<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
-----------------
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
-----
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 20, 1999
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____ TO ____
COMMISSION FILE NUMBER 001-10811
SMART & FINAL INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE NO. 95-4079584
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
600 Citadel Drive
City of Commerce, California 90040
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (323) 869-7500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No____
The registrant had 29,136,995 shares of common stock outstanding as of July 30,
1999.
===============================================================================
<PAGE>
SMART & FINAL INC.
Index
Part I
Financial Information
<TABLE>
<CAPTION>
Page
<S> <C>
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets 2
Unaudited Consolidated Statements of Operations 3
Unaudited Consolidated Statements of Cash Flows 4
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition 9
and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk 17
</TABLE>
Part II
Other Information
<TABLE>
<S> <C>
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
SMART & FINAL INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share amounts)
June 20, January 3,
ASSETS 1999 1999
------------ ------------
<S> <C> <C>
Current assets: (Unaudited)
Cash & cash equivalents $ 34,396 $ 20,887
Trade notes and accounts receivable, less
allowance for doubtful accounts of
$3,052 in 1999 and $3,660 in 1998 59,915 70,155
Inventories 150,882 157,678
Prepaid expenses 13,555 22,341
Deferred tax asset 11,511 11,511
------------ ------------
Total current assets 270,259 282,572
Property, plant and equipment:
Land 36,844 36,387
Buildings and improvements 29,563 29,625
Leasehold improvements 88,002 85,501
Fixtures and equipment 167,251 162,148
------------ ------------
321,660 313,661
Less - Accumulated depreciation and amortization 111,687 108,588
------------ ------------
Net property, plant and equipment 209,973 205,073
Assets under capital leases, net of accumulated
amortization of $6,910 in 1999 and $6,669 in 1998 3,775 4,016
Goodwill, net of accumulated amortization
of $2,787 in 1999 and $2,060 in 1998 55,940 56,667
Deferred tax asset 3,730 3,730
Other assets 27,164 30,206
------------ ------------
Total assets $ 570,841 $ 582,264
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current maturities of long-term debt $ 4,803 $ 139,680
Accounts payable 87,552 97,568
Payable to Parent - 1,681
Accrued salaries and wages 15,404 13,951
Other accrued liabilities 32,098 40,789
------------ ------------
Total current liabilities 139,857 293,669
Long-term liabilities:
Notes payable, net of current maturities 12,704 15,839
Notes payable to Parent 15,965 55,388
Bank debt 124,500 -
Obligations under capital leases 7,146 7,485
Other long-term liabilities 3,091 3,033
Workers' compensation reserve, postretirement
and postemployment benefits 18,427 17,564
------------ ------------
Total long-term liabilities 181,833 99,309
Stockholders' equity:
Preferred stock, $1 par value (authorized-
10,000,000 shares; no shares issued) - -
Common stock, $0.01 par value (authorized-
100,000,000 shares; 29,136,995 shares issued
and outstanding in 1999 and 22,527,179 in 1998) 291 225
Additional paid-in capital 204,025 144,987
Notes receivable for stock (93) -
Cumulative translation loss (835) (835)
Retained earnings 45,763 44,909
------------ ------------
Total stockholders' equity 249,151 189,286
------------ ------------
Total liabilities and stockholders' equity $ 570,841 $ 582,264
============ ============
The accompanying notes are an integral part of these consolidated financial statements.
2
</TABLE>
<PAGE>
SMART & FINAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-four Weeks Ended
--------------------------- ----------------------------
June 20, June 21, June 20, June 21,
1999 1998 1999 1998
------------ ----------- ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales....................................................... $ 418,608 $ 380,577 $ 816,945 $ 714,855
Cost of sales, buying and occupancy......................... 365,391 332,697 713,650 627,235
----------- ----------- ----------- -----------
Gross margin................................................ 53,217 47,880 103,295 87,620
Operating and administrative expenses....................... 45,880 43,458 91,982 82,876
----------- ----------- ----------- -----------
Income from operations............................... 7,337 4,422 11,313 4,744
Interest expense, net....................................... 5,027 2,438 10,108 4,566
----------- ----------- ----------- -----------
Income before income taxes, extraordinary item and
cumulative effect of accounting change................. 2,310 1,984 1,205 178
Income taxes................................................ 893 753 474 (27)
----------- ----------- ----------- -----------
Income from consolidated subsidiaries................. 1,417 1,231 731 205
Equity earnings in unconsolidated subsidiary................ 71 57 283 187
----------- ----------- ----------- -----------
Income before extraordinary item
and cumulative effect of accounting change....... 1,488 1,288 1,014 392
Extraordinary loss on extinguishment of debt,
net of tax effect of $147................................. 166 - 166 -
Cumulative effect of accounting change (start-up costs,
net of tax effect of $758)................................ - - - 1,090
----------- ----------- ----------- -----------
Net income (loss)..................................... $ 1,322 $ 1,288 $ 848 $ (698)
=========== =========== =========== ===========
Earnings (loss) per common share:
Earnings per common share before extraordinary item and
cumulative effect of accounting change................. $ 0.06 $ 0.06 $ 0.04 $ 0.02
Extraordinary loss on extinguishment of debt
per common share....................................... (0.01) - (0.01) -
Cumulative effect of accounting change per common share.. - - - (0.05)
----------- ----------- ----------- -----------
*Earnings (loss) per common share.......................... $ 0.06 $ 0.06 $ 0.04 $ (0.03)
=========== =========== =========== ===========
Weighted average common shares.............................. 23,378,215 22,446,511 22,952,697 22,421,082
=========== =========== =========== ===========
Earnings (loss) per common share, assuming dilution:
Earnings per common share, assuming dilution, before
extraordinary item and cumulative effect of
accounting change...................................... $ 0.06 $ 0.06 $ 0.04 $ 0.02
Extraordinary loss on extinguishment of debt
per common share....................................... (0.01) - (0.01) -
Cumulative effect of accounting change per common share.. - - - (0.05)
----------- ----------- ----------- -----------
*Earnings (loss) per common share, assuming dilution....... $ 0.06 $ 0.06 $ 0.04 $ (0.03)
=========== =========== =========== ===========
Weighted average common shares
and common share equivalents............................ 23,451,919 22,865,913 22,989,549 22,630,783
=========== =========== =========== ===========
Dividend per common share................................... $ - $ 0.05 $ - $ 0.10
=========== =========== =========== ===========
* Earnings per share totals do not aggregate due to rounding
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE>
SMART & FINAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Twenty-four Weeks Ended
June 20, June 21,
1999 1998
----------------------------
(Unaudited)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)........................................... $ 848 $ (698)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Gain on disposal of fixed assets........................... (524) (1,086)
Depreciation and amortization.............................. 13,966 13,008
Amortization of deferred financing costs................... 1,023 -
Extraordinary loss on extinguishment of debt............... 166 -
Cumulative effect of accounting change, net of taxes....... - 1,090
Equity earnings in unconsolidated subsidiary............... (283) (187)
Decrease (increase), net of business acquisition, in:
Trade notes and accounts receivable....................... 10,240 2,806
Inventories............................................... 6,796 7,583
Prepaid expenses and other................................ 4,364 4,699
Increase (decrease), net of business acquisition, in:
Accounts payable.......................................... (9,313) (2,351)
Accrued liabilities....................................... 1,453 2,513
Other liabilities......................................... (5,495) (4,183)
--------- ---------
Net cash provided by operating activities.................. 23,241 23,194
--------- ---------
Cash Flows From Investing Activities:
Acquisition of property, plant and equipment................ (14,372) (11,493)
Proceeds from disposal of property, plant and equipment..... 692 843
Acquisition of business..................................... - (44,401)
Other....................................................... 105 (245)
--------- ---------
Net cash used in investing activities...................... (13,575) (55,296)
--------- ---------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock, net of costs........ 20,502 1,175
Borrowings on bank line of credit........................... 10,000 65,000
Payments on bank line of credit............................. (19,000) (36,000)
Payments on notes payable................................... (4,851) (1,883)
Change in payable to Parent and affiliates.................. (1,681) 3,743
Quarterly dividend paid..................................... (1,127) (2,241)
--------- ---------
Net cash provided by financing activities.................. 3,843 29,794
--------- ---------
Increase (decrease) in cash and cash equivalents............... 13,509 (2,308)
Cash and cash equivalents at beginning of year................. 20,887 22,891
--------- ---------
Cash and cash equivalents at end of period..................... $ 34,396 $ 20,583
========= =========
Noncash Investing and Financing Activities:
Note to Parent extinguished for common stock issued......... $ 39,423 $ -
Note issued in connection with acquisition of business...... - 17,500
--------- ---------
Total noncash transactions................................. $ 39,423 $ 17,500
========= =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
4
<PAGE>
SMART & FINAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
Smart & Final Inc. (the "Company") is a Delaware corporation and is a 57.3
percent owned subsidiary of Casino USA, Inc. (the "Parent").
The consolidated balance sheet as of June 20, 1999, the consolidated
statements of operations and cash flows for the twelve and twenty-four weeks
ended June 20, 1999 and June 21, 1998 are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of these financial
statements have been included. Such adjustments consisted only of normal
recurring items. Interim results are not necessarily indicative of results for a
full year.
These consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Form 10-K for the year ended January 3, 1999.
(2) Fiscal years
The Company's fiscal year ends on the Sunday closest to December 31. Each
fiscal year consists of twelve-week periods in the first, second and fourth
quarters and a sixteen-week period in the third quarter.
(3) Interest expense
Interest expense was incurred primarily on borrowings under the Company's
revolving credit facilities and loans from its Parent. The Company paid $10.1
million and $4.5 million in interest expense in the twenty-four weeks ended June
20, 1999 and June 21, 1998, respectively.
(4) Income taxes
The Company and Casino USA, Inc. are parties to a tax sharing arrangement
covering income tax obligations in the state of California. Under this
arrangement, the Company received tax sharing benefits of $1,257,000 and
$1,846,000 in the twenty-four weeks ended June 20, 1999 and June 21, 1998,
respectively, from the Parent for state income taxes overpaid, due to taxable
losses in the first half of 1999 and 1998. The Company did not pay any federal
income taxes in the twenty-four weeks ended June 20, 1999 and June 21, 1998, due
to taxable losses in the first half of each year.
(5) Earnings per common share
Earnings per common share is based on the weighted average number of common
shares outstanding. Earnings per common share, assuming dilution includes the
weighted average number of common stock equivalents outstanding related to
employee stock options and a stock purchase agreement.
5
<PAGE>
SMART & FINAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(6) Dividend
The declaration and payment of dividends is subject to the discretion of
the Company's Board of Directors, and there can be no assurance whether or when
dividends will be paid in the future. The Company's debt facilities also contain
restrictions on the amount of cash dividends declared or paid. The Company
announced in a press release dated February 17, 1999, that, as part of a program
to reduce debt levels and interest expense, dividends on its common stock have
been suspended indefinitely. The suspension of dividends was effective
following the payment of the fourth quarter 1998 dividend paid on January 29,
1999.
(7) Stockholders' Equity
During the second quarter of 1999, the Company completed its rights
offering pursuant to its Registration Statement on Form S-3. The Company issued
6,486,406 shares of common stock at a fixed subscription price of $9.25 per
share. The offering increased stockholders' equity approximately $57.9 million
after expenses of the offering.
The Company's Parent exercised all of its subscription rights and acted as
a standby purchaser of shares not subscribed for by other stockholders. As a
result, the Parent increased its ownership by 4,271,935 shares and increased its
ownership interest in the Company to 57.3 percent. Consideration for shares
subscribed by the Parent was the exchange of $39.4 million of its $55.4 million
loan to the Company.
Pursuant to an agreement dated March 7, 1989, the Company's former Chairman
was obligated to purchase 100,000 common shares. The agreement, as amended at
December 29, 1996, included a fixed purchase price of $8.90 per share. On April
22, 1999, the Company's former Chairman fulfilled his obligation by purchasing
the 100,000 common shares.
(8) Segment Reporting
The Company has two reportable segments: Stores and Foodservice. The
stores segment provides food and related items in bulk sizes and quantities
through non-membership grocery warehouse stores. The foodservice distribution
segment provides delivery of food, restaurant equipment and supplies to mainly
restaurant customers and Smart & Final stores. Corporate expense is comprised
primarily of the Company's corporate expenses incidental to the activities of
the reportable segments and rental income from Smart & Final Stores. The
Company's reportable segments are strategic business units that offer different
products and services. They are managed separately because each segment
requires different technology and marketing strategies.
The Company does not allocate interest, income taxes or nonrecurring gains
and losses to the reportable segments. These costs are included in Corporate
Expense below. The Company
6
<PAGE>
SMART & FINAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
evaluates performance based on profit or loss from operations before income
taxes not including nonrecurring gains and losses.
The revenues, profit or loss and other information of each segment are as
follows, amounts in thousands:
For the twelve weeks ended June 20, 1999:
<TABLE>
<CAPTION>
Corporate
Stores Foodservice Expense Total
-------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Revenues from external
customers $323,423 $95,185 $ - $ 418,608
Intercompany real estate
charge (income) 3,148 - (3,148) -
Interest income - - 202 202
Interest expense - - 5,229 5,229
Pre-tax income (loss) before
extraordinary item and cumulative
effect of accounting change 8,990 (1,741) (4,939) 2,310
</TABLE>
For the twelve weeks ended June 21, 1998:
<TABLE>
<CAPTION>
Corporate
Stores Foodservice Expense Total
-------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Revenues from external
customers $272,993 $107,584 $ - $ 380,577
Intercompany real estate
charge (income) 3,110 - (3,110) -
Interest income - - 75 75
Interest expense - - 2,513 2,513
Pre-tax income (loss) before
extraordinary item and cumulative
effect of accounting change 5,218 (511) (2,723) 1,984
</TABLE>
7
<PAGE>
SMART & FINAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the twenty-four weeks ended June 20, 1999:
<TABLE>
<CAPTION>
Corporate
Stores Foodservice Expense Total
-------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Revenues from external
customers $617,889 $199,056 $ - $ 816,945
Intercompany real estate
charge (income) 6,342 - (6,342) -
Interest income - - 401 401
Interest expense - - 10,509 10,509
Pre-tax income (loss) before
extraordinary item and cumulative
effect of accounting change 12,463 (1,271) (9,987) 1,205
</TABLE>
For the twenty-four weeks ended June 21, 1998:
<TABLE>
<CAPTION>
Corporate
Stores Foodservice Expense Total
-------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Revenues from external
customers $496,435 $218,420 $ - $ 714,855
Intercompany real estate
charge (income) 6,335 - (6,335) -
Interest income - - 170 170
Interest expense - - 4,736 4,736
Pre-tax income (loss) before
extraordinary item and cumulative
effect of accounting change 6,192 (1,938) (4,076) 178
</TABLE>
(9) Legal Actions
The Company has been named as defendant in various legal actions arising in
the normal conduct of its business. In the opinion of management, after
consultation with counsel, none of these actions are expected to result in
significant liability to the Company.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis should be read in conjunction with the
accompanying consolidated financial statements and notes thereto and the
Company's Form 10-K for the year ended January 3, 1999.
Summary
Smart & Final Inc. (the "Company") reported net income of $1.3 million, or
$0.06 per diluted share, for both twelve-week periods ended June 20, 1999 and
June 21, 1998. The 1999 results include an extraordinary loss on extinguishment
of debt, net of tax, of $0.2 million, or $0.01 per diluted share.
For the twenty-four weeks ended June 20, 1999, the Company reported net
income of $0.8 million, or $0.04 per diluted share, compared to a net loss of
$0.7 million, or $0.03 per diluted share, in the twenty-four weeks ended June
21, 1998. The 1998 period included a cumulative effect of accounting change,
net of tax, charge of $1.1 million, or $0.05 per diluted share, related to
adoption of the American Institute of Certified Public Accountants ("AICPA")
Statement of Position 98-5 which required write-off of start-up costs.
Operating earnings increased sharply from $4.7 million in the first half of
the prior year to $11.3 million in the same period of the current year. This
improvement was attributed to increased sales, improved gross margin rates as
well as reduced operating and administrative expenses as a result of aggressive
cost reduction programs.
Improved operating results were partially offset by increased interest
costs for the first half of 1999. Interest expense, net increased due to higher
debt levels and rate increases. The recently completed offering of common stock
to the Company's stockholders has improved the Company's financial position and
is expected to significantly reduce interest expense.
9
<PAGE>
Results of Operations
The following table shows, for the periods indicated, certain condensed
consolidated income statement data, expressed as a percentage of sales.
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-Four Weeks Ended
-------------------- -----------------------
June 20, June 21, June 20, June 21,
1999 1998 1999 1998
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Sales:
Store 77.3% 71.7% 75.6% 69.4%
Foodservice distribution sales 22.7 28.3 24.4 30.6
----- ----- ----- -----
Sales, consolidated total 100.0 100.0 100.0 100.0
Cost of sales, buying and occupancy 87.3 87.4 87.4 87.7
----- ----- ----- -----
Gross margin 12.7 12.6 12.6 12.3
Operating and administrative expenses 11.0 11.4 11.3 11.6
----- ----- ----- -----
Income from operations 1.8 1.2 1.4 0.7
Interest expense, net 1.2 0.6 1.2 0.6
----- ----- ----- -----
Income before income taxes,
extraordinary item and
cumulative effect of accounting change 0.6 0.5 0.1 --
Income taxes 0.2 0.2 0.1 --
----- ----- ----- -----
Income before extraordinary item and
cumulative effect of accounting change 0.4 0.3 0.1 0.1
Extraordinary loss on extinguishment
of debt, net of tax -- -- -- --
Cumulative effect of accounting change
(start-up costs) -- -- -- 0.2
----- ----- ----- -----
Net income (loss) 0.3% 0.3% 0.1% (0.1)%
===== ===== ===== =====
</TABLE>
. Totals do not aggregate due to rounding.
The following table sets forth pre-tax profit or loss, in millions,
for each of the Company's various reportable segments:
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-Four Weeks Ended
-------------------- -----------------------
June 20, June 21, June 20, June 21,
1999 1998 1999 1998
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Stores $ 9.0 $ 5.2 $12.5 $ 6.2
Foodservice (1.8) (0.5) (1.3) (1.9)
----- ----- ----- -----
Segment totals 7.2 4.7 11.2 4.3
Interest and other corporate expenses 4.9 2.7 10.0 4.1
----- ----- ----- -----
Consolidated pre-tax income (loss)
before extraordinary item and
cumulative effect of accounting change $ 2.3 $ 2.0 $ 1.2 $ 0.2
===== ===== ===== =====
</TABLE>
10
<PAGE>
Background
The Company continued its expansion program in 1999 and 1998 as shown in
the following table:
<TABLE>
<CAPTION>
Two
Quarter Ended Quarters Ended Year Ended
-------------------- -------------------- -----------
June 20, June 21, June 20, June 21, January 3,
1999 1998 1999 1998 1999
-------- --------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
USA:
Beginning store count 210 169 209 167 167
Stores opened:
New stores 2 -- 3 2 5
Relocations -- 1 -- 3 3
Acquired -- 39 -- 39 39
Stores relocated or closed -- (1) -- (3) (5)
---- ---- ---- ---- ----
Ending store count 212 208 212 208 209
---- ---- ---- ---- ----
MEXICO:
Store count beginning 6 6 6 5 5
New stores opened -- -- -- 1 1
---- ---- ---- ---- ----
Store count ending 6 6 6 6 6
---- ---- ---- ---- ----
Grand Total 218 214 218 214 215
==== ==== ==== ==== ====
</TABLE>
Mexico operations are not consolidated and are reported on the equity
basis.
Although new stores are important to the Company's continued growth and
profitability, each new store opening initially penalizes earnings because
stores are not immediately profitable. To date new stores opened in existing
market areas generally have achieved break even on a pre-tax basis after
allocation of all operating expenses within the first six to eighteen months.
Stores opened in new market areas, which mature more slowly, generally have
achieved break even in approximately three years. Because of the complex
customer mix, break-even of the Florida stores is expected to take an even
longer period.
Each of the Company's fiscal years consists of twelve-week periods in the
first, second and fourth quarters of the fiscal year and a sixteen-week period
in the third quarter.
Comparison of Twelve Weeks Ended June 20, 1999 with Twelve Weeks Ended June 21,
1998.
Sales. Second quarter 1999 sales were $418.6 million, up 10.0% over the
comparable 1998 period. Sales reflect the May, 1998 acquisition of the United
Grocers Cash & Carry ("Cash & Carry") store operations.
11
<PAGE>
Store sales, including Cash & Carry, increased 18.5%, from $273.0 million
in second quarter 1998 to $323.4 million in second quarter 1999. Excluding Cash
& Carry, store sales increased 7.3% in the second quarter of 1999 versus the
second quarter of 1998. Comparable store sales for the second quarter of 1999
increased 3.9% over the prior year period. Average comparable transaction size
also increased, by 3.3%, to $34.72 in the second quarter of 1999. Store sales
reflect the eight new stores, including relocations, opened in 1998 and the
three new stores opened in the first half of 1999. Additionally, 39 stores were
acquired from United Grocers in May 1998.
Foodservice distribution sales decreased 11.5% from $107.6 million in the
second quarter of 1998 to $95.2 million in the current year second quarter.
This decrease in part reflects the decision made in the latter part of 1998 to
focus foodservice growth on improved credit quality and profitability of
foodservice distribution business versus aggressive sales growth.
Gross Margin. Gross margin improved 11.1% from $47.9 million in the second
quarter of 1998 to $53.2 million in the current year quarter. As a percentage
of sales, gross margin improved from 12.6% in the prior year quarter to 12.7% in
second quarter 1999. The increase in gross margin percentage was due to a
number of factors: higher foodservice margins were achieved by focusing on
improved credit quality and margins and reducing distribution expenses, and a
higher proportion of sales from stores which generate higher gross margins and
higher expenses than foodservice distribution sales. The increases in gross
margin were offset by the inclusion of Cash & Carry, acquired in May 1998, which
operates at lower gross margin and expense levels than Smart & Final stores.
Operating and Administrative Expenses. Operating and administrative
expenses for the second quarter of 1999 were $45.9 million, up $2.4 million, or
5.6%, over the second quarter of 1998. These expenses, as a percentage of
sales, decreased from 11.4% in the second quarter of 1998 to 11.0% in the second
quarter of 1999. Expenses, as a percentage of sales, declined due to the
inclusion of Cash & Carry, acquired in May 1998, which operates at lower gross
margin and expense levels than Smart & Final stores and an intensive corporate-
wide expense reduction program. These improvements were partially offset by
increased operating expenses from foodservice operations.
