which would restrain, prevent or otherwise impose adverse
conditions on any of the Transactions or the financing thereof. No action,
request for stay, petition for review or rehearing, reconsideration, or appeal
with respect to any of the foregoing shall be pending, and the time for any
applicable agency to take action to set aside its consent on its own motion
shall have expired.
H. CONSUMMATION OF ACQUISITION AND MERGER.
(i) The Recapitalization and Merger Agreement shall be in
full force and effect and shall not have been modified or waived in any
material respect without the consent of Agent, Arrangers and Requisite
Lenders. All conditions to the Acquisition and the Merger set forth in
Article 9 of the Recapitalization and Merger Agreement shall have been
satisfied in all material respects or the fulfillment of any such
conditions shall have been waived with the consent of Agent and
Arrangers;
(ii) the Merger shall have become effective in accordance
with the terms of the Recapitalization and Merger Agreement and the
laws of the State of Delaware; the Certificate of Merger shall have
been filed with the Secretary of State of the State of Delaware on the
Closing Date, shall be in form and in substance satisfactory to Agent,
shall be in full force and effect and shall have been delivered to
Agent;
(iii) The sole consideration paid to the holders of equity
interests in Smitty's in respect of such equity interests in connection
with the Acquisition shall be 3,038,888 shares of Company's Class B
Common Stock or such other consideration as shall be consented to by
Agent, Arrangers and Requisite Lenders;
(iv) Transaction Costs shall not exceed $160,700,000; and
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(v) Agent shall have received an Officers' Certificate of
Company to the effect set forth in clauses (i)-(iv) above and stating
that Company will proceed to consummate the Acquisition and the Merger
immediately upon the making of the initial Loans.
I. DELIVERY OF MORTGAGES; TITLE INSURANCE POLICIES; APPRAISALS.
Schedule 4.1I annexed hereto shall set forth all Real Property Assets of
Company or any of its Subsidiaries as of the Closing Date after giving effect
to the Mergers. Agent shall have received from Company and each of its
Subsidiaries having Real Property Assets (i) fully executed counterparts of
Mortgages, which Mortgage shall cover the fee interest and/or leasehold
interest of Company or such Subsidiary in each Real Property Asset designated
as a "MORTGAGED PROPERTY" on Schedule 4.1I annexed hereto (each a "MORTGAGED
PROPERTY" and collectively the "MORTGAGED PROPERTIES") (Mortgaged Properties
shall include all Real Property Assets except (1) Surplus Leased Properties
(other than subleased properties with annual net rental income to Company or
its Subsidiaries in excess of $100,000), (2) Real Property Assets subject to an
existing mortgage which is not required to be prepaid prior to the Closing Date
pursuant to this Agreement, (3) other leased properties where the consent of
the lessor to mortgage the same is required and such consent has not been
obtained and (4) Excluded Sites), together with evidence (which may be in the
form of recording instructions accepted by title insurers, which instructions
may authorize the title insurer to remove from the counterpart of the Mortgage
being recorded any exhibit pages rejected by the county recorder which, if not
removed, would prevent the recordation of such Mortgage counterpart) that
counterparts of the Mortgages have been or promptly will be recorded in all
places to the extent necessary or desirable, in the reasonable judgment of
Agent, so as to effectively create a valid and enforceable first priority lien
(subject only to Liens permitted pursuant to this Agreement, and subject, where
applicable, to the effect, if any, on lien priority of the absence of a
recorded memorandum of lease) on each Mortgaged Property in favor of Agent (or
such other trustee as may be required or desired under local law) for the
benefit of Lenders; (ii) a preliminary title report, title commitment or lot
book guaranty obtained by Company or such Subsidiary in respect of each
Mortgaged Property as may be required by Agent; (iii) an opinion of counsel
(which counsel shall be reasonably satisfactory to Agent) in such states as may
be required by Agent and in which each Mortgaged Property is located other than
Wyoming and Idaho with respect to the enforceability of the Mortgages recorded
in such state and such other matters as Agent may request, in form and
substance satisfactory to Agent; (iv) in the case of each real property
leasehold interest of Company or such Subsidiary constituting Mortgaged
Property, such estoppel letters, consents and waivers from the landlords on
such real property as may be required by Agent, which letters, consents,
waivers and agreements shall be substantially in the form of Exhibit XIX
annexed hereto and in any event in form and substance reasonably satisfactory
to Agent; (v) Title Insurance Policies with respect to the Mortgaged Properties
designated on Schedule 4.1I annexed hereto, in amounts not less than the
respective amounts designated on such Schedule 4.1I with respect to any
particular Mortgaged Property; (vi) information sufficient for Agent to
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determine whether (1) any Mortgaged Property is in an area designated by the
Federal Emergency Management Agency as having special flood or mud slide
hazards (any Real Property Asset located within such an area being a "FLOOD
HAZARD PROPERTY") and (2) the community in which each Flood Hazard Property
is located is participating in the National Flood Insurance Program;
(vii) if any Mortgaged Properties are Flood Hazard Properties, Company's or
such Subsidiary's written acknowledgment of receipt of written notification
from Agent (1) as to the existence of each such Flood Hazard Property and (2)
as to whether the community in which each such Flood Hazard Property is located
is participating in the National Flood Insurance Program; (viii) appraisals of
the Real Property Assets so designated on Schedule 4.1I annexed hereto
performed by certified real estate appraisers approved by Agent, which
appraisals shall be in form, scope and substance satisfactory to Agent; and
(ix) the evidence of insurance with respect to the Mortgaged Properties
required to be provided to Agent pursuant to the Mortgages, including flood
insurance with respect to each Mortgaged Property that is a Flood Hazard
Property located in a community which is participating in the National Flood
Insurance Program.
J. SECURITY INTERESTS IN PERSONAL AND MIXED PROPERTY. To the
extent not otherwise satisfied pursuant to subsection 4.1I, Agent shall have
received evidence satisfactory to it that Company and Subsidiary Guarantors
shall have taken or caused to be taken all such actions, executed and delivered
or caused to be executed and delivered all such agreements, documents and
instruments, and made or caused to be made all such filings and recordings
(other than the filing or recording of items described in clauses (iii), (iv)
and (v) below) that may be necessary or, in the opinion of Agent, desirable in
order to create in favor of Agent, for the benefit of Lenders, a valid and
(upon such filing and recording) perfected first priority security interest in
the entire personal and mixed property Collateral except for the prior security
interest, if any, granted to the holders of secured Indebtedness referred to in
Section 7.1 with respect to the personal property secured thereby. Such
actions shall include, without limitation, the following:
(i) Schedules to Collateral Documents. Delivery to Agent
of accurate and complete schedules to all of the applicable Collateral
Documents.
(ii) Stock Certificates and Instruments. Delivery to Agent
of (a) certificates (which certificates shall be accompanied by
irrevocable undated stock powers, duly endorsed in blank and otherwise
satisfactory in form and substance to Agent) representing all capital
stock pledged pursuant to the Pledge Agreements and (b) all promissory
notes or other instruments (duly endorsed, where appropriate, in a
manner satisfactory to Agent) evidencing any Collateral;
(iii) Lien Searches and UCC Termination Statements.
Delivery to Agent of (a) the results of a recent search, by a Person
satisfactory to Agent, of all effective UCC financing statements and
fixture filings and all judgment and tax
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lien filings which may have been made with respect to any personal or
mixed property of any Loan Party, together with copies of all such
filings disclosed by such search, and (b) UCC termination statements
duly executed by all applicable Persons for filing in all applicable
jurisdictions as may be necessary to terminate any effective UCC
financing statements or fixture filings disclosed in such search (other
than any such financing statements or fixture filings in respect of
Liens permitted to remain outstanding pursuant to the terms of this
Agreement).
(iv) UCC Financing Statements and Fixture Filings.
Delivery to Agent of UCC financing statements and, where appropriate,
fixture filings, duly executed by each applicable Loan Party with
respect to all personal and mixed property Collateral of such Loan
Party, for filing in all jurisdictions as may be necessary or, in the
opinion of Agent, desirable to perfect the security interests created
in such Collateral pursuant to the Collateral Documents;
(v) PTO Cover Sheets, Etc. Delivery to Agent of all cover
sheets or other documents or instruments required to be filed with the
PTO in order to create or perfect Liens in respect of any IP
Collateral; and
(vi) Opinions of Local Counsel. Delivery to Agent of an
opinion of counsel (which counsel shall be reasonably satisfactory to
Agent) under the laws of each jurisdiction other than Wyoming, Idaho
and Texas in which any Loan Party or any personal or mixed property
Collateral is located with respect to the creation and perfection of
the security interests in favor of Agent in such Collateral and such
other matters governed by the laws of such jurisdiction regarding such
security interests as Agent may reasonably request, in each case in
form and substance reasonably satisfactory to Agent.
K. ENVIRONMENTAL REPORTS. (i) Agent shall have received reports,
opinions and other information in form, scope and substance satisfactory to
Agent and (ii) Lenders shall have received summaries thereof in form, scope and
substance satisfactory to Requisite Lenders, in each case concerning the
Hazardous Materials liabilities of Company and Smitty's and their respective
Subsidiaries.
L. FINANCIAL STATEMENTS; PRO FORMA BALANCE SHEET. On or before
the Closing Date, Lenders shall have received from Company (i) audited
financial statements of Company and its Subsidiaries for Fiscal Years 1994 and
1995, consisting of balance sheets and the related consolidated statements of
income, stockholders' equity and cash flows for such Fiscal Years, (ii)
unaudited financial statements of Company and its Subsidiaries as at March 30,
1996, consisting of a balance sheet and the related consolidated statements of
income, stockholders' equity and cash flows for the three-month period ending
on such date, all in reasonable detail and certified by the chief financial
officer of Company that they fairly present the financial condition of Company
and its Subsidiaries as at the dates indicated and the results of their
operations and their
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cash flows for the periods indicated, subject to changes resulting from audit
and normal year-end adjustments, and (iii) pro forma consolidated balance
sheets of Company and its Subsidiaries as at March 30, 1996, prepared in
accordance with GAAP and giving effect to the consummation of the Transactions,
the related financings and the other transactions contemplated by the Loan
Documents and the Related Agreements, which pro forma financial statements
shall be in form and substance satisfactory to Lenders. On or before the
Closing Date, Lenders shall have received from Company (i) audited financial
statements of Smitty's and its Subsidiaries for Fiscal Years 1994 and 1995,
consisting of balance sheets and the related consolidated statements of income,
stockholders' equity and cash flows for such Fiscal Years, and (ii) unaudited
financial statements of Smitty's and its Subsidiaries as at April 7, 1996,
consisting of a balance sheet and the related consolidated statements of
income, stockholders' equity and cash flows for the nine-month period ending
on such date, all in reasonable detail and certified by the chief financial
officer of Smitty's prior to the Merger that they fairly present the financial
condition of Smitty's and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
subject to changes resulting from audit and normal year-end adjustments. Agent
and Lenders shall have had an opportunity to discuss such unaudited financial
statements with the independent certified public accountants for Company with
the cost of such review being for the account of Company.
M. SOLVENCY ASSURANCES. On the Closing Date, Agent, Arrangers,
and Lenders shall have received (i) a letter from Houlihan Lokey Howard &
Zukin, dated the Closing Date and addressed to Agent, Arrangers and Lenders, in
form and substance satisfactory to Agent, Arrangers and Lenders and with
appropriate attachments, and (ii) a Financial Condition Certificate dated the
Closing Date, substantially in the form of Exhibit XII annexed hereto and with
appropriate attachments, in each case demonstrating that, after giving effect
to the consummation of the Transactions, the related financings and the other
transactions contemplated by the Loan Documents and the Related Agreements,
Company will be Solvent and that the consummation of the Equity Tender Offer
will not violate Section 160 of the Delaware General Corporations Law.
N. EVIDENCE OF INSURANCE. Agent shall have received a certificate
from Company's insurance broker or other evidence satisfactory to it that all
insurance required to be maintained pursuant to subsection 6.4 is in full force
and effect and that Agent on behalf of Lenders has been named as additional
insured and/or loss payee thereunder to the extent required under subsection
6.4.
O. OPINIONS OF COUNSEL TO LOAN PARTIES. Lenders and their
respective counsel shall have received (i) originally executed copies of one or
more favorable written opinions of Latham & Watkins, counsel for Loan Parties,
in form and substance reasonably satisfactory to Agent and its counsel, dated
as of the Closing Date and setting forth substantially the matters in the
opinions designated in Exhibit VIII annexed hereto and as to such other matters
as Agent acting on behalf of Lenders may reasonably
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request and (ii) evidence satisfactory to Agent that Company has requested such
counsel to deliver such opinions to Lenders.
P. OPINIONS OF AGENT'S COUNSEL. Lenders shall have received
originally executed copies of one or more favorable written opinions of
O'Melveny & Myers, counsel to Agent, dated as of the Closing Date,
substantially in the form of Exhibit IX annexed
hereto and as to such other matters as Agent acting on behalf of Lenders may
reasonably request.
Q. OPINIONS OF COUNSEL DELIVERED UNDER RELATED AGREEMENTS. Agent
and its counsel shall have received copies of each of the opinions of counsel
delivered on behalf of or to any Loan Party under the Related Agreements,
together with a letter from each such counsel authorizing Lenders to rely upon
such opinion to the same extent as though it were addressed to Lenders.
R. AUDITOR'S LETTER. Agent shall have received an executed copy
of the Auditor's Letter as delivered by Company to its independent certified
public accountants.
S. FAIRNESS OPINION. Agent shall have received a copy of an
executed fairness opinion from Goldman, Sachs & Co. regarding the issuance by
Company of its Class B Common Stock in connection with the Acquisition, which
letter shall be in form and in substance satisfactory to Agent.
T. SCHEDULED CALIFORNIA DISPOSITIONS. On or prior to the Closing
Date, Company shall have received not less than $67,200,000 from the sale of
its California facilities other than the California Stores and the Excess
California Land. Company shall have delivered to Agent an Officers'
Certificate, in form and substance satisfactory to Agent, setting forth in
reasonable detail the aggregate amount of proceeds received by it with respect
to each facility disposed of on or prior to the Closing Date and the breakdown
of such amounts for each such facility.
U. FEES. Company shall have paid to Agent, for distribution (as
appropriate) to Agent and Lenders, the fees payable on the Closing Date
referred to in subsection 2.3.
V. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS.
Company shall have delivered to Agent an Officers' Certificate, in form and
substance satisfactory to Agent, to the effect that the representations and
warranties in Section 5 hereof are true, correct and complete in all material
respects on and as of the Closing Date to the same extent as though made on and
as of that date (or, to the extent such representations and warranties
specifically relate to an earlier date, that such representations and
warranties were true, correct and complete in all material respects on and as
of such earlier date) and that Company shall have performed in all material
respects all agreements and satisfied all conditions which this Agreement
provides shall
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be performed or satisfied by it on or before the Closing Date except as
otherwise disclosed to and agreed to in writing by Agent and Requisite Lenders.
W. COMPLETION OF PROCEEDINGS. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby
and by other Related Agreements and all documents incidental thereto not
previously found acceptable by Agent, acting on behalf of Lenders, and its
counsel shall be satisfactory in form and substance to Agent and such counsel,
and Agent and such counsel shall have received all such counterpart originals
or certified copies of such documents as Agent may reasonably request.
X. TRANSACTION COSTS. The Transaction Costs shall not exceed
$160,700,000.
Each Lender hereby agrees that by its execution and delivery of its
signature page hereto and by the funding of its Loans to be made on the Closing
Date, such Lender approves of and consents to each of the matters set forth in
this subsection 4.1 which must be approved by, or which must be satisfactory
to, all or Requisite Lenders; provided that in the case of any agreement or
document which must be approved by, or which must be satisfactory to, all or
Requisite Lenders, Agent or Company shall have delivered a copy of such
agreement or document in substantially the form in which executed or delivered
to such Lender on or prior to the Closing Date.
4.2 CONDITIONS TO ALL LOANS.
The obligations of each Lender to make Loans on each Funding
Date (other than any Funding Date relating to any Refunded Swing Line Loans)
are subject to the following further conditions precedent:
A. Agent shall have received before that Funding Date, in
accordance with the provisions of subsection 2.1B, an originally executed
Notice of Borrowing, in each case signed by the chief executive officer, the
chief financial officer or the treasurer of Company or by any executive officer
of Company designated by any of the above-described officers on behalf of
Company in a writing delivered to Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein
and in the other Loan Documents shall be true, correct and complete in
all material respects on and as of that Funding Date to the same extent
as though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date,
in which case such representations and warranties shall have been true,
correct and complete in all material respects on and as of such earlier
date;
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(ii) No event shall have occurred and be continuing or
would result from the consummation of the borrowing contemplated by
such Notice of Borrowing that would constitute an Event of Default or a
Potential Event of Default;
(iii) Each Loan Party shall have performed in all material
respects all agreements and satisfied all conditions which this
Agreement provides shall be performed or satisfied by it on or before
that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator
or governmental authority shall purport to enjoin or restrain any
Lender from making the Loans to be made by it on that Funding Date;
(v) The making of the Loans requested on such Funding Date
shall not violate any law including, without limitation, Regulation G,
Regulation T, Regulation U or Regulation X of the Board of Governors of
the Federal Reserve System; and
(vi) There shall not be pending or, to the knowledge of
Company, threatened, any action, suit, proceeding, governmental
investigation or arbitration against or affecting Company or any of its
Subsidiaries or any property of Company or any of its Subsidiaries that
has not been disclosed by Company in writing pursuant to subsection 5.6
or 6.1(x) prior to the making of the last preceding Loans (or, in the
case of the initial Loans, prior to the execution of this Agreement),
and there shall have occurred no development not so disclosed in any
such action, suit, proceeding, governmental investigation or
arbitration so disclosed, that, in either event, in the opinion of
Agent or of Requisite Lenders, could reasonably be expected to have a
Material Adverse Effect ; and no injunction or other restraining order
shall have been issued and no hearing to cause an injunction or other
restraining order to be issued shall be pending or noticed with respect
to any action, suit or proceeding seeking to enjoin or otherwise
prevent the consummation of, or to recover any damages or obtain relief
as a result of, the transactions contemplated by this Agreement or the
making of Loans hereunder.
4.3 CONDITIONS TO LETTERS OF CREDIT.
The issuance of any Letter of Credit hereunder (whether or not
the applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
A. On or before the date of issuance of the initial Letter of
Credit pursuant to this Agreement, the initial Loans shall have been made.
B. On or before the date of issuance of such Letter of Credit,
Agent shall have received, in accordance with the provisions of subsection
3.1B(i), an originally executed
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Notice of Issuance of Letter of Credit, in each case signed by the chief
executive officer, the chief financial officer or the treasurer of Company or
by any executive officer of Company designated by any of the above-described
officers on behalf of Company in a writing delivered to Agent, together with
all other information specified in subsection 3.1B(i) and such other documents
or information as the applicable Issuing Lender may reasonably require in
connection with the issuance of such Letter of Credit.
C. On the date of issuance of such Letter of Credit, all
conditions precedent described in subsection 4.2B shall be satisfied to the
same extent as if the issuance of such Letter of Credit were the making of a
Loan and the date of issuance of such Letter of Credit were a Funding Date.
SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to
make the Loans, to induce Issuing Lenders to issue Letters of Credit and to
induce other Lenders to purchase participations therein, Company represents and
warrants to each Lender, on the date of this Agreement, on each Funding Date
and on the date of issuance of each Letter of Credit, that, prior to and after
giving effect to the Merger, the following statements are true, correct and
complete:
5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.
A. ORGANIZATION AND POWERS. Each Loan Party is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation as specified in Schedule 5.1 annexed hereto.
Each Loan Party has all requisite corporate power and authority to own and
operate its properties, to carry on its business as now conducted and as
proposed to be conducted, to enter into the Loan Documents and Related
Agreements to which it is a party and to carry out the transactions
contemplated thereby.
B. QUALIFICATION AND GOOD STANDING. Each Loan Party is qualified
to do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, except
in jurisdictions where the failure to be so qualified or in good standing has
not had and will not have, either individually or in the aggregate for all such
jurisdictions, a Material Adverse Effect.
C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged
only in the businesses permitted to be engaged in pursuant to subsection 7.14.
D. SUBSIDIARIES. All of the Subsidiaries of Company, prior to and
after the Merger, are identified in Schedule 5.1 annexed hereto, as said
Schedule 5.1 may be supplemented from time to time pursuant to the provisions
of subsection 6.1(xvii). The
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capital stock of each of the Subsidiaries of Company identified in Schedule 5.1
annexed hereto (other than the LC Subsidiaries) is duly authorized, validly
issued, fully paid and nonassessable and none of such capital stock constitutes
Margin Stock. Each of the Subsidiaries of Company identified in Schedule 5.1
annexed hereto (other than the LC Subsidiaries) is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation set forth therein, has all requisite
corporate power and authority to own and operate its properties and to carry
on its business as now conducted and as proposed to be conducted, and is
qualified to do business and in good standing in every jurisdiction where its
assets are located and wherever necessary to carry out its business and
operations, in each case except where failure to be so qualified or in good
standing or to have such corporate power and authority has not had and will not
have, either individually or in the aggregate for all such failures, a Material
Adverse Effect. Each LC Subsidiary identified in Schedule 5.1 annexed hereto
is a duly formed and validly existing limited liability company under the laws
of the state of its organization or formation, as the case may be, with the
power under the limited liability company act of such state and its articles of
organization and operating agreement or certificate of formation and limited
liability company agreement, as the case may be, to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted. Schedule 5.1 annexed hereto correctly sets forth the ownership
interest of Company and each of its Subsidiaries in each of the Subsidiaries of
Company identified therein and whether any such Subsidiary is an Inactive
Subsidiary. The aggregate assets and annual revenues of all Inactive
Subsidiaries identified on Schedule 5.1 annexed hereto does not and will not
exceed $3,000,000 and $3,000,000, respectively.
5.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and
performance of the Loan Documents and the Related Agreements have been duly
authorized by all necessary corporate action on the part of each Loan Party
that is a party thereto.
B. NO CONFLICT. The execution, delivery and performance by Loan
Parties of the Loan Documents and the Related Agreements to which they are
parties and the consummation of the transactions contemplated by the Loan
Documents and such Related Agreements do not and will not (i) violate any
provision of any law or any governmental rule or regulation applicable to
Company or any of its Subsidiaries, the Certificate or Articles of
Incorporation or Bylaws of Company or any of its Subsidiaries or any material
order, judgment or decree of any court or other agency of government binding on
Company or any of its Subsidiaries, (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
material Contractual Obligation of Company or any of its Subsidiaries which
could reasonably be expected to result in a Material Adverse Effect, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Company or any of its Subsidiaries (other than any
Liens created under any of the Loan Documents in favor of
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Agent on behalf of Lenders), or (iv) require any approval of stockholders or
any approval or consent of any Person under any Contractual Obligation of
Company or any of its Subsidiaries, except for such approvals or consents which
will be obtained on or before the Closing Date and disclosed in writing to
Lenders or such approvals or consents the failure to obtain could not
reasonably be expected to result in a Material Adverse Effect.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance
by Loan Parties of the Loan Documents and the Related Agreements to which they
are parties and the consummation of the transactions contemplated by the Loan
Documents and such Related Agreements do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body, except for (i) filings and recordings required in connection with the
perfection of the security interests granted pursuant to the Loan Documents,
(ii) such registrations, consents, approvals, notices or other actions which
have been obtained on or before the Closing Date and are described on Schedule
5.2C annexed hereto and (iii) notices or other actions required to be taken
after the Closing Date relating to operating licenses, which notices or other
actions will be given or taken as required in due course (or, in the case of
any Loan Document or other Related Agreement executed and delivered after the
Closing Date, on or before such date of execution and delivery) except for such
filings, recording, registrations, consents, approvals, notices or other
actions the failure to obtain or take could not, in the aggregate, reasonably
be expected to have a Material Adverse Effect.
D. BINDING OBLIGATION. Each of the Loan Documents and Related
Agreements has been duly executed and delivered by each Loan Party that is a
party thereto and is the legally valid and binding obligation of such Loan
Party, enforceable against such Loan Party in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
E. VALID ISSUANCE OF COMMON STOCK, PREFERRED STOCK, SENIOR
SUBORDINATED NOTES AND YUCAIPA WARRANT.
(i) Common Stock and Preferred Stock. The Preferred Stock
is, and each class of Common Stock is, or when issued and delivered
will be, duly and validly issued, fully paid and nonassessable. No
stockholder of Company has or will have any preemptive rights to
subscribe for any additional equity Securities of Company. The
issuance and sale of Company's Common Stock and Preferred Stock, upon
such issuance and sale, will either (a) have been registered or
qualified under applicable federal and state securities laws or (b) be
exempt therefrom.
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(ii) Senior Subordinated Notes . Company has the corporate
power and authority to issue the Senior Subordinated Notes. The Senior
Subordinated Notes, when issued and paid for, will be the legally valid
and binding obligations of Company, enforceable against Company in
accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability. The subordination provisions of
the Senior Subordinated Notes will be enforceable against the holders
thereof and the Loans and all other monetary Obligations hereunder are
and will be within the definition of "Senior Indebtedness" included in
such provisions. Senior Subordinated Notes, when issued and sold, will
either (a) have been registered or qualified under applicable federal
and state securities laws or (b) be exempt therefrom.
