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UNITED STATES
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 29, 1997
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition from ____ to ____
Commission file number 001-13222
---------
STATER BROS. HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0350671
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
21700 Barton Road
Colton, California 92324
------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (909) 783-5000
--------------
Not Applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report.)
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 preceeding 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 .
--- ---
As of July 25, 1997, there were issued and outstanding 50,000 shares of the
registrant's Class A Common Stock
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STATER BROS. HOLDINGS INC.
JUNE 29, 1997
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION (UNAUDITED) PAGE
----
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (UNAUDITED) AS OF SEPTEMBER 29, 1996
AND JUNE 29, 1997 3
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE 39 WEEKS
ENDED JUNE 23, 1996 AND JUNE 29, 1997 5
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE 13 WEEKS
ENDED JUNE 23, 1996 AND JUNE 29, 1997 6
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE
39 WEEKS ENDED JUNE 23, 1996 AND JUNE 29, 1997 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 21
ITEM 2. CHANGES IN SECURITIES 21
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 22
ITEM 5. OTHER INFORMATION 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 22
SIGNATURES 24
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATER BROS. HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
ASSETS
<TABLE>
<CAPTION>
SEPT. 29, JUNE 29,
1996 1997
-------- --------
<S> <C> <C>
Current Assets
Cash and cash equivalents......................... $ 45,279 $ 39,830
Receivables....................................... 19,009 19,410
Inventories....................................... 117,372 115,739
Prepaid expenses.................................. 3,357 5,000
Deferred income taxes............................. 4,710 4,710
Properties held for sale.......................... 1,787 1,348
-------- --------
Total current assets................................. 191,514 186,037
Investment in unconsolidated affiliate............... 7,626 11,503
Property and equipment
Land.............................................. 18,688 16,418
Buildings and improvements........................ 89,856 84,009
Store fixtures and equipment...................... 78,570 84,678
Property subject to capital leases................ 14,368 14,368
-------- --------
201,482 199,473
Less accumulated depreciation and amortization.... 87,267 93,452
-------- --------
114,215 106,021
Deferred income taxes................................ 5,295 7,381
Deferred debt issuance cost, net..................... 5,221 4,335
Lease guarantee escrow............................... 6,701 7,970
Other assets......................................... 7,722 7,196
-------- --------
Total assets......................................... $338,294 $330,443
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE> 4
STATER BROS. HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
(In thousands, except share amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPT. 29, JUNE 29,
1996 1997
-------- --------
<S> <C> <C>
Current Liabilities
Accounts payable.................................... $ 79,271 $ 63,140
Accrued payroll and related expenses................ 23,981 23,597
Other accrued liabilities........................... 23,607 25,359
Current portion of capital lease obligations........ 1,182 1,180
-------- --------
Total current liabilities.............................. 128,041 113,276
Long-term debt......................................... 165,000 165,000
Capital lease obligations, less current portion........ 6,917 6,042
Long-term portion of self-insurance reserves........... 10,332 9,475
Other long-term liabilities............................ 2,526 3,992
10.5% Cumulative Series B Preferred Stock:
(stated value $100 per share)
Authorized shares - 693,650
Issued and outstanding shares - 693,650.......... 69,365 69,365
Stockholders' equity
Class A Common Stock, $.01 par value:
Authorized shares - 100,000
Issued and outstanding shares - 50,000.............. 1 1
Additional paid-in capital.......................... 12,715 12,715
Retained deficit.................................... (41,953) (34,773)
Less option to acquire stock........................ (14,650) (14,650)
-------- --------
Total stockholders' equity............................. (43,887) (36,707)
-------- --------
Total liabilities and stockholders' equity............. $338,294 $330,443
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
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STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share and share amounts)
<TABLE>
<CAPTION>
39 Weeks Ended
----------------------
June 23, June 29,
1996 1997
---------- ----------
<S> <C> <C>
Sales.................................................. $1,244,312 $1,292,267
---------- ----------
Cost of goods sold..................................... 959,246 997,032
---------- ----------
Gross profit........................................... 285,066 295,235
Operating expenses
Selling, general and administrative expenses........ 239,252 248,683
Depreciation and amortization....................... 9,220 9,858
Consulting fees..................................... 1,125 1,125
---------- ----------
Total operating expenses............................... 249,597 259,666
---------- ----------
Operating profit....................................... 35,469 35,569
Interest income........................................ 1,309 1,733
Interest expense....................................... (14,943) (14,871)
Equity in earnings (loss) from unconsolidated affiliate (935) (1,123)
Other income (loss) - net.............................. (187) 96
---------- ----------
Income before income taxes............................. 20,713 21,404
Income taxes........................................... 8,390 8,777
---------- ----------
Net income............................................. $ 12,323 $ 12,627
Less preferred dividends............................... 2,155 5,448
---------- ----------