Interest expense, net. Interest expense, net increased from $2.4 million
in the second quarter of 1998 to $5.0 million in the second quarter of 1999.
Interest expense, net increased due to higher weighted average borrowings as
well as higher weighted average interest rates as a result of the Company's debt
restructuring in late 1998. Weighted average borrowings for the second quarter
of 1999 increased over the comparable 1998 quarter as a result of spending
required for working capital and the Company's expansion program, which includes
the 1998 Cash & Carry acquisition.
12
<PAGE>
Comparison of Twenty-Four Weeks Ended June 20, 1999 with Twenty-Four Weeks Ended
June 21, 1998.
Sales. Sales in the first half of 1999 were $816.9 million, up 14.3% from
the comparable 1998 period. Sales reflect the May 1998 acquisition of Cash &
Carry stores operations.
Store sales, including Cash & Carry, increased 24.5%, from $496.4 million
to $617.9 million in the first half of 1999. Excluding Cash & Carry, store
sales increased 7.7% in the first half of 1999 versus the same period of 1998.
Comparable store sales increased 4.2% in the first half of 1999. Average
comparable transaction size also increased 4.8% to $33.42 in the first half of
1999.
Foodservice distribution sales decreased 8.9% to $199.1 million for the
first half of 1999. This decrease is in part the result of focusing foodservice
growth on improved credit quality and profitability of foodservice distribution
business versus aggressive sales growth.
Gross Margin. Gross margin improved 17.9% from $87.6 million in the first
half of 1998 to $103.3 million in the 1999 twenty-four-week period. As a
percentage of sales, gross margin increased from 12.3% of sales for the first
half of 1998 to 12.6% in the comparable 1999 period. The increase in gross
margin percentage was due to a number of factors: higher foodservice margins
achieved by a focus on improved credit quality and profitability and reduced
distribution expenses, increased store margins due to purchasing economy and
store assortment mix and a lower overall mix of foodservice sales which carry
lower margins than store sales. The overall margin was reduced by the inclusion
of Cash & Carry, acquired in May 1998, which operates at lower gross margin and
expense levels than Smart & Final stores.
Operating and Administrative Expenses. Operating and administrative
expenses for the first half of 1999 were $92.0 million, or 11.3% of sales,
compared with $82.9 million, or 11.6% of sales, in the first half of 1998.
Lower expenses as a percentage of sales were due to the inclusion of Cash &
Carry operations, which operate at lower gross margin and expense levels than
Smart & Final stores and an intensive corporate-wide expense reduction program.
These improvements were partially offset by higher foodservice distribution
expenses including increased sales commission expenses associated with higher
foodservice distribution gross margins.
Interest Expense, net. Interest expense, net increased from $4.6 million,
or 0.6% of sales, in the first half of 1998 to $10.1 million, or 1.2% of sales,
in the comparable 1999 period. This increase was a result of higher weighted
average borrowings as well as higher weighted average interest rates as a result
of the Company's debt restructuring in late 1998.
13
<PAGE>
Financial Condition
Cash and cash equivalents were $20.9 million on January 3, 1999, and $34.4
million at June 20, 1999. Cash provided by operating activities, for the
twenty-four weeks ended June 20, 1999, was $23.2 million. The rights offering
and other stock purchase agreements generated net proceeds of $59.9 million.
Proceeds of the rights offering were used to reduce the note payable to the
Company's majority shareholder by $39.4 million and the revolving debt by $19
million. Other changes in debt were additional borrowings of $10 million and
payments of $6.5 million. Investments in fixed asset and other additions were
$13.6 million and $1.1 million of dividends were paid.
During the twenty-four weeks ended June 20, 1999, trade notes and accounts
receivable decreased $10.2 million and inventories declined by $6.8 million as a
result of a program to reduce cash investments in working capital. Other
changes in operating assets and liabilities generally reflect the timing of
receipts and disbursements. Accounts payable decreased $9.3 million and other
liabilities decreased $5.5 million while prepaid expenses decreased $4.4 million
and other accrued liabilities increased $1.5 million in the first half of 1999.
Stockholders' equity increased from $189.3 million to $249.2 million at
June 20, 1999. This increase includes the effect of the $57.9 million, net of
fees, rights offering completed during second quarter 1999, as well as a $1.2
million increase due to the issuance of stock resulting from the exercise of
stock options and other stock purchase agreements and the $0.8 million income
for the first half of 1999.
Liquidity and Capital Resources
Historically, the Company's primary source of liquidity has been cash flow
from operations. Cash provided by operating activities was $23.2 million in the
first half of 1999 and in the comparable 1998 period. At June 20, 1999, the
Company had cash of $34.4 million, compared to $20.9 million at January 3, 1999.
The Company had $157.3 million of debt, excluding capital leases, and
stockholders' equity of $249.2 million at June 20, 1999.
During second quarter, 1999, the Company completed its fixed-price rights
offering pursuant to a registration statement on Form S-3 filed in April 1999.
The offering increased stockholders' equity by $57.9 million after expenses of
the offering. The Company's majority shareholder increased its ownership by
4,271,935 shares and paid for its subscribed shares by exchanging $39.4 million
of its $55.4 million loan to the Company. The Company used the $19 million
proceeds from other stockholders to pay down its revolving loan.
As of the end of second quarter, 1999, the Company was in compliance with
financial covenants contained in its loan agreements, as amended during the
latter part of June 1999.
The Company expects to be able to fund future acquisitions and other cash
requirements by a combination of available cash, cash from operations, lease
financings and other borrowings and proceeds from the issuance of equity
securities. It believes that its sources of funds are
14
<PAGE>
adequate to provide for working capital, other capital expenditures, and debt
service requirements for the foreseeable future.
Year 2000
The Company relies on a diverse assortment of computer hardware and
software, the integrated operation of which is essential to the successful
implementation of the Company's operations. In 1996, the Company began a
comprehensive review of its information technology systems and other systems and
equipment and has developed a Year 2000 implementation program. The
implementation program has been reviewed by the Company's Board of Directors.
Full compliance and testing is scheduled to be completed by the end of third
quarter 1999.
The entire implementation program is divided into three broad systems, the
corporate systems, the store systems and the foodservice systems and the program
has two phases, the impact analysis phase and the modification or replacement
phase.
The impact analysis phase for the corporate systems, which includes the
identification of date sensitive computer codes within the systems, has been
completed. The modification or replacement phase for the corporate systems is
substantially complete with one remaining subsystem to be completed by the end
of third quarter 1999.
The impact analysis phase for the store systems has been completed and the
modification or replacement phase is to be completed by the end of third
quarter 1999. The impact analysis phase for the foodservice systems also has
been completed, and the modification or replacement phase is on schedule to be
completed by the end of the third quarter of 1999.
Except for the cost of replacement systems, the Company will expense, as
incurred, the cost of the Year 2000 program. The Company is funding the costs
associated with the Year 2000 program through operating cash flows. The Company
estimates the total incremental cost of the Year 2000 program will not exceed
$2.7 million. As of June 20, 1999, the Company had incurred approximately $1.8
million in costs with respect to the Year 2000 program.
As part of the Year 2000 project, the Company has identified relationships
with third parties, including vendors, suppliers, and service providers, which
the Company believes are critical to its business operations. The Company is in
the process of communicating with these third parties through questionnaires,
letters and interviews in an effort to determine the extent to which they are
addressing their Year 2000 issues. The Company will continue to communicate
with, assess and monitor the progress of these third parties in resolving Year
2000 issues.
The Company anticipates minimal disruptions in its operations as a result
of system failures related to Year 2000 issues. If the Company or a key third
party experiences a systems failure due to the century change, the Company
believes the most significant adverse impact would be its inability to
communicate with suppliers concerning timely delivery of inventory. Other
possible consequences include, but are not limited to, loss of communications
with stores, loss of electric power, and an inability to process customer
transactions or otherwise engage in
15
<PAGE>
similar normal business activities. The Company cannot assure that there will
not be an adverse impact on the Company if third parties do not appropriately
address their Year 2000 issues in a timely manner.
Although the Company does not believe the actual impact of these failures
will be material, the Company is currently developing a contingency plan for
possible Year 2000 issues including the delivery of inventory and processing of
customer transactions. The Company will continue to develop these plans based
on its internal testing results, tests with third parties and its assessment of
other outside risks. The Company will continually refine its contingency plan
throughout 1999, as additional information becomes available.
16
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Risk
The Company is exposed to market risks relating to fluctuations in interest
rates. The Company's objective of financial risk management is to minimize the
negative impact of interest rate fluctuations on the Company's earnings and cash
flows. Interest rate risk is managed through the use of interest rate collar
contracts to hedge principal amounts of up to $100 million. The agreements
limit LIBOR fluctuations to interest rate ranges from 4.7% to 8.0% and extend to
September 2004. These contracts are entered into with major financial
institutions thereby minimizing risk of credit loss.
Credit Risk
The Company is exposed to credit risk on accounts receivable. The Company
provides credit to customers in the ordinary course of business and performs
ongoing credit evaluations. Concentrations of credit risk with respect to trade
receivables are limited due to the number of customers comprising the Company's
customer base. The Company currently believes its allowance for doubtful
accounts is sufficient to cover customer credit risks.
Forward-Looking Statements
From time to time Smart & Final may publish forward-looking statements
about anticipated results. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that such forward-looking
statements are based upon internal estimates which are subject to change because
they reflect preliminary information and management assumptions, and that a
variety of factors could cause the Company's actual results and experience to
differ materially from the anticipated results or other expectations expressed
in the Company's forward-looking statements. The factors which could cause
actual results or outcomes to differ from such expectation include the extent of
the company's success in (i) changing market conditions (ii) unforeseen costs
and expenses (iii) ability to attract new customers and retain existing
customers (iv) gain or losses from sales along with the uncertainties (v)
increases in interest rates of the Company's cost of borrowing and other
factors, including unusually adverse weather conditions, described from time to
time in the company's SEC filing and reports. This report includes "forward-
looking statements" including, without limitation, statements as to the
Company's liquidity and availability of capital resources.
17
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The annual Meeting of Stockholders of the Company was held on May
11, 1999. At the meeting, stockholders (1) elected three directors of
the Company, (2) approved an amendment to the Company's Long-Term
Equity Compensation Plan, (3) approved two amendments to the Company's
Non-Employee Director Stock Plan and (4) ratified the selection of
Arthur Andersen LLP, independent public accountants, as auditors for
the Company for the year ending January 2, 2000.
The three directors elected at the meeting were Timm F. Crull,
Ross E. Roeder, and Joel-Andre Ornstein. The directors whose term of
office as a director continued after the meeting are Pierre B.
Bouchut, Christian P. Couvreux, James S. Gold, Antoine Guichard, David
J. McLaughlin, Thomas G. Plaskett, and Etienne Snollaerts.
The votes cast for, against, or withheld, as well as the number
of abstention and broker non-votes for each nominee for office as a
director were as follows:
<TABLE>
<CAPTION>
VOTES Broker
-------------------------------
For Against Withheld Abstentions Non-Votes
---------- ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Timm F. Crull 17,462,540 -- 644,590 -- --
Ross E. Roeder 17,461,540 -- 643,665 -- --
Joel-Andre Ornstein 17,458,790 -- 646,415 -- --
</TABLE>
The votes cast for, against, or withheld, as well as the number of
abstentions and broker non-votes for approving an amendment to the
Company's Long-Term Equity Compensation:
<TABLE>
<CAPTION>
VOTES Broker
---------------------------------
For Against Withheld Abstentions Non-Votes
---------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Approval of amend- 15,150,133 1,654,342 -- 16,444 1,284,286
ment to the Company's
Long-Term Equity
Compensation Plan
</TABLE>
18
<PAGE>
The votes cast for, against, or withheld, as well as the number of
abstentions and broker non-votes for approval of two amendments to the
Company's Non-Employee Director Stock Plan:
<TABLE>
<CAPTION>
VOTES Broker
---------------------------------
For Against Withheld Abstentions Non-Votes
---------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Approval of two 16,616,404 186,466 -- 18,050 1,284,285
Amendments to the
Company's Non-Employee
Director Stock Plan
</TABLE>
The votes cast for, against, or withheld, as well as the number of
abstentions and broker non-votes for ratification of Arthur Andersen
LLP, as auditors for the Company for the year ending January 2, 2000
were as follows:
<TABLE>
<CAPTION>
VOTES Broker
---------------------------------
For Against Withheld Abstentions Non-Votes
---------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Ratification of 18,091,422 6,845 -- 6,938 --
Arthur Andersen LLP
as auditors for the
Company for the year
ending January 2, 2000
</TABLE>
Item 5. Other information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number Description of Exhibit
-------------- ----------------------
10.89 Long-Term Equity Compensation Plan, as amended
10.119 Employment Agreement between the Company and Ross
E. Roeder* dated May 11, 1999
10.120 Smart & Final Non-Employee Director Stock Plan, as
amended*
10.121 Standby Purchase Agreement between the Company and
Casino USA, Inc. dated as of May 10, 1999
10.122 Third Amendment to Participation Agreement and
Amendment to Revolving Credit Agreement dated as
of June 23, 1999
19
<PAGE>
10.123 Addendum to Promissory Note, dated June 11, 1999,
by Smart & Final Inc. on Behalf of Casino USA,
Inc.
27 Financial Data Schedule
--------------
* Management contracts and compensatory plans, contracts and
arrangements of the Company.
(b) Reports on Form 8K
None
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the securities exchange act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SMART & FINAL INC.
By:
Date: July 30, 1999 /s/ MARTIN A. LYNCH
------------------------------------------
Martin A. Lynch
Executive Vice President,
Chief Financial Officer, and
Principal Accounting Officer of the Company
21
<PAGE>
SMART & FINAL INC.
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
10.89 Long-Term Equity Compensation Plan, as amended
10.119 Employment Agreement between the Company and Ross E.
Roeder* dated May 11, 1999
10.120 Smart & Final Non-Employee Director Stock Plan, as amended*
10.121 Standby Purchase Agreement between the Company and Casino
USA, Inc. dated as of May 10, 1999
10.122 Third Amendment to Participation Agreement and Amendment to
Revolving Credit Agreement dated as of June 23, 1999
10.123 Addendum to Promissory Note, dated June 11, 1999, by Smart
& Final Inc. on Behalf of Casino USA, Inc.
27 Financial Data Schedule
22
<PAGE>
EXHIBIT 10.89
SMART & FINAL INC.
LONG-TERM EQUITY COMPENSATION PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1. Establishment of the Plan. Smart & Final Inc., a Delaware corporation
(hereinafter referred to as the "Company"), hereby establishes an incentive
compensation plan to be known as the "Smart & Final Inc. Long-Term Equity
Compensation Plan" (hereinafter referred to as the "Plan"), as set forth in this
document. The Plan permits the grant of Nonqualified Stock Options, Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Shares
and Performance Units.
The Plan shall become effective as of February 21, 1997 (the "Effective Date")
and shall remain in effect as provided in Section 1.3 hereof.
1.2. Objectives of the Plan. The objectives of the Plan are to optimize
the profitability and growth of the Company through incentives which are
consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's stockholders; to provide Participants
with an incentive for excellence in individual performance; and to promote
teamwork among Participants.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants who make
significant contributions to the Company's success and to allow Participants to
share in the success of the Company.
1.3. Duration of the Plan. The Plan shall commence on the Effective Date,
as described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 15 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Award be granted under the Plan on or after December 31, 2006.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1. "Award" means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Shares or Performance Units.
2.2. "Award Agreement" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan.
2.3. "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.4. "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.5. "Change in Control" of the Company shall be deemed to have occurred
(as of a particular day, as specified by the Board) upon the occurrence of any
event described in this Section 2.5 as constituting a Change in Control.
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<PAGE>
A Change in Control will be deemed to have occurred as of the first day any
one (1) or more of the following paragraphs shall have been satisfied:
(a) Any Person (other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or a corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company), becomes the Beneficial Owner, directly or indirectly, of
securities of the Company, representing more than thirty-five percent
(35%) of the combined voting power of the Company's then outstanding
securities; or
(b) During any period of two (2) consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning
of such period constitute the Board (and any new Director, whose
election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the Directors then still in office who either
were Directors at the beginning of the period or whose election or
nomination for election was so approved), cease for any reason to
constitute a majority thereof; or
(c) The stockholders of the Company approve: (i) a plan of complete
liquidation of the Company; or (ii) an agreement for the sale or
disposition of all or substantially all the Company's assets; or (iii)
a merger, consolidation, or reorganization of the Company with or
involving any other corporation, other than a merger, consolidation, or
reorganization that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least sixty-five percent (65%)
of the combined voting power of the voting securities of the Company
(or such surviving entity) outstanding immediately after such merger,
consolidation, or reorganization.
However, in no event shall a Change in Control be deemed to have occurred, with
respect to a Participant, if that Participant is part of a purchasing group
which consummates the Change-in-Control transaction. The Participant shall be
deemed "part of a purchasing group" for purposes of the preceding sentence if
the Participant is an equity participant or has agreed to become an equity
participant in the purchasing company or group (except for (i) passive ownership
of less than three percent (3%) of the voting equity securities of the
purchasing company; or (ii) ownership of equity participation in the purchasing
company or group which is otherwise deemed not to be significant, as determined
prior to the Change in Control by a majority of the continuing Nonemployee
Directors).
2.6. "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.7. "Committee" means the Compensation Committee of the Board, as
specified in Article 3 herein, or such other Committee appointed by the Board to
administer the Plan with respect to grants of Awards.
2.8. "Company" means Smart & Final Inc., a Delaware corporation, including
any and all Subsidiaries, and any successor thereto as provided in Article 18
herein.
2.9. "Director" means any individual who is a member of the Board of
Directors of the Company.
2.10. "Disability" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan, or if no such plan exists, at
the discretion of the Committee.
2.11. "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.12. "Employee" means any full-time, active employee of the Company.
Directors who are not employed by the Company shall not be considered Employees
under this Plan.
2.13. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
A-2
<PAGE>
2.14. "Fair Market Value" shall be determined on the basis of the closing
sale price on the principal securities exchange on which the Shares are traded
or, if there is no such sale on the relevant date, then on the last previous day
on which a sale was reported.
2.15. "Freestanding SAR" means an SAR that is granted independently of any
Options, as described in Article 7 herein.
2.16. "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
2.17. "Insider" shall mean an individual who is, on the relevant date, an
officer, director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.18. "Named Executive Officer" means a Participant who, as of the date of
vesting and/or payout of an Award, as applicable, is one of the group of
"covered employees," as defined in the regulations promulgated under Code
Section 162(m), or any successor statute.
2.19. "Nonemployee Director" means an individual who is a member of the
Board of Directors of the Company but who is not an Employee of the Company.
2.20. "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
2.21. "Option" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
2.22. "Option Price" or "Exercise Price" means the price at which a Share
may be purchased by a Participant pursuant to an Option.
2.23. "Participant" means an Employee who has outstanding an Award granted
under the Plan. The term "Participant" shall not include Nonemployee Directors.
2.24. "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.25. "Performance Share" means an Award granted to a Participant, as
described in Article 9 herein.
2.26. "Performance Unit" means an Award granted to a Participant, as
described in Article 9 herein.
2.27. "Period of Restriction" means the period during which the transfer
of Shares of Restricted Stock is limited in some way (based on the passage of
time, the achievement of performance goals, or upon the occurrence of other
events as determined by the Committee, at its discretion), and the Shares are
subject to a substantial risk of forfeiture, as provided in Article 8 herein.
2.28. "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.29. "Restricted Stock" means an Award granted to a Participant pursuant
to Article 8 herein.
2.30. "Retirement" shall have the meaning ascribed to such term in the
Company's tax-qualified retirement plan.
A-3
<PAGE>
2.31. "Shares" means the shares of common stock of the Company.
2.32. "Stock Appreciation Right" or "SAR" means an Award, granted alone or
in connection with a related Option, designated as an SAR, pursuant to the terms
of Article 7 herein.
2.33. "Subsidiary" means any corporation, partnership, joint venture, or
other entity in which the Company has a majority voting interest (including all
division, affiliates, and related entities).
2.34. "Tandem SAR" means an SAR that is granted in connection with a
related Option pursuant to Article 7 herein, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Option (and when a
Share is purchased under the Option, the Tandem SAR shall similarly be
canceled).
ARTICLE 3. ADMINISTRATION
3.1. The Committee. The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the Board. The
members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors.
3.2. Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees who
shall participate in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or instrument entered
into under the Plan as they apply to Employees; establish, amend, or waive rules
and regulations for the Plan's administration as they apply to Employees; and
(subject to the provisions of Article 15 herein) amend the terms and conditions
of any outstanding Award to the extent such terms and conditions are within the
discretion of the Committee as provided in the Plan. Further, the Committee
shall make all other determinations which may be necessary or advisable for the
administration of the Plan, as the Plan applies to Employees. As permitted by
law, the Committee may delegate its authority as identified herein.
3.3. Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its stockholders, Employees, Participants, and their
estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1. Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.2 herein, the number of Shares hereby reserved for
issuance to Participants under the Plan shall be two million four hundred
seventy thousand (2,470,000). The Compensation Committee shall determine the
appropriate methodology for calculating the number of shares issued pursuant to
the Plan.
Unless and until the Committee determines that an Award to a Named Executive
Officer shall not be designed to comply with the Performance-Based Exception,
the following rules shall apply to grants of such Awards under the Plan:
(a) Stock Options: The maximum aggregate number of Shares that may be
granted in the form of Stock Options, pursuant to any Award granted in
any one fiscal year to any one single Participant shall be one hundred
thousand (100,000).
(b) SARs: The maximum aggregate number of Shares that may be granted in the
form of Stock Appreciation Rights, pursuant to any Award granted in any
one fiscal year to any one single Participant shall be one hundred
thousand (100,000).
(c) Restricted Stock: The maximum aggregate grant with respect to Awards of
Restricted Stock granted in any one fiscal year to any one Participant
shall be one hundred thousand (100,000) Shares.
A-4
<PAGE>
(d) Performance Shares/Performance Units: The maximum aggregate payout with
respect to Awards of Performance Shares or Performance Units granted in
any one fiscal year to any one Participant shall be the value of two
million dollars ($2 million) at the end of the Performance Period.
4.2. Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368) or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of Shares which may be delivered under
Section 4.1, in the number and class of and/or price of Shares subject to
outstanding Awards granted under the Plan, and in the Award limits set forth in
subsections 4.1(a) and 4.1(b), as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1. Eligibility. Persons eligible to participate in this Plan include all
Employees and members of the Board of the Company and its subsidiaries.