5.3 FINANCIAL CONDITION.
Company has heretofore delivered to Lenders, at Lenders'
request, the following financial statements and information: (i) the audited
consolidated balance sheets of Company and its Subsidiaries as at December 31,
1994 and December 30, 1995 and the related consolidated statements of income,
stockholders' equity and cash flows of Company and its Subsidiaries for the
Fiscal Years then ended, (ii) the unaudited consolidated balance sheets of
Company and its Subsidiaries as at March 30, 1996 and the related unaudited
consolidated statements of income, stockholders' equity and cash flows of
Company and its Subsidiaries for the three months then ended, (iii) the audited
consolidated balance sheets of Smitty's and its Subsidiaries as at July 30,
1994 and July 30, 1995 and the related consolidated statements of income,
stockholders' equity and cash flows of Smitty's and its Subsidiaries for the
Fiscal Years then ended, and (iv) the unaudited consolidated balance sheets of
Smitty's and its Subsidiaries as at April 7, 1996 and the related unaudited
consolidated statements of income, stockholders' equity and cash flows of
Company and its Subsidiaries for the nine months then ended. All such
statements were prepared in conformity with GAAP and fairly present, in all
material respects, the financial position (on a consolidated basis) of the
entities described in such financial statements as at the respective dates
thereof and the results of operations and cash flows (on a consolidated basis)
of the entities described therein for each of the periods then ended, subject,
in the case of any such unaudited financial statements, to changes resulting
from audit and normal year-end adjustments. None of the Loan Parties (and will
not following the funding of the initial Loans) has any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the foregoing financial
statements or the notes thereto and which in any such case is material in
relation to the business, operations, properties, assets, condition (financial
or otherwise) or prospects of the Loan Parties taken as a whole, other than (i)
the incurrence of the Obligations and obligations under other Related
Agreements, (ii) contingent obligations or liabilities for taxes, long
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term leases or forward or long term commitments and (iii) other items disclosed
on Schedule 4.1B annexed hereto.
5.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS.
As of the Closing Date, since July 30, 1995, no event or change
has occurred that has caused or evidences, either in any case or in the
aggregate, a material adverse effect upon the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Smitty's and its
Subsidiaries, taken as a whole. Since December 30, 1995 and except as
disclosed on Schedule 4.1B annexed hereto, no event or change has occurred that
has caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect. Neither Company nor any of its Subsidiaries has directly or
indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so except as permitted by
subsection 7.5.
5.5 TITLE TO PROPERTIES; LIENS.
Each Loan Party has (i) good, sufficient and legal title,
subject only to Liens permitted under this Agreement and, with respect to Real
Property Assets acquired after the Closing Date by such Loan Party from a
Person other than a Loan Party, such defects in title as existed prior to such
acquisition, to (in the case of fee interests in real property), (ii) valid
leasehold interests, subject only to Liens permitted under this Agreement and,
with respect to Real Property Assets acquired after the Closing Date by such
Loan Party from a Person other than a Loan Party, such defects in title as
existed prior to such acquisition, in (in the case of leasehold interests in
real or personal property), or (iii) good title to (in the case of all other
personal property), all of its properties and assets reflected in the financial
statements referred to in subsection 5.3 or in the most recent financial
statements delivered pursuant to subsection 6.1, in each case except for assets
disposed of since the date of such financial statements in the ordinary course
of business or as otherwise permitted under subsection 7.7. Except as
permitted by this Agreement, all such properties and assets are free and clear
of Liens.
5.6 LITIGATION; ADVERSE FACTS.
There are no actions, suits, proceedings, arbitrations or
governmental investigations (whether or not purportedly on behalf of Company or
any of its Subsidiaries) at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign that are pending or, to the
knowledge of Company, threatened against or affecting Company or any of its
Subsidiaries or any property of Company or any of its Subsidiaries and that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. Neither Company nor any of its Subsidiaries (i) is in
violation of any applicable laws that, individually or in the
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aggregate, could reasonably be expected to result in a Material Adverse Effect,
or (ii) is subject to or in default with respect to any final judgments, writs,
injunctions, decrees, rules or regulations of any court or any federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
5.7 PAYMENT OF TAXES.
Except to the extent permitted by subsection 6.3, all material
tax returns and reports of Company and its Subsidiaries required to be filed by
any of them have been timely filed, and all material taxes, assessments, fees
and other governmental charges upon Company and its Subsidiaries and upon their
respective properties, assets, income, businesses and franchises which are due
and payable have been paid when due and payable. Company knows of no proposed
tax assessment against Company or any of its Subsidiaries which is not being
actively contested by Company or such Subsidiary in good faith and by
appropriate proceedings; provided that such reserves or other appropriate
provisions, if any, as shall be required in conformity with GAAP shall have
been made or provided therefor.
5.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS; MATERIAL
CONTRACTS.
A. Neither Company nor any of its Subsidiaries is in
default in the performance, observance or fulfillment of any of the material
obligations, covenants or conditions contained in any of its material
Contractual Obligations, and no condition exists that, with the giving of
notice or the lapse of time or both, would constitute such a default, except
where the consequences, direct or indirect, of such default or defaults, if
any, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party
to or is otherwise subject to any agreements or instruments the performance of
which, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect, or any charter or other internal restrictions
which, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect.
5.9 GOVERNMENTAL REGULATION.
Neither Company nor any of its Subsidiaries is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or
under any other federal or state statute or regulation which may limit its
ability to incur Indebtedness for borrowed money or which may otherwise render
all or any portion of the Obligations unenforceable.
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5.10 SECURITIES ACTIVITIES.
A. Neither Company nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin Stock.
B. Following application of the proceeds of each Loan,
not more than 25% of the value of the assets (either of Company only or of
Company and its Subsidiaries on a consolidated basis) subject to the provisions
of subsection 7.2 or 7.7 or subject to any restriction contained in any
agreement or instrument, between Company and any Lender or any Affiliate of any
Lender, relating to Indebtedness and within the scope of subsection 8.2, will
be Margin Stock.
5.11 EMPLOYEE BENEFIT PLANS.
A. Except with respect to the Deferred Compensation
Agreements, each of the Loan Parties and each of their respective ERISA
Affiliates are in material compliance with all applicable provisions and
requirements of ERISA and the regulations and published interpretations
thereunder with respect to each Employee Benefit Plan, and have performed all
their material obligations under each Employee Benefit Plan.
B. Except with respect to the Deferred Compensation
Agreements, no ERISA Events have occurred or are reasonably expected to occur
which individually or in the aggregate resulted in or might reasonably be
expected to result in a liability of any of the Loan Parties or any of their
respective ERISA Affiliates (unless no Loan Parties shall be jointly and
severally liable therefor) in excess of $3,000,000 during the term of this
Agreement.
C. Except as disclosed on Schedule 5.11 annexed hereto
and except to the extent required under Section 4980B of the Internal Revenue
Code, no Employee Benefit Plan provides health or welfare benefits (through the
purchase of insurance or otherwise) for any retired or former employees of any
of the Loan Parties or any of their respective ERISA Affiliates (unless no Loan
Parties shall be jointly and severally liable therefor). Except with respect
to the Deferred Compensation Agreements, there are no material liabilities of
any Loan Party under any of the plans listed on Schedule 5.11 annexed hereto
that are not reflected in the consolidated financial statements of Company.
D. As of the most recent valuation date for any Pension
Plan, the Amount of Unfunded Benefit Liabilities, individually or in the
aggregate for all Pension Plans (excluding for purposes of such computation (1)
any Pension Plan which has a negative Amount of Unfunded Benefit Liabilities
and (2) any Pension Plan for which
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neither Company nor any other Loan Party would have any liability if the
Pension Plan then terminated) does not exceed $6,000,000.
E. With respect to the Deferred Compensation Agreements,
(i) each of the Loan Parties and each of their respective ERISA Affiliates are
in compliance with all applicable provisions and requirements of ERISA and the
regulations and published interpretations thereunder and have performed all
obligations where the failure to do so would have a Material Adverse Effect,
(ii) no ERISA Events have occurred or are reasonably expected to occur which
individually or in the aggregate resulted in or might reasonably be expected to
result in a liability of any of the Loan Parties or any of their respective
ERISA Affiliates (unless no Loan Parties shall be jointly and severally liable
therefor) which would have a Material Adverse Effect and (iii) there are no
liabilities of any Loan Party that are not reflected in the consolidated
financial statements of Company which would have a Material Adverse Effect.
5.12 CERTAIN FEES.
Except as disclosed in Schedule 5.12 annexed hereto, no
material broker's or finder's fee or commission will be payable with respect to
this Agreement or any of the transactions contemplated hereby, and Company
hereby indemnifies Lenders against, and agrees that it will hold Lenders
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
5.13 ENVIRONMENTAL PROTECTION.
A. Except as set forth in Schedule 5.13 annexed hereto:
(i) the operations of the Loan Parties (including, without
limitation, all operations and conditions at or in the Facilities)
comply in all material respects with all Environmental Laws;
(ii) each of the Loan Parties has obtained all Governmental
Authorizations under Environmental Laws necessary to their respective
operations, and all such Governmental Authorizations are in good
standing, and each of the Loan Parties is in compliance with all
material terms and conditions of such Governmental Authorizations;
(iii) no Loan Party has received (a) any notice or claim to
the effect that it is or may be liable to any Person as a result of or
in connection with any Hazardous Materials except as would not
reasonably be expected to have a Material Adverse Effect or (b) any
letter or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and
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Liability Act (42 U.S.C. Section 9604) or comparable state laws
regarding any matter which could reasonably be expected to result in a
Material Adverse Effect, and, to the best of Company's knowledge, none
of the operations of any of the Loan Parties is the subject of any
federal or state investigation relating to or in connection with any
Hazardous Materials at any Facility or at any other location;
(iv) none of the operations of any of the Loan Parties is
subject to any judicial or administrative proceeding alleging the
violation of or liability under any Environmental Laws which if
adversely determined could reasonably be expected to have a Material
Adverse Effect;
(v) none of the Loan Parties or, to the best knowledge of
Company, any predecessor of the Loan Parties has filed any notice under
any Environmental Law indicating past or present treatment or Release
of Hazardous Materials at any Facility except as would not reasonably
be expected to have a Material Adverse Effect, and none of Loan
Parties' operations involves the generation, transportation, treatment,
storage or disposal of hazardous waste, as defined under 40 C.F.R.
Parts 260-270 or any state equivalent other than in compliance in all
material respects with all applicable Environmental Laws;
(vi) no Hazardous Materials exist on, under or about any
Facility in a manner that has a reasonable possibility of giving rise
to an Environmental Claim having a Material Adverse Effect, and no Loan
Party has filed any notice or report of a Release of any Hazardous
Materials that has a reasonable possibility of giving rise to an
Environmental Claim having a Material Adverse Effect;
(vii) none of the Loan Parties or, to the best knowledge of
Company, any of its predecessors has disposed of any Hazardous
Materials in a manner that has a reasonable possibility of giving rise
to an Environmental Claim having a Material Adverse Effect;
(viii) to the best knowledge of Company, no unpermitted
underground storage tanks or surface impoundments are on or at any
Facility; and
(ix) no Lien in favor of any Person relating to or in
connection with any Environmental Claim has been filed or has been
attached to any Facility that has a reasonable possibility of having a
Material Adverse Effect.
B. None of the Loan Parties or any of their respective
Facilities or operations are subject to any outstanding written order or
agreement with any governmental authority or private party relating to (a) any
Environmental Laws or (b) any Environmental Claims which could reasonably be
expected to result in a liability to Company or any of its Subsidiaries, after
giving effect to indemnification provisions
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upon which Company is reasonably relying, in excess of $12,000,000 individually
or in the aggregate.
C. None of the Loan Parties has any contingent liability
in connection with any Release of any Hazardous Materials by the Loan
Parties which could reasonably be expected to result in a liability to
Company or any of its Subsidiaries, after giving effect to
indemnification provisions upon which Company is reasonably relying, in
excess of $12,000,000 individually or in the aggregate.
D. Except as set forth in Schedule 5.13 annexed hereto, no
event or condition has occurred with respect to the Loan Parties
relating to any Environmental Laws or any Release of Hazardous Materials
at any Facility or any other location, which, individually, or in the
aggregate, has had or could reasonably be expected to have a Material
Adverse Effect.
5.14 EMPLOYEE MATTERS.
There is no strike or work stoppage in existence or threatened
involving Company or any of its Subsidiaries that could reasonably be expected
to have a Material Adverse Effect.
5.15 SOLVENCY.
Each Loan Party is and, upon the incurrence of any Obligations
by such Loan Party on any date on which this representation is made, will be,
Solvent.
5.16 MATTERS RELATING TO COLLATERAL.
A. CREATION, PERFECTION AND PRIORITY OF LIENS. The execution and
delivery of the Collateral Documents by Loan Parties, together with (i) the
actions taken on or prior to the date hereof pursuant to subsections 4.1I,
4.1J, 6.8 and 6.9 and (ii) the delivery to Agent of any Pledged Collateral not
delivered to Agent at the time of execution and delivery of the applicable
Collateral Document (all of which Pledged Collateral has been so delivered) are
effective to create in favor of Agent for the benefit of Lenders, as security
for the respective Secured Obligations (as defined in the applicable Collateral
Document in respect of any Collateral), a valid and perfected first priority
Lien on all of the Collateral, and all filings and other actions necessary or
desirable to perfect and maintain the perfection and first priority status of
such Liens have been duly made or taken and remain in full force and effect,
other than the filing of any UCC financing statements delivered to Agent for
filing (but not yet filed) and the periodic filing of UCC continuation
statements in respect of UCC financing statements filed by or on behalf of
Agent.
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B. GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the pledge or grant by any Loan
Party of the Liens purported to be created in favor of Agent pursuant to any of
the Collateral Documents or (ii) the exercise by Agent of any rights or
remedies in respect of any Collateral (whether specifically granted or created
pursuant to any of the Collateral Documents or created or provided for by
applicable law), except for filings or recordings contemplated by subsection
5.16A, except as may be required, in connection with the disposition of any
Pledged Collateral, by laws generally affecting the offering and sale of
securities and except for such authorizations, approvals, other actions,
notices or filings, the failure to have which could not reasonably be expected
to result in a Material Adverse Effect.
C. MARGIN REGULATIONS. The pledge of the Pledged Collateral
pursuant to the Collateral Documents does not violate Regulation G, T, U or X
of the Board of Governors of the Federal Reserve System.
D. INFORMATION REGARDING COLLATERAL. All information supplied to
Agent by or on behalf of any Loan Party with respect to any of the Collateral
(in each case taken as a whole with respect to any particular Collateral) is
accurate and complete in all material respects.
5.17 RELATED AGREEMENTS.
A. DELIVERY OF RELATED AGREEMENTS. Company has delivered
to Lenders complete and correct copies of each Related Agreement, the Existing
Smitty's Subordinated Note Indenture, the Existing Smitty's Discount Debenture
Indenture, and of all exhibits and schedules thereto.
B. WARRANTIES IN RECAPITALIZATION AND MERGER AGREEMENT.
Except to the extent otherwise set forth herein or in the schedules hereto,
each of the representations and warranties given by Yucaipa, Company or
Smitty's in the Recapitalization and Merger Agreement is true and correct in
all material respects as of the date hereof (or as of any earlier date to which
such representation and warranty specifically relates) and will be true and
correct in all material respects as of the Closing Date (or as of such earlier
date, as the case may be), in each case subject to the qualifications set forth
in the schedules to the Recapitalization and Merger Agreement.
C. SURVIVAL. Notwithstanding anything in the
Recapitalization and Merger Agreement to the contrary, the representations and
warranties of Company set forth in subsections 5.17B shall, solely for purposes
of this Agreement, survive the Closing Date for the benefit of Lenders.
5.18 PERMITS.
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Except as disclosed in Schedule 5.18 annexed hereto, each of
Company and its Subsidiaries, prior to and after giving effect to the
Acquisition and Merger, has such certificates, permits, licenses, franchises,
consents, approvals, authorizations and clearances that are material to the
condition (financial or otherwise), business or operations of any of Company
and its Subsidiaries ("Permits") and is (and will be immediately after the
consummation of the Acquisition and the Merger) in compliance in all material
respects with all applicable laws as are necessary to own, lease or operate its
properties and to conduct its businesses in substantially the manner as
presently conducted and to be conducted immediately after the consummation of
the Acquisition and Merger, and all such Permits are valid and in full force
and effect and will be valid and in full force and effect immediately upon
consummation of the Acquisition and Merger. Each of Company and its
Subsidiaries, prior to and after giving effect to the Acquisition and Merger,
is and will be in compliance in all material respects with its obligations
under such Permits and no event has occurred that allows, or after notice or
lapse of time would allow, revocation or termination of such Permits, except
for any such revocation or termination which could not reasonably be expected
to individually or in the aggregate have a Material Adverse Effect.
5.19 DISCLOSURE.
No representation or warranty of Company, Smitty's or any of
its Subsidiaries contained in any Loan Document or Related Agreement or in any
other document, certificate or written statement furnished to Lenders by or on
behalf of Company or any of its Subsidiaries for use in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact or omits to state a material fact (known to Company, in the case
of any document not furnished by it) necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which the same were made. Any projections and pro forma financial information
contained in such materials are based upon good faith estimates and assumptions
believed by Company to be reasonable at the time made, it being recognized by
Lenders that such projections as to future events are not to be viewed as facts
and that actual results during the period or periods covered by any such
projections may differ from the projected results. There are no facts known
(or which should upon the reasonable exercise of diligence be known) to Company
(other than matters of a general economic nature) that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect
and that have not been disclosed herein or in such other documents,
certificates and statements furnished to Lenders for use in connection with the
transactions contemplated hereby.
5.20 REAL PROPERTY ASSETS.
Schedule 4.1I sets forth all of the Real Property Assets of
Company or any of its Subsidiaries; Schedule 5.20A sets forth all of the
Surplus Leased Properties of Company or any of its Subsidiaries; Schedule 5.20B
sets forth all of the Surplus Owned
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Properties of Company or any of its Subsidiaries; Schedule 5.20C sets forth
all of the Excess California Land and the California Stores of Company or any
of its Subsidiaries, in each case as of the Closing Date after giving effect
to the Merger.
SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the
Commitments hereunder shall remain in effect and until payment in full of all
of the Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Company shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 6.