Earnings available to common shareholders.............. $ 10,168 $ 7,179
========== ==========
Earnings per common share.............................. $ 126.75 $ 143.58
========== ==========
Average common shares outstanding...................... 80,220 50,000
========== ==========
Shares outstanding at end of period.................... 50,000 50,000
========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
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STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share and share amounts)
<TABLE>
<CAPTION>
13 Weeks Ended
--------------------
June 23, June 29,
1996 1997
-------- --------
<S> <C> <C>
Sales.................................................. $429,349 $427,445
Cost of goods sold..................................... 330,092 330,731
-------- --------
Gross profit........................................... 99,257 96,714
Operating expenses
Selling, general and administrative expenses........ 83,636 81,531
Depreciation and amortization....................... 3,058 3,297
Consulting fees..................................... 375 375
-------- --------
Total operating expenses............................... 87,069 85,203
-------- --------
Operating profit....................................... 12,188 11,511
Interest income........................................ 602 738
Interest expense....................................... (5,019) (4,892)
Equity in earnings (loss) from unconsolidated affiliate (387) (544)
Other income (loss) - net.............................. (11) 99
-------- --------
Income before income taxes............................. 7,373 6,912
Income taxes........................................... 2,988 2,834
-------- --------
Net income............................................. $ 4,385 $ 4,078
Less preferred dividends............................... 1,816 1,816
-------- --------
Earnings available to common shareholders.............. $ 2,569 $ 2,262
======== ========
Earnings per common share.............................. $ 51.38 $ 45.24
======== ========
Average common shares outstanding...................... 50,000 50,000
======== ========
Shares outstanding at end of period.................... 50,000 50,000
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
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STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
39 Weeks Ended
-----------------------
June 23, June 29,
1996 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ......................................... $ 12,323 $ 12,627
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................... 9,220 9,858
Provision for deferred income taxes ............. 2 (2,086)
(Gain) loss on disposals of assets .............. 187 (96)
Net undistributed loss in investment in
unconsolidated affiliate ...................... 935 1,123
Changes in operating assets and liabilities:
(Increase) decrease in receivables ............. (2,584) (401)
(Increase) decrease in inventories ............. (1,642) 1,633
(Increase) decrease in prepaid expenses ........ (581) (1,643)
(Increase) decrease in other assets ............ 1,167 (741)
Increase (decrease) in accounts payable ........ (4,949) (16,131)
Increase (decrease) in accrued liabilities and
long-term portion of self-insurance reserves . 7,463 (493)
--------- ---------
Net cash (used by) provided by operating activities 21,541 3,650
--------- ---------
INVESTING ACTIVITIES:
Investment in unconsolidated affiliate ............. -- (5,000)
Purchase of property and equipment ................. (13,658) (14,329)
Proceeds from sale of property and equipment and
properties held for sale .......................... 18,629 16,552
--------- ---------
Net cash (used by) provided by investing activities 4,971 (2,777)
--------- ---------
FINANCING ACTIVITIES:
Dividends paid or accrued on preferred stock ....... (2,155) (5,447)
Redemption of common stock ......................... (69,365) --
Issuance of preferred stock ........................ 69,365 --
Principal payments on capital lease obligations .... (806) (875)
--------- ---------
Net cash (used by) financing activities ............ (2,961) (6,322)
--------- ---------
Net increase (decrease) in cash and cash equivalents 23,551 (5,449)
Cash and cash equivalents at beginning of period ... 26,308 45,279
--------- ---------
Cash and cash equivalents at end of period ......... $ 49,859 $ 39,830
========= =========
Interest paid ...................................... $ 9,938 $ 9,629
Income taxes paid .................................. $ 7,175 $ 4,275
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
7
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STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
JUNE 29, 1997
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all normal recurring adjustments necessary to
present fairly the financial position of Stater Bros. Holdings Inc. (the
"Company") and its subsidiaries as of September 29, 1996 and June 29, 1997 and
the results of its operations and cash flows for the thirty-nine weeks ended
June 23, 1996 and June 29, 1997. These consolidated financial statements should
be read in conjunction with the audited financial statements and notes thereto
included in the Company's latest annual report filed on Form 10-K. The operating
results for the thirty-nine weeks ended June 29, 1997 are not necessarily
indicative of the results of operations for a full year.
NOTE 2 - INCOME TAXES
The provision for income taxes for the thirty-nine weeks ended June 23,
1996 and June 29, 1997 consists of the following:
<TABLE>
<CAPTION>
39 Weeks Ended
-------------------------------
June 23, 1996 June 29, 1997
------------- -------------
(In thousands)
<S> <C> <C>
Federal Income Taxes $ 7,198 $ 6,785
State Income Taxes 1,192 1,992
-------- --------
$ 8,390 $ 8,777
======== ========
</TABLE>
NOTE 3 - CONVERSION OF COMMON STOCK
Effective March 8, 1996, the Company converted the Company's 50,000
shares of Common Stock held by Craig Corporation ("Craig") into 693,650 shares
of the Company's Series B Preferred Stock. The Series B Preferred Stock is
redeemable by the Company in whole but not in part for $69.4 million plus
accrued and unpaid dividends. On July 24, 1997, the Company gave notice of
exercise of option to redeem all outstanding shares of the Company's Series B
Preferred Stock for approximately $74.0 million, including accrued and unpaid
dividends.