5.2. Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.
ARTICLE 6. STOCK OPTIONS
6.1. Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee.
6.2. Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Code Section 422, or an
NQSO whose grant is intended not to fall under the provisions of Code Section
422.
6.3. Option Price. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted.
6.4. Duration of Options. Each Option granted to an Employee shall expire
at such time as the Committee shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.
6.5. Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
6.6. Payment. Options granted under this Article 6 shall be exercised by
the delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
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The Option Price upon exercise of any Option shall be payable to the Company
in full either: (a) in cash or its equivalent, or (b) by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price (provided that the Shares which are tendered
must have been held by the Participant for at least six (6) months prior to
their tender to satisfy the Option Price), or (c) by a combination of (a) and
(b).
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Committee determines to be consistent with the
Plan's purpose and applicable law.
Subject to any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment, the Company
shall deliver to the Participant, in the Participant's name, Share certificates
in an appropriate amount based upon the number of Shares purchased under the
Option(s).
6.7. Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.
6.8. Termination of Employment. Each Participant's Option Award Agreement
shall set forth the extent to which the Participant shall have the right to
exercise the Option following termination of the Participant's employment with
the Company. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Participant, need not be uniform among all Options issued pursuant to this
Article 6, and may reflect distinctions based on the reasons for termination of
employment.
6.9. Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further,
all ISOs granted to a Participant under the Plan shall be exercisable
during his or her lifetime only by such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6 may
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant's
Award Agreement, all NQSOs granted to a Participant under this Article
6 shall be exercisable during his or her lifetime only by such
Participant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1. Grant of SARs. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SAR.
The Committee shall have complete discretion in determining the number of SARs
granted to each Participant (subject to Article 4 herein) and, consistent with
the provisions of the Plan, in determining the terms and conditions pertaining
to such SARs.
The grant price of a Freestanding SAR shall equal the Fair Market
Value of a Share on the date of grant of the SAR. The grant price of Tandem SARs
shall equal the Option Price of the related Option.
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7.2. Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of this Plan to the contrary, with respect
to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR will
expire no later than the expiration of the underlying ISO; (ii) the value of the
payout with respect to the Tandem SAR may be for no more than one hundred
percent (100%) of the difference between the Option Price of the underlying ISO
and the Fair Market Value of the Shares subject to the underlying ISO at the
time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only
when the Fair Market Value of the Shares subject to the ISO exceeds the Option
Price of the ISO.
7.3. Exercise of Freestanding SARs. Freestanding SARs may be exercised
upon whatever terms and conditions the Committee, in its sole discretion,
imposes upon them.
7.4. SAR Agreement. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the grant price, the term of the SAR, and such
other provisions as the Committee shall determine.
7.5. Term of SARs. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed ten (10) years.
7.6. Payment of SAR Amount. Upon exercise of an SAR, a Participant shall
be entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the date of
exercise over the grant price; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.
7.7. Termination of Employment. Each SAR Award Agreement shall set forth
the extent to which the Participant shall have the right to exercise the SAR
following termination of the Participant's employment with the Company and/or
its subsidiaries. Such provisions shall be determined in the sole discretion of
the Committee, shall be included in the Award Agreement entered into with
Participants, need not be uniform among all SARs issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of employment.
7.8. Nontransferability of SARs. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant.
ARTICLE 8. RESTRICTED STOCK
8.1. Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine. Without limiting the generality of the foregoing, Shares of
Restricted Stock may be granted in connection with payouts under other
compensation programs of the Company.
8.2. Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Committee shall determine.
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8.3. Transferability. Except as provided in this Article 8, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee and specified in the Restricted Stock
Award Agreement, or upon earlier satisfaction of any other conditions, as
specified by the Committee in its sole discretion and set forth in the
Restricted Stock Award Agreement. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be available during his or
her lifetime only to such Participant.
8.4. Other Restrictions. The Committee may impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock,
restrictions based upon the achievement of specific performance goals (Company-
wide, divisional, and/or individual), time-based restrictions on vesting
following the attainment of the performance goals, and/or restrictions under
applicable Federal or state securities laws.
The Company shall retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 8, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.
8.5. Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
8.6. Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying Shares
while they are so held. The Committee may apply any restrictions to the
dividends that the Committee deems appropriate. Without limiting the generality
of the preceding sentence, if the grant or vesting of Restricted Shares granted
to a Named Executive Officer is designed to comply with the requirements of the
Performance-Based Exception, the Committee may apply any restrictions it deems
appropriate to the payment of dividends declared with respect to such Restricted
Shares, such that the dividends and/or the Restricted Shares maintain
eligibility for the Performance-Based Exception.
8.7. Termination of Employment. Each Restricted Stock Award Agreement
shall set forth the extent to which the Participant shall have the right to
receive unvested Restricted Shares following termination of the Participant's
employment with the Company. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement entered
into with each Participant, need not be uniform among all Shares of Restricted
Stock issued pursuant to the Plan, and may reflect distinctions based on the
reasons for termination of employment; provided, however that, except in the
cases of terminations connected with a Change in Control and terminations by
reason of death or Disability, the vesting of Shares of Restricted Stock which
qualify for the Performance-Based Exception and which are held by Named
Executive Officers shall occur at the time they otherwise would have, but for
the employment termination.
ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1. Grant of Performance Units/Shares. Subject to the terms of the Plan,
Performance Units and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee.
9.2. Value of Performance Units/Shares. Each Performance Unit shall have
an initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will determine
the number and/or value of Performance Units/Shares that will be paid out to the
Participant. For purposes of this Article 9, the time period during which the
performance goals must be met shall be called a "Performance Period."
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9.3. Earning of Performance Units/Shares. Subject to the terms of this
Plan, after the applicable Performance Period has ended, the holder of
Performance Units/Shares shall be entitled to receive payout on the number and
value of Performance Units/Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance goals have been achieved.
9.4. Form and Timing of Payment of Performance Units/ Shares. Payment of
earned Performance Units/Shares shall be made in a single lump sum following the
close of the applicable Performance Period. Subject to the terms of this Plan,
the Committee, in its sole discretion, may pay earned Performance Units/Shares
in the form of cash or in Shares (or in a combination thereof) which have an
aggregate Fair Market Value equal to the value of the earned Performance
Units/Shares at the close of the applicable Performance Period. Such Shares may
be granted subject to any restrictions deemed appropriate by the Committee.
At the discretion of the Committee, Participants may be entitled to receive
any dividends declared with respect to Shares which have been earned in
connection with grants of Performance Units and/or Performance Shares which have
been earned, but not yet distributed to Participants (such dividends shall be
subject to the same accrual, forfeiture, and payout restrictions as apply to
dividends earned with respect to Shares of Restricted Stock, as set forth in
Section 8.6 herein). In addition, Participants may, at the discretion of the
Committee, be entitled to exercise their voting rights with respect to such
Shares.
9.5. Termination of Employment Due to Death, Disability, or Retirement.
Unless determined otherwise by the Committee and set forth in the Participant's
Award Agreement, in the event the employment of a Participant is terminated by
reason of death, Disability, or Retirement during a Performance Period, the
Participant shall receive a payout of the Performance Units/Shares which is
prorated, as specified by the Committee in its discretion.
Payment of earned Performance Units/Shares shall be made at a time specified
by the Committee in its sole discretion and set forth in the Participant's Award
Agreement. Notwithstanding the foregoing, with respect to Named Executive
Officers who retire during a Performance Period, payments shall be made at the
same time as payments are made to Participants who did not terminate employment
during the applicable Performance Period.
9.6. Termination of Employment for Other Reasons. In the event that a
Participant's employment terminates for any reason other than those reasons set
forth in Section 9.5 herein, all Performance Units/Shares shall be forfeited by
the Participant to the Company unless determined otherwise by the Committee, as
set forth in the Participant's Award Agreement.
9.7. Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participant's Award Agreement, a Participant's rights under the Plan shall be
exercisable during the Participant's lifetime only by the Participant or the
Participant's legal representative.
ARTICLE 10. PERFORMANCE MEASURES
Unless and until the Committee proposes for shareholder vote and shareholders
approve a change in the general performance measures set forth in this Article
10, the attainment of which may determine the degree of payout and/or vesting
with respect to Awards to Named Executive Officers which are designed to qualify
for the Performance-Based Exception, the performance measure(s) to be used for
purposes of such grants shall be chosen from among profits, net income (either
before or after taxes), share price, earnings per share, return on assets,
return on equity, operating income, return on capital, return on investment,
shareholder return, sales, customer service, employee satisfaction, or economic
value added.
The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the preestablished performance goals; provided, however,
that Awards which are designed to qualify for the
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Performance-Based Exception, and which are held by Named Executive Officers, may
not be adjusted upward (the Committee shall retain the discretion to adjust such
Awards downward).
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining shareholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards which shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).
ARTICLE 11. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant's lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate.
ARTICLE 12. DEFERRALS
The Committee may permit or require a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such Participant by virtue of the exercise of an Option or SAR, the lapse
or waiver of restrictions with respect to Restricted Stock, or the satisfaction
of any requirements or goals with respect to Performance Units/Shares. If any
such deferral election is required or permitted, the Committee shall, in its
sole discretion, establish rules and procedures for such payment deferrals.
ARTICLE 13. RIGHTS OF EMPLOYEES
13.1. Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.
13.2. Participation. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
ARTICLE 14. CHANGE IN CONTROL
14.1. Treatment of Outstanding Awards. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges:
(a) Any and all Options and SARs granted hereunder shall become immediately
exercisable, and shall remain exercisable throughout their entire term;
(b) Any restriction periods and restrictions imposed on Restricted Shares
shall lapse;
(c) The target payout opportunities attainable under all outstanding Awards
of Restricted Stock, Performance Units and Performance Shares shall be
deemed to have been fully earned for the entire Performance Period(s)
as of the effective date of the Change in Control. The vesting of all
Awards denominated in Shares shall be accelerated as of the effective
date of the Change in Control, and there shall be paid out in cash to
Participants within thirty (30) days following the effective date of
the Change in Control a pro rata amount based upon an assumed
achievement of all relevant performance goals and upon the length of
time within the Performance Period which has elapsed prior to the
Change in Control.
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14.2. Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 14 may not be terminated,
amended, or modified on or after the date of a Change in Control to affect
adversely any Award theretofore granted under the Plan without the prior written
consent of the Participant with respect to said Participant's outstanding
Awards; provided, however, the Board of Directors, upon recommendation of the
Committee, may terminate, amend, or modify this Article 14 at any time and from
time to time prior to the date of a Change in Control.
ARTICLE 15. AMENDMENT, MODIFICATION, AND TERMINATION
15.1. Amendment, Modification, and Termination. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, however, that no amendment which requires shareholder
approval in order for the Plan to continue to comply with Rule 16b-3 under the
Exchange Act, including any successor to such Rule, shall be effective unless
such amendment shall be approved by the requisite vote of shareholders of the
Company entitled to vote thereon.
15.2. Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.3 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan; provided that no such adjustment
shall be authorized to the extent that such authority would be inconsistent with
the Plan's meeting the requirements of Section 162(m) of the Code, as from time
to time amended.
15.3. Awards Previously Granted. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award.
15.4. Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Committee determines that such compliance is not desired with respect to any
Award or Awards available for grant under the Plan, then compliance with Code
Section 162(m) will not be required. In addition, in the event that changes are
made to Code Section 162(m) to permit greater flexibility with respect to any
Award or Awards available under the Plan, the Committee may, subject to this
Article 15, make any adjustments it deems appropriate.
ARTICLE 16. WITHHOLDING
16.1. Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan.
16.2. Share Withholding. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock,
or upon any other taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax which could be imposed on the transaction.
All such elections shall be irrevocable, made in writing, signed by the
Participant, and shall be subject to any restrictions or limitations that the
Committee, in its sole discretion, deems appropriate.
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ARTICLE 17. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgement in any such action, suit, or proceeding against him or her, provided
he or she shall give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and defend it on his
or her own behalf. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation of Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
ARTICLE 18. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 19. LEGAL CONSTRUCTION
19.1. Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
19.2. Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
19.3. Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
19.4. Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions or Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
plan or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.
19.5. Governing Law. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the state of Delaware.
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Exhibit 10.119
SMART & FINAL, INC
600 Citadel Drive
Commerce, California 90040
As of January 1, 1999
Ross E. Roeder
Dear Ross:
Smart & Final Inc., a Delaware corporation (the "Company"), is pleased
to offer you employment in accordance with the terms of this Agreement:
1. Position. You will serve in a substantially full-time capacity
and will devote substantially all of your full-time efforts as the Chairman and
Chief Executive Officer of the Company and shall report exclusively to the Board
of Directors of the Company (the "Board"). In devoting your full-time efforts
you will be available on weekends and Company holidays as you deem necessary to
perform your duties. You will have duties, authorities and responsibilities
commensurate with your position as Chairman and Chief Executive Officer of the
Company. Upon the expiration of your term as a director during the Employment
Term, the Company will recommend you for re-election to the Board. You will, of
course, be allowed to participate in charitable, community or industry affairs,
to manage your and any family investments and to serve on the board of directors
of other companies which are not in direct competition with the Company to the
extent that such activities do not materially interfere with the performance of
your duties hereunder or create a conflict of interest.
2. Term. The term of your employment under this Agreement (the
"Employment Term") shall commence as of January 1, 1999 (the "Commencement
Date") and, unless terminated earlier as provided in Section 9 below, shall
terminate on December 31, 2001 (the "Original Employment Term") except that the
Employment Term shall be automatically extended, subject to earlier termination
as provided in Section 9 below, for an additional two (2) year period
terminating December 31, 2003 unless either (i) prior to June 30, 2001, the
Company has given you written notice (the "Notice of Non-Renewal") that the
Employment Term shall terminate at the end of the Original Employment Term or
(ii) if the Notice of Non-Renewal is not delivered to you in accordance with (i)
above, you give the Company, written notice, prior to July 31, 2001, that the
Employment Term shall terminate at the end of the Original Employment Term.
3. Base Salary. During the Employment Term, the Company shall pay
you an annual base salary (the "Base Salary") in an amount not less than Six
Hundred Thousand Dollars ($600,000) in accordance with the Company's normal
payroll practices for senior executives. Base Salary shall be reviewed at least
annually for increase (but not decrease) by the
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Compensation Committee of the Board (the "Committee"). If so increased, the Base
Salary shall not be thereafter decreased and shall thereafter, as increased, be
the Base Salary hereunder.
4. Annual Bonus. For each calendar year and portion thereof during
the Employment Term, commencing with the 1999 calendar year, you shall be
eligible to participate in a performance-based annual bonus plan which provides
you with a minimum annual target bonus amount of not less than one hundred
percent (100%) of your then current Base Salary. The criteria upon which such
performance targets are based shall be determined by the Board in consultation
with you and may include Company sales and/or earnings per share or such other
criteria as agreed upon by the parties hereto. The annual performance targets
must be reasonably attainable and shall be established by the mutual agreement
of the parties hereto.
5. Office/Expenses/Relocation. While your principal office for
purposes of your employment with the Company will be at the Company's
headquarters in Commerce, California, you have indicated that you intend to
retain a residence, including an office for the performance of your duties
hereunder, in St. Petersburg, Florida. The Company will reimburse you for your
reasonable business, entertainment and travel expenses related to your services
on behalf of the Company, including, but not limited to, your travel expenses
between Florida and the Company's headquarters. If at any time during the
Employment Term you desire to acquire a residence in the Los Angeles area, the
Company will reimburse you for your reasonable moving and relocation expenses
and provide you with temporary housing consistent with the Company's policy for
relocating senior executives (with a Tax Gross Up, which term shall have the
meaning set forth in Section 18).
6. Restricted Stock.
a. Simultaneous with the execution of this Agreement, the Company
shall award you a bonus in the form of Fifty Thousand (50,000) restricted shares
of the Company's common stock (the "Restricted Stock") under the Company's Long
Term Equity Compensation Plan (the "Equity Plan") in accordance with the terms
of the Restricted Stock Agreement annexed as Attachment A hereto. The
Restricted Stock shall fully vest on February 17, 2000, or, if earlier, on such
date that the Company's common stock (the "Common Stock") fully attains the
Common Stock trading price target set forth in the Restricted Stock Agreement,
provided that, in either case, you are in continuous service with the Company as
an employee through such date. Notwithstanding the foregoing, in the event of a
Change in Control of the Company (as defined in Exhibit A hereto), your
termination due to death or Disability, a termination without Cause or a
termination with Good Reason, all shares of Restricted Stock shall immediately
vest. In addition, in the event that the stockholders of the Company engage in
a transaction that causes the Company to cease to be subject to the reporting
obligations of the Securities Exchange Act of 1934, as amended (a "Going Private
Transaction"), (i) all shares of Restricted Stock shall fully vest twenty (20)
business days prior to the consummation of such transaction, (ii) you shall have
the same rights and privileges with regard to the vested shares of Restricted
Stock as the selling stockholders of the Company in such transaction on a pari
----
passu basis, and (iii) the Company shall provide you with a replacement
- -----
incentive on a going-forward
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basis that provides substantially equivalent economic value to you and
recognizes, for vesting purposes, your prior service under this Agreement. It is
intended that you will receive an additional award of restricted stock in
February 2000 which will have terms that are not less favorable to you than
those applicable to the Restricted Stock and will be for at least 1.5 times the
number of shares of restricted stock that are then granted to any other
executive of the Company.
b. In the event that you file an election pursuant to Section 83(b)
of the Internal Revenue Code of 1986, as amended (the "Code"), to be taxed with
respect to the fair market value of the Restricted Stock (or any future grant of
restricted stock you receive from the Company) on the date such shares are
transferred to you (the "83(b) Tax"), the Company will provide you with a loan,
to be evidenced by a promissory note (the "Note"), with a principal amount equal
to the amount of taxes payable on the compensation recognized as a result of the
shares of restricted stock and the 83(b) election. The principal amount of the
Note will be due and payable on December 31, 2001 or, if earlier, on your
termination due to death or Disability, termination without Cause, termination
with Good Reason or termination pursuant to Section 11b. below. The Note,
including all accrued and unpaid interest thereon, will be unsecured, but with
full recourse. The interest rate of the Note will be equal to the minimum
applicable federal rate, published by the Internal Revenue Service for the month
during which the Note is executed, that is necessary to avoid imputed interest
income under the Code, and such interest amount will be payable on each
anniversary of the date of execution of the Note. You will receive a bonus at
the same time an interest payment is due equal to the amount of the interest
then accrued and payable under the Note plus a Tax Gross Up to the extent the
interest is not deductible to you. The Company may apply the bonus and Tax
Gross Up to pay the interest then due on the Note and for required withholding,
respectively. Subject to the proviso below, a bonus in an amount equal to one
hundred percent (100%) of the total principal due under the Note, will be given
to you on December 31, 2001; provided that such bonus will be paid, if earlier,
on your termination due to death or Disability, termination without Cause,
termination with Good Reason or termination pursuant to Section 11b. below. The
bonus may be applied by the Company to reduce the principal on the Note. You
will also receive a Tax Gross Up with each bonus. The Tax Gross Up for this
Section 6 shall be calculated as if your aggregate tax rate (including all
federal, state, and local income and payroll taxes) is 48.9%.
7. Stock Options. Simultaneous with your execution of this
Agreement, the Committee shall grant you non-qualified stock options (the
"Options") to purchase Two Hundred Thousand (200,000) shares of Common Stock at
an exercise price equal to the price of the "Casino Rights Offer" or, if such
offering does not occur within sixty (60) days of your execution of this
Agreement, at a price per share equal to the fair market value of the Common
Stock on the date of execution of this Agreement pursuant to the Equity Plan in
accordance with the terms of the Stock Option Agreement annexed as Attachment B
hereto. The Options shall be for a ten (10) year term. Options to purchase
66,667 shares of the Common Stock will vest and become exercisable on December
31, 1999, Options to purchase an additional 66,666 shares of the Common Stock
will vest and become exercisable on December 31, 2000 and Options to
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<PAGE>
purchase the remaining 66,666 shares of the Common Stock will vest on December
31, 2001, provided that, in each instance, you are in continuous service with
the Company as an employee through the applicable date. Notwithstanding the
foregoing, in the event of a Change in Control of the Company, your termination
due to death or Disability, a termination without Cause, termination of the
Employment Term at the end of the Original Employment Term following a notice
from you pursuant to Section 2 above, or a termination with Good Reason, all
then outstanding Options shall immediately vest and shall remain exercisable for
the two (2) year period following your date of termination of employment, but in
no event beyond the expiration of their stated term. In the event of your
termination without Good Reason, all then vested Options shall remain
exercisable for a period of ninety (90) days, but in no event beyond the
expiration of their stated term. In addition, in the event of a Going-Private
Transaction, (i) all Options shall fully vest twenty (20) business days prior to
the consummation of such transaction, (ii) you shall have the same rights and
privileges with regard to the shares subject to, or acquired through, the
Options as the selling stockholders of the Company in such transaction on a pari
passu basis, and (iii) the Company shall provide you with replacement incentives
- ---- -----
on a going-forward basis that provides substantially equivalent economic value
to you and recognizes, for vesting purposes, your prior service under this
Agreement. It is intended that, during the Employment Term, you will receive
additional grants of stock options in February of each year which will have
terms that are not less favorable to you than those applicable to the Stock
Options and which will be to purchase at least 1.5 times the number of shares
that are covered by any stock options then granted to any other executive of the
Company. During the Employment Term, the Company will file and maintain Forms S-
3 and/or Forms S-8 as reasonably requested by you with regard to the shares of
Common Stock under Sections 6 and 7.