6.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
Company will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance
with sound business practices to permit preparation of financial statements in
conformity with GAAP. Company will deliver to Agent and Lenders:
(i) Fiscal Period Financials: as soon as available and in
any event within 30 days (or, in the case of the first Fiscal Period
ending after the Closing Date, 30 days after the end of the subsequent
Fiscal Period, or in the case of the last Fiscal Period in any Fiscal
Quarter (other than the last Fiscal Quarter in any Fiscal Year), 45
days, or in the case of the last Fiscal Period in any Fiscal Year, 90
days) after the end of each Fiscal Period ending after the Closing Date
(a) the consolidated balance sheet of Company and its Subsidiaries as
at the end of such Fiscal Period and the related consolidated
statements of income and cash flows of Company and its Subsidiaries for
such Fiscal Period and for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Period, setting forth in
comparative form (1) other than for the first 12 months after the
Closing Date, the corresponding figures for the consolidated balance
sheet and the related consolidated statement of income for the
corresponding periods of the previous Fiscal Year and (2) the
corresponding figures for the consolidated balance sheet and the
related consolidated statement of income from the Financial Plan for
the current Fiscal Year, and (b) sales growth on a comparable store
basis for each Regional Division for such Fiscal Period and for the
period from the beginning of the then current Fiscal Year to the end of
such Fiscal Period, setting forth in comparative form the corresponding
figures from the Financial Plan for the current Fiscal Year, all in
reasonable detail and certified by the chief financial officer of
Company that they fairly present the financial condition of Company and
its Subsidiaries as at the dates indicated and the results of their
operations for the periods indicated, subject to changes resulting from
audit and normal year-end adjustments;
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(ii) Quarterly Financials: as soon as available and in any
event within 45 days after the end of each of the first three Fiscal
Quarters of each Fiscal Year and within 90 days after the end of the
fourth Fiscal Quarter of each Fiscal Year, (a) the consolidated balance
sheet of Company and its Subsidiaries as at the end of such Fiscal
Quarter and the related consolidated statements of income and cash
flows of Company and its Subsidiaries for such Fiscal Quarter and for
the period form the beginning of the then current Fiscal Year to the
end of such Fiscal Quarter, setting forth in comparative form (1) other
than for the first 12 months after the Closing Date, the corresponding
figures for the corresponding periods of the previous Fiscal Year and
(2) the corresponding figures from the Financial Plan for the current
Fiscal Year, and (b) net sales and sales growth on a comparable store
basis for each Regional Division for such Fiscal Quarter and for the
period from the beginning of the then current Fiscal Year to the end of
such Fiscal Quarter, setting forth in comparative form the
corresponding figures from the Financial Plan for the current Fiscal
Year, all in reasonable detail and certified by the chief financial
officer of Company that they fairly present the financial condition of
Company and its Subsidiaries as at the dates indicated and the results
of their operations and their cash flows for the periods indicated,
subject to changes resulting from audit and normal year-end
adjustments;
(iii) Year-End Financials: as soon as available and in any
event within 90 days after the end of each Fiscal Year (or, if an
extension has been obtained from the Securities and Exchange Commission
for filing such report after such 90th day, then on the date of
delivery of such report to the Securities and Exchange Commission and
in any event within 105 days after the end of such Fiscal Year), (a)
the consolidated balance sheet of Company and its Subsidiaries as at
the end of such Fiscal Year and the related consolidated statements of
income, stockholders' equity and cash flows of Company and its
Subsidiaries for such Fiscal Year, setting forth in each case except
for the first Fiscal Year ended after the Closing Date in comparative
form the corresponding figures for the previous Fiscal Year, and the
corresponding figures from the Financial Plan for the Fiscal Year
covered by such financial statements, all in reasonable detail and
certified by the chief financial officer of Company that they fairly
present the financial condition of Company and its Subsidiaries as at
the dates indicated and the results of their operations and their cash
flows for the periods indicated, and (b) in the case of such
consolidated financial statements, a report thereon of Ernst & Young
LLP or other independent certified public accountants of recognized
national standing selected by Company and satisfactory to Agent, which
report shall be unqualified, shall express no doubts about the ability
of Company and its Subsidiaries to continue as a going concern, and
shall state that such consolidated financial statements fairly present
the consolidated financial position of Company and its Subsidiaries as
at the dates indicated and the results of their operations and their
cash flows for the periods indicated in conformity with GAAP applied on
a basis consistent with prior years (except as otherwise disclosed in
such
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financial statements) and that the examination by such accountants
in connection with such consolidated financial statements has been made
in accordance with generally accepted auditing standards;
(iv) Officers' and Compliance Certificates: (a) together
with each delivery of financial statements of Company and its
Subsidiaries pursuant to subdivisions (ii) and (iii) above, (1) an
Officers' Certificate of Company stating that the signers have reviewed
the terms of this Agreement and have made, or caused to be made under
their supervision, a review in reasonable detail of the transactions
and condition of Company and its Subsidiaries during the accounting
period covered by such financial statements and that such review has
not disclosed the existence during or at the end of such accounting
period, and that the signers do not have knowledge of the existence as
at the date of such Officers' Certificate, of any condition or event
that constitutes an Event of Default or Potential Event of Default, or,
if any such condition or event existed or exists, specifying the nature
and period of existence thereof and what action Company has taken, is
taking and proposes to take with respect thereto; and (2) a Compliance
Certificate duly executed and duly completed in all respects; and (b)
within 100 days after the beginning of each Fiscal Year and in any
event on or prior to the date of any mandatory prepayments made
pursuant to subsection 2.4B(iii)(e) during such Fiscal Year, an
Officers' Certificate of Company setting forth the Consolidated Excess
Cash Flow for the Fiscal Year covered by such financial statements and
demonstrating in reasonable detail the derivation of such Consolidated
Excess Cash Flow;
(v) Reconciliation Statements: if, as a result of any
change in accounting principles and policies from those used in the
preparation of the audited financial statements referred to in
subsection 5.3, the financial statements of Company and its
Subsidiaries on a consolidated basis or any Regional Division delivered
pursuant to subdivisions (i), (ii), (iii) or (xiii) of this subsection
6.1 will differ in any material respect from the financial statements
that would have been delivered pursuant to such subdivisions had no
such change in accounting principles and policies been made, then,
subject to subsection 1.2, (a) together with the first delivery of
financial statements pursuant to subdivision (i), (ii), (iii) or (xiii)
of this subsection 6.1 following such change, financial statements of
Company and its Subsidiaries on a consolidated basis or, to the extent
applicable, any Regional Division for the current Fiscal Year to the
effective date of such change, in each case prepared on a pro forma
basis as if such change had been in effect during such periods, and (b)
together with each delivery of financial statements pursuant to
subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1 following
such change, such financial statements prepared on a basis consistent
with the accounting principles and policies used in the preparation of
the financial statements delivered immediately prior to such change;
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(vi) Accountants' Certification: together with each
delivery of consolidated financial statements of Company and its
Subsidiaries pursuant to subdivision (iii) above, a written statement
by the independent certified public accountants giving the report
thereon (a) stating whether, in connection with their audit
examination, any condition or event that constitutes an Event of
Default or Potential Event of Default that relates to accounting
matters has come to their attention and, if such a condition or event
has come to their attention, specifying the nature and period of
existence thereof; provided that such accountants shall not be liable
by reason of any failure to obtain knowledge of any such Event of
Default or Potential Event of Default that would not be disclosed in
the course of their audit examination, and (b) stating that based on
their audit examination nothing has come to their attention that causes
them to believe that the information contained in the certificates
delivered therewith pursuant to subdivision (iv) above is not correct;
(vii) Accountants' Reports: promptly upon receipt thereof
(unless restricted by applicable professional standards), copies of all
reports (other than reports of a routine or ministerial nature which
are not material) submitted to Company by independent certified public
accountants in connection with each annual, interim or special audit of
the financial statements of Company and its Subsidiaries made by such
accountants, including, without limitation, any comment letter
submitted by such accountants to management in connection with their
annual audit;
(viii) SEC Filings and Press Releases: promptly upon the
sending or filing thereof, copies of (a) all financial statements,
reports, notices and proxy statements sent or made available generally
by Company to its security holders, (b) all regular and periodic
reports and all registration statements (other than on Form S-8 or a
similar form) and prospectuses, if any, filed by Company or any of its
Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority
(other than reports of a routine or ministerial nature which are not
material), and (c) all press releases and other statements made
available generally by Company or any of its Subsidiaries to the public
concerning material developments in the business of Company or any of
its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any officer of
Company obtaining knowledge (a) that a condition or event that
constitutes an Event of Default or Potential Event of Default has
occurred and is continuing, or becoming aware that any Lender has given
any notice (other than to Agent) or taken any other action with respect
to a claimed Event of Default or Potential Event of Default, (b) that
any Person has given any notice to Company or any of its Subsidiaries
or taken any other action with respect to a claimed default or event or
condition of the type referred to in subsection 8.2, (c) of any
condition or event
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that would be required to be disclosed in a current report filed by
Company with the Securities and Exchange Commission on
Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date
hereof) or (d) of the occurrence of any event or change that has caused
or evidences, either in any case or in the aggregate, a Material
Adverse Effect, an Officers' Certificate specifying the nature and
period of existence of such condition, event or change, or specifying
the notice given or action taken by any such Person and the nature of
such claimed Event of Default, Potential Event of Default, default,
event or condition, and what action Company has taken, is taking and
proposes to take with respect thereto;
(x) Litigation or Other Proceedings: promptly upon any
officer of Company obtaining knowledge of (X) the institution of, or
non-frivolous threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or
any property of Company or any of its Subsidiaries (collectively,
"PROCEEDINGS") not previously disclosed in writing by Company to
Lenders or (Y) any material development in any Proceeding that, in any
case:
(1) if adversely determined, has a reasonable
possibility of giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as
a result of, the transactions to occur or which have occurred
pursuant to the Loan Documents or the Related Agreements;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters;
(xi) ERISA Events: promptly upon becoming aware of the
occurrence of or forthcoming occurrence of any ERISA Event, a written
notice specifying the nature thereof, what action Company, any of its
Subsidiaries or any of their respective ERISA Affiliates has taken, is
taking or proposes to take with respect thereto and, when known, any
action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of
(a) each Schedule B (Actuarial Information) to the annual report (Form
5500 Series) filed by Company, any of its Subsidiaries or any of their
respective ERISA Affiliates with the Internal Revenue Service with
respect to each Pension Plan; (b) all notices received by Company, any
of its Subsidiaries or any of their respective ERISA Affiliates from a
Multiemployer Plan sponsor concerning an ERISA
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Event; and (c) copies of such other documents or governmental reports
or filings relating to any Employee Benefit Plan as Agent shall
reasonably request;
(xiii) Financial Plans: as soon as practicable and in any
event no later than 30 days after the beginning of each Fiscal Year, a
consolidated plan and financial forecast for such Fiscal Year (the
"FINANCIAL PLAN" for such Fiscal Year) as customarily prepared by
Company, including without limitation (a) forecasted balance sheets and
forecasted statements of income and cash flows of Company and its
Subsidiaries on a consolidated basis and net sales and sales growth on
a comparable store basis for each Regional Division for such Fiscal
Year, together with an explanation of the assumptions on which such
forecasts are based, (b) forecasted statements of income and cash flows
of Company and its Subsidiaries on a consolidated basis for each Fiscal
Period of such Fiscal Year, together with an explanation of the
assumptions on which such forecasts are based, and (c) such other
information and projections as any Lender may reasonably request;
(xiv) Insurance: as soon as practicable and in any event by
the last day of each Fiscal Year, an Officers' Certificate or other
report, in each case in form and substance satisfactory to Agent,
outlining all material insurance coverage maintained as of the date of
such Officers' Certificate or report by Company and its Subsidiaries
and all material insurance coverage planned to be maintained by Company
and its Subsidiaries in the immediately succeeding Fiscal Year;
(xv) Environmental Audits and Reports: as soon as
practicable following receipt thereof, copies of all environmental
audits and reports (other than routine follow-up reports to matters
previously disclosed to Lenders), whether prepared by personnel of
Company or any of its Subsidiaries or by independent consultants, with
respect to significant environmental matters at any Facility or which
relate to an Environmental Claim which could reasonably be expected to
result in a Material Adverse Effect;
(xvi) Board of Directors: with reasonable promptness,
written notice of any change in the Board of Directors of Company;
(xvii) New Subsidiaries: promptly upon any Person becoming a
Subsidiary of Company, a written notice setting forth with respect to
such Person (a) the date on which such Person became a Subsidiary of
Company and (b) all of the data required to be set forth in Schedule
5.1 annexed hereto with respect to all Subsidiaries of Company (it
being understood that such written notice shall be deemed to supplement
Schedule 5.1 annexed hereto for all purposes of this Agreement);
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(xviii) Margin Determination Certificate: concurrently with
the delivery of the financial statements required under subsections
6.1(ii) and 6.1(iii), Company shall deliver a Margin Determination
Certificate;
(xix) Schedules to the Security Agreement: as soon as
available and in any event within 5 days after the end of each Fiscal
Quarter, Company and the Subsidiary Guarantors shall deliver to Agent a
supplement, if any, to Schedule 1(a), Schedule 1(b) and Schedule 1(h)
to the Security Agreement and other statements and schedules required
to be furnished pursuant to the Security Agreement; and
(xx) Other Information: with reasonable promptness, such
other information and data with respect to Company or any of its
Subsidiaries as from time to time may be reasonably requested by any
Lender.
6.2 CORPORATE EXISTENCE, ETC.
Except as permitted under subsection 7.7, Company will, and
will cause each of its Subsidiaries to, at all times preserve and keep in full
force and effect its corporate existence and all rights and franchises material
to its business; provided, however that neither Company nor any of its
Subsidiaries shall be required to preserve any such right or franchise if the
Board of Directors of Company or such Subsidiary shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
Company or such Subsidiary, as the case may be, and if the loss thereof is not
disadvantageous in any material respect to Company and its Subsidiaries, taken
as a whole, or Lenders.
6.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
A. Company will, and will cause each of its Subsidiaries
to, pay all material taxes, assessments and other governmental charges imposed
upon it or any of its material properties or assets or in respect of any of its
income, businesses or franchises before any material penalty accrues thereon,
and all claims (including, without limitation, claims for labor, services,
materials and supplies) for sums that have become due and payable and that by
law have or may become a Lien upon any of its properties or assets, prior to
the time when any material penalty or fine shall be incurred with respect
thereto; provided that no such charge or claim need be paid if it is being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, so long as such reserve or other appropriate provision,
if any, as shall be required in conformity with GAAP shall have been made
therefor.
B. Company will not, nor will it permit any of its
Subsidiaries to, file or consent to the filing of any consolidated income tax
return with any Person (other than Company or any of its Subsidiaries).
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6.4 MAINTENANCE OF PROPERTIES; INSURANCE.
A. Company will, and will cause its Subsidiaries to,
maintain or cause to be maintained in good repair, working order and condition,
ordinary wear and tear excepted, all material Collateral (without limiting any
obligations under the Collateral Documents) and all other material properties
used or useful in the business of Company and its Subsidiaries (including,
without limitation, Intellectual Property) and from time to time will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
Company will maintain or cause to be maintained, with financially sound and
reputable insurance companies or associations or with self-insurance programs,
in each case to the extent consistent with prudent business practices and
customary in its industry, insurance with respect to its properties and
business and the properties and businesses of its Subsidiaries against loss or
damage of the kinds (including, in any event, business interruption insurance
and, to the extent commercially reasonable, earthquake insurance) and in the
amounts customarily carried or maintained under similar circumstances by
corporations of established reputation engaged in similar businesses and owning
similar properties in the same general geographic areas in which Company or any
of its Subsidiaries operates. In addition, Company will maintain or cause to
be maintained flood insurance with respect to each Flood Hazard Property (as
defined in subsection 4.1I) included in the Collateral and located in a
community that participates in the National Flood Insurance Program. All
insurance relating to the Collateral shall comply with the insurance provisions
of the Collateral Documents.
B. In the event that Company or any of its Subsidiaries,
in connection with any casualty or casualties involving assets of Company or
any of its Subsidiaries, receives (a) proceeds of insurance (other than
proceeds which are required to be paid to a landlord and which cannot be paid
to a mortgagee or other lender to Company or its Subsidiaries in preference to
payments to a landlord under leases existing as of the Closing Date and which
proceeds are in fact paid to such landlord in accordance with the terms of such
leases) in excess of $5,000,000 in connection with any one casualty, or (b)
aggregate proceeds of insurance in excess of $15,000,000 from all such
casualties (on a cumulative basis, net of any proceeds already used to restore
the assets affected by such casualty or casualties or to make prepayments in
accordance with subsection 2.4B(iii)(a)), Company shall immediately pay all
such insurance proceeds (and not just such excess) over to Agent, and Agent
shall hold such proceeds in an interest bearing account. Agent shall (i) so
long as no Event of Default has occurred and is continuing, disburse all such
insurance proceeds (and any earnings on amounts held in such interest bearing
account) held by it to Company, in accordance with and subject to such
customary terms, conditions and procedures as Agent shall require, for the sole
purpose of restoring or replacing (or reimbursing Company or any of its
Subsidiaries for restoration or replacement costs previously expended and for
costs expended in obtaining such proceeds with respect to) the affected assets,
or, (ii) at Company's option (or if otherwise required by subsection
2.4B(iii)(a)), apply such proceeds and such earnings for the purpose of making
a prepayment in accordance with subsection 2.4. Company
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hereby authorizes Agent to make such prepayments with such proceeds and such
earnings. If an Event of Default has occurred and is continuing, Agent may
elect, in its sole and absolute discretion, (i) to apply all or any portion of
such insurance proceeds and such earnings to the restoration of any of the
Collateral, subject to conditions determined by Agent, (ii) to disburse any
such insurance proceeds and such earnings to Company for the purposes set forth
in the immediately preceding sentence, (iii) to hold such insurance proceeds
and such earnings as additional Collateral under the Collateral Documents or
(iv) to apply such insurance proceeds and such earnings as provided for in the
Loan Documents.
6.5 INSPECTION; LENDER MEETING.
Company shall, and shall cause each of its Subsidiaries to,
permit any authorized representatives designated by any Lender to visit and
inspect any of the properties of Company or any of its Subsidiaries, including
its and their financial and accounting records, and to make copies and take
extracts therefrom, and to discuss its and their affairs, finances and accounts
with its and their officers and independent public accountants (provided that
representatives of Company or any of its Subsidiaries may, if it so chooses, be
present at or participate in any such discussion), all upon reasonable notice
and at such reasonable times during normal business hours and as often as may
be reasonably requested. Without in any way limiting the foregoing, Company
will, upon the request of Agent or Requisite Lenders, participate in a meeting
of Agent and Lenders once during each Fiscal Year to be held at Company's
corporate offices (or such other location as may be agreed to by Company and
Agent) at such time as may be agreed to by Company and Agent.
6.6 COMPLIANCE WITH LAWS, ETC.
Company shall comply, and shall cause each of its Subsidiaries
to comply, with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority, noncompliance with which could reasonably
be expected to cause, individually or in the aggregate, a Material Adverse
Effect.
6.7 ENVIRONMENTAL DISCLOSURE AND INSPECTION; REMEDIAL ACTION REGARDING
HAZARDOUS MATERIALS.
A. Company shall, and shall cause its Subsidiaries to,
exercise all due diligence in order to comply and cause (i) all tenants under
any leases or occupancy agreements affecting any portion of the Facilities and
(ii) all other Persons on or occupying such property, to comply with all
Environmental Laws.
B. Company agrees that Agent may, from time to time as
Agent deems reasonably necessary, retain, at Company's expense, an independent
professional consultant reasonably acceptable to Company to review any report
relating to Hazardous
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Materials prepared by or for Company or any of its Subsidiaries and to conduct
its own investigation of any Facility currently owned, leased, operated or used
by Company or any of its Subsidiaries, and Company agrees to use its reasonable
best efforts to obtain permission for Agent's professional consultant to
conduct its own investigation of any Facility previously owned, leased,
operated or used by Company or any of its Subsidiaries. Company hereby grants
(to the extent it is authorized to do so) to Agent and its agents, employees,
consultants and contractors the right to enter into or on to the Facilities
currently owned, leased, operated or used by Company or any of its Subsidiaries
to perform such tests on such property as are reasonably necessary to conduct
such a review and/or investigation. Any such investigation of any Facility
shall only be conducted, unless otherwise agreed to by such Person and Agent,
during normal business hours and, to the extent reasonably practicable, shall
be conducted so as not to interfere with the ongoing operations at any such
Facility or to cause any damage or loss to any property at such Facility.
Company and Agent hereby acknowledge and agree that any report of any
investigation conducted at the request of Agent pursuant to this subsection
6.7B will be obtained and shall only be used by Agent and Lenders for the
purposes of Lenders' internal credit decisions, to monitor and police the Loans
and to protect Lenders' security interests, if any, created by the Loan
Documents. Agent agrees to deliver a copy of any such report to Company with
the understanding that Company acknowledges and agrees that (i) it will
indemnify and hold harmless Agent and each Lender from any costs, losses or
liabilities relating to Company's or any of its Subsidiary's use of or reliance
on such report, (ii) neither Agent nor any Lender makes any representation or
warranty with respect to such report, and (iii) by delivering such report to
Company, neither Agent nor any Lender is requiring or recommending the
implementation of any suggestions or recommendations contained in such report.
C. Company shall promptly advise Lenders in writing and
in reasonable detail of (i) any Release of any Hazardous Materials at any
Facility required to be reported to any federal, state or local governmental or
regulatory agency under any applicable Environmental Laws, (ii) any and all
written communications with any governmental authority or any adverse party
with respect to any Environmental Claims that have a reasonable possibility of
giving rise to a Material Adverse Effect or with respect to any Release of
Hazardous Materials at any Facility required to be reported to any federal,
state or local governmental or regulatory agency, (iii) any remedial action
taken by Company or any of its Subsidiaries or any other Person in response to
(x) any Hazardous Materials on, under or about any Facility, the existence of
which has a reasonable possibility of resulting in an Environmental Claim
having a Material Adverse Effect, or (y) any Environmental Claim that could
reasonably be expected to result in a Material Adverse Effect, (iv) Company's
or any of its Subsidiaries' discovery of any occurrence or condition on any
real property adjoining or in the vicinity of any Facility that could cause
such Facility or any part thereof to be subject to any material restrictions on
the ownership, occupancy, transferability or use thereof under any
Environmental Laws, and (v) any request for information from any governmental
agency
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that suggests such agency is investigating whether Company or any of its
Subsidiaries may be potentially responsible for a Release of Hazardous
Materials.
D. Company shall promptly notify Lenders of (i) any
proposed acquisition of stock, assets, or property by Company or any of its
Subsidiaries that could reasonably be expected to expose Company or any of its
Subsidiaries to, or result in, Environmental Claims that could reasonably be
expected to have a Material Adverse Effect or that could reasonably be expected
to have a material adverse effect on any Governmental Authorization then held
by Company or any of its Subsidiaries and (ii) any proposed action to be taken
by Company or any of its Subsidiaries to commence manufacturing, industrial or
other operations that could reasonably be expected to subject Company or any of
its Subsidiaries to additional laws, rules or regulations which could
reasonably be expected to have a Material Adverse Effect, including, without
limitation, laws, rules and regulations requiring additional environmental
permits or licenses.
E. Company shall, at its own expense, provide copies of
such documents or information as Agent may reasonably request in relation to
any matters disclosed pursuant to this subsection 6.7.
F. Company shall promptly take, and shall cause its
Subsidiaries promptly to take, the appropriate remedial action as requested or
approved by the Governmental Authority having jurisdiction over the Facility at
issue in connection with the presence, storage, use, disposal, transportation
or Release of any Hazardous Materials on, under or about any Facility in order
to comply with all applicable Environmental Laws and Governmental
Authorizations. In the event Company or any of its Subsidiaries undertakes any
remedial action with respect to any Hazardous Materials on, under or about any
Facility, Company or such Subsidiary shall conduct and complete such remedial
action in material compliance with all applicable Environmental Laws, and in
accordance with the policies, orders and directives of all federal, state and
local governmental authorities except when, and only to the extent that,
Company's or such Subsidiary's liability for such presence, storage, use,
disposal, transportation or discharge of any Hazardous Materials is being
contested in good faith by Company or such Subsidiary.
6.8 EXECUTION OF SUBSIDIARY GUARANTY AND PERSONAL PROPERTY COLLATERAL
DOCUMENTS BY FUTURE SUBSIDIARIES.
A. EXECUTION OF SUBSIDIARY GUARANTY AND PERSONAL PROPERTY
COLLATERAL DOCUMENTS. In the event that any Person becomes a Subsidiary (other
than an Inactive Subsidiary) of Company after the date hereof, Company will
promptly notify Agent of that fact and cause (i) such Subsidiary to execute and
deliver to Agent a counterpart of the Subsidiary Guaranty, a Pledge Agreement,
a Security Agreement, Mortgages and a Trademark Security Agreement and to take
all such further actions and execute all such
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further documents and instruments (including without limitation actions,
documents and instruments comparable to those described in subsection 4.1J) as
may be necessary or, in the opinion of Agent, desirable to create in favor of
Agent, for the benefit of Lenders, a first-priority security interest (subject
only to Liens permitted under this Agreement) in all of the real, personal and
mixed property assets of such Subsidiary (other than with respect to Excluded
Sites and other than any such assets which are subject to Liens permitted under
subsection 7.2A(iv) and other Real Property Assets that such Subsidiary would
not be obligated to pledge to Agent pursuant to subsection 6.9 (it being
understood and agreed that all of the requirements of subsection 6.9 are
applicable to the Real Property Assets of such Subsidiary, with the date such
Subsidiary became a Subsidiary of Company being treated for purposes of
subsection 6.9 as the date on which such Subsidiary acquired all of its Real
Property Assets)) and (ii) the parent of such Subsidiary to execute and deliver
to Agent a counterpart of the Pledge Agreement or a Pledge Amendment to the
Pledge Agreement previously executed by such parent effecting the pledge by
such parent to Agent of all of the capital stock of, or any other equity
interest in, such Subsidiary.
B. SUBSIDIARY CHARTER DOCUMENTS, LEGAL OPINIONS, ETC.
Company shall deliver to Agent, together with such Loan Documents, (i)
certified copies of such Subsidiary's Certificate or Articles of Incorporation,
together with a good standing certificate from the Secretary of State of the
jurisdiction of its incorporation, each to be dated a recent date prior to
their delivery to Agent, (ii) a copy of such Subsidiary's Bylaws, certified by
its corporate secretary or an assistant secretary as of a recent date prior to
their delivery to Agent, (iii) a certificate executed by the secretary or an
assistant secretary of such Subsidiary as to (a) the fact that the attached
resolutions of the Board of Directors of such Subsidiary approving and
authorizing the execution, delivery and performance of such Loan Documents are
in full force and effect and have not been modified or amended and (b) the
incumbency and signatures of the officers of such Subsidiary executing such
Loan Documents, (iv) the certificate or certificates evidencing all of the
capital stock of (or, if certificated, any other equity interest in) such
Subsidiary, and (v) if requested by Agent, a favorable opinion of counsel to
such Subsidiary, in form and substance satisfactory to Agent and its counsel,
as to (a) the due organization and good standing of such Subsidiary, (b) the
due authorization, execution and delivery by such Subsidiary of such Loan
Documents, (c) the enforceability of such Loan Documents against such
Subsidiary, (d) such other matters (including without limitation matters
relating to the creation and perfection of Liens in any Collateral pursuant to
such Loan Documents) as Agent may reasonably request, all of the foregoing to
be satisfactory in form and substance to Agent and its counsel.
6.9 ADDITIONAL REAL PROPERTY.
A. After the Closing Date, Company shall, and shall cause its
Subsidiaries to,
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(i) with respect to each leasehold interest in Real Property
Assets hereafter acquired by Company or any of its Subsidiaries (in
either case, the "Lessee"), use its best efforts (which shall not be
deemed to include the payment of monetary consideration other than
nominal monetary consideration and out-of-pocket expenses incurred by
any lessor in connection with obtaining the items listed below, but
shall include efforts to include each of the items listed below in the
terms of the lease itself) to obtain and deliver to Agent as soon as
practicable, and if possible within four months after such acquisition,
an agreement by the landlord substantially in the form of Exhibit XIX
annexed hereto and in any event including the following:
(a) the agreement of the lessor (if required under the
lease) to the encumbrancing of such Lessee's leasehold interest
under the lease pursuant to a Mortgage and to the assignment of
such leasehold interest to Agent or its Affiliate following a
default hereunder, and if the lease allows the lessor to
unreasonably withhold consent to an assignment of the leasehold
interest by Agent or its Affiliate to a subsequent third party
assignee, the agreement of the lessor not to unreasonably
withhold such consent,
(b) the lessor's waiver of all right, title and
interest in the Lessee's personal property and fixtures located
on the leased premises,
(c) a license from the lessor for Agent to enter upon
the leased premises to take possession of or sell such personal
property and fixtures or to exercise other remedies, whether or
not the lease has been terminated,
(d) the lessor's agreement to give Agent written
notice of any default by the Lessee under the lease, and not to
terminate the lease unless Agent fails to cure the default
within 30 days after receiving written notice from such lessor,
or within any longer cure period set forth in the lease, and
(e) an original memorandum of the lease executed and
acknowledged by the lessor thereunder (or, in the case of an
existing leasehold interest which is of record and which is
acquired by the Lessee by assignment, a memorandum of or a
recordable duplicate original of such assignment, executed and
acknowledged by the assigning Lessee), in form sufficient to
give constructive notice (when recorded) of the Lessee's
leasehold interest under the lease to third-party purchasers
and encumbrancers of the affected real property and otherwise
in form reasonably satisfactory to Agent, together with
evidence of its recordation in all places necessary or
desirable, in the reasonable judgment of Agent, to give
constructive notice of the Lessee's leasehold interest to third
parties, and
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(ii) with respect to each Real Property Asset (x) which
constitutes an Excluded Site pursuant to the last sentence of the
definition thereof which has not been sold or leased within 120 days of
the Closing Date and (y) in which Company or such Subsidiary acquires
fee title or a leasehold interest after the Closing Date (in each case
excluding any Real Property Asset which is, but only so long as it
remains, (A) an Excluded Site, or (B) a leasehold interest as to which
encumbrancing requires the consent of the lessor, where Company and its
Subsidiaries have been unable to obtain the applicable lessor's consent
thereto, or (C) an asset subject to a Lien permitted under subsection
7.2A(iv)), such non-excluded Real Property Assets being collectively
referred to herein as the "COVERED REAL PROPERTY", as soon as
practicable and in any event within one month after the applicable Real
Property Asset becomes Covered Real Property, deliver:
(a) fully executed counterparts of a Mortgage, or an
amendment to a Mortgage, in form satisfactory to Agent, which
Mortgage or amendment shall encumber such Covered Real
Property, together with evidence that counterparts of such
Mortgage or amendment have been recorded in all places to the
extent necessary or desirable, in the reasonable judgment of
Agent, so as to effectively create a valid and enforceable
first priority Lien (subject only to Permitted Encumbrances) on
such Covered Real Property in favor of Agent (or such other
trustee as may be required or desired under local law) for the
benefit of Lenders,
(b) if requested by Agent, a title report, title
commitment or other title search satisfactory to Agent obtained
by such Person in respect of such Covered Real Property,
(c) if requested by Agent, an opinion of counsel
(which counsel shall be reasonably satisfactory to Agent) in
the state in which such Covered Real Property is located with
respect to the enforceability of the Mortgages recorded in such
state and such other matters as Agent may request, in form and
substance satisfactory to Agent,
(d) in the case of each such Covered Real Property
consisting of a leasehold interest, a copy of the lease
(including all amendments thereto), together with such estoppel
letters, consents, waivers and agreements from the lessor on
such real property as were obtained pursuant to clause (i)
above,
(e) environmental audits prepared by professional
consultants mutually acceptable to Company and Agent, in form,
scope and substance satisfactory to Agent in its reasonable
discretion,
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(f) if Company or any of its Subsidiaries obtains an
owner's or lessee's policy of title insurance with respect to
such Covered Real Property, or if requested by Agent with
respect to any other Covered Real Property having an
acquisition cost or value (as estimated by Agent) in excess of
$2,000,000, a Title Insurance Policy, in an amount reasonably
satisfactory to Agent, with respect to Agent's lien thereon,
(g) information sufficient for Agent to determine
whether (1) any such Real Property Asset is Flood Hazard
Property and (2) the community in which each Flood Hazard
Property is located is participating in the National Flood
Insurance Program,
(h) upon Company's or such Subsidiary's receipt of
written notification from Agent (1) as to the existence of each
such Flood Hazard Property and (2) as to whether the community
in which each such Flood Hazard Property is located is
participating in the National Flood Insurance Program, written
acknowledgment of the receipt of such notification, and
(i) the evidence of insurance with respect to such
Real Property Asset required to be provided to Agent pursuant
to the terms of the Mortgages, including flood insurance with
respect to each Flood Hazard Property located in a community
that is participating in the National Flood Insurance Program.