8. Employee/Fringe Benefits. You will be eligible to participate in
all employee benefit, welfare, retirement, equity and fringe plans, programs and
perquisites that are offered from time to time to senior executives of the
Company at a level commensurate with your positions in accordance with the terms
of such plans, programs and perquisites. Your service on the Board will be
recognized for all purposes under all of the Company's plans and programs (other
than retirement plans qualified under Section 401(a) of the Code or the
Supplemental Executive Retirement Plan). In addition, the Company shall provide
you with the following benefits:
a. Effective as of the Commencement Date, you shall be entitled
to a benefit under the Supplemental Executive Retirement Plan (the "SERP")
following your retirement from the Company in accordance with its terms and
conditions, provided that such benefit shall be not less than One Hundred
Twenty-Five Thousand Dollars ($125,000) per year in the form of a single life
annuity or, if you elect, a joint-and-survivor benefit, in an amount which shall
be actuarially equivalent to such single life annuity. The Company agrees to
make any modifications to the SERP which are necessary to provide for such
benefit and to make contributions to the SERP in a manner consistent with the
funding provided for other SERP participants. Except in the case of your
termination with Cause, all forfeiture provisions under
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the SERP shall not apply and your termination of employment with the Company for
any other reason shall be deemed a retirement under the SERP.
b. During the Employment Term, the Company shall (i) pay you an
automobile allowance of One Thousand Dollars ($1,000) per month, (ii) reimburse
you for maintenance expenses for such automobile not exceeding Two Thousand Five
Hundred Dollars ($2,500) per calendar year and for operating expenses (including
gasoline) in accordance with the Company's written policies, and (iii) pay your
insurance premiums for such automobile.
c. During the Employment Term, the Company shall pay your
financial planning expenses with AYCO (or a similar financial services provider
as agreed by the parties hereto) up to a limit of Fifteen Thousand Dollars
($15,000).
d. During the Employment Term, you shall be entitled to paid
vacation of a minimum of five (5) weeks per calendar year, in accordance with
the standard written policy of the Company.
e. During the Employment Term, the Company will provide you with
a long term disability policy providing disability benefits of at least sixty
percent (60%) of your Base Salary to the extent available on reasonable
commercial terms or, alternatively, include you in any then existing Company
long term policy provided for other Company senior executives at the level
provided in such policy. In addition, you shall receive a Tax Gross Up on any
pre-tax contributions you make towards such long term disability policy.
f. The Company shall provide you and any spouse full retiree
medical insurance coverage (as defined under the Company's current retiree
medical insurance arrangement) and shall pay the premiums for such coverage for
the remainder of your lives in the event of your termination of employment due
to death, Disability, termination without Cause, termination with Good Reason,
or termination pursuant to Section 11b. below.
9. Termination of Employment Term. The Employment Term and your
employment with the Company shall terminate earlier than as provided under
Section 2 above, as follows:
a. Termination by the Company with Cause (as defined in Section
10), provided that the Company delivers written notice (which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
such termination) within ninety (90) days of the Board's discovery of the Cause
event and such termination has been approved by at least two-thirds (2/3) of the
Board at a meeting at which you and your counsel had the right to appear and
address;
b. Termination by the Company Without Cause. Termination by the
Company without Cause shall include the termination of the Employment Term at
the end of the Original Employment Term following the giving of a Notice of Non-
Renewal by the Company
5
<PAGE>
pursuant to Section 2 above, and such termination shall be deemed a termination
by the Company without Cause for the purposes of all of the provisions of this
Agreement. Following the giving of a Notice of Non-Renewal by the Company, you
may terminate the Employment Term effective at any time.
c. Termination by you with or without Good Reason (as defined in
Section 10);
d. Your death; or
e. Your Disability termination, which shall mean termination by
the Company because of your inability as a result of physical or mental
incapacity to perform your material duties for one hundred eighty (180)
consecutive days. The Company may only give notice of a Disability termination
while you are so incapacitated.
10. Consequences of a Termination.
a. In the event of any termination you shall receive your accrued
but unpaid Base Salary, unpaid expenses, any unpaid annual bonuses or Tax Gross
Up for any period prior to the termination, any unpaid bonuses (or pro rata
minimum bonuses) under Section 4 above earned for the months in the current
period prior to your termination and the benefits provided under Sections 6 and
7 to the extent applicable (collectively, the "Accrued Obligations").
b. In the event that the Company terminates your employment
without Cause or you terminate your employment with Good Reason, in addition to
any Accrued Obligations, you will also receive the following severance benefits:
i. Continued payment on a monthly basis of your then current
monthly Base Salary (without future increase) for the greatest of the following
periods: (A) the number of months that were remaining in the then current
Employment Term immediately prior to such termination, (B) twelve (12) months or
(C) if the termination without Cause follows the giving of a Notice of Non-
Renewal by the Company under Section 2, above, twenty-four (24) months (the
"Severance Period");
ii. Payment on a monthly basis during each month of the
Severance Period of an amount equal to your annual bonus target for the last
Company fiscal year completed prior to the date of termination divided by twelve
(12);
iii. Payment of you and your spouse's COBRA continuation
coverage premiums for eighteen (18) months but in no event beyond the date you
and your spouse cease to be eligible for COBRA coverage and, thereafter, you and
your spouse shall be entitled to the retiree health benefits provided in Section
8f. above;
6
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iv. As provided in Sections 6 and 7 above with regard to
your Restricted Stock and Stock Options;
v. Additional service and compensation credit (at your then
current level) under the SERP through your attainment of age sixty-five (65);
vi. During the Severance Period, you will continue to
participate in all Company fringe and employee benefit plans, programs and
arrangements (without duplication of benefits otherwise provided herein) on the
same after tax-basis as during your active employment except for the SERP and
the Company's tax-qualified retirement plans and equity plans and programs; and
vii. The disability policy (including Tax Gross Up) provided
for in Section 8 e. above for the twenty-four (24) month period ending December
31, 2003 if the Employment Term terminates at the end of the Original Employment
Term pursuant to Section 2 above.
c. In the event that you give notice to terminate the Employment Term
at the end of the Original Employment Term pursuant to Section 2 above, you
shall be entitled to continued payment on a monthly basis of your then current
monthly Base Salary (without future increase) for a period of twelve (12) months
from the end of the Original Employment Term.
d. Cause means (i) your willful misconduct with respect to the
Company which has a material adverse effect on the Company; (ii) your conviction
of a felony; (iii) your willful failure to follow lawful and reasonable
direction of the Board that is not cured within ten (10) days after your receipt
of written notice specifying the details thereof; (iv) your willful, proven
violation of the Company's policy against sexual harassment involving physical
contact or solicitation of a sexual act which, in either case, has a material
adverse impact on the Company; (v) your willful misrepresentations to the Board
or your theft, fraud, embezzlement (other than good faith expense accounts
disputes) which, in any case, has a material adverse effect on the Company; or
(vi) your other material breach of this Agreement that is not cured within
twenty (20) days after your receipt of written notice specifying the details
thereof. No action shall be deemed willful if taken by you in good faith as not
being adverse to the best interests of the Company.
e. Good Reason means (i) a diminution in title or reporting lines or
a material diminution in your authority, duties or responsibilities; (ii) a
relocation of your principal office without your consent; (iii) the failure to
pay your Base Salary or any other material breach of this Agreement by the
Company that remains uncured after you have given the Company ten (10) days
written notice of such breach; (iv) the failure of any Successor to assume this
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Agreement in a writing delivered to you; or (v) your failure to be re-elected to
the Board or appointed as Chairman of the Board during the Employment Term.
11. Change in Control Benefits.
a. In the event of a Qualifying Termination during the period
commencing one-hundred eighty (180) days prior to the date of a Change in
Control and terminating on the second anniversary of the date of a Change in
Control, then, in lieu of the benefits provided to you under Section 10 above,
the Company shall pay you the following amounts within (except as otherwise
provided) ten (10) business days of the Qualifying Termination (or, if later,
the date of the Change in Control) and provide the following benefits:
i. Any Accrued Obligations.
ii. A lump-sum cash payment equal to three (3) times your
highest rate of Base Salary in effect at any time up to and including the date
of your termination.
iii. A lump-sum cash payment equal to three (3) times the
greater of: (i) your highest annual bonus earned over the three (3) fiscal years
ending prior to the earlier of the Change in Control or the Qualifying
Termination; or (ii) your annual bonus target for the fiscal year if
termination.
iv. To the extent eligible prior or after the Change in
Control (or, if earlier, the Qualifying Termination), continued participation,
at no after tax cost to you, in all welfare plans for three (3) years after the
date of termination, provided that in the event you obtain other employment that
offers substantially similar or improved benefits, as to any particular welfare
plan, such continuation coverage shall cease.
v. Three (3) additional years of service and compensation
credit (at your then current level) under the SERP.
b. A Qualifying Termination shall mean any termination of your
employment: (i) by the Company without Cause, (ii) by you with Good Reason, or
(iii) by you for any reason (or no reason) during the thirty (30) day period
commencing on the first anniversary of the date of the Change in Control.
12. Parachute Gross Up. The provisions of Exhibit B shall apply.
13. No Mitigation/No Offset. In the event of any termination of
employment hereunder, including, for these purposes, the expiration of the
Employment Term at the end of the Original Employment Term, you shall be under
no obligation to seek other employment and there shall be no offset against any
amounts due you under this Agreement on account of any remuneration attributable
to any subsequent employment that you may obtain. The amounts
8
<PAGE>
payable hereunder shall not be subject to setoff, counterclaim, recoupment,
defense or other right which the Company may have against you or others.
14. Non-Competition/Non-Solicitation/Confidentiality.
a. You agree that during the Employment Term and the twelve (12)
month period thereafter, you shall not be engaged as, or be, an employee,
director, partner, principal, shareholder, advisor, in any other business,
activity or conduct which directly competes with the primary business of the
Company, provided that Competition shall not include: (i) holding five percent
(5%) or less of an interest in the equity or debt of any publicly traded
company, (ii) engaging in any activity with the prior written approval of the
Board, or (iii) being employed by, or consulting for, a non-Competitive division
or business unit of an entity which is in Competition with the Company (and
participating in such entity's employee equity plans).
b. You agree that during the Employment Term and the twelve (12)
month period thereafter you shall not, directly or indirectly, solicit or
induce, or attempt to solicit or induce, any non-clerical employee(s), sales
representative(s), agent(s), or consultant(s) of the Company to terminate such
person's employment, representation or other association with the Company for
the purpose of affiliating with any entity with which the you are associated.
c. You specifically acknowledges that any trade secrets or
confidential business and technical information of the Company or its vendors,
suppliers or customers, whether reduced to writing, maintained on any form of
electronic media, or maintained in mind or memory and whether compiled by you or
the Company (collectively, "Confidential Information"), derives independent
economic value from not being readily known to or ascertainable by proper means
by others; that reasonable efforts have been made by the Company to maintain the
secrecy of such information; that such information is the sole property of the
Company or its vendors, suppliers, or customers and that any retention, use or
disclosure of such information by you during the Employment Term (except in the
course of performing duties and obligations of employment with the Company) or
any time after termination thereof, shall constitute misappropriation of the
trade secrets of the Company or its vendors, suppliers, or customers, provided
that Confidential Information shall not include: (i) information that is at the
time of disclosure public knowledge or generally known within the industry; (ii)
information deemed in good faith by you, while employed by the Company,
desirable to disclose in the course of performing your duties; (iii) information
the disclosure of which you in good faith deems necessary in defense of your
rights provided such disclosure by you is limited to only disclose as necessary
for such purpose; or (iv) information disclosed by you to comply with a court,
or other lawful compulsory, order compelling you to do so, provided you give the
Company prompt notice of the receipt of such order and the disclosure by you is
limited to only disclosure necessary for such purpose.
9
<PAGE>
d. If, at the time of enforcement of this Section 14, a court
holds that the restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area and that the court shall be allowed to revise
the restrictions contained herein to cover the maximum period, scope and area
permitted by law. In the event of a material breach or threatened material
breach of this Section 14, the Company, in addition to its other remedies at law
or in equity, shall be entitled to injunctive or other equitable relief in order
to enforce or prevent any violations of the provisions of this Section 14.
15. Assignment. This Agreement may and shall be assigned or
transferred to, and shall be binding upon and shall inure to the benefit of, any
Successor of the Company, and any such Successor shall be deemed substituted for
all purposes of the "Company" under the terms of this Agreement. Successor
shall mean any person, firm, corporation or business entity which at any time,
whether by merger, purchase, or otherwise, acquires all or substantially all of
the assets of the Company. Notwithstanding such assignment, the Company shall
remain, with such successor, jointly and severally liable for all its
obligations hereunder. Except as herein provided, this Agreement may not
otherwise be assigned by the Company. This Agreement is not assignable by you.
This Agreement shall inure to the benefit of and be enforceable by your personal
or legal representatives, executors, and administrators, successors, heirs,
distributes, devisees, and legatees.
16. Indemnity. The Company will indemnify and hold you harmless both
during and after the Employment Term to the fullest extent permitted by the law
of the State of Delaware with regard to actions and inactions in relation to
your duties as a director and officer of the Company and will, during and after
the Employment Term, maintain adequate directors and officers insurance for you
to cover any such liability (but in no event less than that maintained for any
other director or officer).
17. Withholding Taxes. All forms of compensation referred to in this
Agreement are subject to reduction to reflect applicable withholding and payroll
taxes.
18. Tax Gross Ups. If a provision provides for a Tax Gross Up, it
shall mean that the Company will pay to you such additional compensation as is
necessary (after taking into account all federal, state and local income and
payroll taxes payable by you as a result of the receipt of such additional
compensation) to place you in the same after-tax position (including federal,
state and local income and payroll taxes) as you would have been in had no such
tax been paid or incurred.
19. Legal Expenses. The Company will pay (i) any legal fees incurred
by you associated with the negotiation and preparation of this Agreement up to
Fifteen Thousand Dollars
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($15,000) and (ii) any disputes that you and the Company may have with respect
to this Agreement or the breach thereof or your employment or the termination
thereof or matters related to any of the foregoing, provided that you prevail in
at least one material respect with respect to such dispute.
20. Arbitration. Except as provided in Section 14 above, any
controversy or claim arising out of or relating to this Agreement or the breach
thereof, or your employment or the termination thereof or related matters, will
be settled by arbitration in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association (the
"AAA"). The situs of the arbitration will be in St. Petersburg, Florida, or
such other location agreed by the parties hereto. The decision of the
arbitrator will be final and binding on the parties, and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The Company will pay all fees and expenses of the arbitrator and the
AAA.
21. Entire Agreement. This Agreement (including the Exhibits
attached hereto) contain all of the terms of your employment with the Company
and supersede any prior understandings or agreements, whether oral or written,
between you and the Company with regard to its subject matter.
22. Amendment and Governing Law. This Agreement may not be amended
or modified except by an express written agreement signed by you and the
Company. This Agreement will be interpreted under the laws of the State of
California, without regard to conflict of law provisions thereof. Any notices
to be given hereunder shall be given in person, by overnight delivery service or
by certified mail - return receipt requested. Notice shall be sent to the
Company at its principal office and to you at your home address as reflected on
the records of the Company.
11a
<PAGE>
We hope that you find the foregoing terms acceptable. You may indicate
your agreement with these terms and accept this offer by signing and dating
below.
Very truly yours,
SMART & FINAL, INC.
By: /s/ T. Crull
------------
Name: Timm F. Crull
Title: Chairman, Compensation Committee
/s/ Ross E. Roeder
- ------------------
Ross E. Roeder
Dated: May 11, 1999
12
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Exhibit A
---------
For purposes of this Agreement, the term "Change in Control" shall
have the same meaning as ascribed to such term in the Company's 1997 Executive
Severance Plan (which became effective on February 12, 1997) as in effect on the
date hereof.
<PAGE>
Exhibit B
---------
(a) In the event that you shall become entitled to payments and/or
benefits provided by the Agreement or any other amounts in the "nature of
compensation" (whether pursuant to the terms of the Agreement or any other plan,
arrangement or agreement with the Company, any person whose actions result in a
change of ownership or effective control covered by Section 280G(b)(2) of the
Code of 1986 or any person affiliated with the Company or such person) as a
result of such change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (and any similar tax that may
hereafter be imposed) the Company shall pay to you at the time specified in
subsection (d) below an additional amount (the "Gross-up Payment") such that the
net amount retained by you, after deduction of any Excise Tax on the Company
Payments and any U.S. federal, state, and local income or payroll tax upon the
Gross-up Payment provided for by this paragraph (a), but before deduction for
any U.S. federal, state, and local income or payroll tax on the Company
Payments, shall be equal to the Company Payments.
(b) For purposes of determining whether any of the Company Payments
and Gross-up Payments (collectively the "Total Payments") will be subject to the
Excise Tax and the amount of such Excise Tax, (x) the Total Payments shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "parachute payments" in excess of the "base amount" (as defined
under Code Section 280G(b)(3) of the Code) shall be treated as subject to the
Excise Tax, unless and except to the extent that, in the opinion of the
Company's independent certified public accountants appointed prior to any change
in ownership (as defined under Code Section 280G(b)(2)) or tax counsel selected
by such accountants (the "Accountants") such Total Payments (in whole or in
part) either do not constitute "parachute payments," represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount" or are otherwise not
subject to the Excise Tax, and (y) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Accountants in accordance
with the principles of Section 280G of the Code.
<PAGE>
(c) For purposes of determining the amount of the Gross-up Payment,
you shall be deemed to pay U.S. federal income taxes at the highest marginal
rate of U.S. federal income taxation in the calendar year in which the Gross-up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of your residence for the calendar
year in which the Company Payment is to be made, net of the maximum reduction in
U.S. federal income taxes which could be obtained from deduction of such state
and local taxes if paid in such year. In the event that the Excise Tax is
subsequently determined by the Accountants to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, you shall repay to
the Company, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the prior Gross-up Payment attributable to
such reduction (plus the portion of the Gross-up Payment attributable to the
Excise Tax and U.S. federal, state and local income tax imposed on the portion
of the Gross-up Payment being repaid by you if such repayment results in a
reduction in Excise Tax or a U.S. federal, state and local income tax
deduction), plus interest on the amount of such repayment at the rate provided
in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the
event any portion of the Gross-up Payment to be refunded to the Company has been
paid to any U.S. federal, state and local tax authority, repayment thereof (and
related amounts) shall not be required until actual refund or credit of such
portion has been made to you, and interest payable to the Company shall not
exceed the interest received or credited to you by such tax authority for the
period it held such portion. You and the Company shall mutually agree upon the
course of action to be pursued (and the method of allocating the expense
thereof) if your claim for refund or credit is denied.
In the event that the Excise Tax is later determined by the Accountant
or the Internal Revenue Service to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross-up Payment), the Company shall make an additional Gross-up Payment in
respect of such excess (plus any interest or penalties payable with respect to
such excess) at the time that the amount of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided for in subsection
(c) above shall be paid not later than the thirtieth (30th) day following an
event occurring which subjects you to the Excise Tax; provided, however, that if
the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to you on such day an
estimate, as determined in good faith by the Accountant, of the minimum amount
of such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code), subject to
further payments pursuant to subsection (c) hereof, as soon as the amount
thereof can reasonably be determined, but in no event later than the ninetieth
(90th) day after the occurrence of the event subjecting you, to the Excise Tax.
In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan by
the Company to you, payable on the fifth (5th) day after demand by the Company
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
Page 2 of 22
<PAGE>
(e) In the event of any controversy with the Internal Revenue Service
(or other taxing authority) with regard to the Excise Tax, you shall permit the
Company to control issues related to the Excise Tax (at its expense), provided
that such issues do not potentially materially adversely affect you, but you
shall control any other issues. In the event the issues are interrelated, you
and the Company shall in good faith cooperate so as not to jeopardize resolution
of either issue, but if the parties cannot agree you shall make the final
determination with regard to the issues. In the event of any conference with
any taxing authority as to the Excise Tax or associated income taxes, you shall
permit the representative of the Company to accompany you, and you and your
representative shall cooperate with the Company and its representative.
(f) The Company shall be responsible for all charges of the
Accountant.
Page 3 of 22
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made and entered into as of the
23rd day of July, 1999 by and between SMART & FINAL INC., a Delaware corporation
("Company") and ROSS E. ROEDER, an individual currently employed as Chairman and
Chief Executive Officer of Company ("Roeder"), based upon the following facts:
A. Company has employed Roeder pursuant to a contractual employment
agreement ("Roeder Contract") dated as of January 1, 1999; and
B. Section 6(a) of the Roeder Contract provides for a restricted stock
grant of 50,000 shares of common stock of the Company ("Restricted Stock") to
Roeder; and
C. Section 6(b) of the Roeder Contract provides that Roeder may, at his
sole election under Section 83(b) of the Internal Revenue Code of 1986 make an
election ("Election") with respect to the fair market value of the Restricted
Stock, and the Roeder Contract further provides that the amount of any current
federal, state, and local income tax and payroll tax effects to Roeder of such
Election (the "83(b) Tax") will be determined by the parties and that upon
request by Roeder, Company will loan to Roeder the amount of the 83(b) Tax; and
D. Roeder has made the Election and has requested a loan in the amount
of the 83(b) Tax; and
E. Roeder and Company now mutually desire to enter into this Agreement
(i) to establish and document the amount of the 83(b) Tax, and (ii) to
facilitate a loan to Roeder in the amount of the 83(b) Tax ("Loan").
NOW, THEREFORE, based on the foregoing, and in consideration of the
mutual promises contained below and for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1.Election. Roeder made an Election dated June 8, 1999 with a property transfer
- -----------
date of May 11, 1999 and a fair market value of the property on that date of
$606,250.00, and Roeder has provided notice to the Company of such Election.
2.83(b) Tax. The amount of the 83(b) Tax is determined and agreed to be
- ------------
$273,149.03, subject to audit and revision after the filing of Roeder's
personal income tax returns for the 1999 tax year.
<PAGE>
3. Definitions. For purposes of this Loan Agreement the terms below are
-----------
defined as follows:
"Business Day" means a day that Company's corporate offices are open
for business with the general public.
"Interest Rate" means, with respect to the Note, the lesser of, as
expressed on a per annum basis: (i) the Applicable Federal Rate of interest
applicable to loans between employers and employees, as reported from time to
time in the Internal Revenue Bulletin; or (ii) the maximum rate of interest
permitted by applicable law, whichever is lower. Interest on the New Note shall
be calculated on the basis of a 360 day year for the actual number of days
elapsed in the period during which it accrues.
"Maturity Date" means the earliest of (i) December 31, 2001; or (ii)
30 days following such earlier date as may be specified by the terms of Section
6(b) of the Roeder Contract; or (iii) 15 calendar days following the full or
partial sale of the Restricted Stock.
"Note" means the promissory note to be issued pursuant to this
Agreement, substantially in the form of Exhibit A hereto, and any and all Notes
later issued in replacement or exchange therefor in accordance with the
provisions thereof.
"Payment Date" means the last Business Day of any July until the
Indebtedness is paid in full, commencing July 31, 2000, provided, however, that
-------- -------
in the event that any Payment Date shall occur on a date which is not a Business
Day, such Payment Date shall be the next following Business Day (unless such
next following Business Day is the first Business Day of another calendar month,
in which case such Payment Date shall be the immediately preceding Business
Day).
4. The Indebtedness. Company hereby agrees, on the terms and conditions set
----------------
forth in this Agreement, to make the Loan to Roeder. Roeder's obligation to
repay the Loan shall be evidenced by the Note. The Note shall be dated as of
the date of this Agreement and shall be unsecured, but with full recourse to
Roeder. The Note shall entitle the holder thereto to payments, in annual
installments of interest only on the unpaid principal balance, at a rate
equal to the Interest Rate, payable on each Payment Date, unless the amount
of the unpaid principal balance of the Note shall qualify the Note to be
exempt from the assessment of interest by the then current Internal Revenue
Service guidelines. Unless sooner paid, by reason of prepayment,
acceleration or otherwise, the entire unpaid principal balance of the Note,
together with interest any accrued thereon, shall be due and payable on the
Maturity Date.
5. Payments. Payments on the Note shall be made on the Payment Date by
--------
personal or cashier's check by the close of Company's normal business hours
in Los Angeles, California on such date. In computing interest on the Note,
the first date of the period ending on a Payment Date shall be included and
the Payment Date shall be excluded.
<PAGE>
6. Prepayment. Roeder shall have the full right to prepay the Note prior
----------
to the Maturity Date, in full or in part, without the consent of Company.
7. Representations, Warranties and Covenants of Roeder. Roeder hereby
---------------------------------------------------
represents and warrants to and covenants with Company that:
a. Roeder has entered into this Agreement freely and without undue
influence or coercion of any type by Company.
b. Roeder shall hold the Restricted Stock for, at a minimum, the period
of time specified by the plan or plans under which shares are issued.
c. Roeder shall faithfully abide by, perform and discharge each and
every obligation, covenant and agreement under this Agreement and the Note.
8. Events of Default and Remedies. If any of the following events (each such
------------------------------
event hereinafter referred to as an "Event of Default") shall have occurred
and be continuing:
a. failure of Roeder to pay any installment of interest on the Note when
due and payable and the continuance of such default for a period of 30 days or
to pay all or part of the principal on the Note when due and payable at maturity
(whether by redemption or otherwise); or
b. failure of Roeder to observe or perform any covenant or agreement of
Roeder contained herein (other than such failure which is specifically dealt
with elsewhere in this Section 8) and the continuance of such failure for a
period of 30 days after there has been given to Roeder by Company a written
notice specifying the default and requiring it to be remedied; or
c. the entry of an order for relief or the filing of an involuntary
petition with respect to Roeder under the United States Bankruptcy Code; Roeder
shall have instituted proceedings to be adjudicated a voluntary bankrupt or
shall consent to the filing of a similar proceeding against it or shall file a
petition or answer or consent seeking reorganization under the United States
Bankruptcy Code or similar statute or consent to the filing of such petition;
the appointment of a receiver, trustee, custodian or liquidator of or for any
part of the assets or property of Roeder or Roeder makes a general assignment
for the benefit of creditors.
Upon the occurrence of an event of default specified in the preceding
section then Company may by notice to Roeder, and in the case of clauses (a)
through (b) of this Section 8 after a ten (10) day period after such notice
during which Roeder may act to cure such default, and in the case of clause (c)
of this Section 8, immediately declare the unpaid
<PAGE>
principal amount of the New Note, interest accrued thereon and all other amounts
owing by Roeder hereunder to be immediately due and payable without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived, and an action shall immediately accrue. Company shall be further
entitled to exercise every other right and power and remedy herein specifically
given or now or hereafter existing at law, in equity or by statute. No delay or
omission by Company in the exercise of any right, power or remedy or in the
pursuance of any remedy shall impair any such right, power or remedy or be
construed to be a waiver of any default on the part of Company or to be an
acquiescence therein. No waiver in respect of any event of default shall extend
to any subsequent or other event of default.
9. Miscellaneous.
-------------
a. Notices. Any notice required or permitted under this Agreement or
-------
by law in respect of this Agreement, shall be in writing and shall be deemed
effective, when personally delivered or if sent by registered or certified mail,
three Business days after the date of delivery to the post office, or if sent by
overnight delivery when received, in each case addressed to the person required
to receive same at the following addresses:
If to Roeder: Ross E. Roeder
If to Company: Smart & Final Inc.
600 Citadel Drive
City of Commerce, CA 90040
Attn: Donald G. Alvarado, Esq.
b. Survival. All covenants, agreements, representations and warranties
--------
contained in this Agreement, or any document, agreement or instrument delivered
pursuant hereto shall survive the expiration or other termination of this
Agreement.
c. Amendments and Waivers. The terms of this Agreement shall not be
----------------------
waived (except as expressly provided in Section 8 above), altered, modified,
supplemented or terminated in any manner whatsoever except by written instrument
signed by Roeder and Company.
d. Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of California.
e. Entire Agreement. This Agreement and the other agreements and
----------------
documents referred to herein constitute the final and entire expression of the
agreement
<PAGE>
with respect to the matters contemplated hereby.
f. Invalidity of Provisions. Any provision of this Agreement which
------------------------
may be prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
g. Headings. Any headings or captions preceding the individual sections
--------
hereof are intended solely for the convenience of the parties and shall not
alter or vary the meaning, construction or effect of this Agreement.
h. Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon and shall inure to the benefit of Roeder and Company and their
respective successors and assigns, except that Roeder may not assign his rights
and obligations hereunder without the express written consent of the Company.
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be
duly executed as of the date first written above.
"Roeder": For "Company"
SMART & FINAL INC.,
a Delaware corporation
/s/ ROSS E. ROEDER By: /s/ Richard N. Phegley
- ------------------------ --------------------------
ROSS E. ROEDER Vice President & Treasurer
_______________________
<PAGE>
PROMISSORY NOTE
$273,149.03 Dated: July 23, 1999
FOR VALUE RECEIVED, the undersigned, ROSS E. ROEDER, an individual ("Borrower"),
HEREBY PROMISES TO PAY to the order of SMART & FINAL INC., a Delaware
corporation ("Lender") the principal sum of Two-Hundred Seventy-Three Thousand
One-Hundred Forty-Nine Dollars and Three Cents ($273,149.03).
The Borrower promises to pay interest on the unpaid principal sum of this
Promissory Note from the date hereof until such principal amount is paid in
full, at such interest rates, and payable at such times, as are specified in the
Loan Agreement (as defined below).
Both principal and interest are payable in lawful money of the United States of
America in same day funds to the Lender in accordance with the provisions of
Sections 4 and 5 of the Loan Agreement.
This Promissory Note is the Note referred to in, and is entitled to the benefits
of, the Loan Agreement dated as of July 23, 1999 (as the same may be amended,
supplemented or otherwise modified from time to time, "Loan Agreement") among
the Borrower and the Lender. The Loan Agreement contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified.
This Promissory Note shall be governed by, and construed in accordance with, the
laws of the State of California.
"BORROWER"
/s/ ROSS E. ROEDER
------------------
Ross E. Roeder
Page 9 of 22
<PAGE>
EXHIBIT 10.120
SMART & FINAL INC.
NON-EMPLOYEE DIRECTOR STOCK PLAN
1. PURPOSE
The purpose of this Smart & Final Inc. Non-Employee Director Stock Plan
(this "Plan") is to promote the interests of the Company and its stockholders by
(i) providing an incentive to those directors of the Company who are not
employees of the Company or its subsidiaries to serve on the Board of Directors
of the Company, and (ii) linking the personal interests of such directors with
the interests of the stockholders in the continuing financial success of the
Company.
2. DEFINITIONS
For purposes of this Plan, each term set forth in this Section 2 shall have
the meaning set forth opposite such term and, when the defined meaning is
intended, the term is capitalized.
2.1 "Award Date" means, for purposes of the initial award of Shares under
this Plan, May 10, 1996 and, thereafter, May 1 of each succeeding year in which
this Plan is in effect.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.4 "Company" means Smart & Final Inc., a Delaware corporation.
2.5 "Director" means any person who is a member of the Board.
2.6 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
2.7 "Fair Market Value of a Share on the Award Date" means the closing
price of a Share as reported on the New York Stock Exchange composite-
transactions report for the Award Date (or, if there is no trading on the New
York Stock Exchange on the Award Date, then on the first previous date on which
there was trading).
2.8 "Non-Employee Director" means any Director who is not and has not been
an employee of the Company or its direct or indirect subsidiaries and who is
paid an annual cash retainer fee for his or her services as a Director.
2.9 "Plan" means this Smart & Final Inc. Non-Employee Director Stock Plan,
as the same may be amended from time to time.
2.10 "Plan Committee" means the Governance Committee of the Board, or any
successor committee of the Board which the Board appoints to administer this
Plan.
2.11 "Rule 16b-3" means Rule 16b-3 as promulgated under Section 16(b) of
the Exchange Act, or any successor provisions thereto.
2.12 "Share(s)" mean share(s) of Stock.
2.13 "Stock" means the Common Stock, par value $.01 per share, of the
Company.
3. SHARES AVAILABLE FOR AWARD
<PAGE>
Shares awarded under this Plan may be authorized but unissued Shares or
authorized and issued shares held in the Company's treasury or acquired by the
Company for purposes of this Plan. The aggregate number of Shares to be awarded
under this Plan shall not exceed 125,000 Shares; provided, however, in the event
of any change in the outstanding Shares by reason of a recapitalization, stock
dividend, stock split, split-up, combination or exchange of shares or any
similar change affecting the Stock, the Board (whose determination shall be
conclusive) shall make appropriate and proportionate adjustments in the
aggregate share limitation set forth in the immediately preceding clause.
No fractional Shares shall be issued under this Plan as a result of any
adjustment made under this Section 3.
4. AUTOMATIC AWARD OF SHARES
An award of Shares shall be automatically made on the Award Date to each
Non-Employee Director who is serving as such on the Award Date. Each award shall
comprise that number of Shares equal to the quotient of $10,000 divided by the
Fair Market Value of a Share on the Award Date; provided, however, if this award
calculation results in fractional Shares, such awards shall be rounded down to
the nearest whole Share number and cash shall be paid in lieu of fractional
shares, and provided, further, if at any time there are not sufficient Shares
available under this Plan to permit the award of Shares to be made to all Non-
Employee Directors eligible therefor, then the award of Shares to be made to all
such eligible Non-Employee Directors under this Section 4 shall be reduced pro
rata (to zero if necessary) so as to not exceed the number of Shares available
for award under this Plan and cash shall be paid in lieu of the difference. In
the event that any Shares awarded under this Section 4 are newly issued by the
Company, the Non-Employee Director receiving such Shares shall pay to the
Company, in cash, an amount equal to the par value of such Shares. Any Shares
awarded under this Plan must be held by such Non-Employee Director at least six
months after the Award Date or, in the case of Shares awarded on May 10, 1996,
six months after the date of the stockholder approval of this Plan, as described
in Section 7.1 of this Plan.
5. NATURE OF PAYMENTS
All awards of Shares under this Plan shall be in lieu of a portion of the
annual cash retainer fees otherwise due to each eligible Non-Employee Director
in consideration of past services performed for the Company by such Non-Employee
Directors; provided, however, that such awards of Shares shall not be deemed to
constitute "covered compensation" for purposes of the Smart & Final Directors
Deferred Compensation Plan.
6. ADMINISTRATION
The Plan Committee shall administer this Plan in accordance with its
provisions and shall interpret this Plan, prescribe, amend and rescind any rules
and regulations necessary or appropriate for the administration of this Plan and
make such other determinations and take such other action as it deems necessary
or advisable, except as otherwise expressly reserved to the Board in this Plan.
The Plan Committee shall act by a majority of its members by vote in a meeting
or by written instrument signed by a majority of its members. Any
interpretation, determination, or other action made or taken by the Plan
Committee shall be final and binding upon all Non-Employee Directors and all
other persons. Neither the Plan Committee members nor the Directors, officers or
employees of the Company shall be under any duty to provide to any Non-Employee
Director or any other person tax or legal advice concerning any matter relating
to this Plan. Members of the Plan Committee shall serve without additional
compensation for their services as members, but all expenses and liabilities
they incur in connection with the administration of this Plan shall be borne by
the Company. No Plan Committee member shall be personally liable for any action,
determination or interpretation made in good faith with respect to this Plan,
and all such persons shall be fully protected by the Company with respect to any
such action, determination or interpretation.
7. EFFECTIVE DATE AND DURATION
7.1 Adoption of this Plan. This Plan was adopted by the Board effective as
of February 22, 1996, subject to the approval of the stockholders of the Company
at the 1996 annual meeting of stockholders. This Plan shall be
<PAGE>
automatically null and void in the event that such stockholder approval is not
so obtained in accordance with the applicable laws of the State of Delaware.
7.2 Term. Unless terminated earlier as provided herein, this Plan shall
terminate on February 22, 2005. No award of Shares shall be made after the date
this Plan terminates; provided, however, the applicable terms and conditions of
this Plan, and any terms and conditions applicable to any award of Shares made
prior to the date this Plan terminates, shall survive the termination of this
Plan.
7.3 Amendment and Termination. The Board may from time to time amend,
modify, suspend or terminate this Plan; provided, however, that no amendment or
modification of this Plan shall become effective without stockholder approval if
such stockholder approval is required by law, rule or regulation, and provided,
further, to the extent required under Rule 16b-3, the provisions of this Plan
shall not be amended or modified more than once every six months, except that
the foregoing clause shall not preclude any amendment or modification to comport
with changes in the Code, the Employee Retirement Income Security Act of 1974 or
the rules thereunder in effect from time to time. Except as otherwise stated in
this Plan or required by law, no amendment, modification, suspension or
termination of this Plan shall materially and adversely alter or impair any
right of any Non-Employee Director with respect to any prior award of Shares,
without the written consent of such Non-Employee Director.
7.4 Reformation to Comply with Rule 16b-3. It is the intent of the Company
that this Plan comply in all respects with the applicable provisions of Rule
16b-3 in connection with any award of Shares to a Non-Employee Director.
Accordingly, if any provision of this Plan does not comply with the requirements
of Rule 16b-3 as then applicable to such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 so that such Non-Employee Director shall avoid
liability under Section 16(b).
8. MISCELLANEOUS
8.1 Investment Representation. By his or her receipt of an award of Shares
under this Plan, a Non-Employee Director will be deemed to have represented and
warranted to the Company that the Shares being acquired are being acquired for
investment and not for resale or with a view to the distribution thereof.
8.2 Compliance With Laws and Regulations. This Plan, any Shares awarded
under this Plan, and the obligations of the Company to issue or deliver Shares
shall be subject to all applicable federal and state laws, rules and regulations
and to any approvals by any government or regulatory agency as may be required.
The Company shall not be required to issue or deliver any Shares either (i)
prior to (a) the listing of such Shares on any stock exchange on which the Stock
may then be listed and (b) the completion of any registration or qualification
of such Shares which is required under any federal or state law, or any ruling
or regulation of any government body, and which the Company shall, in its sole
discretion, determine to be necessary or advisable; or (ii) until exemptions
from such registration and qualification requirements are established to the
reasonable satisfaction of the Company and its counsel. The Company may, in
order to insure that resales are made in compliance with all applicable federal
or state law, imprint a legend on certificates representing such Shares to the
effect that the Shares may not be resold in the absence of compliance with the
applicable restrictions or a determination that no restrictions are applicable.
8.3 Non-transferability. A Non-Employee Director's rights and interests
under this Plan may not be assigned, hypothecated, encumbered or transferred, in
whole or in part, whether directly, by operation of law or otherwise (except, in
the event of the death of a Non-Employee Director, by will or the laws of
descent and distribution). Without limiting the generality of the foregoing, no
rights or interests of any Non-Employee Director under this Plan shall be
subject to attachment, execution, garnishment, sequestration, the laws of
bankruptcy or any other legal or equitable process.
8.4 No Rights to Directorship. Nothing in this Plan or in any action taken
under this Plan shall confer upon any Non-Employee Director any right to
continued or future service on the Board and shall not interfere with or limit
in
<PAGE>
any way the right of the stockholders to remove any Non-Employee Director
from his position as a Director. Participation under this Plan does not
constitute an employment contract between any Non-Employee Director and the
Company or any of its direct or indirect subsidiaries.
8.5 Certain Corporate Transactions. Nothing in this Plan shall in any way
prohibit the Company from merging with or consolidating into another
corporation, or from selling or transferring all or substantially all of its
assets, or from distributing all or substantially all of its assets to its
stockholders in liquidation, or from dissolving and terminating its corporate
existence.
8.6 Unfunded Plan. This Plan shall be unfunded and the Company shall not be
required to establish any special fund or to make any segregation of assets to
assure the award or delivery of Shares under this Plan. To the extent that a
Non-Employee Director or any other person acquires a right to receive an award
pursuant to this Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company.
8.7 Taxes. The Company shall, to the extent permitted by law, have the right
to deduct from any payment of any kind otherwise due to, or to otherwise require
payment from, a Non-Employee Director of an amount sufficient to cover any
federal, state, local or foreign taxes required to be withheld with respect to
any award of Shares under this Plan. The Company shall have the further right to
require that a Non-Employee Director furnish any information deemed necessary by
the Company to meet any tax reporting obligations before delivering any Shares
pursuant to this Plan.
8.8 Headings. The Section and other headings contained in this Plan are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Plan.
8.9 Governing Law. The validity and construction of this Plan and any action
taken under this Plan shall be governed by the laws, without regard to the laws
as to choice or conflict of laws, of the State of Delaware.
<PAGE>
Exhibit 10.121
[LOGO OF SMART & FINAL]
Food . Supplies . Business . Home
- -------------------------------------------------------------------------------
600 Citadel Drive
Commerce, California 90040
May 11, 1999
Casino USA, Inc.
524 Chapala Street
Santa Barbara, California 93101
Re: Standby Stock Purchase and Debt Reduction Agreement
Gentlemen:
This letter agreement ("Agreement") will confirm the terms and conditions which
have been negotiated among Smart & Final Inc., a Delaware corporation (the
"Company"), Casino USA, Inc., a California corporation ("Casino USA"), and
Casino Guichard-Perrachon S.A., a publicly traded French joint stock limited
liability company ("Casino") regarding a proposed offering of Company common
stock through an equity rights offering mechanism, with Casino USA acting as a
standby purchaser.
Section 1.
The Rights Offering.
A. Rights Offering. The Company proposes to distribute to holders of record
---------------
of its Common Stock (the "Common Stock"), of record as of the close of
business on May 12, 1999, or such later date on which the Registration
Statement (as defined below) becomes effective (the "Record Date"),
transferable rights (the "Rights") to purchase an aggregate of 6,486,406
shares of Common Stock (the "Shares") at a price of $9.25 per share (the
"Subscription Price") by issuing to such holders subscription warrants (the
"Subscription Warrants") evidencing one Right for each share of Common Stock
held as of the Record Date (the "Rights Offering").
B. Subscription Privileges. The Company proposes to offer to sell the Shares
-----------------------
on the basis of one Share for every 3.4884 Rights granted and properly
exercised (the "Basic Subscription Privilege"). In addition, all holders of
Rights are entitled, subject to availability and proration as described in
the Registration Statement , to purchase Shares not purchased by other
stockholders under the Basic Subscription Privilege (the "Oversubscription
Privilege"). The Company expects to mail the Subscription Warrants together
with the prospectus (as defined below) and related instructions to the
record holders of Shares as soon as practicable after the Registration
Statement becomes effective (the "Time of Mailing"). The Rights will expire
at 5:00 P.M., New York City time, on June 3, 1999 (the "Expiration Date").
Page 1 of 8
<PAGE>
C. Registration Statement. The Company filed on April 2, 1999 with the
----------------------
Securities and Exchange Commission (the "SEC") a registration statement on
Form S-3 (No. 333-755627) and a related preliminary prospectus for the
registration of the Rights and the Shares under the Securities Act of 1933,
as amended (the "1933 Act"), has filed such amendments thereto, if any, and
such amended preliminary prospectuses as may have been required prior to the
date hereof, and will file such additional amendments thereto and such
amended prospectuses as may hereafter be required. Such registration
statement (as amended, if applicable) and the final prospectus relating to
the offering constituting a part thereof (including in each case all
documents, if any, incorporated by reference therein), as from time to time
amended or supplemented pursuant to the 1933 Act, are hereinafter referred
to as the "Registration Statement" and the "Prospectus," respectively.
D. Related Parties. Casino USA is currently the owner of approximately
---------------
12,415,925 shares of Common Stock , which constitutes approximately 55% of
the total issued and outstanding shares. Casino is the principal shareholder
and beneficial owner of Casino USA.
E. Casino Loan Agreement/New Note. The Company and Casino USA are parties to
------------------------------
that certain Loan Agreement (the "Casino Loan Agreement") dated as of
November 13, 1998, pursuant to which they agreed to consolidate certain
unsecured pre-existing notes and cash advances owed by the Company to Casino
USA, plus a 1.75% structuring fee of the consolidated amount, into one
aggregate principal obligation totaling $55,387,505 (the "Principal
Amount"), bearing interest at the LIBOR rate plus 4.50% per annum and
maturing February 15, 2002. Under the Casino Loan Agreement, the Company
executed and delivered to Casino USA a promissory note in the form attached
to the Casino Loan Agreement (the "New Note") evidencing the obligations
under the Casino Loan Agreement.
F. Purchase Commitments. In order to facilitate the success of the Rights
--------------------
Offering, Casino USA hereby commits to exercise its Basic Subscription
Privilege to subscribe for all Shares that Casino USA may acquire by
exercise of its Rights (the "Basic Shares"). Casino USA may, at is sole
election, exercise its Oversubscription Privilege to subscribe for all or
part of that number of Shares which it is permitted to purchase pursuant to
the Oversubscription Privilege (the "Oversubscription Shares"). Subject to
the terms and conditions of this Agreement, Casino USA further commits to
subscribe (at the Subscription Price) for that number of Shares (the
"Unsubscribed Shares") not subscribed for by the Company's record holders or
their transferees (which shall include Casino USA) in the Rights Offering
(the "Excess Shares").
G. Manner of Payment for Shares. Casino USA hereby agrees to pay for Shares
----------------------------
purchased by it upon exercise of Casino USA's Rights and under this
Agreement by reducing the outstanding Principal Amount under the Casino Loan
Agreement (and reducing the amount owing under the New Note) by the total
Subscription Price otherwise due upon exercise of those Rights by Casino
USA, and to pay cash for Shares purchased by it pursuant to the Offering to
the extent the aggregate Subscription Price payable by it exceeds the
Principal Amount.