Company shall, and shall cause each of its Subsidiaries to,
permit any authorized representatives designated by Agent to visit and inspect
any Real Property Asset for the purpose of obtaining an appraisal of value,
conducted by consultants retained by Agent in compliance with all applicable
banking regulations.
B. Upon the first anniversary of the Closing Date,
Company shall, and shall cause its Subsidiaries to,
(i) with respect to (x) each Surplus Leased Property then
leased by Company or any of its Subsidiaries (in either case, the
"Lessee") with a fair market value of $1,000,000 or greater, and (y) if
the aggregate fair market value of all Surplus Leased Properties with a
positive fair market value of less than $1,000,000 exceeds $5,000,000,
all such Surplus Leased Properties with a positive fair market value,
(i) use its best efforts (which shall not be deemed to include the
payment of monetary consideration other than nominal monetary
consideration and out-of-pocket expenses incurred by any lessor in
connection with obtaining the items listed below) to obtain and deliver
to Agent as soon as practicable, an agreement by the landlord
substantially in the form of Exhibit XIX annexed hereto and in any
event including the following:
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(a) the agreement of the lessor (if required under
the lease) to the encumbrancing of such Lessee's leasehold
interest under the lease pursuant to a Mortgage and to the
assignment of such leasehold interest to Agent or its Affiliate
following a default hereunder, and if the lease allows the
lessor to unreasonably withhold consent to an assignment of the
leasehold interest by Agent or its Affiliate to a subsequent
third party assignee, the agreement of the lessor not to
unreasonably withhold such consent,
(b) the lessor's waiver of all right, title and
interest in the Lessee's personal property and fixtures located
on the leased premises,
(c) a license from the lessor for Agent to enter
upon the leased premises to take possession of or sell such
personal property and fixtures or to exercise other remedies,
whether or not the lease has been terminated,
(d) the lessor's agreement to give Agent written
notice of any default by the Lessee under the lease, and not to
terminate the lease unless Agent fails to cure the default
within 30 days after receiving written notice from such lessor,
or within any longer cure period set forth in the lease, and
(e) an original memorandum of the lease executed
and acknowledged by the lessor thereunder (or, in the case of
an existing leasehold interest which is of record and which is
acquired by the Lessee by assignment, a memorandum of or a
recordable duplicate original of such assignment, executed and
acknowledged by the assigning Lessee), in form sufficient to
give constructive notice (when recorded) of the Lessee's
leasehold interest under the lease to third-party purchasers
and encumbrancers of the affected real property and otherwise
in form reasonably satisfactory to Agent, together with
evidence of its recordation in all places necessary or
desirable, in the reasonable judgment of Agent, to give
constructive notice of the Lessee's leasehold interest to third
parties, and
(ii) except with respect to a leasehold interest as to
which the consent of a lessor is required, where Company and the
Subsidiaries have been unable to deliver the applicable consent
thereto, deliver:
(a) fully executed counterparts of a Mortgage, or
an amendment to a Mortgage, in form satisfactory to Agent,
which Mortgage or amendment shall encumber such Surplus Leased
Property, together with evidence that counterparts of such
Mortgage or amendment have been recorded in all places to the
extent necessary or desirable, in the reasonable
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judgment of Agent, so as to effectively create a valid and
enforceable first priority Lien (subject only to Permitted
Encumbrances) on such Surplus Leased Property in favor of Agent
(or such other trustee as may be required or desired under local
law) for the benefit of Lenders,
(b) a copy of the lease, including all amendments
thereto,
(c) if requested by Agent and if then in the
possession or control of Company, environmental audits prepared
by professional consultants,
(d) information sufficient for Agent to determine
whether (1) any such Surplus Leased Property is Flood Hazard
Property and (2) the community in which each Flood Hazard
Property is located is participating in the National Flood
Insurance Program,
(e) upon Company's or such Subsidiary's receipt of
written notification from Agent (1) as to the existence of each
such Flood Hazard Property and (2) as to whether the community
in which each such Flood Hazard Property is located is
participating in the National Flood Insurance Program, written
acknowledgment of the receipt of such notification, and
(f) the evidence of insurance with respect to such
Real Property Asset required to be provided to Agent pursuant
to the terms of the Mortgages, including flood insurance with
respect to each Flood Hazard Property located in a community
that is participating in the National Flood Insurance Program.
Upon the written request of Agent, Company shall, and shall
cause each of its Subsidiaries to, permit any authorized representatives
designated by Agent to visit and inspect any such Real Property Asset for the
purpose of obtaining an appraisal of value, conducted by consultants retained
by Agent in compliance with all applicable banking regulations.
6.10 INTEREST RATE PROTECTION.
Within 90 days of the Closing Date, Company shall obtain, and
shall thereafter cause to be maintained for a period of not less than two years
after the date Company first obtained such agreements, one or more Interest
Rate Agreements with respect to the Loans in an aggregate notional principal
amount of not less than $260,000,000, each such Interest Rate Agreement to be
in form and substance satisfactory to Agent and Arrangers.
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SECTION 7. COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the
Commitments hereunder shall remain in effect and until payment in full of all
of the Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Company shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 7.
7.1 INDEBTEDNESS.
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or guaranty, or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) Company may become and remain liable with respect to
the Obligations;
(ii) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations permitted by subsection
7.4 and, upon any matured obligations actually arising pursuant
thereto, the Indebtedness corresponding to the Contingent Obligations
so extinguished;
(iii) Company and its Subsidiaries may become and remain
liable with respect to Indebtedness in respect of Capital Leases;
provided that such Capital Leases are permitted under the terms of
subsection 7.9;
(iv) Company may become and remain liable with respect to
Indebtedness to any of its wholly-owned Subsidiaries, and any
wholly-owned Subsidiary of Company may become and remain liable with
respect to Indebtedness to Company or any other wholly-owned Subsidiary
of Company; provided that (a) all such intercompany Indebtedness shall
be evidenced by promissory notes that are pledged to Agent pursuant to
the terms of the applicable Collateral Documents, (b) all such
intercompany Indebtedness owed by Company to any of its Subsidiaries or
by any Subsidiary to Company or any other Subsidiary shall be
subordinated in right of payment to the payment in full of the
Obligations pursuant to the terms of the applicable promissory notes or
an intercompany subordination agreement, in each case approved by
Agent, and (c) any payment by any Subsidiary of Company under any
guaranty of the Obligations shall result in a pro tanto reduction of
the amount of any intercompany Indebtedness owed by such Subsidiary to
Company or to any of its Subsidiaries for whose benefit such payment is
made;
(v) Company and its Subsidiaries, as applicable, may
remain liable with respect to each of the items of existing
Indebtedness described in Schedule 7.1
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annexed hereto and any Indebtedness incurred to refinance such existing
Indebtedness; provided that after giving effect to such refinancing
Indebtedness and the repayment of the corresponding existing
Indebtedness with the proceeds thereof, (a) the aggregate principal
amount of the refinancing Indebtedness and the corresponding existing
Indebtedness so refinanced shall not be greater than the outstanding
principal amount of such existing Indebtedness immediately prior to
such refinancing, (b) the weighted average life to maturity of such
refinancing Indebtedness shall be no shorter than the existing
Indebtedness being refinanced and (c) such refinancing Indebtedness
shall not be secured by any additional property than that which secures
the existing Indebtedness being refinanced;
(vi) Company may become and remain liable with respect to
Indebtedness evidenced by the Senior Subordinated Notes in an aggregate
principal amount not to exceed $575,000,000;
(vii) Company and its Subsidiaries may become and remain
liable with respect to Indebtedness incurred to finance (or may assume
Indebtedness originally incurred to finance) (a) the purchase price of
equipment, fixtures and any other similar property or the remodeling or
other improvement costs of any facility of Company or any of its
Subsidiaries or (b) the purchase price of any Real Property Assets
consisting of fee interests in stores; provided that the aggregate
principal amount of such Indebtedness when incurred (and, in the case
of assumed Indebtedness, when originally incurred) shall not be less
than 80% or more than 100% of the fair market value of (i) the
equipment, fixtures and any other similar property acquired plus the
reasonable installation and delivery charges associated therewith or
the remodeling or other improvement costs relating to such facility or
(ii) such Real Property Assets, as applicable; provided further that
(1) the aggregate principal amount of all such Indebtedness incurred or
assumed during any Fiscal Year for purposes described in the first
clause (a) of this subsection 7.1(vii) shall not exceed $20,000,000 and
(2) the aggregate principal amount of all Indebtedness incurred to
finance the purchase price of any such Real Property Assets (together
with assumed Indebtedness originally incurred to finance the purchase
price of any such Real Property Assets) shall not exceed $10,000,000 at
any time;
(viii) Company may become and remain liable with respect to
unsecured Indebtedness so long as each of the following conditions is
satisfied: (A) Company becomes liable with respect to such
Indebtedness concurrently with the termination of a lease of a Related
Asset or the transfer to Company of either (i) an unencumbered fee
interest in a Related Asset by the Owner Trustee or (ii) the proceeds
realized by the Owner Trustee or Company from the sale of a Related
Asset (such proceeds, the "Related Asset Proceeds"); (B) the principal
amount of such Indebtedness does not exceed the then outstanding amount
of indebtedness incurred by the Owner Trustee to acquire such Related
Asset (the
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"Related Asset Notes"), the interest rate on such Indebtedness does not
exceed the interest rate on the Related Asset Notes, the final stated
maturity of, and interim amortization of, such Indebtedness are on the
dates and in the amounts required with respect to the Related Asset
Notes and the other terms and conditions governing such Indebtedness
are substantially the same as the terms and conditions governing the
Related Asset Notes, in each case as such rate, final maturity date,
amortization schedule and other terms and conditions are in effect on
the Closing Date; (C) if the Related Assets are transferred to Company,
Company closes an Asset Sale selling the Related Assets so transferred
not later than 90 days after such Related Assets are transferred to
Company; (D) the Net Asset Sale Proceeds of the Asset Sale of the
Related Assets or the Related Asset Proceeds, as the case may be, are
applied by Company to permanently reduce the outstanding principal
amount of Indebtedness of Company under this Agreement pursuant to
subsection 2.4B(iii)(a) within the third Business Day following the
date of receipt by Company of such Net Asset Sale Proceeds or Related
Asset Proceeds and without regard to any exclusions permitted pursuant
to clauses (i)-(vi) of the proviso therein contained; and (E) the
outstanding principal amount of the Indebtedness permitted pursuant to
this clause (viii) minus the sum of the Net Asset Sales Proceeds of all
Asset Sales of Related Assets and all Related Asset Proceeds which have
been applied pursuant to the foregoing clause (D) shall not at any time
exceed $25,000,000;
(ix) Company and its Subsidiaries may become and remain
liable with respect to Indebtedness represented by Deferred Trade
Payables in an aggregate amount for all such Indebtedness not to exceed
$5,000,000 at any time outstanding;
(x) Subsidiaries of Company acquired after the Closing
Date, the acquisition of which is permitted under this Agreement, may
remain liable with respect to Indebtedness existing immediately prior
to the time any such entity became a Subsidiary of Company in an
aggregate amount for all such Subsidiaries not to exceed $4,000,000 at
any time outstanding; provided that such Indebtedness is not incurred
in contemplation of such acquisition; and
(xi) Company and its Subsidiaries may become and remain
liable with respect to other Indebtedness in an aggregate principal
amount not to exceed $10,000,000 at any time outstanding.
7.2 LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, create, incur,
assume or permit to exist any Lien on or with respect to any property or asset
of any kind (including any document or instrument in respect of goods or
accounts receivable) of Company or any of its
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Subsidiaries, whether now owned or hereafter acquired, or any income or profits
therefrom, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any Lien with respect to any
such property, asset, income or profits under the Uniform Commercial Code of
any State or under any similar recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents,
including Liens securing its obligations to one or more Interest Rate
Exchangers;
(iii) existing Liens described in Schedule 7.2 annexed
hereto;
(iv) Liens on (a) Real Property Assets consisting of fee
interests in stores or (b) equipment, fixtures and other similar
property of Company or any of its Subsidiaries, in each case securing
Indebtedness described in subsections 7.1(iii) and 7.1(vii); provided
that such Liens shall extend only to the equipment, fixtures and other
similar property so financed and the proceeds thereof; provided,
further, that with respect to any such Lien described in clause (a)
above, (1) no Event of Default or Potential Event of Default shall have
occurred and be continuing at the time of incurrence or assumption of
such Lien, (2) such Lien is limited to such Real Property Assets (and
equipment located in or on such Real Property Assets), (3) the
Indebtedness secured by such Lien is Non- Recourse Indebtedness, and
(4) the aggregate principal amount of all Indebtedness secured by all
such Liens shall not at any time exceed $10,000,000;
(v) other Liens securing Indebtedness in an aggregate
amount not to exceed $5,000,000 at any time outstanding; provided that
(a) any such Indebtedness shall be permitted under subsection 7.1 and
(b) such Liens shall not attach to any Collateral;
(vi) Liens securing Indebtedness permitted under subsection
7.1(x), which Liens are existing prior to the time the entity which
incurred such Indebtedness became a Subsidiary of Company; provided
that such Liens were not incurred in connection with, or in
contemplation of, the acquisition of such Subsidiary and such Liens
extend to or cover only the property and assets of such entity which
were covered by such Liens and which were owned by such entity, in each
case at the time such entity became a Subsidiary of Company;
(vii) Liens in favor of third parties as consignors (or as
creditors of such consignors) in goods which are delivered to Company
or any of its Subsidiaries by such third parties on consignment in the
ordinary course of business, the value of which goods so held on
consignment shall at no time exceed $8,000,000 in the aggregate for
Company and its Subsidiaries; and
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(viii) the replacement, extension or renewal of any Lien
permitted by this subsection 7.2A upon or in the same property subject
to such Lien and as security for the same obligations or any
refinancings thereof; provided that such Lien does not extend to or
cover any property other than the property covered by such Lien
immediately prior to such replacement, extension or renewal of such
Lien and the principal of the obligations secured thereby is not
increased.
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 7.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 7.2A.
C. NO FURTHER NEGATIVE PLEDGES. Except with respect to specific
property encumbered to secure payment of particular Indebtedness or to be sold
pursuant to an executed agreement with respect to an Asset Sale or as may be
provided for in the Senior Subordinated Note Indenture, neither Company nor any
of its Subsidiaries shall enter into any agreement prohibiting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired. The foregoing shall not prohibit the execution or
renewal of a store lease which by its terms prohibits the hypothecation of the
leasehold interest thereunder (but does not prohibit the incurrence of liens on
any property of Company and its Subsidiaries other than such leasehold interest
and equipment related thereto) if, despite the best efforts of Company and its
Subsidiaries in accordance with subsection 6.9, the lessor will not agree to
permit such hypothecation.
7.3 INVESTMENTS; JOINT VENTURES.
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, make or own any Investment in any Person, including
any Joint Venture, except:
(i) Company and its Subsidiaries may make and own
Investments in Cash Equivalents;
(ii) Company and its Subsidiaries may continue to own the
Investments owned by them as of the Closing Date in any Subsidiaries of
Company and described on Schedule 5.1 annexed hereto as in effect on
the Closing Date;
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(iii) Company and its Subsidiaries may make intercompany
loans to the extent permitted under subsection 7.1(iv);
(iv) Company and its Subsidiaries may create or acquire new
Subsidiaries to the extent otherwise permitted under this Agreement;
provided that (a) any such new Subsidiary is wholly-owned by Company or
one of its wholly-owned Subsidiaries and the provisions of subsections
6.8 and 6.9 have been complied with and (b) to the extent such creation
or acquisition constitutes a Consolidated Capital Expenditure, such
Consolidated Capital Expenditure is permitted under subsection 7.8;
(v) Company and its Subsidiaries may continue to own the
existing Investments owned by them and described in Schedule 7.3
annexed hereto;
(vi) Company or any of its Subsidiaries may, so long as no
Potential Event of Default or Event of Default has occurred and is
continuing or occurs as a result thereof, make Development Investments
in or to any Developer; provided that (a) no such Development
Investment shall be permitted unless, at the time of the making of such
Development Investment, the Development Site and the store located or
to be located at the Development Site have been leased or irrevocably
committed by the Developer to be leased to Company or one of its
Subsidiaries, (b) neither Company nor any of its Subsidiaries may be or
become a general partner of any Developer or otherwise be liable in any
manner for any Indebtedness or any other obligations of any Developer
(other than pursuant to customary provisions contained in any lease
pertaining to a Development Site or a store leased to Company or one of
its Subsidiaries) and (c) the aggregate Development Investments,
together with the maximum aggregate liability, contingent or otherwise,
of Company and its Subsidiaries in respect of all Contingent
Obligations under subsection 7.4(viii), shall not exceed $30,000,000 at
any time outstanding;
(vii) Company and its Subsidiaries may make and own
Investments received in connection with the bankruptcy of suppliers and
customers or received pursuant to a plan of reorganization of any
supplier or customer, in each case in settlement of delinquent
obligations or disputes with such suppliers or customers;
(viii) So long as no Event of Default or Potential Event of
Default shall have occurred and be continuing, Company or any of its
Subsidiaries may make loans to its employees for the purpose of
purchasing Common Stock of Company; provided that the aggregate amount
of such loans shall not exceed $4,000,000 at any time outstanding;
(ix) Company and its Subsidiaries may accept promissory
notes received in consideration of, or the deferral of a portion of the
sales price accepted with
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respect to, any Asset Sale other than California Asset Sales; provided
that (a) the aggregate principal amount of such promissory notes and
the deferred portion of such sales prices related to all Asset Sales
other than California Asset Sales shall not at any time exceed
$10,000,000 and (b) any such promissory notes so accepted shall be
pledged as security for the Obligations pursuant to the applicable
Collateral Document;
(x) Company or any of its Subsidiaries may, so long as no
Potential Event of Default or Event of Default has occurred and is
continuing or occurs as a result thereof, make California Development
Investments; provided that (a) neither Company nor any of its
Subsidiaries may be or become a general partner of any Developer or
otherwise be liable in any manner for any Indebtedness or any other
obligations of any Developer (other than pursuant to customary
provisions contained in any lease pertaining to a Development Site);
(b) the aggregate California Development Investments, together with the
maximum aggregate liability, contingent or otherwise, of Company and
its Subsidiaries in respect of all Contingent Obligations under
subsection 7.4(ix), shall not exceed $30,000,000 at any time
outstanding; (c) California Development Investments may be made in cash
only with respect to Excess California Land or California Stores which
are then subject to an executed contract of sale or lease with a party
not an Affiliate of Company and the aggregate amount of all such cash
California Development Investments shall not exceed $15,000,000 at any
time outstanding; provided that up to $5,000,000 in California
Development Investments may be made in cash with respect to Excess
California Land or California Stores which are not then subject to such
an executed contract of sale or lease;
(xi) Company and its Subsidiaries may accept promissory
notes received in consideration of, or the deferral of a portion of the
sales price accepted with respect to, any California Asset Sales;
provided that the aggregate principal amount of such promissory notes
and the deferred portion of such sales prices related to California
Asset Sales shall not exceed (x) 25% of the aggregate sales prices
related to California Asset Sales until Company and its Subsidiaries
have received the first $33,800,000 in Net Asset Sale Proceeds from
California Asset Sales, and (y) 35% of the aggregate sales prices
related to California Asset Sales made after receipt by Company and its
Subsidiaries of such $33,800,000; and any such promissory notes so
accepted shall be pledged as security for the Obligations pursuant to
the applicable Collateral Document;
(xii) Company and its Subsidiaries may make loans to
redevelopment agencies for business purposes in an aggregate amount not
to exceed $5,000,000 at any time outstanding;
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(xiii) Company and its Subsidiaries may make and own
Investments (a) in suppliers in anticipation of becoming a customer of
such suppliers and in lieu of deposits, cash discounts or concessions
and (b) in connection with joint ventures with suppliers entered into
in the ordinary course of business; provided that the aggregate amount
of all such Investments under clauses (a) and (b), together with the
amount of guarantees permitted under subsection 7.4(v), shall not
exceed $5,000,000 at any time outstanding; and
(xiv) Company and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed at any time
$5,000,000.
7.4 CONTINGENT OBLIGATIONS.
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or become or remain liable with respect to
any Contingent Obligation, except:
(i) Subsidiaries of Company may become and remain liable
with respect to Contingent Obligations in respect of the Subsidiary
Guaranty, including Contingent Obligations thereunder for the benefit
of Interest Rate Exchangers;
(ii) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations in respect of Letters of
Credit;
(iii) Company may become and remain liable with respect to
Contingent Obligations under Hedge Agreements required under subsection
6.10 and under other Hedge Agreements with respect to Indebtedness,
which Hedge Agreements are in form and substance satisfactory to Agent;
(iv) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Sales or other sales of assets other than
guaranties of Indebtedness incurred by any Person acquiring all or any
portion of such assets for the purpose of financing such acquisition;
provided that the maximum assumable liability in respect of all such
obligations shall at no time exceed the gross proceeds actually
received by Company and its Subsidiaries in connection with such Asset
Sales and other sales;
(v) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations under guarantees in the
ordinary course of business of the obligations of suppliers, customers,
franchisees and licensees of Company and its Subsidiaries in an
aggregate amount which, together with the amount of Investments
permitted under subsection 7.3(xiii), shall not to exceed at any time
$5,000,000;
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(vi) Company may become and remain liable with respect to
Contingent Obligations under guarantees in respect of Operating Leases
and Capital Leases entered into by Company or any of its Subsidiaries
which are permitted under subsection 7.9;
(vii) Company and its Subsidiaries, as applicable, may
remain liable with respect to existing Contingent Obligations described
in Schedule 7.4 annexed hereto;
(viii) Company and its Subsidiaries may, so long as no
Potential Event of Default or Event of Default has occurred and is
continuing at the time of becoming liable therefor or occurs as a
result thereof, become and remain liable with respect to Contingent
Obligations that are (x) guaranties of Development Investments
described in clause (a) of the term "Development Investments" or (y)
commitments by Company or any of its Subsidiaries to make a Development
Investment; provided that, with respect to both clause (x) and clause
(y) above, (1) no such Contingent Obligations shall be permitted
unless, at the time of becoming liable with respect to such Contingent
Obligations, the Development Site and the store located or to be
located at the Development Site have been leased or irrevocably
committed by the Developer to be leased to Company or one of its
Subsidiaries, (2) neither Company nor any of its Subsidiaries may be or
become a general partner of any Developer or otherwise be liable in any
manner for any Indebtedness or any other obligations of any Developer
(other than pursuant to customary provisions contained in any lease
pertaining to a Development Site or a store leased to Company or one of
its Subsidiaries) and (3) the maximum aggregate liability, contingent
or otherwise, of Company and its Subsidiaries in respect of all
Contingent Obligations under this subsection 7.4(viii), together with
the aggregate Development Investments under subsection 7.3(vi), shall
not exceed $30,000,000 at any time outstanding;
(ix) Company and its Subsidiaries may, so long as no
Potential Event of Default or Event of Default has occurred and is
continuing at the time of becoming liable therefor or occurs as a
result thereof, become and remain liable with respect to Contingent
Obligations that are (x) guaranties of California Development
Investments described in clause (a) of the term "California Development
Investments" or (y) commitments by Company or any of its Subsidiaries
to make a California Development Investment; provided that, with
respect to both clauses (x) and (y) above, (1) no such Contingent
Obligations shall be permitted unless, at the time of becoming liable
with respect to such Contingent Obligations, neither Company nor any of
its Subsidiaries may be or become a general partner of any Developer or
otherwise be liable in any manner for any Indebtedness or any other
obligations of any Developer (other than pursuant to customary
provisions contained in any lease pertaining to a Development Site) and
(2) the maximum aggregate liability, contingent or
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otherwise, of Company and its Subsidiaries in respect of all Contingent
Obligations under this subsection 7.4(ix), together with the aggregate
California Development Investments under subsection 7.3(x), shall not
exceed $30,000,000 at any time outstanding;
(x) Subsidiaries of Company may become and remain liable
with respect to Contingent Obligations in respect of subordinated
guaranties of the Senior Subordinated Notes in the form contained in,
and to the extent required to be made in accordance with the terms and
conditions of, the Senior Subordinated Note Indenture as in effect on
the Closing Date; and
(xi) Company and its Subsidiaries may become and remain
liable with respect to other Contingent Obligations; provided that the
maximum aggregate liability, contingent or otherwise, of Company and
its Subsidiaries in respect of all such Contingent Obligations shall at
no time exceed $7,000,000.