Page 2 of 8
<PAGE>
H. Capitalized terms used but not defined in this Agreement shall have the
meanings respectively given to those terms in the Registration Statement.
Section 2.
Purchase, Sale and Delivery of Securities.
A. Closing Time. Payment of the purchase price for, and delivery of
------------
certificates for, the Basic Shares, any Oversubscription Shares and any
Excess Shares (collectively, the "Purchased Shares") shall be made at the
principal executive office of the Company, or at such other place as shall
be agreed upon by Casino USA and the Company, at 8:30 A.M., Los Angeles
time, on the [fourth] business day after the Expiration Date of the Rights
Offering, or such other time and date as shall be agreed upon by Casino USA
and the Company (such time and date of payment and delivery being herein
called "Closing Time"). Certificates for the Shares purchased by Casino USA
under this Agreement shall be in such denominations and registered in such
names as Casino USA may request in writing at least two business days before
the Closing Time.
B. Manner of Payment for Purchased Shares. Casino USA shall at the Closing Time
--------------------------------------
deliver to the Company (i) the original New Note marked "paid in full," plus
(ii) an amount of U.S. Dollars, paid in immediately available funds
delivered to the Company by wire transfer, equal to the excess, if any, of
(A) the aggregate Subscription Price for the total number of Purchased
Shares over (B) the Principal Amount. If such procedure is necessary, the
Company shall give written notice to Casino USA at least two business days
prior to the Closing Time setting forth wiring instructions for the
Company's account. Notwithstanding the foregoing, if, pursuant to this
Agreement, Casino USA purchases Shares having an aggregate Subscription
Price which is less than the Principal Amount, Casino USA shall at the
Closing Time, in lieu of the delivery and payment set forth in the preceding
sentence, deliver to the Company a written statement executed by Casino USA
to the effect that the Principal Amount is thereby reduced by an amount
specified therein, which shall be equal to the aggregate Subscription Price
for the total number of Purchased Shares acquired by Casino USA in the
Rights Offering. Such notice will be attached to and become part of the New
Note.
C. Affiliate Status. The parties acknowledge that Casino USA is an affiliate
----------------
of the Company for purposes of the 1933 Act, and that the ability of Casino
USA to resell the Purchased Shares may be limited by applicable provisions
of Rule 144 or other limitations in effect from time to time under the 1933
Act. The Company shall be entitled to imprint on or attach to certificates
for Shares delivered to Casino USA the Company's customary legend to the
effect that the holder thereof is an affiliate subject to such limitations.
D. Performance Guarantee. Casino hereby guarantees the performance of Casino
---------------------
USA under this Agreement.
Page 3 of 8
<PAGE>
Section 3.
Representations and Warranties.
A. The Company. The Company hereby represents and warrants to Casino USA as
-----------
follows: (i) the Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions set forth in
Sections 1 and 2 2 hereof; (ii) the execution and delivery by the Company of
this Agreement, and the consummation by the Company of the transactions set
forth in Sections 1 and 2 hereof, have been duly authorized by all necessary
corporate action on the part of the Company; (iii) this Agreement has been
duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms, except as the enforceability hereof may be
limited by bankruptcy, insolvency or other similar laws affecting creditors'
rights generally or general principles of equity; (iv) no consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority
or instrumentality, domestic or foreign, is required by, or with respect to,
the Company in connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the transactions set
forth in Section 2 hereof (other than the filing and effectiveness of the
Registration Statement); (v) the execution and delivery of this Agreement by
the Company and the consummation of the transactions set forth in Sections 1
and 2 hereof by the Company do not conflict with, or result in a breach of,
any law or regulation of any governmental authority applicable to the
Company or any material agreement to which the Company is a party; and (vi)
when issued and paid for in accordance with the provisions of Section 2
hereof, the Purchased Shares sold to Casino USA pursuant to Section 2 hereof
shall be duly authorized, validly issued, fully paid, nonassessable, and
free of any claims or encumbrances.
B. Casino USA. Casino USA hereby represents and warrants to the Company as
----------
follows: (i) it has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions set forth in Sections
1 and 2 hereof; (ii) the execution and delivery by it of this Agreement, and
the consummation by it of the transactions set forth in Sections 1 and 2
hereof, have been duly authorized by all necessary corporate action on its
part; (iii) this Agreement has been duly executed and delivered by it and
constitutes a valid and binding obligation of it enforceable against it in
accordance with its terms, except as the enforceability hereof may be
limited by bankruptcy, insolvency or other similar laws affecting creditors'
rights generally or general principles of equity; (iv) no consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority
or instrumentality, domestic or foreign, is required by, or with respect to,
it in connection with the execution and delivery of this Agreement by it or
the consummation by it of the transactions set forth in Sections 1 and 2
hereof (other than any filings pursuant to Section 16(a) of, or Regulation
13D under, the Securities Exchange Act of 1934, as amended); (v) the
execution and delivery of this Agreement by it and the consummation by it of
the transactions set forth in Sections 1 and 2 hereof do not conflict with,
or result in a breach of, any law or regulation of any governmental
authority applicable to it or, at the Closing Time, any material agreement
to which it is a party; (vi) it will acquire the Purchased Shares for its
own account and not with a view to distribution or resale in any manner
which would be in violation of the 1933 Act;
Page 4 of 8
<PAGE>
and (vi) it will have at the Closing Time readily available funds in an
amount sufficient to satisfy its monetary obligations, if any, hereunder.
Section 4.
Covenants of the Parties Hereto.
A. Mutual Assurance. Subject to the terms and conditions of this Agreement,
----------------
each party hereto will use its best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things reasonably necessary
or reasonably desirable to consummate the transactions contemplated by this
Agreement.
B. Fees and Expenses. The Company hereby agrees to pay or reimburse all out-
-----------------
of-pocket expenses and professional fees reasonably incurred by Casino USA
in connection with this Agreement and the Rights Offering (including
reasonable fees and expenses of its investment banking adviser and legal
counsel), in an aggregate amount not to exceed $450,000. The Company agrees
to pay all other expenses and professional fees incurred by the Company in
connection with the Rights Offering, including the expenses referred to in
Part II of the Registration Statement.
C. Standby Purchaser Fee. In consideration of Casino USA's standby purchaser
---------------------
commitment under Sections 1.F. and 1.G. of this Agreement, the Company
agrees to issue to Casino USA at the Closing Time ten thousand (10,000)
shares of Common Stock as a standby purchaser fee, payable in the form of a
certificate including or representing such shares and delivered to Casino
USA at the Closing Time. This fee is in addition to the Shares which are the
subject of the Offering and is in addition to any Purchased Shares which
Casino USA may purchase under the Basic Subscription Privilege or
Oversubscription Privilege or otherwise pursuant to the Rights Offering.
Notwithstanding the foregoing, this fee is not payable unless the
Registration Statement is declared effective and Casino USA timely performs
its obligations hereunder.
Section 5.
Conditions to the Closing.
A. Mutual Conditions. The obligations of Casino USA, on the one hand, and the
-----------------
Company, on the other hand, to consummate their respective obligations
pursuant to Section 2 hereof are subject to the satisfaction on or prior to
the Expiration Date of each of the following conditions:
(i) The Registration Statement shall have become effective
not later than 5:30 P.M. on May 11, 1999; and at the Expiration Date no
stop order suspending the effectiveness of the Registration Statement shall
have been issued under the 1933 Act and no proceedings therefor shall have
been initiated or threatened by the Commission.
Page 5 of 8
<PAGE>
(ii) Each of the representations and warranties of the other
parties hereto contained in this Agreement shall be true and correct in all
material respects, at and as of the Expiration Date, with the same force
and effect as if given on the Expiration Date.
(iii) The Rights Offering shall have been completed in
conformity with all of the requirements related thereto provided in the
Registration Statement and the Prospectus and under applicable the rules
and regulations of the SEC under the 1933 Act.
(iv) The Shares shall have been approved for listing on the
New York Stock Exchange subject to notice of issuance.
B. Other Conditions Benefiting Casino USA. The obligations of Casino USA to
--------------------------------------
consummate its obligations pursuant to Sections 1 and 2 hereof shall also be
subject to the satisfaction on or prior to the Expiration Date of each of
the following conditions:
(i) Material Adverse Change. Since the respective dates as to
-----------------------
which information is given in the Registration Statement and the
Prospectus, there shall not have been any material adverse change in or
affecting the business, prospects, financial position, stockholders' equity
or results of operations of the Company and its subsidiaries taken as a
whole
(ii) Legal Opinion. Casino USA shall have received the
-------------
opinion, dated as of the date hereof, of Donald G. Alvarado, Esq., as
counsel for the Company, in form and substance satisfactory to counsel for
Casino USA, relating to incorporation and good standing of the Company,
authorization of the Rights Offering and the issuance of Shares,
capitalization of the Company, effectiveness and compliance with regulatory
requirements of the Registration Statement, and other consents and
approvals required in connection with the Rights Offering, including those
as may be contemplated in Section 3.A.(iv) of this Agreement.
(iii) Accountant's Comfort Letter. Casino USA shall have
---------------------------
received from Arthur Andersen & Co. a comfort letter with respect to the
Registration Statement dated as of the date hereof, in form and substance
satisfactory to it and its counsel, of the type typically rendered to
underwriters in public offerings in the United States.
C. No Transfer of Rights By Casino USA. Casino USA shall not sell, transfer or
-----------------------------------
assign any of the Rights issued to it in the Rights Offering.
Section 6.
Other Provisions.
A. Notices. Any notice required to be given hereunder shall be sufficient if
-------
in writing and sent by facsimile transmission (with transmission confirmed),
by courier service (with proof of service), hand delivery or certified or
registered mail (return receipt requested and first-class postage prepaid),
addressed as follows:
Page 6 of 8
<PAGE>
If to the Company, to Smart & Final Inc., 600 Citadel Drive, City of
Commerce, California 90040; attention: Donald G. Alvarado, Esq., Senior Vice
President, Law/Development;
If to Casino USA or to Casino, to Casino USA, Inc., 524 Chapala Street,
Santa Barbara, California 93101; attention: Chairman;
or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date
so telecommunicated, personally delivered or mailed.
B. Parties. This Agreement shall inure to the benefit of and be binding upon
-------
Casino USA, the Company and their respective successors. Nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than Casino USA, the Company and their
respective successors, any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for
the sole and exclusive benefit of Casino USA and the Company and their
respective successors. No purchaser of Purchased Shares from Casino USA
shall be deemed to be a successor by reason merely of such purchase. The
parties acknowledge the receipt and adequacy of legal consideration for
their respective rights and obligations under this Agreement.
C. Governing Law and Time. This Agreement shall be governed by and construed
----------------------
in accordance with the internal laws of the State of California without
regard to conflicts of law principles. Unless otherwise set forth herein,
specified times of day refer to New York City time.
D. Other General Provisions. The representations and warranties of the parties
------------------------
hereunder shall survive the Closing Time and shall not be affected by any
investigation of the subject matter thereof made by or on behalf of either
party. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and part of one instrument, and a
signature hereto sent by facsimile transmission shall be as binding as
delivery of a manually executed counterpart hereof. Each party agrees to
indemnify and hold harmless the other party from any liability for any
commission or compensation in the nature of a finders' fee (and the costs
and expenses of defending against such asserted liability) for which the
indemnifying party or any of such party's agents is responsible. Any
provision of this Agreement may be amended or waived only with the written
consent of the Company and Casino USA and Casino. This Agreement shall
constitute the entire agreement between the parties hereto, and shall
supersede any prior oral or written term sheets or other agreements or
understandings concerning the subject matter hereof.
Page 7 of 8
<PAGE>
Section 7.
Agreement and Execution.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the Company, Casino USA and Casino in accordance with its terms.
Executed as of this 11th day of May 1999.
Very truly yours,
Smart & Final Inc.
By /s/ Martin A. Lynch
-------------------
Name: Martin A. Lynch
Title: Executive Vice President
Accepted as of the date written above in this Section 7.
Casino USA, Inc.
By /s/ Andre Delolmo
-----------------
Name: Andre Delolmo
Title: President
Casino Guichard-Perrachon, S.A.
By /s/ Andre Delolmo
-----------------
Name: Andre Delolmo
Title: Charge de Mission
Page 8 of 8
<PAGE>
EXHIBIT 10.122
THIRD AMENDMENT
To
REVOLVING CREDIT AGREEMENT
And
AMENDMENT TO PARTICIPATION AGREEMENT
Dated as of June 23, 1999
This THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT AND AMENDMENT TO
PARTICIPATION AGREEMENT (this "Amendment") is among SMART & FINAL, INC., a
---------
Delaware corporation (the "Borrower"), the holders under the Trust Agreement
--------
referred to below (the "Holders"), the financial institutions and other entities
-------
party to the Revolving Credit Agreement and Synthetic Lease Credit Agreement
referred to below (the "Lenders"), and CREDIT LYONNAIS LOS ANGELES BRANCH, as
-------
administrative agent (the "Administrative Agent") for the Lenders and the
--------------------
Holders.
PRELIMINARY STATEMENTS:
1. Reference is made to (i) the Credit Agreement (as amended,
supplemented or otherwise modified from time to time, the "Revolving Credit
----------------
Agreement") dated as of November 13, 1998 among the Borrower, the financial
- ---------
institutions named therein, and Credit Lyonnais Los Angeles Branch, as
Administrative Agent for the Lenders, (ii) the Participation Agreement (as
amended, supplemented or otherwise modified from time to time, the
"Participation Agreement") dated as of November 13, 1998 among the Borrower, the
- ------------------------
Guarantors party thereto, First Security Bank, National Association, as owner
trustee under the S&F Trust 1998-1, the various banks and other institutions
party thereto as Holders and as Lenders, and Credit Lyonnais Los Angeles Branch,
as Administrative Agent for the Lenders and the Holders, (iii) the Credit
Agreement (as defined in the Participation Agreement) (as amended, supplemented
or otherwise modified from time to time, the "Synthetic Lease Credit
----------------------
Agreement"), and (iv) the Trust Agreement (as defined in the Participation
- ---------
Agreement) (as amended, supplemented or otherwise modified from time to time,
the "Trust Agreement").
---------------
2. The Borrower has requested (a) amendments to certain of the
covenants and provisions contained in the Revolving Credit Agreement and the
Participation Agreement in order to permit the Borrower to comply with such
covenants, and (b) a waiver of certain Defaults arising as a result of the
Borrower's failure to timely satisfy certain obligations under the Revolving
Credit Agreement and under the Participation Agreement and the Holders and the
Lenders have agreed, subject to the provisions of this Amendment, to amend the
Revolving Credit Agreement and the Participation Agreement and to grant such
waiver, in each case as set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
SECTION 1. Amendments to Revolving Credit Agreement. Effective as of
----------------------------------------
the Amendment Effective Date (as defined in Section 4 hereof), the Revolving
Credit Agreement is hereby amended as follows:
(a) The definition of the term "Applicable Margin" contained in
-----------------
Section 1.01 of the Revolving Credit Agreement is hereby amended and restated in
its entirety to read as follows:
" 'Applicable Margin' means, for any fiscal quarter for each
------------------
Interest Type of Advance set forth below, the applicable rate per annum set
forth in the table below opposite the Adjusted Leverage Ratio determined as
of the last day of the immediately preceding fiscal quarter and beneath
such Interest Type of Loan:
<TABLE>
<CAPTION>
Applicable Applicable
Margin for Margin for
Adjusted Leverage Eurodollar Rate Base Rate
Tier Ratio Advances Advances
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
I equal to or greater than 5.00 3.00% 2.00%
- ----------------------------------------------------------------------------------------------------------------
II equal to or greater than 4.75 but less than 5.00 2.50% 1.50%
- ----------------------------------------------------------------------------------------------------------------
III equal to or greater than 4.25 but less than 4.75 2.25% 1.25%
- ----------------------------------------------------------------------------------------------------------------
IV equal to or greater than 3.75 but less than 4.25 2.00% 1.00%
- ----------------------------------------------------------------------------------------------------------------
V equal to or greater than 3.25 but less than 3.75 1.75% 0.75%
- ----------------------------------------------------------------------------------------------------------------
VI less than 3.25 1.50% 0.50%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
provided, however, that, notwithstanding the foregoing, for purposes of
-------- -------
determining the Applicable Margin, the Adjusted Leverage Ratio shall be
deemed to be greater than or equal to 5.00 to 1.0 at all times (i) prior to
receipt by the Administrative Agent of the financial statements, compliance
certificate and Borrowing Base Certificate required by 6.03(d) with respect
to the fiscal year of the Borrower ending January 2, 2000, and (ii) when a
Default has occurred and is continuing based on the Borrower's failure to
deliver any financial statement, compliance certificate or Borrowing Base
Certificate as and when required pursuant to Sections 6.03(a), 6.03(c) or
6.03(d), as applicable. For purposes of this Agreement, any change in the
Applicable Margin based on a change in the Adjusted Leverage Ratio shall be
effective three Business Days after the date of receipt by the
Administrative Agent of the financial statements, compliance certificate
and Borrowing Base Certificate required by Sections 6.03(a), 6.03(c) and
6.03(d), as applicable, reflecting such change."
(b) The definition of the term "Borrowing Base Amount" contained in
---------------------
Section 1.01 of the Revolving Credit Agreement is hereby amended by deleting
clause (a) thereof and replacing it with the following:
"(a) from and after the Eligible Real Property Inclusion Date, 35% of
the appraised value (as set forth on Schedule 1.01(c)) of Eligible Real Property
identified on
2
<PAGE>
Schedule 1.01(c) (subject to such reserves and reductions as the Administrative
Agent or the Required Lenders may reasonably require, including without
limitation as a result of casualty or condemnation or as a result of any
reappraisal pursuant to Section 6.01(m));"
(c) The definition of the term "Commitment Fee Percentage" contained
-------------------------
in Section 1.01 of the Revolving Credit Agreement is hereby amended and restated
in its entirety to read as follows:
" 'Commitment Fee Percentage' means a fee per annum on the
-------------------------
undrawn amount of the Facility as set forth below payable quarterly in
arrears following the Closing:
<TABLE>
<CAPTION>
Commitment
Adjusted Leverage Fee
Tier Ratio Percentage
- --------------------------------------------------------------------------------------------
<S> <C> <C>
I equal to or greater than 5.00 0.50%
- --------------------------------------------------------------------------------------------
II equal to or greater than 4.75 but less than 5.00 0.50%
- --------------------------------------------------------------------------------------------
III equal to or greater than 4.25 but less than 4.75 0.50%
- --------------------------------------------------------------------------------------------
IV equal to or greater than 3.75 but less than 4.25 0.40%
- --------------------------------------------------------------------------------------------
V equal to or greater than 3.25 but less than 3.75 0.35%
- --------------------------------------------------------------------------------------------
VI less than 3.25 0.30%
- --------------------------------------------------------------------------------------------
</TABLE>
provided, however, that, notwithstanding the foregoing, for purposes of
-------- -------
determining the Commitment Fee Percentage, the Adjusted Leverage Ratio
shall be deemed to be greater than or equal to 5.00 to 1.0 at all times (i)
prior to receipt by the Administrative Agent of the financial statements,
compliance certificate and Borrowing Base Certificate required by Section
6.03(d) with respect to the fiscal year of the Borrower ending January 2,
2000, and (ii) when a Default has occurred and is continuing based on the
Borrower's failure to deliver any financial statement, compliance
certificate or Borrowing Base Certificate as and when required pursuant to
Sections 6.03(a), 6.03(c) or 6.03(d), as applicable. For purposes of this
Agreement, any change in the Commitment Fee Percentage based on a change in
the Adjusted Leverage Ratio shall be effective three Business Days after
the date of receipt by the Administrative Agent of the financial
statements, compliance certificate and Borrowing Base Certificate required
by Sections 6.03(a), 6.03(c) and 6.03(d), as applicable, reflecting such
change."
(d) The definition of the term "EBITDA" contained in Section 1.01 of
------
the Revolving Credit Agreement is hereby amended and restated in its entirety to
read as follows:
' "EBITDA' means, for any period, net income (or net loss) plus, to
------ ----
the extent deducted in determining such net income (or net loss), the sum of (a)
interest expense, (b) income tax expense, (c) depreciation expense and (d)
amortization expense, in each case
3
<PAGE>
determined in accordance with GAAP for such period. In addition, up to
$19,022,000 of the 1998 Restructuring Charge Amount (as defined below) may be
added back to EBITDA for financial covenant calculations for all calculation
periods that include the fourth fiscal quarter of 1998 (but such amount may only
be added back to EBITDA for any period to the extent such amount would otherwise
be deducted in determining net income for the applicable period). For purposes
of this definition, the term "1998 Restructuring Charge Amount" means the
--------------------------------
$19,022,000 of pre-tax, one-time charges taken by the Borrower in fiscal year
1998 associated with, among other things, the adjustment of balance sheet
valuations and the discontinuance of certain loss-producing operations."
(e) The definition of the term "Eligible Accounts Receivable"
----------------------------
contained in Section 1.01 of the Revolving Credit Agreement is hereby amended
and restated in its entirety to read as follows:
" 'Eligible Accounts Receivable' means Accounts Receivable of the
----------------------------
Borrower and its Domestic Subsidiaries. The value of such Accounts Receivable
shall be their book value determined in accordance with GAAP (plus, to the
extent deducted in determining the amount of Accounts Receivable in accordance
with GAAP, the amount of any allowance for doubtful accounts), as reflected on
the most recent Borrowing Base Certificate received by the Administrative Agent
pursuant to Section 4.02(a)(iii) or Section 6.03(a); provided, however, that the
-------- -------
following shall not constitute Eligible Accounts Receivable:
(i) Accounts Receivable in respect of which the Security Agreement,
after giving effect to the related filings of financing statements that
have then been made, if any, does not create or has ceased to create a
valid and perfected first priority Lien in favor of the Administrative
Agent and the Lender Parties securing the Secured Obligations;
(ii) Accounts Receivable owing from any Person that is an Affiliate of
the Borrower;
(iii) Accounts Receivable owing from any Person that is also a
supplier to or creditor of the Borrower or any of its Domestic
Subsidiaries unless such Person has waived any right of set-off in a manner
acceptable to the Administrative Agent; and
(iv) Accounts Receivable more than 90 days past original invoice
date."
(f) The definition of the term "Eligible Real Property Inclusion Date"
-------------------------------------
contained in Section 1.01 of the Revolving Credit Agreement is hereby amended
and restated in its entirety to read as follows:
" 'Eligible Real Property Inclusion Date' means March 28, 1999."
--------------------------------------
(g) Section 1.01 of the Revolving Credit Agreement is hereby amended
by adding thereto, in appropriate alphabetical order, the following defined
term:
4
<PAGE>
"'Insignificant Subsidiaries' means Henry Lee Export Corporation, CB
--------------------------
Foods, Inc. and Okun Produce International and any other Subsidiary formed
after June 30, 1999 and designated as such by a written notice to the
Administrative Agent to the extent such designation is then permitted in
accordance with Section 6.02(n)."
(h) [intentionally omitted].
(i) Section 4.02(a)(iii) of the Revolving Credit Agreement is hereby
amended by inserting, immediately following the words "evidencing the same"
appearing at the end of such Section, the following parenthetical:
"(which Borrowing Base Certificate may be the Borrowing Base Certificate
then most recently required to be delivered pursuant to Section 6.03(a) and
need not be separately delivered pursuant to this Section 4.02(a)(iii))".
(j) Section 5.01(b) of the Revolving Credit Agreement is hereby
amended by deleting the words "as of the date hereof" each time they appear in
the first sentence of such Section and replacing them with the words "as of the
date of effectiveness of the Third Amendment hereto".
(k) Section 5.01(j)(vi) of the Revolving Credit Agreement is hereby
amended by deleting the reference to $100,000 appearing in such Section and
replacing it with $1,000,000.
(l) Section 5.01(r)(i) of the Revolving Credit Agreement is hereby
amended by inserting the word "net" immediately prior to the words "book value"
appearing in such Section.
(m) Article V of the Revolving Credit Agreement is hereby amended by
adding thereto a new Section 5.01(w) to read as follows:
"(w) Insignificant Subsidiaries. The aggregate fair market value of
--------------------------
all assets of the Insignificant Subsidiaries does not exceed $5,000,000.
None of the Insignificant Subsidiaries engages in any material business
activities."
(n) Section 6.01(l)(i) of the Revolving Credit Agreement is hereby
amended and restated in its entirety to read as follows:
"(i) Substantially concurrently with the formation or acquisition of
any Subsidiary of the Borrower, (A) cause such Subsidiary (other than a
Foreign Subsidiary or an Insignificant Subsidiary) to guarantee all
Obligations of the Borrower hereunder and under the Notes by executing and
delivering to the Administrative Agent an amendment to Guaranty in
substantially the form of Exhibit L, (B) cause such Subsidiary (other than
a Foreign Subsidiary or an Insignificant Subsidiary) to execute and deliver
to the Administrative Agent, an amendment to the Security Agreement, in
substantially the form of Exhibit M (whereby such Subsidiary shall grant a
Lien on those of its assets described in the Security Agreement), (C)
except in the case of an Insignificant
5
<PAGE>
Subsidiary, promptly pledge to the Administrative Agent or cause to be
pledged to the Administrative Agent all of the outstanding capital stock of
such Subsidiary (or, if such Subsidiary is a Foreign Subsidiary, 65% of
such capital stock) owned by any Loan Party to secure such Loan Party's
Obligations under the Loan Documents, (D) with respect to any real property
in which such Subsidiary (other than a Foreign Subsidiary or an
Insignificant Subsidiary) has an interest, cause such Subsidiary to execute
and deliver such deeds of trust, trust deeds and mortgages ("Additional
----------
Mortgages") in appropriate form for filing in all filing or recording
---------
offices that the Administrative Agent may deem necessary or desirable to
create a valid first and subsisting Lien on the property described therein
in favor of the Administrative Agent for the benefit of the Lender Parties,
(E) promptly take, and cause such Subsidiary (other than a Foreign
Subsidiary or an Insignificant Subsidiary) and each other Loan Party to
take all action necessary or (in the opinion of the Administrative Agent or
the Required Lenders) desirable to perfect and protect the Liens intended
to be created by the Collateral Documents, as amended pursuant to this
Section 6.01(l), and (F) promptly deliver to the Administrative Agent such
opinions of counsel, if any, as the Administrative Agent or the Required
Lenders may reasonably require with respect to the foregoing (including
opinions as to enforceability and perfection of security interests)."
(o) Section 6.01(m)(ii) of the Revolving Credit Agreement is hereby
amended by inserting the following immediately prior to the word "ensure"
appearing in such Section: "confirm the appraised value of any property set
forth on Schedule 1.01(c) or to".
(p) Section 6.02(b)(iii) of the Revolving Credit Agreement is hereby
amended by deleting the period at the end of clause (C) of such Section and
replacing it with a comma and by adding the following clauses (D) and (E)
thereto:
"(D) unsecured Debt of the Borrower in respect of its daily
overdraft facility but only to the extent such Debt (1) is incurred in the
ordinary course of the Borrower's business consistent with past practices
(2) does not exceed $7,500,000 in principal amount at any time outstanding,
and (3) is repaid in full within 3 Business Days of the incurrence of such
Debt, and
(E) other unsecured Debt of the Borrower and its Subsidiaries in an
aggregate principal amount at any time outstanding not to exceed
$2,000,000."
(q) Article VI of the Revolving Credit Agreement is hereby amended by
adding thereto a new Section 6.02(n) to read as follows:
"(n) Certain Covenants Regarding Insignificant Subsidiaries. Any
------------------------------------------------------
contrary provision of this Agreement or any other Loan Document
notwithstanding the Borrower shall not and shall not permit (A) any of its
Subsidiaries to sell, contribute or otherwise transfer any assets to or for
the benefit of any Insignificant Subsidiary, or (B) the Insignificant
Subsidiaries to have assets with a fair market value in excess of
$5,000,000, or (C) any Insignificant Subsidiary to have any material
liabilities (other than liabilities, such as franchise tax obligations,
required by law in connection with the maintenance of
6
<PAGE>
its corporate existence but only for so long as is reasonably required to
dissolve such Insignificant Subsidiary) or to engage in any material
business activities. The Borrower may not designate any Subsidiary as an
"Insignificant Subsidiary" unless the Borrower would be in compliance with
this Section 6.02(n) after giving effect to such designation."
(r) Section 6.03(a) of the Revolving Credit Agreement is hereby
amended and restated in its entirety to read as follows:
"(a) Monthly Financials; Borrowing Base Certificate; Annual Forecast.
---------------------------------------------------------------
(i) Monthly, within 40 days after the end of each fiscal month of the
Borrower and its Subsidiaries (and, with respect to clause (B) below, at
any other time reasonably requested by the Administrative Agent):
(A) Consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as of the end of such month and
Consolidated and consolidating statements of income and cash flows of
the Borrower and its Subsidiaries for the period commencing at the end
of the previous month and ending with the end of such month, setting
forth in each case in comparative form the corresponding figures for
the corresponding month of the preceding year (except that the
Borrower shall not be required to deliver the financial statements
otherwise required under this clause (A) with respect to any monthly
period occurring during a period when the Borrower has demonstrated
(pursuant to compliance certificates delivered in accordance with this
Section 6.03) an Adjusted Leverage Ratio of less than 4.0 to 1.0 for
then most recently ended two consecutive fiscal quarters), and
(B) a Borrowing Base Certificate as of the end of such
month, which shall (1) be completed substantially in the form of
Exhibit K, detailing the Borrower's Eligible Accounts Receivable,
Eligible Inventory and Eligible Real Property as of the last day of
such month (or as of such other date as the Administrative Agent may
request), (2) be prepared by or under the supervision of the
Borrower's chief executive officer, chief financial officer or
treasurer and certified by such officer subject only to adjustment
upon completion of the normal year-end audit of physical inventory,
and (3) include such additional schedules and other information as the
Administrative Agent may reasonably request; and
(ii) annually, not later than 45 days after the end of each fiscal
year of the Borrower and its Subsidiaries, forecasts prepared by management
of the Borrower, in form reasonably satisfactory to the Administrative
Agent, of balance sheets, income statements and cash flow statements on a
quarterly basis for the fiscal year following such fiscal year then ended
and on an annual basis for each fiscal year thereafter until the Commitment
Termination Date.
(iii) Any contrary provision of this Section 6.03(a) or of Section
6.03(c) or (d) notwithstanding, the Borrower shall not be required to
report consolidating numbers
7
<PAGE>
with respect to the Insignificant Subsidiaries or with respect to HL
Holding Corporation or Smart & Final de Mexico, S.A. de C.V."
(s) (i) Section 6.03(c) of the Revolving Credit Agreement is hereby
amended by adding thereto, immediately following the words "in comparative form"
the words "the corresponding figures for such period (on a quarterly and year to
date basis) from the forecast delivered pursuant to Section 6.03(a) and"; and
(ii) Section 6.03(d) of the Revolving Credit Agreement is hereby amended by
adding thereto, at the end of clause (ii) of such Section, the words "and
including a comparison of the results for such fiscal year to the results for
such fiscal year set forth in the forecast delivered pursuant to Section
6.03(a)".
(t) Sections 6.04(b), (c) and (d) of the Revolving Credit Agreement
are hereby amended and restated in their entirety to read as follows:
"(b) Adjusted Leverage Ratio. Maintain an Adjusted Leverage Ratio
-----------------------
not greater than (i) 5.25 to 1.0 from and including June 20, 1999 to, but
not including, January 2, 2000, (ii) 5.00 to 1.0 from and including January
2, 2000, to, but not including, March 26, 2000, (iii) 4.75 to 1.0 from and
including March 26, 2000 to but not including March 25 , 2001, and (iv)
4.50 to 1.0 from and including March 25, 2001 and at all times thereafter.
(c) Fixed Charge Coverage Ratio. Maintain at all times a ratio of
---------------------------
the sum of (i) Consolidated EBITDA of the Borrower and its Subsidiaries
plus (ii) Consolidated rent expense of the Borrower and its Subsidiaries to
the sum of (iii) Consolidated Interest Expense of the Borrower and its
Subsidiaries plus (iv) Consolidated rent expense of the Borrower and its
Subsidiaries (in each case determined for the period of four consecutive
fiscal quarters ending as of the last day of each fiscal quarter of the
Borrower) of not less than (i) 1.50 to 1.0 from and including June 20, 1999
to, but not including, January 2, 2000, (ii) 1.60 to 1.0 from and including
January 2, 2000, to, but not including, March 26, 2000, (iii) 1.65 to 1.0
from and including March 26, 2000 to but not including March 25, 2001, and
(iv) 1.75 to 1.0 from and including March 25, 2001 and at all times
thereafter.
(d) Capital Expenditures. Not make, or permit any of its
--------------------
Subsidiaries to make, any Capital Expenditures that would cause the
aggregate of all such Capital Expenditures made by the Borrower and its
Subsidiaries to exceed $35,000,000 in fiscal year of the Borrower and its
Subsidiaries ending January 2, 2000 or $40,000,000 in any fiscal year of
the Borrower and its Subsidiaries thereafter."
(u) Clause (ii) of the proviso to Section 9.07(a) of the Revolving
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
"(ii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender Party or an assignment
of all of a Lender Party's rights and obligations under this Agreement, the
amount of the Commitments and Advances of the assigning Lender Party being
assigned pursuant to each such assignment shall (unless otherwise consented
to by the Borrower and the Administrative Agent
8
<PAGE>
(except that no consent of the Borrower shall be required if an Event of
Default has occurred and is continuing)) be such amount as will cause the
aggregate amount of Commitments and Advances being assigned by such Lender
Party hereunder plus the amount being assigned by such Lender (in its
----
capacity as a Lender and, as applicable, a Holder under the Synthetic Lease
Documents) under the Synthetic Lease Documents to equal $5,000,000 or an
integral multiple of $1,000,000 in excess thereof,"
(v) The Revolving Credit Agreement is hereby amended by adding thereto
Schedule 1.01(c) (as attached hereto).
(w) Schedules 5.01(b), 5.01(j) and 5.01(r)(i) to the Revolving Credit
Agreement are hereby replaced in their entirety with Schedules 5.01(b), 5.01(j)
and 5.01(r)(i) hereto.
SECTION 2. Amendment to Participation Agreement. Effective as of
-------------------------------------
the Amendment Effective Date (as defined in Section 4 hereof), the Participation
Agreement is hereby amended as follows:
(a) The definition of the term "Applicable Percentage" contained in
Appendix A to the Participation Agreement is hereby amended and restated in its
entirety to read as follows:
" 'Applicable Percentage' shall mean for Eurodollar Loans, the
Lender Unused Fee, Eurodollar Holder Advances and the Holder Unused Fee,
the margin (expressed as a percentage) to be used in determining the
Eurodollar Rate and/or the applicable Unused Fee, as the case may be, and
shall, until the receipt of the Margin Certificate for the fiscal year of
the Borrower ending January 2, 2000, be (a) 3.00%, for the Eurodollar
Loans, (b) 2.00%, for the ABR Loans, (c) 0.50%, for the Lender Unused Fee,
(d) 3.75%, for the Eurodollar Holder Advances, (e) 2.75%, for the ABR
Holder Advances and (f) 0.50%, for the Holder Unused Fee, and after such
receipt shall be determined, subject to the final paragraph of this
definition, by reference to the Adjusted Leverage Ratio set forth in the
most recently delivered Margin Certificate as follows:
9
<PAGE>
<TABLE>
<CAPTION>
Applicable
Applicable Percentage Applicable Applicable Applicable
Percentage Applicable for Percentage Percentage Percentage
Adjusted for Percentage Eurodollar for ABR for the for the
Leverage Eurodollar for ABR Holder Holder Holder Lender
Ratio Loans Loans Advances Advances Unused Fee Unused Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Less than 3.25 1.50% 0.50% 2.25% 1.25% 0.30% 0.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Equal to or
greater than 3.25 1.75% 0.75% 2.50% 1.50% 0.35% 0.35%
but less than 3.75
- ------------------------------------------------------------------------------------------------------------------------------------
Equal to or
greater than 3.75 2.00% 1.00% 2.75% 1.75% 0.40% 0.40%
but less than 4.25
- -----------------------------------------------------------------------------------------------------------------------------------
Equal to or
greater than 4.25 2.25% 1.25% 3.00% 2.00% 0.50% 0.50%
but less than 4.75
- ------------------------------------------------------------------------------------------------------------------------------------
Equal to or
greater than 4.75 2.50% 1.50% 3.25% 2.25% 0.50% 0.50%
but less than 5.00
- ------------------------------------------------------------------------------------------------------------------------------------
Equal to or
greater than 5.00 3.00% 2.00% 3.75% 2.75% 0.50% 0.50%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Adjustments, if any, in the Applicable Percentage shall be made by the
Agent on the fifth (5th) Business Day after receipt by the Agent of
quarterly financial statements for Smart & Final Inc. and its Subsidiaries
and the accompanying Officer's Compliance Certificate setting forth the
income and cash flows of Smart & Final Inc. and its Consolidated
Subsidiaries as of the most recent fiscal quarter end. Subject to Section
2.8(b) of the Credit Agreement and Section 3.2(b) of the Trust Agreement,
in the event the Lessee fails to deliver, or to cause the delivery of, such
financial statements and certificate within forty-five (45) days after the
end of each fiscal quarter of Smart & Final Inc., the Applicable Percentage
shall be the highest Applicable Percentage until five (5) Business Days
after receipt by the Agent of such financial statements and certificates."
(b) Section 9.8(a)(ii) of the Synthetic Lease Credit Agreement is
hereby amended and restated in its entirety to read as follows:
"(ii) except in the case of an assignment to another Lender or an
assignment of all of a Lender's rights and obligations under the Operative
Agreements, the amount of any such partial assignment shall (unless
otherwise consented to by the Borrower and the Administrative Agent (except
that no consent of the Borrower shall be required if an Event of Default
has occurred and is continuing)) be such amount as will cause the aggregate
amount of such partial assignment plus the amount being assigned by such
----
Lender under the Lessee Credit Agreement (in its capacity as a Lender under
the Lessee Credit Agreement) and, as applicable, under the Trust Agreement
(in its capacity as a Holder) to be at least equal to $5,000,000 or an
integral multiple of $1,000,000 in excess thereof."
10
<PAGE>
SECTION 3. Waivers. Effective as of the Amendment Effective Date,
-------
the Lenders, the Holders and the Administrative Agent hereby waive (but only to
the extent set forth below) any Default or Event of Default arising as a result
of:
(a) the Borrower's failure to comply with Sections 6.04(b) and 6.04(c)
with respect to the periods ending January 3, 1999 and March 28, 1999;
(b) the inaccuracy of the representation set forth in (i) Section
5.01(b) of the Revolving Credit Agreement (but only such inaccuracy to the
extent existing prior to giving effect to this Amendment and solely with
respect to the failure to include the Insignificant Subsidiaries and HL
Holding Corporation and Smart & Final de Mexico, S.A. de C.V. on Schedule
5.01(b) as in effect prior to the Amendment Effective Date), and (ii)
5.01(j)(vi) but only to the extent the annualized costs referred to therein
have not exceeded $1,000,000;
(c) [intentionally omitted];
(d) the failure to comply with the provisions of Section
6.01(l)(ii)(1) with respect to the properties identified on Schedules
3(d)(i), (ii) and (iii) hereto, provided, that (i) such waiver shall be
--------
effective with respect to the properties identified on Schedule 3(d)(i)
only to the extent that the provisions of Section 6.01(l)(ii)(1) of the
Revolving Credit Agreement have been complied with regarding such
properties on or prior to the date hereof, (ii) such waiver shall be
effective with respect to the properties identified on Schedule 3(d)(ii)
only to the extent that the provisions of Section 6.01(l)(ii)(1) of the
Revolving Credit Agreement have been complied with regarding such
properties on or prior to July 31, 1999, and (iii) such waiver with respect
to the properties identified on Schedule 3(d)(iii) may be revoked at any
time on 30 days prior written notice to the Borrower from the
Administrative Agent or the Required Lenders if the provisions of Section
6.01(l)(ii)(1) of the Revolving Credit Agreement have not been complied
with regarding such properties on or prior to the expiration of such 30 day
period.
SECTION 4. Conditions to Effectiveness. The amendments set forth
---------------------------
herein shall become effective on the date (the "Amendment Effective Date") on
------------------------
which each of the following conditions has been satisfied:
(a) The Administrative Agent shall have executed this Amendment and
shall have received counterparts of this Amendment executed by the Borrower, the
Required Lenders under the Revolving Credit Agreement and the Majority Secured
Parties (as defined in the Participation Agreement) and a counterpart of the
Consent attached hereto executed by each Guarantor.
(b) (i) The offering of fixed price rights (the "Rights Offering") to
---------------
purchase common stock of the Borrower described in the Borrower's Registration
Statement on form S-3 dated May 5, 1999 shall have been consummated on or prior
to June 11, 1999 with gross proceeds to the Borrower of not less than
$59,999,000, (ii) 100% of the Net Cash Proceeds of the Rights Offering shall
have been applied to prepay the Revolving Advances and permanently
11
<PAGE>
reduce the Revolving Commitments in accordance with Sections 2.04(b) and
2.05(b)(iii) of the Revolving Credit Agreement, and (iii) the Administrative
Agent shall have received evidence satisfactory to it of the cancellation of not
less than $38,500,000 in principal amount of Debt in respect of the Casino Note
(and it is expressly understood and agreed that, as of the Amendment Effective
Date, the Casino Note shall constitute "Surviving Debt" for purposes of the
Revolving Credit Agreement only to the extent the principal amount outstanding
thereunder does not exceed $17,000,000).
(c) The Borrower shall have paid (i) to the Administrative Agent, for
the ratable account of each Lender under the Revolving Credit Agreement, a fee
in an amount equal to 0.125% of the aggregate Revolving Commitments, and (ii) to
the Agent (as defined in the Synthetic Lease Credit Agreement), for the ratable
account of the Lenders under the Synthetic Lease Credit Agreement and the
Holders under the Synthetic Lease Credit Agreement, a fee in an amount equal to
0.125% of the aggregate Commitments under the Synthetic Lease Credit Agreement
and the aggregate Holder Commitments under the Trust Agreement.
(d) The Administrative Agent shall have received a favorable written
opinion (addressed to the Administrative Agent, the Issuing Bank, the Lenders
and the Holders) of Donald G. Alvarado, general counsel for the Loan Parties,
covering such matters relating to the Loan Parties and this Amendment as the
Administrative Agent or the Required Lenders or the Majority Secured Parties
shall reasonably request (and the Borrower hereby requests such counsel to
deliver such opinions).
(e) The Administrative Agent shall have received certified copies of
resolutions of the Borrower's board of directors authorizing this Amendment and
such other documents and certificates as the Administrative Agent or its counsel
may reasonably request relating to the organization, existence and good standing
of each Loan Party, the authorization of this Amendment and any other legal
matters relating to the Loan Parties and this Amendment, all in form and
substance satisfactory to the Administrative Agent and its counsel.
(f) The Administrative Agent shall have received a certificate of the
Borrower, certifying as to the names and true signatures of the officers of the
Borrower and each other Loan Party authorized to sign this Amendment or the
Consent.
SECTION 5. Representations and Warranties. The Borrower represents
------------------------------
and warrants as follows:
(a) Authority. The Borrower and each other Loan Party has the
---------
requisite corporate power and authority to execute and deliver this Amendment
and the Consent, as applicable, and to perform its obligations hereunder and
under the Loan Documents and the Operative Agreements (in each case as modified
hereby) to which it is a party. The execution, delivery and performance by the
Borrower of this Amendment and by each other Loan Party of the Consent, and the
performance by each Loan Party of each Loan Document and each Operative
Agreement (in each case as modified hereby) to which it is a party have been
duly approved by all necessary corporate action of such Loan Party and no other
corporate proceedings on the part of such Loan Party are necessary to consummate
such transactions.
12
<PAGE>
(b) Enforceability. This Amendment has been duly executed and
--------------
delivered by the Borrower. The Consent has been duly executed and delivered by
each Guarantor and each Grantor. This Amendment and each Loan Document and each
Operative Agreement (in each case as modified hereby) is the legal, valid and
binding obligation of each Loan Party party hereto and thereto, enforceable
against such Loan Party in accordance with its terms, and is in full force and
effect.
(c) Representations and Warranties. The representations and
------------------------------
warranties contained in each Loan Document and each Operative Agreement (other
than any such representations and warranties that, by their terms, are
specifically made as of a date other than the date hereof) are true and correct
on and as of the date hereof as though made on and as of the date hereof and
will be true and correct on and as of the Amendment Effective Date as though
made on and as of such date.
(d) No Default. After giving effect to this Amendment, no event has
----------
occurred and is continuing that constitutes a Default or Event of Default under
any Loan Document or any Operative Agreement.
SECTION 6. General Release of Claims.