7.5 RESTRICTED JUNIOR PAYMENTS; OTHER RESTRICTED PAYMENTS.
A. Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Junior Payment; provided that, so long as no Event
of Default or Potential Event of Default shall have occurred and be continuing
or occurs as a result thereof: (i) on the Closing Date, Company may purchase
for cash up to approximately 13,400,000 shares in aggregate of Company's Class
A Common Stock and Class B Common Stock outstanding prior to the Closing Date
(including certain Existing Management Stock Options) for an aggregate price
not exceeding $465,000,000 pursuant to the Equity Tender Offer; (ii) on the
Closing Date, Company may redeem for cash up to approximately 3,000,000 shares
of its Redeemable Preferred Stock for an aggregate redemption price not
exceeding $1,000,000 pursuant to the Recapitalization and Merger Agreement;
(iii) on the Closing Date, Smitty's may redeem the Existing Smitty's
Subordinated Notes for an aggregate redemption price not exceeding $50,000,000,
plus the payment of accrued but unpaid interest thereon and premiums and
consent payments with respect thereto, as described in the Smitty's Debt
Purchase Offers; (iv) Company may redeem its Redeemable Preferred Stock at the
times and in the amounts required under its Restated Articles of Incorporation
as in effect on the Closing Date; (v) Company may make regularly scheduled
payments of interest in respect of the Senior Subordinated Notes in accordance
with the terms of, and only to the extent required by, and subject to the
subordination provisions contained in, the Senior Subordinated Note Indenture;
and (vi) Company may make regularly scheduled payments of interest in respect
of Subordinated Indebtedness (other than the Senior Subordinated Notes) in
accordance with the terms of, and only to the extent required by, and subject
to the subordination provisions contained in, the agreements, documents and
indentures evidencing and/or relating to such Subordinated Indebtedness.
Neither Company nor any of its Subsidiaries will directly or indirectly
declare, order, pay or make, or set apart any sum or property
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for, any Restricted Junior Payment or agree to do so except as permitted by this
subsection 7.5.
B. Company shall not fail to immediately pay when due any
Specified Mortgage Notes, whether such Specified Mortgage Notes become due at
stated maturity, by acceleration, by mandatory prepayment or otherwise, and
Company shall voluntarily prepay such Specified Mortgage Notes as soon as
entitled to do so in accordance with the terms of the Specified Mortgage Notes.
Other than with respect to the Brigham City Bonds referenced in clause (i) of
the definition of Existing Company IRB's, Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, declare, order, pay,
make or set apart any sum for any voluntary or optional payment or prepayment
of principal of, premium, if any, or interest on, or voluntary or optional
redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any other Senior
Indebtedness; provided that, so long as no Event of Default or Potential Event
of Default shall have occurred and be continuing or occurs as a result thereof,
(i) Company may make payments of regularly scheduled interest or principal in
respect of any other Senior Indebtedness (other than Existing Smitty's Sinking
Fund Bonds) in accordance with the terms of and to the extent required by the
applicable Senior Debt Indenture and (ii) Saint Lawrence Holding Company may
make regularly scheduled interest and sinking fund payments in respect of any
Existing Smitty's Sinking Fund Bonds in accordance with the terms of and to the
extent required by the Existing Smitty's Sinking Fund Bond Indenture.
7.6 FINANCIAL COVENANTS.
A. MINIMUM FIXED CHARGE COVERAGE RATIO. Company shall
not permit the ratio of (i) the sum of Consolidated Adjusted EBITDA plus
Consolidated Rental Payments to (ii) Consolidated Fixed Charges (a) for the
Fiscal Quarter ending September 28, 1996, to be less than 1.20:1.00, (b) for
the two-Fiscal Quarter period ending December 28, 1996 to be less than
1.25:1.00, (c) for the three-Fiscal Quarter period ending April 5, 1997, to be
less than 1.25:1.00, and (d) thereafter, for any consecutive four-Fiscal
Quarter period ending as of the last day of any Fiscal Quarter set forth below
to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
MINIMUM FIXED
PERIOD CHARGE COVERAGE RATIO
-------------------------------------------- ---------------------
<S> <C>
Second Fiscal Quarter 1997 1.25:1.00
Third Fiscal Quarter 1997 1.20:1.00
Fourth Fiscal Quarter 1997 1.20:1.00
</TABLE>
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<TABLE>
<S> <C>
First Fiscal Quarter 1998 1.20:1.00
Second Fiscal Quarter 1998 1.20:1.00
Third Fiscal Quarter 1998 1.20:1.00
Fourth Fiscal Quarter 1998 1.25:1.00
First Fiscal Quarter 1999 1.25:1.00
Second Fiscal Quarter 1999 1.25:1.00
Third Fiscal Quarter 1999 1.25:1.00
Fourth Fiscal Quarter 1999 1.25:1.00
First Fiscal Quarter 2000 1.25:1.00
Second Fiscal Quarter 2000 1.25:1.00
Third Fiscal Quarter 2000 1.25:1.00
Fourth Fiscal Quarter 2000 1.25:1.00
First Fiscal Quarter 2001 1.30:1.00
Second Fiscal Quarter 2001 1.30:1.00
Third Fiscal Quarter 2001 1.30:1.00
Fourth Fiscal Quarter 2001 1.30:1.00
First Fiscal Quarter 2002 1.30:1.00
Second Fiscal Quarter 2002 1.30:1.00
Third Fiscal Quarter 2002 1.30:1.00
Fourth Fiscal Quarter 2002 1.30:1.00
First Fiscal Quarter 2003 1.35:1.00
Second Fiscal Quarter 2003 1.35:1.00
Third Fiscal Quarter 2003 1.35:1.00
Fourth Fiscal Quarter 2003 1.20:1.00
First Fiscal Quarter 2004 1.20:1.00
Second Fiscal Quarter 2004 1.20:1.00
Third Fiscal Quarter 2004 1.20:1.00
Fourth Fiscal Quarter 2004 1.20:1.00
First Fiscal Quarter 2005 1.20:1.00
Second Fiscal Quarter 2005 1.20:1.00
Third Fiscal Quarter 2005 1.20:1.00
</TABLE>
B. MAXIMUM LEVERAGE RATIO. Company shall not permit the ratio of
(i)(A) Consolidated Total Debt as of September 28, 1996, December 28, 1996, and
April 5, 1997, respectively, to (B) Consolidated Adjusted EBITDA multiplied by
(a) for the Fiscal Quarter ending September 28, 1996, 4.000, (b) for the
two-Fiscal Quarters ending December 28, 1996, 2.000 and (c) for the
three-Fiscal Quarters ending April 5,
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1997, 1.325, (x) for the Fiscal Quarter ending September 28, 1996, to exceed
7.1:1.00, (y) for the two-Fiscal Quarter period ending December 28, 1996 to
exceed 6.40:1.00 and (z) for the three-Fiscal Quarter period ending April 5,
1997 to exceed 6.20:1.00, and (ii) (A) Consolidated Total Debt as of the last
day of any Fiscal Quarter set forth below to (B) Consolidated Adjusted EBITDA
for the four-Fiscal Quarter period ending on such last day to exceed the
correlative ratio indicated:
<TABLE>
<CAPTION>
PERIOD MAXIMUM LEVERAGE RATIO
------------------------------------ ----------------------
<S> <C>
Second Fiscal Quarter 1997 5.90:1.00
Third Fiscal Quarter 1997 5.60:1.00
Fourth Fiscal Quarter 1997 5.50:1.00
First Fiscal Quarter 1998 5.40:1.00
Second Fiscal Quarter 1998 5.20:1.00
Third Fiscal Quarter 1998 5.10:1.00
Fourth Fiscal Quarter 1998 4.90:1.00
First Fiscal Quarter 1999 4.80:1.00
Second Fiscal Quarter 1999 4.70:1.00
Third Fiscal Quarter 1999 4.60:1.00
Fourth Fiscal Quarter 1999 4.50:1.00
First Fiscal Quarter 2000 4.40:1.00
Second Fiscal Quarter 2000 4.30:1.00
Third Fiscal Quarter 2000 4.20:1.00
Fourth Fiscal Quarter 2000 4.10:1.00
First Fiscal Quarter 2001 4.00:1.00
Second Fiscal Quarter 2001 3.90:1.00
Third Fiscal Quarter 2001 3.80:1.00
Fourth Fiscal Quarter 2001 3.70:1.00
First Fiscal Quarter 2002 3.60:1.00
Second Fiscal Quarter 2002 3.50:1.00
Third Fiscal Quarter 2002 3.40:1.00
Fourth Fiscal Quarter 2002 3.30:1.00
First Fiscal Quarter 2003 3.30:1.00
Second Fiscal Quarter 2003 3.20:1.00
Third Fiscal Quarter 2003 3.10:1.00
Fourth Fiscal Quarter 2003 2.80:1.00
</TABLE>
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<TABLE>
<S> <C>
First Fiscal Quarter 2004 2.80:1.00
Second Fiscal Quarter 2004 2.70:1.00
Third Fiscal Quarter 2004 2.50:1.00
Fourth Fiscal Quarter 2004 2.50:1.00
First Fiscal Quarter 2005 2.50:1.00
Second Fiscal Quarter 2005 2.50:1.00
Third Fiscal Quarter 2005 2.50:1.00
</TABLE>
C. MINIMUM CONSOLIDATED ADJUSTED EBITDA. Company shall not permit
Consolidated Adjusted EBITDA (a) for the Fiscal Quarter ending September 28,
1996, to be less than $51,900,000, (b) for the two-Fiscal Quarter period ending
December 28, 1996 to be less than $114,600,000, (c) for the three-Fiscal
Quarter period ending April 5, 1997, to be less than $177,700,000, and (d)
thereafter, for any consecutive four-Fiscal Quarter period ending as of the
last day of any Fiscal Quarter set forth below to be less than the correlative
amount indicated:
<TABLE>
<CAPTION>
MINIMUM CONSOLIDATED
PERIOD ADJUSTED EBITDA
-------------------------------------------- --------------------
<S> <C>
Second Fiscal Quarter 1997 $246,400,000
Third Fiscal Quarter 1997 257,500,000
Fourth Fiscal Quarter 1997 262,800,000
First Fiscal Quarter 1998 267,500,000
Second Fiscal Quarter 1998 275,000,000
Third Fiscal Quarter 1998 279,700,000
Fourth Fiscal Quarter 1998 283,600,000
First Fiscal Quarter 1999 286,200,000
Second Fiscal Quarter 1999 288,800,000
Third Fiscal Quarter 1999 291,700,000
Fourth Fiscal Quarter 1999 294,600,000
First Fiscal Quarter 2000 297,700,000
Second Fiscal Quarter 2000 300,600,000
Third Fiscal Quarter 2000 303,500,000
Fourth Fiscal Quarter 2000 304,500,000
First Fiscal Quarter 2001 305,500,000
Second Fiscal Quarter 2001 305,900,000
Third Fiscal Quarter 2001 308,400,000
Fourth Fiscal Quarter 2001 311,500,000
</TABLE>
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<PAGE> 160
<TABLE>
<S> <C>
First Fiscal Quarter 2002 313,700,000
Second Fiscal Quarter 2002 316,700,000
Third Fiscal Quarter 2002 320,600,000
Fourth Fiscal Quarter 2002 324,000,000
First Fiscal Quarter 2003 327,000,000
Second Fiscal Quarter 2003 330,100,000
Third Fiscal Quarter 2003 333,200,000
Fourth Fiscal Quarter 2003 336,300,000
First Fiscal Quarter 2004 340,200,000
Second Fiscal Quarter 2004 343,800,000
Third Fiscal Quarter 2004 347,400,000
Fourth Fiscal Quarter 2004 351,200,000
First Fiscal Quarter 2005 354,000,000
Second Fiscal Quarter 2005 356,500,000
Third Fiscal Quarter 2005 359,000,000
</TABLE>
D. MINIMUM CONSOLIDATED NET WORTH. Company shall not permit
Consolidated Net Worth at any time during the period commencing on the day
immediately preceding the first day of any of the periods set forth below and
ending on the day immediately preceding the last day of such period set forth
below to be less than the correlative amount indicated below for such period
set forth below:
<TABLE>
<CAPTION>
MINIMUM
PERIOD CONSOLIDATED NET WORTH
-------------------------------------------- ----------------------
<S> <C>
Third Fiscal Quarter 1996 ($115,300,000)
Fourth Fiscal Quarter 1996 (113,000,000)
First Fiscal Quarter 1997 (112,600,000)
Second Fiscal Quarter 1997 (110,800,000)
Third Fiscal Quarter 1997 (109,900,000)
Fourth Fiscal Quarter 1997 (103,800,000)
First Fiscal Quarter 1998 (97,800,000)
Second Fiscal Quarter 1998 (91,800,000)
Third Fiscal Quarter 1998 (85,800,000)
Fourth Fiscal Quarter 1998 (79,800,000)
</TABLE>
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<TABLE>
<S> <C>
First Fiscal Quarter 1999 (69,300,000)
Second Fiscal Quarter 1999 (58,800,000)
Third Fiscal Quarter 1999 (48,300,000)
Fourth Fiscal Quarter 1999 (37,800,000)
First Fiscal Quarter 2000 (23,700,000)
Second Fiscal Quarter 2000 (9,500,000)
Third Fiscal Quarter 2000 4,700,000
Fourth Fiscal Quarter 2000 18,900,000
First Fiscal Quarter 2001 34,400,000
Second Fiscal Quarter 2001 50,000,000
Third Fiscal Quarter 2001 65,500,000
Fourth Fiscal Quarter 2001 81,100,000
First Fiscal Quarter 2002 102,000,000
Second Fiscal Quarter 2002 122,900,000
Third Fiscal Quarter 2002 143,800,000
Fourth Fiscal Quarter 2002 164,800,000
First Fiscal Quarter 2003 188,800,000
Second Fiscal Quarter 2003 212,900,000
Third Fiscal Quarter 2003 237,000,000
Fourth Fiscal Quarter 2003 261,100,000
First Fiscal Quarter 2004 287,700,000
Second Fiscal Quarter 2004 314,400,000
Third Fiscal Quarter 2004 341,100,000
Fourth Fiscal Quarter 2004 367,800,000
First Fiscal Quarter 2005 385,000,000
Second Fiscal Quarter 2005 400,000,000
Third Fiscal Quarter 2005 450,000,000
</TABLE>
7.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS.
Company shall not, and shall not permit any of its Subsidiaries
to, alter the corporate, capital or legal structure of Company or any of its
Subsidiaries, including the creation or acquisition of any Subsidiaries, or
enter into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of,
in one transaction or a series of transactions, all or any part of its
business, property or assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or a substantial portion of the business,
property or assets of, or stock or
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other evidence of beneficial ownership of, any Person or any division or line
of business of any Person, except:
(i) any wholly-owned Subsidiary of Company may be merged
with or into Company or any wholly-owned Subsidiary, or be liquidated,
wound up or dissolved, or all or any part of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise disposed
of, in one transaction or a series of transactions, to Company or any
wholly-owned Subsidiary; provided that, in the case of such a merger
or consolidation, Company or such wholly-owned Subsidiary shall be the
continuing or surviving corporation; and provided further that if any
such transaction involves a Subsidiary Guarantor, the surviving
corporation shall be Company or a Subsidiary Guarantor;
(ii) Company and its Subsidiaries may make Consolidated
Capital Expenditures permitted under subsection 7.8 and Development
Investments (to the extent such Development Investments do not
constitute Consolidated Capital Expenditures) permitted under
subsection 7.3(vi);
(iii) Company and its Subsidiaries may sell or otherwise
dispose of assets in transactions that do not constitute Asset Sales;
provided that the consideration received for such assets shall be in an
amount at least equal to the fair market value thereof;
(iv) Company and its Subsidiaries may sell or otherwise
dispose of damaged, worn out or obsolete assets that are no longer
necessary for the proper conduct of their respective business for fair
market value in the ordinary course of business;
(v) Company and its Subsidiaries may sell grocery stores
(including equipment therein acquired after the date which precedes the
Closing Date by six months) opened or acquired after the date which
precedes the Closing Date by six months in connection with a concurrent
lease-back of such grocery stores (including such equipment) to the
extent such transactions are permitted under subsection 7.10;
(vi) Company and its Subsidiaries, as lessors or
sublessors, may lease or sublease any of their respective real or
personal property in the ordinary course of business;
(vii) Company may make California Asset Sales other than
sales of Related Assets; provided that the consideration received shall
be in amount at least equal to the fair market value thereof and the
proceeds thereof shall be applied as required by subsection
2.4B(iii)(a); and Company may make sales of Related Assets acquired
pursuant to subsection 7.1(viii) or subsection 7.7(xi);
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provided that the consideration received shall be in an amount at
least equal to the fair market value thereof and the proceeds of the
sale of the Related Asset shall be applied as required by subsection
7.1(viii) or subsection 7.7(xi), as the case may be;
(viii) Company and its Subsidiaries may make Asset Sales of
stores which are no longer useful to the business of Company and its
Subsidiaries; provided that the aggregate number of any stores sold
pursuant to this clause (viii) shall not exceed five in any Fiscal Year
plus a number of stores equal to the difference between five and the
number of stores sold under this clause (viii) in the immediately
preceding Fiscal Year;
(ix) Company and its Subsidiaries may make Asset Sales of
assets having a fair market value not in excess of $5,000,000; provided
that (x) the consideration received for such assets shall be in an
amount at least equal to the fair market value thereof and (y) the
proceeds of such Asset Sales shall be applied as required by subsection
2.4B(iii)(a);
(x) Company and its Subsidiaries may sell or otherwise
dispose of all or any portion of the manufacturing facilities, stores
and related personal property located at or used in connection with the
operation of such facilities and stores, in each case as listed on
Schedule 7.7; provided that the consideration received shall be an
amount at least equal to the fair market value thereof and the proceeds
thereof shall be applied as required by subsection 2.4B(iii)(a); and
(xi) Company may transfer a store to the Owner Trustee
concurrently with the receipt of an unencumbered fee interest in a
Related Asset so long as each of the following conditions is satisfied:
(A) the transfer is made in accordance with the terms of the
documentation governing the Related Assets as in effect on the Closing
Date or in accordance with terms which are approved by Arrangers; (B)
the fair market value of the store or stores transferred to the Owner
Trustee does not exceed the fair market value of the Related Asset or
Assets received by Company by more than an amount which has been
approved by Agent; (C) Company closes an Asset Sale selling such
Related Asset not later than 90 days after receipt of such Related
Asset; and (D) the Net Asset Sale Proceeds of the Asset Sale of the
Related Asset are applied by Company to permanently reduce the
outstanding principal amount of Indebtedness of Company under this
Agreement pursuant to subsection 2.4B(iii)(a) within the third Business
Day following the date of receipt by Company of such Net Asset Sale
Proceeds and without regard to any exclusion permitted pursuant to
clauses (i)-(vi) of the proviso therein contained.
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7.8 CONSOLIDATED CAPITAL EXPENDITURES.
Company shall not, and shall not permit its Subsidiaries to,
make or incur Consolidated Capital Expenditures, in any Fiscal Year indicated
below, in an aggregate amount in excess of the corresponding amount (the
"MAXIMUM CONSOLIDATED CAPITAL EXPENDITURES AMOUNT") set forth below opposite
such Fiscal Year; provided that the Maximum Consolidated Capital Expenditures
Amount for any Fiscal Year shall be increased (i) by an amount equal to the
excess, if any (but in no event more than 25% of the Maximum Consolidated
Capital Expenditures Amount for Fiscal Year 1996 as set forth in the table
below and 15% of the Maximum Consolidated Capital Expenditures Amount for the
immediately preceding Fiscal Year as set forth in the table below for each
Fiscal Year thereafter) of the Maximum Consolidated Capital Expenditures Amount
for the immediately preceding Fiscal Year (as adjusted in accordance with this
proviso) over the actual amount of Consolidated Capital Expenditures for such
previous Fiscal Year, (ii) by an amount up to, but in no event greater than,
10% of the Maximum Consolidated Capital Expenditures Amount for the immediately
following Fiscal Year, as set forth in the table below, which amount described
in this clause (ii) shall reduce the Maximum Consolidated Capital Expenditures
Amount for the immediately following Fiscal Year and (iii) by an amount equal
to (but in no event greater than $25,000,000 for any Fiscal Year) the aggregate
amount of Net Asset Sale Proceeds (other than insurance proceeds, condemnation
awards, indemnity payments and Net Asset Sale Proceeds applied in accordance
with subsection 2.4B(iii)(a)(v)) received by Company and its Subsidiaries
during such Fiscal Year to the extent such proceeds have been reinvested in new
stores or the construction or remodeling of stores of Company and its
Subsidiaries within 270 days of receipt in accordance with subsection
2.4B(iii)(a)(i)(A); provided, however that the amount which may be added to the
Maximum Consolidated Capital Expenditures Amount pursuant to clauses (i) and
(ii) of the immediately preceding proviso shall not exceed for Fiscal Year
1997, 40% of the Maximum Consolidated Capital Expenditures Amount for Fiscal
Year 1997 and for each Fiscal Year thereafter, 15% of the Maximum Consolidated
Capital Expenditures Amount for such Fiscal Year as set forth in the table
below:
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<TABLE>
<CAPTION>
MAXIMUM CONSOLIDATED
FISCAL YEAR CAPITAL EXPENDITURES
---------------------------------- --------------------
<S> <C>
Closing Date to
1996 Fiscal Year End $76,300,000
Fiscal Year 1997 64,100,000
Fiscal Year 1998 63,700,000
Fiscal Year 1999 63,300,000
Fiscal Year 2000 67,100,000
Fiscal Year 2001 73,100,000
Fiscal Year 2002 74,700,000
Fiscal Year 2003 76,200,000
Fiscal Year 2004 78,200,000
January 2, 2005 to
August 31, 2005 55,000,000
</TABLE>
7.9 RESTRICTION ON LEASES.
Company shall not, and shall not permit any of its Subsidiaries
to, become liable in any way, whether directly or by assignment or as a
guarantor or other surety, for the obligations of the lessee under any lease,
whether an Operating Lease or a Capital Lease (other than intercompany leases
between Company and its wholly-owned Subsidiaries), unless, immediately after
giving effect to the incurrence of liability with respect to such lease, all
amounts paid or payable under all Capital Leases and Operating Leases (net of
sublease income) at the time in effect during the then current Fiscal Year
shall not exceed the corresponding amount set forth below opposite such Fiscal
Year:
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<TABLE>
<CAPTION>
MAXIMUM
PERIOD LEASE PAYMENTS
----------------------------- --------------
<S> <C>
June 30, 1996 to
1996 Fiscal Year End $30,600,000
Fiscal Year 1997 71,500,000
Fiscal Year 1998 80,400,000
Fiscal Year 1999 89,300,000
Fiscal Year 2000 98,900,000
Fiscal Year 2001 113,900,000
Fiscal Year 2002 125,100,000
Fiscal Year 2003 134,800,000
Fiscal Year 2004 149,300,000
January 2, 2005 to
August 31, 2005 105,000,000
</TABLE>
7.10 SALES AND LEASE-BACKS.
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, become or remain liable as lessee or as a guarantor
or other surety with respect to any lease, whether an Operating Lease or a
Capital Lease, of any property (whether real, personal or mixed), whether now
owned or hereafter acquired, (i) which Company or any of its Subsidiaries has
sold or transferred or is to sell or transfer to any other Person (other than
Company or any of its Subsidiaries) or (ii) which Company or any of its
Subsidiaries intends to use for substantially the same purpose as any other
property which has been or is to be sold or transferred by Company or any of
its Subsidiaries to any Person (other than Company or any of its Subsidiaries)
in connection with such lease; provided that Company and its Subsidiaries may
become and remain liable as lessee, guarantor or other surety with respect to
any such lease if and to the extent that Company or any of its Subsidiaries
would be permitted to enter into, and remain liable under, such lease under
subsection 7.9.
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<PAGE> 167
7.11 SALE OR DISCOUNT OF RECEIVABLES.
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, sell with recourse, or discount or otherwise sell
for less than the face value thereof, any of its notes or accounts receivable.
7.12 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate of Company, on
terms that are less favorable to Company or that Subsidiary, as the case may
be, than those that might be obtained at the time from Persons who are not such
an Affiliate; provided that the foregoing restriction shall not apply to (i)
any transaction between Company and any of its wholly-owned Subsidiaries or
between any of its wholly-owned Subsidiaries; (ii) reasonable and customary
fees paid to members of the Boards of Directors of Company and its
Subsidiaries; (iii) issuances of stock, payments of bonuses and other
transactions pursuant to employment or compensation agreements, stock option
agreements, indemnification agreements, severance agreements and other
arrangements, in each case as in effect as of the Closing Date and unamended,
and substantially similar agreements as may hereafter become effective, in each
case with officers or directors who are Affiliates of Company or any of its
Subsidiaries; (iv) payment of consulting and other fees and expenses and the
reimbursement of losses, costs and expenses under the Management Agreement, as
amended in accordance with subsection 7.15A, and in form and substance
satisfactory to Agent; (v) the payment of fees and expenses to Yucaipa or its
affiliates and designees and other holders of capital stock of Smitty's in
connection with the Acquisition, in each case in amounts that are satisfactory
to Agent; (vi) payments by Company and its Subsidiaries pursuant to tax sharing
agreements in effect from time to time among Company and its Subsidiaries; or
(vii) the issuance by Company of common stock to Yucaipa pursuant to Yucaipa's
exercise of the Yucaipa Warrant.
7.13 DISPOSAL OF SUBSIDIARY STOCK; RESTRICTIONS ON SUBSIDIARIES.
A. Except for any sale of 100% of the capital stock or
other equity Securities of any of its Subsidiaries in compliance with the
provisions of subsection 7.7(i) and except pursuant to the Collateral
Documents, Company shall not and shall not permit any of its Subsidiaries to
directly or indirectly sell, assign, pledge or otherwise encumber or dispose of
any shares of capital stock or other equity Securities of any of its
Subsidiaries, except to qualify directors if required by applicable law, or in
the case of Company's Subsidiaries, to Company or to a wholly-owned Subsidiary
of Company.
B. Except as provided herein or in any of the other Loan
Documents, the Senior Subordinated Note Indenture and in any other document
evidencing
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Indebtedness in existence on the Closing Date or any permitted refinancing
thereof as permitted under subsection 7.1(v) (only so long as the agreements
governing such refinancing shall not contain covenants that are more
restrictive than the covenants contained in the indentures or documents so
refinanced), Company will not, and will not permit any of its Subsidiaries to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary to
(i) pay dividends or make any other distributions on any of such Subsidiary's
capital stock owned by Company or any other Subsidiary of Company, (ii) repay
or prepay any Indebtedness owed by such Subsidiary to Company or any other
Subsidiary of Company, (iii) make loans or advances to Company or any other
Subsidiary of Company, or (iv) transfer any of its property or assets to
Company or any other Subsidiary of Company.
7.14 CONDUCT OF BUSINESS.
From and after the Closing Date, Company shall not, and shall
not permit any of its Subsidiaries to, engage in any business other than (i)
the businesses engaged in by Company and its Subsidiaries on the Closing Date
and similar or related businesses and (ii) such other lines of business as may
be consented to by Requisite Lenders.
7.15 AMENDMENTS OR WAIVERS OF CERTAIN RELATED AGREEMENTS; AMENDMENTS OF
DOCUMENTS RELATING TO SUBORDINATED INDEBTEDNESS; DESIGNATION OF
"DESIGNATED SENIOR INDEBTEDNESS".
A. AMENDMENTS OR WAIVERS OF CERTAIN RELATED AGREEMENTS.
Company shall not, and shall not permit any of its Subsidiaries to, amend,
waive any of its rights under, or otherwise change the terms of any of the
Related Agreement (other than the Related Financing Documents) in each case as
in effect on the Closing Date, without the prior written consent of the
Requisite Lenders, if such amendment, waiver or change would increase
materially the obligations of Company or any of its Subsidiaries or confer
additional rights on any other party to any such agreement which would be
adverse to Company or any of its Subsidiaries.
B. AMENDMENTS OF DOCUMENTS RELATING TO SENIOR
INDEBTEDNESS AND SUBORDINATED INDEBTEDNESS. Company shall not, and shall not
permit any of its Subsidiaries to, amend or otherwise change the terms of any
of the Senior Indebtedness, the Senior Subordinated Notes, the Existing
Smitty's Subordinated Notes, the Existing Smitty's Discount Debentures, the
Senior Debt Indentures, the Senior Subordinated Note Indenture, the Existing
Smitty's Subordinated Note Indenture or the Existing Smitty's Discount
Debenture Indenture (collectively, "RESTRICTED AGREEMENTS"), or make any
payment consistent with an amendment thereof or change thereto, if the effect
of such amendment or change is to increase the interest rate on any such
Restricted Agreements, change any dates upon which payments of principal or
interest are due thereon, change any of the covenants with respect thereto in a
manner which is more restrictive to
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Company or any of its Subsidiaries, change any event of default or condition to
an event of default with respect thereto, change the redemption, prepayment or
defeasance provisions thereof, change the subordination provisions (if any)
thereof (or of any guaranty thereof), or change any collateral therefor (other
than to release such collateral), or if the effect of such amendment or change,
together with all other amendments or changes made, is to increase the
obligations of the obligor thereunder or to confer any additional rights on the
holders of any such Restricted Agreements (or a trustee or other representative
on their behalf) which would be adverse to any Loan Party or Lenders.
C. DESIGNATION OF "DESIGNATED SENIOR INDEBTEDNESS".
Company shall not designate any Indebtedness as "Designated Senior
Indebtedness" (as defined in the Senior Subordinated Note Indenture) for
purposes of the Senior Subordinated Note Indenture without the prior written
consent of Requisite Lenders.
7.16 FISCAL YEAR
Company shall not change its Fiscal Year-end from the Saturday
closest to December 31.
SECTION 8. EVENTS OF DEFAULT
If any of the following conditions or events ("Events of
Default") shall occur:
8.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure by Company to pay any installment of principal of any
Loan when due, whether at stated maturity, by acceleration, by notice of
voluntary prepayment, by mandatory prepayment or otherwise; failure by Company
to pay when due any amount payable to an Issuing Lender in reimbursement of any
drawing under a Letter of Credit; or failure by Company to pay any interest on
any Loan or any fee or any other amount due under this Agreement within five
days after the date due; or
8.2 DEFAULT IN OTHER AGREEMENTS.
(i) Failure of Company or any of its Subsidiaries to pay
when due (a) any principal of or interest on any Indebtedness (other than
Indebtedness referred to in subsection 8.1) in an individual principal amount
of $5,000,000 or more or any items of Indebtedness with an aggregate principal
amount of $10,000,000 or more or (b) any Contingent Obligation in an individual
principal amount of $5,000,000 or more or any Contingent Obligations with an
aggregate principal amount of $10,000,000 or more, in each case beyond the end
of any grace period provided therefor; or (ii) breach or default
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by Company or any of its Subsidiaries with respect to any other material term
of (a) any evidence of any Indebtedness (other than the Specified Mortgage
Notes) in an individual principal amount of $5,000,000 or more or any items of
Indebtedness (other than the Specified Mortgage Notes) with an aggregate
principal amount of $10,000,000 or more or any Contingent Obligation in an
individual principal amount of $5,000,000 or more or any Contingent Obligations
with an aggregate principal amount of $10,000,000 or more or (b) any loan
agreement, mortgage, indenture or other agreement relating to such Indebtedness
or Contingent Obligation(s), if the effect of such breach or default is to
cause, or to permit the holder or holders of that Indebtedness or Contingent
Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that
Indebtedness or Contingent Obligation(s) to become or be declared due and
payable prior to its stated maturity or the stated maturity of any underlying
obligation, as the case may be (upon the giving or receiving of notice, lapse
of time, both, or otherwise); or
8.3 BREACH OF CERTAIN COVENANTS.
Failure of Company to perform or comply with any term or
condition contained in subsection 2.5 or 6.2 or Section 7 of this Agreement; or
8.4 BREACH OF WARRANTY.
Any representation, warranty, certification or other statement
made by any Loan Party in any Loan Document or in any statement or certificate
at any time given by any Loan Party in writing pursuant hereto or thereto or in
connection herewith or therewith shall be false in any material respect on the
date as of which made; or
8.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.
Any Loan Party shall default in the performance of or
compliance with any term contained in this Agreement or any of the other Loan
Documents, other than any such term referred to in any other subsection of this
Section 8, and such default shall not have been remedied or waived within 30
days after the receipt by Company of notice from Agent or any Lender of such
default; or
8.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) A court having jurisdiction in the premises shall
enter a decree or order for relief in respect of Company or any of its
Subsidiaries (other than an Inactive Subsidiary whose financial condition does
not adversely affect any other Loan Party) in an involuntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, which decree or order is not stayed; or any
other similar relief shall be granted under any applicable federal or state
law; or (ii) an involuntary case shall be commenced against Company or any of
its Subsidiaries (other than an Inactive Subsidiary) under the Bankruptcy Code
or under any
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other applicable bankruptcy, insolvency or similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Company or any of its Subsidiaries (
other than an Inactive Subsidiary), or over all or a substantial part of its
property, shall have been entered; or there shall have occurred the involuntary
appointment of an interim receiver, trustee or other custodian of Company or
any of its Subsidiaries (other than an Inactive Subsidiary) for all or a
substantial part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of Company or any of its Subsidiaries (other than an Inactive
Subsidiary), and any such event described in this clause (ii) shall continue
for 60 days unless dismissed, bonded or discharged; or
8.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) Company or any of its Subsidiaries shall have an order
for relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or Company or any of its Subsidiaries shall
make any assignment for the benefit of creditors; or (ii) Company or any of its
Subsidiaries shall be unable, or shall fail generally, or shall admit in
writing its inability, to pay its debts as such debts become due; or the Board
of Directors of Company or any of its Subsidiaries (or any committee thereof)
shall adopt any resolution or otherwise authorize any action to approve any of
the actions referred to in clause (i) above or this clause (ii); or
8.8 JUDGMENTS AND ATTACHMENTS.
Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of $5,000,000
or (ii) in the aggregate at any time an amount in excess of $10,000,000 (in
either case not adequately covered by insurance as to which a solvent and
unaffiliated insurance company has acknowledged coverage) shall be entered or
filed against Company or any of its Subsidiaries or any of their respective
assets and either (a) shall remain undischarged, unvacated, unbonded or
unstayed for a period of 60 days (or in any event later than five days prior to
the date of any proposed sale thereunder) or (b) shall not be discharged and
there shall have been a period of 60 days after the date on which any period
for appeal has expired; or
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8.9 DISSOLUTION.
Any order, judgment or decree shall be entered against Company
or any of its Subsidiaries decreeing the dissolution or split up of such Person
and such order shall remain undischarged or unstayed for a period in excess of
30 days; or
8.10 EMPLOYEE BENEFIT PLANS.
There shall occur one or more ERISA Events which individually
or in the aggregate results in or could reasonably be expected to result in
liability of any of the Loan Parties or any of their respective ERISA
Affiliates (unless no Loan Party shall be jointly and severally liable
therefor) in excess of $5,000,000 during the term of this Agreement; or there
shall exist an Amount of Unfunded Benefit Liabilities individually or in the
aggregate for all Pension Plans (excluding for purposes of such computation (1)
any Pension Plan which has a negative Amount of Unfunded Benefit Liabilities
and (2) any Pension Plan for which neither Company nor any other Loan Party
would have liability if the Pension Plan were terminated) which exceeds
$10,000,000; or
8.11 CHANGE IN CONTROL.
A Change of Control shall have occurred; or
8.12 INVALIDITY OF SUBSIDIARY GUARANTY.
Upon execution and delivery thereof, the Subsidiary Guaranty
for any reason, other than the satisfaction in full of all Obligations, ceases
to be in full force and effect (other than in accordance with its terms) or is
declared to be null and void, or any Loan Party denies that it has any further
liability, including without limitation with respect to future advances by
Lenders, under any Loan Document to which it is a party, or gives notice to
such effect; or
8.13 FAILURE OF SECURITY.
Any Collateral Document shall, at any time, cease to be in full
force and effect (other than by reason of a release of Collateral in accordance
with the terms thereof) or shall be declared null and void, or the validity or
enforceability thereof shall be contested by any Loan Party, or Agent shall not
have or cease to have a valid and perfected first priority security interest in
any significant part of the Collateral (other than as a direct result of a
breach by Agent of any obligation imposed on Agent under the Collateral
Documents); or
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8.14 FAILURE TO CONSUMMATE THE TRANSACTIONS.
Any of the Transactions and related transactions contemplated
hereby (i) shall not be consummated in accordance with the Loan Documents and
the Related Agreements prior to or concurrently with or immediately after the
making of the initial Loans (and in any event on the Closing Date), or (ii)
shall be unwound, reversed or otherwise rescinded or modified in whole or in
part for any reason; or
8.15 ACTION UNDER RELATED FINANCING DOCUMENTS.
Any holder of any Indebtedness evidenced by the Related
Financing Documents shall file an action seeking the rescission thereof or
damages or injunctive relief relating thereto; or any event shall occur which,
under the terms of any Related Financing Documents, shall require Company or
any of its Subsidiaries to purchase, redeem or otherwise acquire or offer to
purchase, redeem or otherwise acquire all or any portion of any Indebtedness
evidenced by the Related Financing Documents; or Company or any of its
Subsidiaries shall for any other reason purchase, redeem or otherwise acquire
or offer to purchase, redeem or otherwise acquire, or make any other payments
in respect of, all or any portion of any Indebtedness evidenced by the Related
Financing Documents, except to the extent expressly permitted by subsection
7.5:
THEN (i) upon the occurrence of any Event of Default described in subsection
8.6 or 8.7, each of (a) the unpaid principal amount of and accrued interest on
the Loans, (b) an amount equal to the maximum amount that may at any time be
drawn under all Letters of Credit then outstanding (whether or not any
beneficiary under any such Letter of Credit shall have presented, or shall be
entitled at such time to present, the drafts or other documents or certificates
required to draw under such Letter of Credit), and (c) all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by Company, and the obligation of each Lender to make any Loan
(including the obligation of Swing Line Lender to make any Swing Line Loans),
the obligation of Agent to issue any Letter of Credit and the right of any
Lender to issue any Letter of Credit hereunder shall thereupon terminate, and
(ii) upon the occurrence and during the continuation of any other Event of
Default, Agent shall, upon the written request or with the written consent of
Requisite Lenders, by written notice to Company, declare all or any portion of
the amounts described in clauses (a) through (c) above to be, and the same
shall forthwith become, immediately due and payable, and the obligation of each
Lender to make any Loan (including the obligation of Swing Line Lender to make
any Swing Line Loans), the obligation of Agent to issue any Letter of Credit
and the right of any Lender to issue any Letter of Credit hereunder shall
thereupon terminate; provided that the foregoing shall not affect in any way
the obligations of Revolving Lenders to purchase participations in Letters of
Credit as provided in subsection 3.3C or the obligations of Lenders to purchase
participations in any unpaid Swing Line Loans as provided in subsection
2.1A(vi).
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Any amounts described in clause (b) above, when received by
Agent, shall be held by Agent pursuant to the terms of the Collateral Account
Agreement and shall be applied as therein provided.
Notwithstanding anything contained in the second preceding
paragraph, if at any time within 60 days after an acceleration of the Loans
pursuant to such paragraph Company shall pay all arrears of interest and all
payments on account of principal which shall have become due otherwise than as
a result of such acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this
Agreement) and all Events of Default and Potential Events of Default (other
than non-payment of the principal of and accrued interest on the Loans, in each
case which is due and payable solely by virtue of acceleration) shall be
remedied or waived pursuant to subsection 10.6, then Requisite Lenders, by
written notice to Company, may at their option rescind and annul such
acceleration and its consequences; but such action shall not affect any
subsequent Event of Default or Potential Event of Default or impair any right
consequent thereon. The provisions of this paragraph are intended merely to
bind Lenders to a decision which may be made at the election of Requisite
Lenders and are not intended to benefit Company and do not grant Company the
right to require Lenders to rescind or annul any acceleration hereunder, even
if the conditions set forth herein are met.
SECTION 9. AGENT
9.1 APPOINTMENT.
A. APPOINTMENT OF AGENT. Each Lender hereby appoints, and each
Interest Rate Exchanger, by its acceptance of the benefits of this Agreement
and the other Loan Documents, shall be deemed to have appointed, Bankers as
Agent hereunder and under the other Loan Documents and each Lender hereby
authorizes, and each Interest Rate Exchanger, by its acceptance of the benefits
of this Agreement and the other Loan Documents, shall be deemed to have
authorized, Agent to act as its agent in accordance with the terms of this
Agreement and the other Loan Documents, and each Interest Rate Exchanger is
considered to be a "Lender" for purposes of this Section 9. Each Lender hereby
appoints Bankers and Chase as Arrangers hereunder. Agent agrees to act upon
the express conditions contained in this Agreement and the other Loan
Documents, as applicable. The provisions of this Section 9 are solely for the
benefit of Agent, Arrangers, Co-Agents and Lenders and no Loan Party shall have
any rights as a third party beneficiary of any of the provisions thereof. In
performing its functions and duties under this Agreement, and other than as
expressly provided for in subsection 2.1D(v), Agent shall act solely as an
agent of Lenders and does not assume and shall not be deemed to have assumed
any obligation towards or relationship of agency or trust with or for any Loan
Party. Each Lender named as an Arranger hereunder shall have no
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duties or responsibilities under this Agreement or any other Loan Document to
any Person, other than as a Lender hereunder and thereunder.
B. APPOINTMENT OF SUPPLEMENTAL COLLATERAL AGENTS. It is the
purpose of this Agreement and the other Loan Documents that there shall be no
violation of any law of any jurisdiction denying or restricting the right of
banking corporations or associations to transact business as agent or trustee
in such jurisdiction. It is recognized that in case of litigation under this
Agreement or any of the other Loan Documents, and in particular in case of the
enforcement of any of the Loan Documents, or in case Agent deems that by reason
of any present or future law of any jurisdiction it may not exercise any of the
rights, powers or remedies granted herein or in any of the other Loan Documents
or take any other action which may be desirable or necessary in connection
therewith, it may be necessary that Agent appoint an additional individual or
institution as a separate trustee, co-trustee, collateral agent or collateral
co-agent (any such additional individual or institution being referred to
herein individually as a "SUPPLEMENTAL COLLATERAL AGENT" and collectively as
"SUPPLEMENTAL COLLATERAL AGENTS").
In the event that Agent appoints a Supplemental Collateral
Agent with respect to any Collateral, (i) each and every right, power,
privilege or duty expressed or intended by this Agreement or any of the other
Loan Documents to be exercised by or vested in or conveyed to Agent with
respect to such Collateral shall be exercisable by and vest in such
Supplemental Collateral Agent to the extent, and only to the extent, necessary
to enable such Supplemental Collateral Agent to exercise such rights, powers
and privileges with respect to such Collateral and to perform such duties with
respect to such Collateral, and every covenant and obligation contained in the
Loan Documents and necessary to the exercise or performance thereof by such
Supplemental Collateral Agent shall run to and be enforceable by either Agent
or such Supplemental Collateral Agent, and (ii) the provisions of this Section
9 and of subsections 10.2 and 10.3 that refer to Agent shall inure to the
benefit of such Supplemental Collateral Agent and all references therein to
Agent shall be deemed to be references to Agent and/or such Supplemental
Collateral Agent, as the context may require.
Should any instrument in writing from Company or any other Loan
Party be required by any Supplemental Collateral Agent so appointed by Agent
for more fully and certainly vesting in and confirming to him or it such
rights, powers, privileges and duties, Company shall, or shall cause such Loan
Party to, execute, acknowledge and deliver any and all such instruments
promptly upon request by Agent. In case any Supplemental Collateral Agent, or
a successor thereto, shall die, become incapable of acting, resign or be
removed, all the rights, powers, privileges and duties of such Supplemental
Collateral Agent, to the extent permitted by law, shall vest in and be
exercised by Agent until the appointment of a new Supplemental Collateral
Agent.
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9.2 POWERS AND DUTIES; GENERAL IMMUNITY.
A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes
Agent to take such action on such Lender's behalf and to exercise such powers,
rights and remedies hereunder and under the other Loan Documents as are
specifically delegated or granted to Agent by the terms hereof and thereof,
together with such powers, rights and remedies as are reasonably incidental
thereto. Agent shall have only those duties and responsibilities that are
expressly specified in this Agreement and the other Loan Documents. Agent may
exercise such powers, rights and remedies and perform such duties by or through
its agents or employees. Agent shall not have, by reason of this Agreement or
any of the other Loan Documents, a fiduciary relationship in respect of any
Lender; and nothing in this Agreement or any of the other Loan Documents,
expressed or implied, is intended to or shall be so construed as to impose
upon Agent any obligations in respect of this Agreement or any of the other
Loan Documents except as expressly set forth herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. Agent shall not be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or
any other Loan Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by Agent to Lenders or by or on behalf of
Company to Agent or any Lender in connection with the Loan Documents and the
transactions contemplated thereby or for the financial condition or business
affairs of Company or any other Person liable for the payment of any
Obligations, nor shall Agent be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained in any of the Loan Documents or as to the use
of the proceeds of the Loans or the use of the Letters of Credit or as to the
existence or possible existence of any Event of Default or Potential Event of
Default. Anything contained in this Agreement to the contrary notwithstanding,
Agent shall not have any liability arising from confirmations of the amount of
outstanding Loans or the Letter of Credit Usage or the component amounts
thereof.
C. EXCULPATORY PROVISIONS. Neither Agent nor any of its officers,
directors, employees or agents shall be liable to Lenders for any action taken
or omitted by Agent under or in connection with any of the Loan Documents
except to the extent caused by Agent's gross negligence or willful misconduct.
Agent shall be entitled to refrain from any act or the taking of any action
(including the failure to take an action) in connection with this Agreement or
any of the other Loan Documents or from the exercise of any power, discretion
or authority vested in it hereunder or thereunder unless and until Agent shall
have received instructions in respect thereof from Requisite Lenders (or such
other Lenders as may be required to give such instructions under subsection
10.6) and, upon receipt of such instructions from Requisite Lenders (or such
other Lenders, as the case may be), Agent shall be entitled to act or (where so
instructed) refrain from acting,
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or to exercise such power, discretion or authority, in accordance with such
instructions. Without prejudice to the generality of the foregoing, (i) Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Company and its Subsidiaries), accountants,
experts and other professional advisors selected by it; and (ii) no Lender
shall have any right of action whatsoever against Agent as a result of Agent
acting or (where so instructed) refraining from acting under this Agreement or
any of the other Loan Documents in accordance with the instructions of
Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 10.6).
D. AGENT ENTITLED TO ACT AS LENDER. The agency hereby created
shall in no way impair or affect any of the rights and powers of, or impose any
duties or obligations upon, Agent in its individual capacity as a Lender
hereunder. With respect to its participation in the Loans and the Letters of
Credit, Agent shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not performing the duties
and functions delegated to it hereunder, and the term "Lender" or "Lenders" or
any similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity. Agent and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Company or any of its Affiliates as
if it were not performing the duties specified herein, and may accept fees and
other consideration from Company for services in connection with this Agreement
and otherwise without having to account for the same to Lenders.
9.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
CREDITWORTHINESS.
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Company and its Subsidiaries. Agent
shall not have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of
Lenders or to provide any Lender with any credit or other information with
respect thereto, whether coming into its possession before the making of the
Loans or at any time or times thereafter, and Agent shall not have any
responsibility with respect to the accuracy of or the completeness of any
information provided to Lenders.
9.4 RIGHT TO INDEMNITY.
Each Lender, in proportion to its Pro Rata Share, severally
agrees to indemnify Agent, to the extent that Agent shall not have been
reimbursed by Company,
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for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, counsel fees and disbursements) or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against
Agent in exercising its powers, rights and remedies or performing its duties
hereunder or under the other Loan Documents or otherwise in its capacity as
Agent in any way relating to or arising out of this Agreement or the other
Loan Documents; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent's gross negligence
or willful misconduct. To the extent indemnification payments made by Lenders
pursuant to this Section 9.4 are subsequently recovered by Agent from, or for
the account of, Company, Agent will promptly refund such previously paid
indemnification payments to Lenders. If any indemnity furnished to Agent for
any purpose shall, in the opinion of Agent, be insufficient or become
impaired, Agent may cease, or not commence, to do the acts indemnified against
until such additional indemnity is furnished.
9.5 SUCCESSOR AGENT AND SWING LINE LENDER.
A. SUCCESSOR AGENT. Agent may resign at any time by
giving 30 days' prior written notice thereof to Lenders and Company, and Agent
may be removed at any time with or without cause by an instrument or concurrent
instruments in writing delivered to Company and Agent and signed by Requisite
Lenders. Upon any such notice of resignation or any such removal, Requisite
Lenders shall have the right, upon five Business Days' notice to Company, to
appoint a successor Agent. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, that successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring or removed Agent and the retiring or removed Agent shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Agent's resignation or removal hereunder as Agent, the provisions of
this Section 9 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.