-------------------------
(a) The Borrower represents and agrees that it has diligently and
thoroughly investigated the existence of any Claim (as defined below), and to
its knowledge and belief, no Claim exists and no facts exist that could give
rise to or support a Claim.
(b) As additional consideration for entering into this Amendment and
for the amendments set forth herein, the Borrower and each Guarantor and each of
their respective agents, employees, directors, officers, attorneys, affiliates,
subsidiaries, successors and assigns (individually a "Releasing Party," and
---------------
collectively the "Releasing Parties") hereby releases and forever discharges
-----------------
each of the Lessor, the Administrative Agent, the Syndication Agent, the Agent
and each Lender (under each of the Revolving Credit Agreement and the Synthetic
Lease Credit Agreement) and each Holder under the Trust Agreement and all of
their respective agents, direct and indirect shareholders, employees, directors,
officers, attorneys, branches, affiliates, subsidiaries, successors and assigns
(individually, a "Released Party," and collectively, the "Released Parties") of
-------------- ----------------
and from all damage, loss, claims, demands, liabilities, obligations (except for
any such obligations hereafter arising pursuant to the terms of the Loan
Documents or the Operative Agreements, as amended to date), actions and causes
of action whatsoever (collectively "Claims") that the Releasing Parties or any
------
of them may, as of the date hereof, have or claim to have against each or any of
the Released Parties, in each case whether presently known or unknown or with
respect to which the facts are known (or should have been known) that could give
rise to or support a Claim and of every nature and extent whatsoever on account
of or in any way relating to, arising out of or based upon the Loan Documents,
the Operative Agreements or this Amendment (including clause (a)) or the
negotiation or documentation hereof or the amendments under the Loan Documents
and Operative Agreements effected by this Amendment or the transactions
contemplated hereby, or any action or omission in connection with any of the
foregoing, including, without limitation, all such loss or damage of any kind
13
<PAGE>
heretofore sustained, or that may arise as a consequence of the dealings between
the parties up to the date hereof in connection with or in any way related to
the Loan Documents, the Operative Agreements or this Amendment. Each Releasing
Party further covenants and agrees that it has not assigned heretofore, and will
not hereafter sue any Released Party upon, any Claim released or purported to be
released under this Section, and the Borrower will indemnify and hold harmless
said Released Parties against any loss or liability on account of any actions
brought by any Releasing Party or its assigns or prosecuted on behalf of any
Releasing Party and relating to any Claim released or purported to be released
under this Section. It is further understood and agreed that any and all rights
under the provisions of Section 1542 of the California Civil Code are expressly
waived by each of the Releasing Parties. Section 1542 provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
THE DEBTOR."
SECTION 7. Reference to and Effect on the Loan Documents and the
-----------------------------------------------------
Credit Documents.
- ----------------
(a) Upon and after the effectiveness of this Amendment, (i) each
reference in the Revolving Credit Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Revolving Credit Agreement,
and each reference in the other Loan Documents or any Operative Agreement to
"the Credit Agreement", "the Lessee Credit Agreement", "thereunder", "thereof"
or words of like import referring to the Revolving Credit Agreement, shall mean
and be a reference to the Revolving Credit Agreement as modified hereby, and
(ii) each reference in the Participation Agreement or the Synthetic Lease Credit
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Participation Agreement or the Synthetic Lease Credit
Agreement, as the case may be, and each reference in the other Operative
Agreements or in the Loan Documents to "the Participation Agreement", "the
Credit Agreement", "the Synthetic Lease Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Participation Agreement or
the Synthetic Lease Credit Agreement Credit Agreement, shall mean and be a
reference to the Participation Agreement or the Synthetic Lease Credit
Agreement, as the case may be, in each case as modified hereby.
(b) Except as specifically modified above, the Revolving Credit
Agreement, the Participation Agreement, the Synthetic Lease Credit Agreement,
the Post-Closing Letter and the other Loan Documents and Operative Agreements
are and shall continue to be in full force and effect and are hereby in all
respects ratified and confirmed. Without limiting the generality of the
foregoing, the Collateral Documents (as defined in the Revolving Credit
Agreement) and the Security Documents (as defined in the Participation
Agreement) and all of the Collateral described therein do and shall, to the
extent set forth therein, continue to secure the payment of all obligations and
liabilities of the Borrower and/or the Lessor (as defined in the Participation
Agreement), as applicable, under the Revolving Credit Agreement and the
Participation
14
<PAGE>
Agreement and/or any of the other Loan Documents or Operative Agreements, in
each case as amended hereby.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Administrative Agent, the Lenders, the Holders, or the
Lessor under any of the Loan Documents or the Operative Agreements, nor
constitute a waiver of any provision of any of the Loan Documents or the
Operative Agreements.
(d) Each of the parties hereto specifically acknowledges and agrees
that (i) none of the parties to the Revolving Credit Agreement, the
Participation Agreement, any other Loan Documents or any other Operative
Agreement have agreed to any other or future waiver of or amendment to any of
the Loan Documents or Operative Agreements, (ii) neither the granting of the
waiver described herein nor the granting of any prior waivers and amendments
under the Loan Documents and/or the Operative Agreements creates any obligation
whatsoever on the part of any of the parties to any of the Loan Documents and/or
the Operative Agreements to grant any other or future waiver or amendment under
any of the Loan Documents or the Operative Agreements, and (iii) except as
specifically set forth herein, each of the parties to any of the Loan Documents
and/or the Operative agreements have reserved all rights and remedies under the
Loan Documents and/or the Operative Agreements, as applicable.
SECTION 8. Costs, Expenses and Taxes. The Borrower agrees to pay on
-------------------------
demand all reasonable costs and expenses of the Administrative Agent and the
Lenders in connection with the preparation, execution, delivery and
administration of this Amendment and the other instruments and documents, if
any, to be delivered hereunder, including, without limitation, the reasonable
fees and out of pocket expenses of counsel for the Administrative Agent and the
Lenders with respect thereto and with respect to advising each of such parties
as to its rights and responsibilities hereunder and thereunder. The Borrower
further agrees to pay on demand all costs and expenses, if any (including,
without limitation, reasonable counsel fees and expenses), in connection with
the enforcement (whether though negotiations, legal proceedings or otherwise) of
this Amendment and the other instruments and documents to be delivered
hereunder, including, without limitation, reasonable counsel fees and expenses
in connection with the enforcement of rights under this Section.
SECTION 9. Consent of Lenders and Holders Under Operative Agreements.
---------------------------------------------------------
By their execution hereof, the Lenders and Holders under the Operative
Agreements, hereby consent and agree to the terms of this Amendment and to the
amendments and modifications set forth herein for purposes of Section 28.1 of
the Lease (as defined in the Participation Agreement).
SECTION 10. Counterparts. This Amendment 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 to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart of a
15
<PAGE>
signature page to this Amendment by telefacsimile shall be effective as delivery
of a manually executed counterpart of this Amendment.
SECTION 11. Governing Law. This Amendment shall be governed by, and
-------------
construed in accordance with, the laws of the State of California.
[Signature Pages Follow]
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first written above.
SMART & FINAL INC.,
as Borrower
By: /s/ MARTIN A. LYNCH
-----------------------------
Martin A. Lynch
Title: Executive Vice President &
Chief Financial Officer
S-1
<PAGE>
CREDIT LYONNAIS LOS ANGELES BRANCH,
as Administrative Agent
By: /s/ DIANNE M. SCOTT
-------------------------------------
Dianne M. Scott
Title: First Vice President & Manager
S-2
<PAGE>
L/C Bank
--------
CREDIT LYONNAIS NEW YORK
BRANCH
By: /s/ ROBERT IVOSEVICH
-----------------------------
Robert Ivosevich
Title: Senior Vice President
S-3
<PAGE>
Holders and Lenders:
-------------------
CREDIT LYONNAIS LOS ANGELES
BRANCH, as a Lender
By:/s/ DIANNE M. SCOTT
-----------------------------
Dianne M. Scott
Title: First Vice President & Manager
S-4
<PAGE>
CREDIT LYONNAIS LEASING CORP., as
a Holder
By:/s/ L.M. WERTHEIM
-----------------------------
L.M. Wertheim
Title: President
S-5
<PAGE>
NATIONSBANK, N.A., as a Lender and a
Holder
By:/s/ JAMES P. JOHNSON
-----------------------------
James P. Johnson
Title: Managing Director
S-6
<PAGE>
UNION BANK OF CALIFORNIA, N.A., as a
Lender and a Holder
By:/s/ TERRY ROCHA
-----------------------------
Terry Rocha
Title: Vice President
S-7
<PAGE>
WELLS FARGO BANK, N.A., as a Lender
By:/s/ RAZIA DAMJI
-----------------------------
Razia Damji
Title: Vice President
S-8
<PAGE>
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK N.A.
"RABOBANK NEDERLAND", NEW YORK
BRANCH, as a Lender and a Holder
By:/s/ IAN REECE
-----------------------------
Ian Reece
Title: Senior Credit Officer
By:/s/ ELLEN A. POLANSKY
-----------------------------
Ellen A. Polansky
Title: Vice President
S-9
<PAGE>
NATEXIS BANQUE - BFCE, as a Lender and
a Holder
By: /s/ PIETER J. VAN TULDER
-----------------------------
Pieter J. Van Tulder
Title: Vice President & Manager,
Multinational Group
/s/ CHRISTINE DIRRINGER
-----------------------------
Christine Dirringer
Title: Assistant Treasurer
S-10
<PAGE>
CONSENT
Dated as of June 23, 1999
The undersigned, as Guarantors under the "Guaranty" and as Grantors
under the "Security Agreement" (as such terms are defined in and under the
Revolving Credit Agreement referred to in the foregoing Amendment) and as
Guarantors under the "Guaranty Agreement" (as defined in the Participation
Agreement referred to in the foregoing Amendment), each hereby consents and
agrees to the foregoing Amendment and hereby confirms and agrees that (i) the
Guaranty, the Guaranty Agreement and the Security Agreement and all other Loan
Documents and Operative Agreements are, and shall continue to be, in full force
and effect and are hereby ratified and confirmed in all respects except that,
upon Amendment Effective Date (as defined in the foregoing Amendment), each
reference in the Guaranty, the Guaranty Agreement, the Security Agreement and
the other Loan Documents and Operative Agreements to the "Credit Agreement",
"Lessee Credit Agreement", "the Participation Agreement," "the Synthetic Lease
Credit Agreement", "thereunder", "thereof" and words of like import referring to
the Revolving Credit Agreement, the Participation Agreement or the Synthetic
Lease Credit Agreement, as the case may be shall mean and be a reference to the
Revolving Credit Agreement, the Participation Agreement or the Synthetic Lease
Credit Agreement, as the case may be, as amended and modified by said Amendment,
and (ii) the Security Agreement and all of the Collateral described therein do,
and shall continue to, secure the payment of all of the Secured Obligations as
defined in the Security Agreement.
AMERICAN FOODSERVICE DISTRIBUTORS
By: /s/ RICHARD N. PHEGLEY
-----------------------------
Richard N. Phegley
Title: Vice President & Treasurer
SMART & FINAL STORES CORPORATION
By: /s/ RICHARD N. PHEGLEY
-----------------------------
Richard N. Phegley
Title: Vice President & Treasurer
SMART & FINAL OREGON, INC.
By: /s/ RICHARD N. PHEGLEY
-----------------------------
Richard N. Phegley
Title: Vice President & Treasurer
PORT STOCKTON FOOD DISTRIBUTORS, INC.
By: /s/ RICHARD N. PHEGLEY
-----------------------------
Richard N. Phegley
Title: Vice President & Treasurer
HENRY LEE COMPANY
By: /s/ RICHARD N. PHEGLEY
-----------------------------
Richard N. Phegley
Title: Vice President & Treasurer
AMERIFOODS TRADING COMPANY
By: /s/ RICHARD N. PHEGLEY
-----------------------------
Richard N. Phegley
Title: Vice President & Treasurer
<PAGE>
Schedule 1.01(c)
Real Property Appraisals
<TABLE>
<CAPTION>
STORE ADDRESS STORE NUMBER APPRAISED VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
1422 East First Street, 302 $ 920,000
Santa Ana, CA 92701
- --------------------------------------------------------------------------------------------------
907 East Holt Blvd., 303 $ 650,000
Ontario, CA 91761
- --------------------------------------------------------------------------------------------------
1382 Locust Street, 305 $ 1,600,000
Pasadena, CA 91106
- --------------------------------------------------------------------------------------------------
500 South Pacific Avenue, 306 $ 1,200,000
San Pedro, CA 90731
- --------------------------------------------------------------------------------------------------
1216 South Compton Ave., 310 $ 1,250,000
Los Angeles, CA 90021
- --------------------------------------------------------------------------------------------------
12210 Santa Monica Blvd., 315 $ 4,300,000
Los Angeles, CA 90025
- --------------------------------------------------------------------------------------------------
3310 Vine Street, 316 $ 1,140,000
Riverside, CA 92507
- --------------------------------------------------------------------------------------------------
1720 Redlands Blvd., 318 $ 1,000,000
Redlands, CA 92373
- --------------------------------------------------------------------------------------------------
266 East Huntington Drive, 319 $ 1,400,000
Monrovia, CA 91016
- --------------------------------------------------------------------------------------------------
322 Pacific Coast Highway, 322 $ 720,000
Redondo Beach, CA 90277
- --------------------------------------------------------------------------------------------------
7720 Melrose Avenue, 323 $ 1,140,000
Los Angeles, CA 90046
- --------------------------------------------------------------------------------------------------
1725 Golden State Highway 326 $ 450,000
Bakersfield, CA 93301
- --------------------------------------------------------------------------------------------------
10113 Venice Boulevard, 330 $ 2,675,000
Los Angeles, CA 90034
- --------------------------------------------------------------------------------------------------
2019 Pasadena Avenue, 334 $ 800,000
Los Angeles, CA 90031
- --------------------------------------------------------------------------------------------------
8137 South Vermont Avenue, 337 $ 1,450,000
Los Angeles, CA 90044
- --------------------------------------------------------------------------------------------------
1125 East El Segundo, 341 $ 750,000
Compton, CA 90059
- --------------------------------------------------------------------------------------------------
2308 East 4th Street 345 $ 1,150,000
Los Angeles, CA 90033
- --------------------------------------------------------------------------------------------------
9535 Alondra Blvd., 357 $ 825,000
Bellflower, CA 90706
- --------------------------------------------------------------------------------------------------
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
STORE ADDRESS STORE NUMBER APPRAISED VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
80555 State Highway 111, 358 $ 690,000
Indio, CA 92201
- --------------------------------------------------------------------------------------------------
19718 Sherman Way, 361 $ 3,000,000
Los Angeles, CA 91306
- --------------------------------------------------------------------------------------------------
939 North Western Avenue, 363 $ 4,000,000
Los Angeles, CA 90029
- --------------------------------------------------------------------------------------------------
2949 West Pico Blvd., 364 $ 800,000
Los Angeles, CA 90006
- --------------------------------------------------------------------------------------------------
20410 South Susan Road, 369 $ 1,000,000
Carson, CA 90810
- --------------------------------------------------------------------------------------------------
10893 San Fernando Road, 372 $ 1,250,000
Pacoima, CA 91331
- --------------------------------------------------------------------------------------------------
720 15th Street 378 $ 1,720,000
San Diego, CA 92101
- --------------------------------------------------------------------------------------------------
16130 Gothard Street 382 $ 1,000,000
Huntington Beach, CA 92647
- --------------------------------------------------------------------------------------------------
749 North State Street, 392 $ 700,000
Mermet, CA 92543
- --------------------------------------------------------------------------------------------------
200 Eastgate Road, 393 $ 165,000
Barstow, CA 92311
- --------------------------------------------------------------------------------------------------
37055 Date Palm Drive 396 $ 690,000
Cathedral City, CA 92234
- --------------------------------------------------------------------------------------------------
147 North Wilson Way 403 $ 560,000
Stockton, CA 95205
- --------------------------------------------------------------------------------------------------
6340 Stockton Blvd., 406 $ 750,000
Sacramento, CA 95824
- --------------------------------------------------------------------------------------------------
1941 San Pablo Ave., 409 $ 1,920,000
Berkeley, CA 94702
- --------------------------------------------------------------------------------------------------
319 East Market Street, 431 $ 910,000
Salinas, CA 93901
- --------------------------------------------------------------------------------------------------
1243 42nd Avenue, 445 $ 2,520,000
Oakland, CA 94601
- --------------------------------------------------------------------------------------------------
1575 Centinela Ave., 457 $ 1,400,000
Inglewood, CA 90302
- --------------------------------------------------------------------------------------------------
2720 West Beverly Blvd., 459 $ 2,100,000
Los Angeles, CA 90057
- --------------------------------------------------------------------------------------------------
3708 West Burbank Blvd., 471 $ 2,125,000
Los Angeles, CA 91505
- --------------------------------------------------------------------------------------------------
6201 South Alameda Street, 479 $ 1,550,000
Huntington Park, CA 90001
- --------------------------------------------------------------------------------------------------
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
STORE ADDRESS STORE NUMBER APPRAISED VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
2742 East Indian School Rd., 491 $ 950,000
Phoenix, AZ 85016
- --------------------------------------------------------------------------------------------------
2441 Scottsdale Road, 492 $ 1,100,000
Scottsdale, AZ 85257
- --------------------------------------------------------------------------------------------------
7750 North 35th Ave., 493 $ 1,010,000
Phoenix, AZ 85051
- --------------------------------------------------------------------------------------------------
60 South Stapley Drive 495 $ 930,000
Mesa, AZ 85204
- --------------------------------------------------------------------------------------------------
276 East 15th Street 497 $ 850,000
Yuma, AZ 85364
- --------------------------------------------------------------------------------------------------
4228 Westgate 539 $ 270,000
Pendleton, OR 97801
- --------------------------------------------------------------------------------------------------
3251 Leonis Blvd., W-705 $ 1,800,000
Vernon, CA 90058
- --------------------------------------------------------------------------------------------------
TOTAL $59,180,000.00
- --------------------------------------------------------------------------------------------------
</TABLE>
S-4
<PAGE>
Schedule 3(d)(i)
Certain Properties
(Section 6.01(l)(ii)(1) complied with as of the date of Third Amendment)
Stores:
493
708-21
709-43
709-96
W-719
S-5
<PAGE>
Schedule 3(d)(ii)
Certain Properties
(Section 6.01(l)(ii)(1) to be complied with by July 31, 1999)
Stores:
408
470
474
495
S-6
<PAGE>
Schedule 3(d)(iii)
Certain Properties
(Section 6.01(l)(ii)(1) to be complied with within 30 days of request)
Stores:
309
405
473
S-7
<PAGE>
EXHIBIT 10.123
THIS PROMISSORY NOTE HAS BEEN AMENDED BY,
AND IS SUBJECT TO THE TERMS OF,
THE ADDENDUM, DATED JUNE 11, 1999,
ATTACHED HERETO.
<PAGE>
ADDENDUM
TO
PROMISSORY NOTE
BY
SMART & FINAL INC.
ON BEHALF OF
CASINO USA, INC.
$15,964,606.25 Dated: June 11, 1999
This ADDENDUM ("Addendum") amends the Promissory Note (the "Note")
dated November 13, 1998 of SMART & FINAL INC., a Delaware corporation
("Borrower"), payable to the order of CASINO USA, INC., a California corporation
("Lender").
Borrower and Lender have heretofore agreed to a reduction in the
principal sum due by Borrower to Lender under the Note and therefore hereby
amend the Note to amend and restate the first paragraph thereof as follows:
FOR VALUE RECEIVED, the undersigned, SMART & FINAL INC., a Delaware
corporation ("Borrower"), HEREBY PROMISES TO PAY to the order of CASINO
USA, INC., a California corporation ("Lender"), the principal sum of
Fifteen Million Nine Hundred Sixty-Four Thousand Six Hundred Six Dollars
and Twenty-Five Cents ($15,964,606.25).
Borrower and Lender have heretofore further agreed to a reduction in
the interest rate to be paid by Borrower to Lender under the Note and therefore
hereby amend the Note to amend and restate the second paragraph thereof as
follows:
The Borrower promises to pay interest on the unpaid principal
amount of the Advances (as defined below) from the date of this Promissory
Note until such principal amount is paid in full, payable at such times as
are specified in the Loan Agreement (as defined below). The Borrower
promises to make such payments of interest (i) from the date of this
Promissory Note through but not including the date of the Addendum hereto,
at such rates as are specified in the Loan Agreement, and (ii) from the
date of the Addendum hereto until the maturity hereof, at the rate of
interest per annum that is the lower of (a) the sum of (1) the rate of
interest per annum payable by the Borrower under that certain Credit
Agreement, dated as of November 13, 1998, among the Borrower and the
financial institutions named therein, as it may be amended, supplemented or
replaced from time to time, plus (2) twenty-five basis points (0.25%), or
(b) the maximum rate of interest permitted by applicable law.
Page 1 of 2
<PAGE>
All other provisions of the Note shall remain in full force and effect
and shall apply in all respects to the principal sum set forth above, as set
forth in the Note and this Addendum.
This Addendum shall be governed by, and construed in accordance with,
the laws of the State of California.
SMART & FINAL INC.
By:__________________________
Martin A. Lynch
Executive Vice President &
Chief Financial Officer
ACKNOWLEDGED AND AGREED:
CASINO USA, INC.
By:_______________________
Name:
Title:
Page 2 of 2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-START> JAN-04-1999
<PERIOD-END> JUN-20-1999
<CASH> 34,396
<SECURITIES> 0
<RECEIVABLES> 62,967
<ALLOWANCES> 3,052
<INVENTORY> 150,882
<CURRENT-ASSETS> 270,259
<PP&E> 321,660
<DEPRECIATION> 111,687
<TOTAL-ASSETS> 570,841
<CURRENT-LIABILITIES> 139,857
<BONDS> 160,315
0
0
<COMMON> 291
<OTHER-SE> 248,860
<TOTAL-LIABILITY-AND-EQUITY> 570,841
<SALES> 816,945
<TOTAL-REVENUES> 816,945
<CGS> 713,650
<TOTAL-COSTS> 713,650
<OTHER-EXPENSES> 91,982
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,108
<INCOME-PRETAX> 1,205
<INCOME-TAX> 474
<INCOME-CONTINUING> 1,014
<DISCONTINUED> 0
<EXTRAORDINARY> 166
<CHANGES> 0
<NET-INCOME> 848
<EPS-BASIC> $0.04
<EPS-DILUTED> $0.04
</TABLE>