B. SUCCESSOR SWING LINE LENDER. Any resignation or
removal of Agent pursuant to subsection 9.5A shall also constitute the
resignation or removal of Agent or its successor as Swing Line Lender, and any
successor Agent appointed pursuant to subsection 9.5A shall, upon its
acceptance of such appointment, become the successor Swing Line Lender for all
purposes hereunder. In such event (i) Company shall prepay any outstanding
Swing Line Loans made by the retiring or removed Agent in its capacity as Swing
Line Lender, (ii) upon such prepayment, the retiring or removed Agent and Swing
Line Lender shall surrender the Swing Line Note held by it to Company for
cancellation, and (iii) Company shall issue a new Swing Line Note to the
successor Agent and Swing Line Lender substantially in the form of Exhibit VI
annexed hereto, in the principal amount of the Swing Line Loan Commitment then
in effect and with other appropriate insertions.
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9.6 COLLATERAL DOCUMENTS AND SUBSIDIARY GUARANTY.
Each Lender hereby further authorizes Agent, on behalf of and
for the benefit of Lenders, to enter into each Collateral Document as secured
party and to be the agent for and representative of Lenders under the
Subsidiary Guaranty, and each Lender agrees to be bound by the terms of each
Collateral Document and the Subsidiary Guaranty; provided that Agent shall not
(i) enter into or consent to any material amendment, modification, termination
or waiver of any provision contained in any Collateral Document or the
Subsidiary Guaranty or (ii) release any Collateral (except as otherwise
expressly permitted or required pursuant to the terms of this Agreement or the
applicable Collateral Document), in each case without the prior consent of
Requisite Lenders (or, if required pursuant to subsection 10.6, all Lenders);
provided further, however, that, without further written consent or
authorization from Lenders, Agent may execute any documents or instruments
necessary to (a) release any Lien encumbering any item of Collateral that is
the subject of a sale or other disposition of assets permitted by this
Agreement or to which Requisite Lenders have otherwise consented or (b) release\
any Subsidiary Guarantor from the Subsidiary Guaranty if all of the capital
stock of such Subsidiary Guarantor is sold to any Person (other than an
Affiliate of Company) pursuant to a sale or other disposition permitted
hereunder or to which Requisite Lenders have otherwise consented. Anything
contained in any of the Loan Documents to the contrary notwithstanding,
Company, Agent and each Lender hereby agree that (X) no Lender shall have any
right individually to realize upon any of the Collateral under any Collateral
Document or to enforce the Subsidiary Guaranty, it being understood and agreed
that all powers, rights and remedies under the Collateral Documents and the
Subsidiary Guaranty may be exercised solely by Agent for the benefit of Lenders
in accordance with the terms thereof, and (Y) in the event of a foreclosure by
Agent on any of the Collateral pursuant to a public or private sale, Agent or
any Lender may be the purchaser of any or all of such Collateral at any such
sale and Agent, as agent for and representative of Lenders (but not any Lender
or Lenders in its or their respective individual capacities unless Requisite
Lenders shall otherwise agree in writing) shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for all or any
portion of the Collateral sold at any such public sale, to use and apply any of
the Obligations as a credit on account of the purchase price for any collateral
payable by Agent at such sale.
SECTION 10. MISCELLANEOUS
10.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT.
A. GENERAL. Subject to subsection 10.1B, each Lender shall have
the right at any time to (i) sell, assign or transfer to any Eligible Assignee,
or (ii) sell participations to any Person in, all or any part of its
Commitments or any Loan or Loans made by it or its Letters of Credit or
participations therein or any other interest herein or in any other
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Obligations owed to it; provided that no such sale, assignment, transfer or
participation shall, without the consent of Company, require Company to file a
registration statement with the Securities and Exchange Commission or apply to
qualify such sale, assignment, transfer or participation under the securities
laws of any state; provided, further that no such sale, assignment or transfer
described in clause (i) above shall be effective unless and until an Assignment
Agreement effecting such sale, assignment or transfer shall have been accepted
by Agent and recorded in the Register as provided in subsection 10.1B(ii);
provided, further that no such sale, assignment, transfer or participation of
any Letter of Credit or any participation therein may be made separately from
a sale, assignment, transfer or participation of a corresponding interest in
the Revolving Loan Commitment and the Revolving Loans of the Lender effecting
such sale, assignment, transfer or participation; and provided, further that,
anything contained herein to the contrary notwithstanding, the Swing Line Loan
Commitment and the Swing Line Loans of Swing Line Lender may not be sold,
assigned or transferred as described in clause (i) above to any Person other
than a successor Agent and Swing Line Lender to the extent contemplated by
subsection 9.5. Except as otherwise provided in this subsection 10.1, no
Lender shall, as between Company and such Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment or transfer of, or
any granting of participations in, all or any part of its Commitments or the
Loans, the Letters of Credit or participations therein, or the other
Obligations owed to such Lender.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Each Commitment,
Loan, Letter of Credit or participation in any Letter of Credit or in
any Swing Line Loan, or other Obligation may (a) be assigned in any
amount to another Lender, or to an Affiliate of the assigning Lender or
another Lender, with the giving of notice to Company and Agent or (b)
be assigned in an aggregate amount of not less than $5,000,000 (or such
lesser amount as shall constitute the aggregate amount of the
Commitments, Loans, Letters of Credit and participations in any Letter
of Credit or in any Swing Line Loan, and other Obligations of the
assigning Lender) to any other Eligible Assignee, with the consent of
Company and Agent (which consent of Company and Agent shall not be
unreasonably withheld or delayed). To the extent of any such
assignment in accordance with either clause (a) or (b) above, the
assigning Lender shall be relieved of its obligations with respect to
its Commitments, Loans, Letters of Credit or participations therein, or
other Obligations or the portion thereof so assigned. The parties to
each such assignment shall execute and deliver to Agent, for its
acceptance and recording in the Register, an Assignment Agreement,
together with a processing and recordation fee of, in the case of
assignments to a Lender or an Affiliate of Lender, $1,500 and, in the
case of assignments to any other Eligible Assignee, $3,500 and such
forms, certificates or other evidence, if any, with respect to United
States federal income tax withholding matters as the assignee under
such Assignment Agreement may be required to deliver to Agent pursuant
to
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subsection 2.7B(iii)(a). Upon such execution, delivery, acceptance
and recordation, from and after the effective date specified in such
Assignment Agreement, (y) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment Agreement, shall have
the rights and obligations of a Lender hereunder and (z) the assigning
Lender thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment
Agreement, relinquish its rights (other than any rights which survive
the termination of this Agreement under subsection 10.9B) and be
released from its obligations under this Agreement (and, in the case of
an Assignment Agreement covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto); provided that, anything
contained in any of the Loan Documents to the contrary notwithstanding,
if such Lender is the Issuing Lender with respect to any outstanding
Letters of Credit such Lender shall continue to have all rights and
obligations of an Issuing Lender with respect to such Letters of Credit
until the cancellation or expiration of such Letters of Credit and the
reimbursement of any amounts drawn thereunder). The Commitments
hereunder shall be modified to reflect the Commitment of such assignee
and any remaining Commitment of such assigning Lender and, if any such
assignment occurs after the issuance of the Notes hereunder, the
assigning Lender shall, upon the effectiveness of such assignment or as
promptly thereafter as practicable, surrender its applicable Notes to
Agent for cancellation, and thereupon new Notes shall be issued to the
assignee and to the assigning Lender, substantially in the form of
Exhibit IV-A, Exhibit IV-B, Exhibit IV-C, Exhibit IV-D or Exhibit V
annexed hereto, as the case may be, with appropriate insertions, to
reflect the new Commitments and/or outstanding Term Loans, as the case
may be, of the assignee and/or the assigning Lender.
(ii) Acceptance by Agent; Recordation in Register. Upon
its receipt of an Assignment Agreement executed by an assigning Lender
and an assignee representing that it is an Eligible Assignee, together
with the processing and recordation fee referred to in subsection
10.1B(i) and any forms, certificates or other evidence with respect to
United States federal income tax withholding matters that such assignee
may be required to deliver to Agent pursuant to subsection
2.7B(iii)(a), Agent shall, if Agent and Company have consented to the
assignment evidenced thereby (in each case to the extent such consent
is required pursuant to subsection 10.1B(i)), (a) accept such
Assignment Agreement by executing a counterpart thereof as provided
therein (which acceptance shall evidence any required consent of Agent
to such assignment), (b) record the information contained therein in
the Register, and (c) give prompt notice thereof to Company. Agent
shall maintain a copy of each Assignment Agreement delivered to and
accepted by it as provided in this subsection 10.1B(ii).
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C. PARTICIPATIONS. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of any
portion of the principal amount of or the postponement of the date of payment of
interest on any Loan allocated to such participation (it being understood that
changes in interim amortization amounts are not extensions of scheduled final
maturity dates), or the extension of the stated expiration date beyond the
Revolving Loan Commitment Termination Date of any Letter of Credit allocated to
such participation, or (ii) a reduction of the principal amount of or the rate
of interest payable on any Loan allocated to such participation (other than any
waiver of any increase in the interest rate applicable to the Loans pursuant to
subsection 2.2E), and all amounts payable by Company hereunder (including
without limitation amounts payable to such Lender pursuant to subsections 2.6D,
2.7 and 3.6) shall be determined as if such Lender had not sold such
participation. Company and each Lender hereby acknowledge and agree that,
solely for purposes of subsections 10.4 and 10.5, (a) any participation will
give rise to a direct obligation of Company to the participant and (b) the
participant shall be considered to be a "Lender".
D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the
assignments and participations permitted under the foregoing provisions of this
subsection 10.1, any Lender may assign and pledge all or any portion of its
Loans, the other Obligations owed to such Lender, and its Notes to any Federal
Reserve Bank as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any operating circular issued by
such Federal Reserve Bank; provided that (i) no Lender shall, as between Company
and such Lender, be relieved of any of its obligations hereunder as a result of
any such assignment and pledge and (ii) in no event shall such Federal Reserve
Bank be considered to be a "Lender" or be entitled to require the assigning
Lender to take or omit to take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning
Company and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 10.19.
F. REPRESENTATIONS OF LENDERS. Each Lender listed on the signature
pages hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (A) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loans for its own account in the ordinary course of its business and
without a view to distribution of such Loans within the meaning of the
Securities Act or the Exchange Act or other federal securities laws (it being
understood that, subject to the provisions of this subsection 10.1, the
disposition of such Loans or any interests therein shall at all times remain
within its exclusive control). Each Lender that becomes a party hereto pursuant
to an Assignment Agreement shall be deemed to agree that the representations and
warranties of such
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Lender contained in Section 2(c) of such Assignment Agreement are incorporated
herein by this reference.
10.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (i) all the actual and reasonable
costs and expenses of the Arrangers incurred in preparation of the Loan
Documents and any consents, amendments, waivers or other modifications thereto;
(ii) all the costs of furnishing all opinions by counsel for Company (including
without limitation any opinions requested by Lenders as to any legal matters
arising hereunder) and of Company's performance of and compliance with all
agreements and conditions on its part to be performed or complied with under
this Agreement and the other Loan Documents including, without limitation, with
respect to confirming compliance with environmental and insurance requirements;
(iii) the reasonable fees, expenses and disbursements of counsel to Agent
(including internal counsel) in connection with the negotiation, preparation,
execution and administration of the Loan Documents and any consents,
amendments, waivers or other modifications thereto and any other documents or
matters requested by Company; (iv) all the reasonable costs and expenses of
creating and perfecting Liens in favor of Agent on behalf of Lenders pursuant
to any Collateral Document, including without limitation filing and recording
fees, expenses and taxes, stamp or documentary taxes, search fees, title
insurance premiums, and reasonable fees, expenses and disbursements of counsel
to Agent and of counsel providing any opinions that Agent or Requisite Lenders
may reasonably request in respect of the Collateral Documents or the Liens
created pursuant thereto; (v) all the reasonable costs and expenses (including
without limitation the reasonable fees, expenses and disbursements of any
auditors, accountants or appraisers and any environmental or other consultants,
advisors and agents employed or retained by Agent or its counsel) of obtaining
and reviewing any appraisals provided for under subsection 6.9, any
environmental audits or reports provided for under subsection 6.9; (vi) all
other actual and reasonable costs and expenses incurred by Arrangers in
connection with the syndication of the Commitments and the negotiation,
preparation and execution of the Loan Documents and any consents, amendments,
waivers or other modifications thereto and the transactions contemplated
thereby; and (vii) after the occurrence of an Event of Default, all reasonable
costs and expenses, including reasonable attorneys' fees (including internal
counsel) and costs of settlement, incurred by Agent and Lenders in enforcing
any Obligations of or in collecting any payments due from any Loan Party
hereunder or under the other Loan Documents by reason of such Event of Default
(including, without limitation, in connection with the sale of, collection
from, or other realization upon any of the Collateral or the enforcement of the
Subsidiary Guaranty) or in connection with any refinancing or restructuring of
the credit arrangements provided under this Agreement in the nature of a
"work-out" or pursuant to any insolvency or bankruptcy proceedings.
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10.3 INDEMNITY.
In addition to the payment of expenses pursuant to subsection
10.2, whether or not the transactions contemplated hereby shall be consummated,
Company agrees to defend (subject to Indemnitees' selection of counsel),
indemnify, pay and hold harmless Agent and Lenders, and the officers,
directors, trustees, employees, agents and affiliates of Agent and Lenders
(collectively called the "INDEMNITEES"), from and against any and all
Indemnified Liabilities (as hereinafter defined); provided that Company shall
not have any obligation to any Indemnitee hereunder with respect to any
Indemnified Liabilities to the extent such Indemnified Liabilities arise solely
from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court of competent jurisdiction.
As used herein, "INDEMNIFIED LIABILITIES" means, collectively,
any and all liabilities, obligations, losses, damages (including natural
resource damages), penalties, actions, judgments, suits, claims (including
Environmental Claims), costs (including the costs of any investigation, study,
sampling, testing, abatement, cleanup, removal, remediation or other response
action necessary to remove, remediate, clean up or abate any Hazardous
Materials Activity), expenses and disbursements of any kind or nature
whatsoever (including the reasonable fees and disbursements of counsel for
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened by any Person, whether or not any such
Indemnitee shall be designated as a party or a potential party thereto, and any
fees or expenses incurred by Indemnitees in enforcing this indemnity), whether
direct, indirect or consequential and whether based on any federal, state or
foreign laws, statutes, rules or regulations (including securities and
commercial laws, statutes, rules or regulations and Environmental Laws), on
common law or equitable cause or on contract or otherwise, that may be imposed
on, incurred by, or asserted against any such Indemnitee, in any manner
relating to or arising out of (i) this Agreement or the other Loan Documents or
the Related Agreements or the transactions contemplated hereby or thereby
(including Lenders' agreement to make the Loans hereunder or the use or
intended use of the proceeds thereof or the issuance of Letters of Credit
hereunder or the use or intended use of any thereof, or any enforcement of any
of the Loan Documents (including any sale of, collection from, or other
realization upon any of the Collateral or the enforcement of the Subsidiary
Guaranty), (ii) the statements contained in the commitment letter delivered by
any Lender to Company with respect thereto, or (iii) any Environmental Claim or
any Hazardous Materials Activity relating to or arising from, directly or
indirectly, any past or present activity, operation, land ownership, or
practice of Company or any of its Subsidiaries and in any event including
without limitation the Environmental Losses.
Without limiting the generality of the foregoing, the rights of
each Indemnitee under this subsection 10.3 relating to any Environmental Losses
shall be in addition to any other rights and remedies of such Indemnitee
against Company or its Affiliates under any other document or instrument now or
hereafter executed by
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Company or its Affiliates, or at law or in equity (including, without
limitation, any right of reimbursement or contribution pursuant to CERCLA or
other similar Environmental Laws), and shall not in any way be deemed a waiver
of any of such rights. Company agrees that it shall have no right of
contribution (including, without limitation, any right of contribution under
CERCLA or other similar Environmental Laws) or subrogation against any other
Loan Party, unless and until all Obligations of Company (other than Obligations
which are contingent and unliquidated and not due and owing on such date and
which pursuant to the provisions of this Agreement, Letters of Credit or the
Loan Documents survive the termination of this Agreement, the repayment of the
Obligations, the termination of the Commitments and the expiration or
cancellation of all Letters of Credit) have been satisfied.
To the extent that the undertakings to defend, indemnify, pay
and hold harmless set forth in this subsection 10.3 may be unenforceable in
whole or in part because they are violative of any law or public policy,
Company shall contribute the maximum portion that it is permitted to pay and
satisfy under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by Indemnitees or any of them.
10.4 SET-OFF.
In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default each Lender is hereby authorized by Company
at any time or from time to time, without notice to Company or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts) and any other
Indebtedness at any time held or owing by that Lender to or for the credit or
the account of Company against and on account of the obligations and
liabilities of Company to that Lender under this Agreement, the Letters of
Credit and participations therein and the other Loan Documents, including, but
not limited to, all claims of any nature or description arising out of or
connected with this Agreement, the Letters of Credit and participations therein
or any other Loan Document, irrespective of whether or not (i) that Lender
shall have made any demand hereunder or (ii) the principal of or the interest
on the Loans or any amounts in respect of the Letters of Credit or any other
amounts due hereunder shall have become due and payable pursuant to Section 8
and although said obligations and liabilities, or any of them, may be
contingent or unmatured.
10.5 RATABLE SHARING.
Lenders hereby agree among themselves that if any of them
shall, whether by voluntary payment (other than a voluntary prepayment of Loans
made and applied in
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accordance with the terms of this Agreement), by realization upon security,
through the exercise of any right of set-off or banker's lien, by counterclaim
or cross action or by the enforcement of any right under the Loan Documents or
otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code, receive payment or reduction of a proportion of
the aggregate amount of principal, interest, amounts payable in respect of
Letters of Credit, fees and other amounts then due and owing to that Lender
hereunder or under the other Loan Documents (collectively, the "AGGREGATE
AMOUNTS DUE" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Agent and each other Lender of the receipt of such payment and (ii) apply a
portion of such payment to purchase participations or participating interests
(which it shall be deemed to have purchased from each seller of a participation
or a participating interest simultaneously upon the receipt by such seller of
its portion of such payment) in the Aggregate Amounts Due to the other Lenders
so that all such recoveries of Aggregate Amounts Due shall be shared by all
Lenders in proportion to the Aggregate Amounts Due to them; provided that if
all or part of such proportionately greater payment received by such purchasing
Lender is thereafter recovered from such Lender upon the bankruptcy or
reorganization of Company or otherwise, those purchases shall be rescinded and
the purchase prices paid for such participations or participating interests
shall be returned to such purchasing Lender ratably to the extent of such
recovery, but without interest. Company expressly consents to the foregoing
arrangement and agrees that any holder of a participation or a participating
interest so purchased may exercise any and all rights of banker's lien, set-off
or counterclaim with respect to any and all monies owing by Company to that
holder with respect thereto as fully as if that holder were owed the amount of
the participation or participating interests held by that holder.
10.6 AMENDMENTS AND WAIVERS.
A. No amendment, modification, termination or waiver of
any provision of this Agreement or of the Notes, or consent to any departure by
Company therefrom, shall in any event be effective without the written
concurrence of Requisite Lenders; provided that no such amendment,
modification, termination, waiver or consent shall, without the consent of each
Lender (with Obligations directly affected in the case of the following clause
(i)): (i) extend the scheduled final maturity of any Loan or Note, or extend
the stated expiration date of any Letter of Credit beyond the Revolving Loan
Commitment Termination Date, or reduce the rate of interest (other than any
waiver of any increase in the interest rate applicable to any of the Loans
pursuant to subsection 2.2E) or fees thereon, or extend the time of payment of
interest or fees thereon, or reduce the principal amount thereof, (ii) release
all or substantially all of the Collateral or all or substantially all of the
Subsidiary Guarantors from the Subsidiary Guaranty except as expressly provided
in the Loan Documents, (iii) amend, modify, terminate or waive any provision of
this subsection 10.6, (iv) reduce the percentage specified in the definition of
Requisite Lenders (it being understood that, with the consent of the
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Requisite Lenders, additional extensions of credit pursuant to this Agreement
may be included in the determination of the Requisite Lenders on substantially
the same basis as the extensions of Term Loans and Revolving Loan Commitments
are included on the Closing Date) or (v) consent to the assignment or transfer
by Company of any of its rights and obligations under this Agreement; provided
further that no such amendment, modification, termination or waiver shall (1)
increase the Commitments of any Lender over the amount thereof then in effect
without the consent of such Lender (it being understood that amendments,
modifications or waivers of conditions precedent, covenants, Potential Events
of Default or Events of Default or of a mandatory reduction in the Commitments
shall not constitute an increase of the Commitment of any Lender, and that an
increase in the available portion of any Commitment of any Lender shall not
constitute an increase in the Commitment of such Lender); (2) without the
consent of the Swing Line Lender, amend, modify, terminate or waive any
provision of subsection 2.1A(vi) or any other provision of this Agreement
relating to the Swing Line Loan Commitment or the Swing Line Loans; (3) without
the consent of the Requisite Class Lenders of each Class which is being
allocated a lesser prepayment, repayment or commitment reduction as a result of
the actions described below (or without the consent of the Requisite Class
Lenders of each Class in the case of an amendment to the definition of
Requisite Class Lenders), amend the definition of Requisite Class Lenders or
alter the required application of any prepayments or repayments (or commitment
reduction), as between the Classes pursuant to subsection 2.4B(iv) (although
the Requisite Lenders may waive, in whole or in part, any such prepayment,
repayment or commitment reduction so long as the application, as between the
Classes, of any such prepayment, repayment or commitment reduction which is
still required to be made is not altered); (4) without the consent of Requisite
Class Lenders of the respective Class, waive or reduce any scheduled repayment
set forth in subsections 2.4A (i)-(iv) of such affected Class; (5) no
amendment, modification, termination or waiver relating to the obligations of
Revolving Lenders relating to the purchase of participations in Letters of
Credit shall be effective without the written concurrence of each Issuing
Lender having a Letter of Credit then outstanding or which has not been
reimbursed for a drawing under a Letter of Credit issued by Agent and of Agent;
or (6) without the consent of Agent, amend, modify, terminate or waive any
provision of Section 9 as the same applies to Agent or of any other provision
of this Agreement as the same applies to the rights or obligations of Agent.
B. If, in connection with any proposed amendment,
modification, termination or waiver to any of the provisions of this Agreement
or the Notes as contemplated by clauses (i) through (v) of the first proviso of
subsection 10.6A, the consent of the Requisite Lenders is obtained but the
consent of one or more of such other Lenders whose consent is required is not
obtained, then Company shall have the right, so long as all non-consenting
Lenders whose individual consent is required are treated as described in either
clause (i) or (ii) below, to either (i) replace each such non-consenting Lender
or Lenders with one or more Replacement Lenders pursuant to subsection 2.9 so
long as at the time of such replacement, each such Replacement
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Lender consents to the proposed amendment, modification, termination or waiver,
or (ii) terminate such non-consenting Lender's Commitments and repay in full
its outstanding Loans in accordance with subsections 2.4B(i)(b) and
2.4B(ii)(b); provided that unless the Commitments that are terminated and the
Loans that are repaid pursuant to the preceding clause (ii) are immediately
replaced in full at such time through the addition of new Lenders or the
increase of the Commitments and/or outstanding Loans of existing Lenders (who
in each case must specifically consent thereto), then in the case of any action
pursuant to the preceding clause (ii), the Requisite Lenders (determined before
giving effect to the proposed action) shall specifically consent thereto;
provided further that Company shall not have the right to terminate such
non-consenting Lender's Commitment and repay in full its outstanding Loans
pursuant to clause (ii) of this subsection 10.6B if, immediately after the
termination of such Lender's Revolving Loan Commitment in accordance with
subsection 2.4B(ii)(b), the Revolving Loan Exposure of all Lenders would exceed
the Revolving Loan Commitments of all Lenders; provided still further that
Company shall not have the right to replace a Lender solely as a result of the
exercise of such Lender's rights (and the withholding of any required consent
by such Lender) pursuant to the second proviso to subsection 10.6A.
C. Agent may, but shall have no obligation to, with the
concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Company in any case shall entitle Company to
any other or further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this subsection 10.6 shall be binding upon each Lender at the time
outstanding, each future Lender and, if signed by Company, on Company.
10.7 INDEPENDENCE OF COVENANTS.
All covenants hereunder shall be given independent effect so
that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or would
otherwise be within the limitations of, another covenant shall not avoid the
occurrence of an Event of Default or Potential Event of Default if such action
is taken or condition exists.
10.8 NOTICES.
Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in
writing and may be personally served, telexed or sent by telefacsimile or
United States mail or courier service and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of telefacsimile
or telex, or three Business Days after depositing it in the United States mail
with postage prepaid and properly addressed; provided that notices to Agent
shall not be effective until received. For the purposes hereof, the address of
each party
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hereto shall be as set forth under such party's name on the signature pages
hereof or (i) as to Company and Agent, such other address as shall be
designated by such Person in a written notice delivered to the other parties
hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Agent.
10.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made
herein shall survive the execution and delivery of this Agreement and the
making of the Loans and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied
by law to the contrary, the agreements of Company set forth in subsections
2.6D, 2.7, 3.5A, 3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set
forth in subsections 9.2C, 9.4 and 10.5 shall survive the payment of the Loans,
the cancellation or expiration of the Letters of Credit and the reimbursement
of any amounts drawn thereunder, and the termination of this Agreement.
Without limiting the generality of the immediately preceding sentence,
Company's obligations relating to any Environmental Losses under subsection
10.3 shall survive the sale or other transfer of subject Mortgaged Property or
Covered Real Property, as the case may be, by Company (or its Affiliate) prior
to the Transfer Date.
10.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Agent or any Lender in the
exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
10.11 MARSHALLING; PAYMENTS SET ASIDE.
Neither Agent nor any Lender shall be under any obligation to
marshal any assets in favor of Company or any other party or against or in
payment of any or all of the Obligations. To the extent that Company makes a
payment or payments to Agent or Lenders (or to Agent for the benefit of
Lenders), or Agent or Lenders enforce any security interests or exercise their
rights of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, any
other state or federal law, common law or any equitable cause, then, to the
extent of such recovery, the
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obligation or part thereof originally intended to be satisfied, and all Liens,
rights and remedies therefor or related thereto, shall be revived and continued
in full force and effect as if such payment or payments had not been made or
such enforcement or setoff had not occurred.
10.12 SEVERABILITY.
In case any provision in or obligation under this Agreement or
the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
10.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.
The obligations of Lenders hereunder are several and no Lender
shall be responsible for the obligations or Commitments of any other Lender
hereunder. Nothing contained herein or in any other Loan Document, and no
action taken by Lenders pursuant hereto or thereto, shall be deemed to
constitute Lenders as a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender
shall be a separate and independent debt, and each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and it shall not
be necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose.
10.14 HEADINGS.
Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose or be given any substantive effect.
10.15 APPLICABLE LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
10.16 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the parties hereto and
their respective successors and assigns and shall inure to the benefit of the
parties hereto and the successors and assigns of Lenders (it being understood
that Lenders' rights of assignment are subject to subsection 10.1). Neither
Company's rights or obligations
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hereunder nor any interest therein may be assigned or delegated by Company
without the prior written consent of all Lenders.
10.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN
ACCORDANCE WITH SUBSECTION 10.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE
IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST
COMPANY IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO
THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1402 OR OTHERWISE.
10.18 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF
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THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT
MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS
BEING ESTABLISHED. The scope of this waiver is intended to be all-
encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this transaction, including without limitation
contract claims, tort claims, breach of duty claims and all other common law
and statutory claims. Each party hereto acknowledges that this waiver is a
material inducement to enter into a business relationship, that each has
already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS
SUBSECTION 10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the
event of litigation, this Agreement may be filed as a written consent to a
trial by the court.
10.19 CONFIDENTIALITY.
Each Lender shall hold all non-public information obtained
pursuant to the requirements of or in connection with this Agreement which has
been identified as confidential by Company in accordance with such Lender's
customary procedures for handling confidential information of this nature and
in accordance with safe and sound lending or investment practices, it being
understood and agreed by Company that in any event a Lender may make
disclosures to Affiliates of such Lender or disclosures reasonably required by
any bona fide assignee, transferee or participant in connection with the
contemplated assignment or transfer by such Lender of any Loans or any
participations therein or disclosures required or requested by any governmental
agency or representative thereof or the NAIC or pursuant to legal process;
provided that, unless specifically prohibited by applicable law or court order,
each Lender shall use its best efforts to notify Company of any request by any
governmental agency or representative thereof (other than any such request in
connection with any examination of the financial condition of such Lender by
such governmental agency) for disclosure of any such non-public information
prior to disclosure of such information; and provided, further that in no event
shall any Lender be obligated or required to return any materials furnished by
Company or any of its Subsidiaries.
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10.20 COUNTERPARTS; EFFECTIVENESS.
This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are physically
attached to the same document. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto and receipt by
Company and Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
COMPANY:
SMITH'S FOOD & DRUG CENTERS, INC.
By: MICHAEL C. FREI
------------------------------
Title: Senior Vice President
------------------------------
Notice Address:
1550 South Redwood Road
------------------------------
Salt Lake City, UT 84104
------------------------------
Attention: Michael Frei
------------------------------
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LENDERS:
BANKERS TRUST COMPANY,
individually and as Agent and Arranger
By: MARY JO JOLLY
---------------------------------
Mary Jo Jolly
Title: Assistant Vice President
------------------------------
Notice Address:
One Bankers Trust Plaza
------------------------------
130 Liberty Street
------------------------------
14th Floor
------------------------------
New York, NY 10006
------------------------------
Attention: Michelle Zorn
------------------------------
With a copy to:
300 South Grand Avenue
-----------------------------
41st Floor
-----------------------------
Los Angeles, CA 90071
-----------------------------
Attention: Eric S. Swanson
-----------------------------
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THE CHASE MANHATTAN BANK, N.A.,
individually and as Arranger
By: ELLEN GERTZOG
------------------------------
Ellen Gertzog
Title: Vice President
------------------------------
Notice Address:
270 Park Avenue
------------------------------
9th Floor
------------------------------
New York, NY 10017-2070
------------------------------
Attention: Ellen Gertzog
------------------------------
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CHASE SECURITIES INC.,
Individually and as Syndication Agent
By: JOHN R. SORICE
------------------------------
Title: Vice President
------------------------------
Notice Address:
270 Park Avenue
------------------------------
4th Floor
------------------------------
New York, NY 10017-2070
------------------------------
Attention: John Sorice
------------------------------
S-4
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ABN AMRO BANK N.V.
SAN FRANCISCO INTERNATIONAL BRANCH
By: ABN AMRO North America, Inc.
By: DIANNE D. WAGGONER
-------------------------------------
Title: Group Vice President
-------------------------------------
By: GINA M. BRUSATORI
-------------------------------------
Gina M. Brusatori
Title: VP and Director
-------------------------------------
Notice Address:
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attention: Dianne D. Waggoner
Group Vice President & Director
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ACADIA PARTNERS, L.P.
By: Acadia PW Partners, L.P.
as General Partner of Acadia
Partners, L.P.
By: Acadia MGP, Inc., as
Managing General Partner
of the General Partner
By: SCOTT KRASE
-------------------------------------
Title:
-------------------------------------
Notice Address:
c/o Oak Hill Partners, Inc.
65 East 55th Street
New York, NY 10022
Attention: Scott Krase
S-6
<PAGE> 200
BANK OF AMERICA N.T. & S.A.
By: LINDA A. CARPER
-------------------------------------
Linda A. Carper
Title: Managing Director
-------------------------------------
Notice Address:
335 Madison Avenue, #9618-LFG
New York, NY 10017
Attention: Linda A. Carper, M.D.
S-7
<PAGE> 201
BANK OF IRELAND,
GRAND CAYMAN BRANCH
By: ROGER BURNS
-------------------------------------
Title: Vice President
-------------------------------------
Notice Address:
640 5th Avenue
New York, NY 10019
Attention: Roger Burns
Vice President
S-8
<PAGE> 202
BANK OF MONTREAL
By: WILLIAM DOBSON
-------------------------------------
Title: Director
-------------------------------------
Notice Address:
430 Park Avenue, 16th Floor
New York, NY 10022
Attention: William Dobson
S-9
<PAGE> 203
BANQUE FRANCAISE DU COMMERCE EXTERIEUR
DANIEL TOUFFU
- ----------------------------- By: IAIN A. WHYTE
Daniel Touffu --------------------------------------
First VP and Regional Manager Iain A. Whyte
Title: Vice President
--------------------------------------
Notice Address:
660 South Figueroa St.
Suite 1400
Los Angeles, CA 90017
Attention: Iain Whyte
S-10
<PAGE> 204
BANQUE PARIBAS
By: LINDA L. ALESHIRE
-------------------------------------
Linda L. Aleshire
Title: VICE PRESIDENT
-------------------------------------
By: JOHN CATE
-------------------------------------
John Cate
Title: GROUP VICE PRESIDENT
-------------------------------------
Notice Address:
2029 Century Park East
Suite 3900
Los Angeles, CA 90067
Attention: Linda Aleshire
S-11
<PAGE> 205
BARCLAYS BANK PLC
By: KEITH F. ARNSDORFF
-------------------------------------
Keith F. Arnsdorff
Title: Associate Director
-------------------------------------
Notice Address:
222 Broadway
CSU - 12th Floor
New York, NY 10038
Attention: Valerie Niemczynski
S-12
<PAGE> 206
BHF-BANK AKTIENGESELLSCHAFT
By: RENATE BOSTON
-------------------------------------
Title: Vice President
-------------------------------------
By: DAN DOBRJANSKY
-------------------------------------
Title: Assistant Treasurer
-------------------------------------
Notice Address:
590 Madison Avenue
New York, NY 10022-2540
Attention: Renate Boston
S-13
<PAGE> 207
CAISSE NATIONALE DE CREDIT AGRICOLE
By: DAVID BOUHL
-------------------------------------
David Bouhl, F.V.P.
Title: Head of Corporate Banking
Chicago
-------------------------------------
Notice Address:
55 East Monroe, Suite 4700
Chicago, IL 60603
Attention: David Bouhl
S-14
<PAGE> 208
CHL HIGH YIELD LOAN PORTFOLIO
(a unit of Chemical Bank)
By: RICHARD W. STEWART
-------------------------------------
Richard W. Stewart
Title: Vice President
-------------------------------------
Notice Address:
380 Madison Avenue
12th Floor
New York, NY 10017
Attention: Richard W. Stewart
S-15
<PAGE> 209
CIBC INC.
By: PAUL MOHME
-------------------------------------
Title: Associate Director
-------------------------------------
Notice Address:
350 South Grand Avenue
Suite 2600
Los Angeles, CA 90071
Attention: Paul Mohme
S-16
<PAGE> 210
COMPAGNIE FINANCIERE DE CIC
ET DE L'UNION EUROPEENNE
By: SEAN MOUNIER
-------------------------------------
Sean Mounier
Title: First Vice President
-------------------------------------
By: MARCUS EDWARD
-------------------------------------
Marcus Edward
Title: Vice President
-------------------------------------
Notice Address:
520 Madison Avenue
37th Floor
New York, NY 10022
Attention: Brian O'Leary
S-17
<PAGE> 211
CONTINENTAL CASUALTY COMPANY
By: BURTON WEINSTEIN
-------------------------------------
Title: Vice President
-------------------------------------
Notice Address:
c/o Loews Corporation
667 Madison Avenue
New York, NY 10021-8087
Attention: High Yield, 7th Floor
S-18
<PAGE> 212
CREDIT LYONNAIS LOS ANGELES BRANCH
By: DAVID L. MILLER
-------------------------------------
Title: Senior Vice President
-------------------------------------
Notice Address:
1301 Avenue of the Americas
New York, NY 10019
Attention: Mark Koneval
Assistant Vice President
Leveraged Finance - 18th Floor
S-19
<PAGE> 213
CRESCENT/MACH I PARTNERS, L.P.
By: TCW Asset Management Company, its
Investment Manager
By: JUSTIN DRISCOLL
-------------------------------------
Title: Vice President
-------------------------------------
Notice Address:
200 Park Avenue, Suite 2200
New York, New York 10166-0228
Attention: Mark L. Gold/Justin Driscoll
S-20
<PAGE> 214
THE DAI-ICHI KANGYO BANK, LTD.,
LOS ANGELES AGENCY
By: T. NOZAKI
-------------------------------------
Tomohiro Nozaki
Title: Senior Vice President &
Joint General Manger
-------------------------------------
Notice Address:
555 West 5th Street
Fifth Floor
Los Angeles, CA 90013
Attention: David K. Henry
S-21
<PAGE> 215
THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES
By: JOEL SEREBRANSKY
-------------------------------------
Title: Investment Officer
-------------------------------------
Notice Address:
c/o Alliance Capital Management
1345 Avenue of the Americas
38th Floor
New York, NY 10105
Attention: Joel Serebransky
S-22
<PAGE> 216
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
By: INA LANE
-------------------------------------
Title: Investment Officer
-------------------------------------
Notice Address:
c/o Alliance Capital Management
1345 Avenue of the Americas
38th Floor
New York, NY 10105
Attention: Joel Serebransky
S-23
<PAGE> 217
FEDERAL STREET PARTNERS
By: GRETCHEN BERGSTRESSER
-------------------------------------
Title: Vice President
-------------------------------------
Notice Address:
100 Federal Street, 01-08-05
Boston, MA 02110
Attention: Gretchen Bergstresser
S-24
<PAGE> 218
THE FIRST NATIONAL BANK OF CHICAGO
By: KAREN F. KITZER
-------------------------------------
Title: Senior Vice President
-------------------------------------
Notice Address:
One First National Plaza
Suite 0088
Chicago, IL 60670
Attention: Karen G. Hannusch
S-25
<PAGE> 219
FIRST SECURITY BANK OF UTAH, N.A.
By: JEFF J. JENSEN
-------------------------------------
Jeff Jensen
Title: Vice President
-------------------------------------
Notice Address:
15 East 100 South, 2nd Floor
Salt Lake City, Utah 84111
Attention: Jeff Jensen
S-26
<PAGE> 220
FIRST SOURCE FINANCIAL LLP
By: First Source Financial, Inc.,
as Agent/Manager
By: R.M. COSEO
-------------------------------------
Title: Senior Vice President
-------------------------------------
Notice Address:
2850 W. Golf Road, Suite 520
Rolling Meadows, IL 60008
Attention: Kevin Kirsten
S-27
<PAGE> 221
FLEET BANK, N.A.
By: GEORGE TRIEBENBACHER
-------------------------------------
Title: Vice President
-------------------------------------
Notice Address:
175 Water Street
27th Floor
New York, NY 10038
Attention: George Triebenbacher
S-28
<PAGE> 222
THE FUJI BANK, LIMITED
LOS ANGELES AGENCY
By: N. UMEMURA
-------------------------------------
Nobuhiro Umemura
Title: Joint General Manager
-------------------------------------
Notice Address:
333 S. Grand Avenue, 25th Floor
Los Angeles, CA 90071
Attention: Ching Lim
S-29
<PAGE> 223
HELLER FINANCIAL, INC.
By: JENA L. HOLMAN
-------------------------------------
Title: Assistant Vice President
-------------------------------------
Notice Address:
500 W. Monroe Street
Chicago, IL 60661
Attention: Linda Wolf
S-30
<PAGE> 224
THE INDUSTRIAL BANK OF JAPAN, LIMITED
LOS ANGELES AGENCY
By: T. AKIYAMA
-------------------------------------
Takahide Akiyama
Title: Joint General Manager
-------------------------------------
Notice Address:
350 S. Grand Avenue, Suite 1500
Los Angeles, CA 90071
Attention: J. Blake Seaton
S-31
<PAGE> 225
ING CAPITAL ADVISORS, INC.
as Agent for Bank Syndication Account
By: MICHAEL P. McADAMS
-------------------------------------
Michael P. McAdams
Title: Managing Director
-------------------------------------
Notice Address:
333 South Grand Avenue, Suite 400
Los Angeles, CA 90071
Attention: Michael Hatley
S-32
<PAGE> 226
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By: CLIFFORD M. RHEAR
-------------------------------------
Title: Managing Director
-------------------------------------
Notice Address:
1295 State Street
Springfield, MA 01111
Attention: John Wheeler
S-33
<PAGE> 227
MERRILL LYNCH SENIOR FLOATING RATE FUND,
INC.
By: JOHN W. FRASER
-------------------------------------
John W. Fraser
Title: Authorized Signatory
-------------------------------------
Notice Address:
800 Scudders Mill Road, Area 2C
Plainsboro, NJ 08536
Attention: John W. Fraser
S-34
<PAGE> 228
MIDLAND BANK PLC
By: JOHN HOWKER
-------------------------------------
Title: Executive Director
-------------------------------------
Notice Address:
140 Broadway, 5th Floor
New York, NY 10005
Attention: John Howker
S-35
<PAGE> 229
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: PATRICIA LORET DE MOLA
-------------------------------------
Title: Senior Vice President
-------------------------------------
Notice Address:
520 Madison Avenue, 26th Floor
New York, NY 10022
Attention: Patricia Loret de Mola
Senior Vice President
S-36
<PAGE> 230
NATIONAL CITY BANK
By: JEFFERY C. POUGH
-------------------------------------
Title: Vice President
-------------------------------------
Notice Address:
1900 E. Ninth Street, LOC 2102
Cleveland, Ohio 44114
Attention: Lisa B. Lisi
S-37
<PAGE> 231
NEW YORK LIFE INSURANCE COMPANY
By: KAREN HINIKER
-------------------------------------
Title: Assistant Vice President
-------------------------------------
Notice Address:
51 Madison Avenue
New York, NY 10010
Attention: Vice President
Investment Department
Private Finance Group
S-38
<PAGE> 232
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION
By: LYDIA S. SANGREE
-------------------------------------
Lydia S. Sangree
Title: Assistant Vice President
-------------------------------------
Notice Address:
51 Madison Avenue
New York, NY 10010
Attention: Vice President
Investment Department
Private Finance Group
S-38(a)
<PAGE> 233
THE NIPPON CREDIT BANK, LTD.
LOS ANGELES AGENCY
By: BERNARDO E. CORREA-HENSCHKE
-------------------------------------
Bernardo E. Correa-Henschke
Title: Vice President & Senior Manager
-------------------------------------
Notice Address:
550 South Hope Street
Suite 2500
Los Angeles, CA 90071
Attention: Julien Michaels
S-39
<PAGE> 234
ORIX USA CORPORATION
By: DAVID WOOLSEY
-------------------------------------
David Woolsey
Title: Deputy President and COO
-------------------------------------
Notice Address:
780 Third Avenue, 48th Floor
New York, NY 10017-7088
Attention: Kiyomi Kosaka
S-40
<PAGE> 235
PEARL STREET L.P.
By: EDWARD C. FORST
-------------------------------------
Edward C. Forst
Title: Authorized Signatory
-------------------------------------
Notice Address:
85 Broad Street, 6th Floor
New York, NY 10004
Attention: Kathy King
S-41
<PAGE> 236
PILGRIM AMERICA PRIME RATE TRUST
By: HOWARD TIFFEN
-------------------------------------
Howard Tiffen
Title: Senior Vice President
-------------------------------------
Notice Address:
40 N. Central Ave., Suite 1200
Phoenix, AZ 85004
Attention: Robert Clouse
S-42
<PAGE> 237
PPM AMERICA, INC., as attorney in fact,
on behalf of Jackson National Life
Insurance Company
By: MICHAEL DiRe
-------------------------------------
Title: Vice President/Head-High Yield
Bank Loans
-------------------------------------
Notice Address:
225 West Wacker Drive, Suite 1200
Chicago, IL 60606-1228
Attention: Private Placements
Michael DiRe or Guy Petrelli
S-43
<PAGE> 238
PRIME INCOME TRUST
By: RAFAEL SCOLARI
-------------------------------------
Title:
-------------------------------------
Notice Address:
2 World Trade Center -- 72nd Floor
New York, NY 10048
Attention: Rafael Scolari
S-44
<PAGE> 239
PROTECTIVE LIFE INSURANCE COMPANY
By: MARK K. OKADA
-------------------------------------
Mark K. Okada CFA
Title: Principal
Protective Asset Management Co.
-------------------------------------
Notice Address:
1150 Two Galleria Tower
13455 Noel Road -- LB #45
Dallas, TX 75240
Attention: Mark Okada -- Principal
S-45
<PAGE> 240
SENIOR HIGH INCOME PORTFOLIO, INC.
By: JOHN W. FRASER
-------------------------------------
John W. Fraser
Title: Authorized Signatory
-------------------------------------
Notice Address:
800 Scudders Mill Road, Area 2C
Plainsboro, NJ 08536
Attention: John W. Fraser
S-46
<PAGE> 241
SOUTHERN PACIFIC THRIFT AND LOAN
ASSOCIATION
By: CHRIS KELLEHER
-------------------------------------
Chris Kelleher
Title: Vice President
-------------------------------------
Notice Address:
12300 Wilshire Blvd., Suite 200
Los Angeles, CA 90025
Attention: Chris Kelleher
S-47
<PAGE> 242
THE SUMITOMO TRUST & BANKING CO., LTD.
LOS ANGELES AGENCY
By: ELEANOR CHAN
-------------------------------------
Eleanor Chan
Title: Manager & Vice President
-------------------------------------
Notice Address:
333 S. Grand Ave., Suite 5300
Los Angeles, CA 90071
Attention: Loan Administration
with a copy to: Karen Ryan
S-48
<PAGE> 243
SUNAMERICA INC.
By: LYNN A. HOPTON
-------------------------------------
Title: Vice President
-------------------------------------
SunAmerica Investments, Inc.
Notice Address:
1 SunAmerica Center
38th Floor
Century City
Los Angeles, CA 90067
Attention: Sabur Moini
S-49
<PAGE> 244
TCW ASSET MANAGEMENT COMPANY,
as Attorney-in-Fact for
Occidental Life Insurance Company of
North Carolina
By: JUSTIN DRISCOLL
-------------------------------------
Title: Vice President
-------------------------------------
Notice Address:
200 Park Avenue, Suite 2200
New York, New York 10166-0228
Attention: Mark L. Gold/Justin Driscoll
S-50
<PAGE> 245
TCW ASSET MANAGEMENT COMPANY,
as Attorney-in-Fact for
Integon Life Insurance Corporation
By: JUSTIN DRISCOLL
-------------------------------------
Title: Vice President
-------------------------------------
Notice Address:
200 Park Avenue, Suite 2200
New York, New York 10166-0228
Attention: Mark L. Gold/Justin Driscoll
S-51
<PAGE> 246
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: RON WALKER
-------------------------------------
Title: Vice President
-------------------------------------
Notice Address:
555 Theodore Fremd Avenue
Suite C-301
Rye, NY 10580
Attention: Ron Walker
S-52
<PAGE> 247
THE TRAVELERS INSURANCE COMPANY
By: ROBERT M. MILLS
-------------------------------------
Robert M. Mills
Title: Assistant Investment Officer
-------------------------------------
Notice Address:
Investment Group - 9PB
205 Columbus Boulevard - Loading Dock
Hartford, CT 06183-2030
Attention: Robert Mills
S-53
<PAGE> 248
UNION BANK, A DIVISION OF
UNION BANK OF CALIFORNIA, N.A.
By: TIMOTHY P. STREB
-------------------------------------
Timothy P. Streb
Title: Vice President
-------------------------------------
Notice Address:
Retailing Industries Department
350 California St.
11th Floor
San Francisco, CA 94104
Attention: Timothy P. Streb
S-54
<PAGE> 249
USL CAPITAL CORPORATION
By: CRAIG F. BRUZZONE
-------------------------------------
Title: Vice President
-------------------------------------
Notice Address:
c/o Municipal & Corporate Financing
733 Front Street, MS-520
San Francisco, CA 94111
Attention: Craig F. Bruzzone
S-55
<PAGE> 250
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: JEFFREY W. MAILLET
-------------------------------------
Jeffrey W. Maillet
Title: Sr. Vice Pres.-Portfolio Manager
-------------------------------------
Notice Address:
One Parkview Plaza
Oakbrook Terrace, IL 60181
Attention: Jeffrey W. Maillet
S-56
<PAGE> 251
SCHEDULE 2.1
LENDERS' COMMITMENTS AND PRO RATA SHARES
<TABLE>
<CAPTION>
Tranche A Pro Rata Tranche B Pro Rata Tranche C Pro Rata
Term Loan Share Term Loan Share Term Loan Share
Share
Lender Commitment Commitment Commitment
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ % $ % $ %
------------- --------- ------------- --------- ------------- ---------
TOTAL $ 100% $ 100% $ 100%
<CAPTION>
Tranche D Pro Rata Share Revolving Pro Rata Pro Rata
Term Loan Loan Share
Share (re: Tranche D (re: Rev.
Lender Commitment Term Loans) Commitment Loans) (Overall)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ % $ % %
------------- --------- --------- --------- ---------
TOTAL $ 100% $ 100% 100%
</TABLE>
LA1-703302.V6
(Credit Agreement)
<PAGE> 252
SCHEDULE 5.1
SUBSIDIARIES OF COMPANY
<TABLE>
<CAPTION>
Ownership
Jurisdiction of Direct by (Each)
Entity Incorporation Parent(s) Direct Parent
-------- -------------- --------- -------------
<S> <C> <C> <C>
%
</TABLE>
LA1-703302.V6
(Credit Agreement)
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
in the headnote to the "Selected Historical Financial Data of Smith's" in
Amendment No. 1 to the Registration Statement (Form S-3) and related Prospectus
of Smith's Food & Drug Centers, Inc. for the registration of 3,226,830 shares of
its Class B Common Stock and to the incorporation by reference therein of our
report dated January 29, 1996, with respect to the consolidated financial
statements of Smith's Food & Drug Centers, Inc., included in its Annual Report
(Form 10-K) for the year ended December 30, 1995, filed with the Securities and
Exchange Commission.
Salt Lake City, Utah
November 7, 1996
ERNST & YOUNG LLP