NOTE 4 - UNCONSOLIDATED AFFILIATE
Prior to November 1996, and since 1986, Stater Bros. Markets, a wholly
owned subsidiary of the Company, owned 49.6% of Santee Dairies, Inc., ("Santee")
an operator of a fluid milk processing plant located in Los Angeles, California.
In November 1996 and for approximately $200,000, Stater Bros. Markets increased
its ownership in Santee to 50%, but is not the controlling shareholder.
Additionally, during the quarter ended December 29, 1996, Stater Bros. Markets
acquired Preferred Stock issued by Santee for an aggregate amount of $4.8
million. Subsequently, Stater Bros. Markets exchanged the Preferred Stock of
Santee Dairies, Inc. for Common Stock of Santee Dairies, Inc. It is not
anticipated that Santee will issue dividends on its Common Stock in the
foreseeable future. Santee is not a significant subsidiary of Stater Bros.
Markets or the Company, and accordingly the Company accounts for its investment
in Santee Dairies Inc. using the equity method of accounting. The Company
recognized undistributed losses from its investment in Santee Dairies, Inc. of
$544,000 and $387,000 for the thirteen weeks ended
8
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STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
JUNE 29, 1997
NOTE 4 - UNCONSOLIDATED AFFILIATE (CONTD.)
June 29, 1997 and June 23, 1996, respectively. For the thirty-nine weeks year to
date, the Company recognized losses of $1,123,000 and $935,000 for 1997 and
1996, respectively.
On July 30, 1997, the Company exchanged its Common Stock in Santee
Dairies, Inc. for a 50% ownership in Santee LLC, at which time Santee Dairies,
Inc. became a wholly owned subsidiary of Santee LLC.
NOTE 5 - CONSULTING AGREEMENT AND COVENANT NOT TO COMPETE
Pursuant to the Consulting Agreement dated as of September 3, 1993 (the
"Consulting Agreement"), effective and commencing March 8, 1994, Craig agreed to
render consulting services to the Company for a five-year period. In
consideration for such consulting services, the Company agreed to pay Craig $1.5
million per year, payable quarterly during the term of the Consulting Agreement.
On July 31, 1997, the Company gave notice to terminate its obligations under the
Consulting Agreement. Additionally, in accordance with the terms of the
Consulting Agreement, Craig has agreed not to engage in any business that
competes with the Company in any of the five counties in which the Company
operates until the end of the five-year period of the Consulting Agreement. The
Company paid Craig $5.0 million on March 8, 1994 which is amortized to earnings
over the five-year term of the covenant not to compete included in the
Consulting Agreement.
NOTE 6 - RECLASSIFICATIONS
Certain amounts in the prior periods have been reclassified to conform
to the current period financial statement presentation.
NOTE 7 - USE OF ESTIMATES
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions that effect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
NOTE 8 - ADOPTION OF ACCOUNTING STANDARD
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS 121), which
the Company adopted at the beginning of fiscal year 1997. Management believes
that the adoption of SFAS 121 will not have a material adverse effect on the
Company's financial position or its results of operations for fiscal 1997.
NOTE 9 - SUBSEQUENT EVENTS
In July 1997, the Company solicited and obtained the requisite consents
from the majority of the noteholders of the Company's 11% Senior Notes due 2001
which permitted the Company to amend the Indenture which governs its 11% Senior
Notes due 2001 as follows:
1) permit the Company to issue and sell up to $100 million
aggregate principal amount of its 9% Senior Subordinated Notes
due 2004, and to use a portion of the net proceeds from the
issuance of such notes to redeem all issued and outstanding
shares of the Company's Series B Preferred Stock, held by
Reading Australia PTY Limited ("Reading"),
9
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STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
JUNE 29, 1997
NOTE 9 - SUBSEQUENT EVENTS (CONTD.)
2) designate Santee LLC and Santee Dairies, Inc., to the extent
such entities ever become Subsidiaries of the Company, as
Unrestricted Subsidiaries (as defined) which would not be
subject to certain significant covenants of the 11% Senior Note
Indenture,
3) permit the Company to make certain additional investments in
Santee LLC (including investments funded by La Cadena
Investments, a California general partnership which owns all of
the issued and outstanding Common Stock of the Company),
4) permit the Company to repay under limited circumstances
investments made by La Cadena in the Company to enable it to
increase its ownership interest in Santee LLC, and
5) make certain other amendments to the 11% Senior Note Indenture.
On July 24, 1997, the Company completed an offering for $100 million of
9% Senior Subordinated Notes due 2004 under Rule 144a of the Securities Act.
Proceeds from the offering were used or will be used to pay for consent
solicitation fees of approximately $5.0 million, fees and expenses related to
the offering of approximately $4.0 million, pay a financial advisory fee to La
Cadena of $2.0 million and to pay approximately $74.0 million to redeem all of
the outstanding shares of the Company's Series B Preferred Stock including
accrued and unpaid dividends.
On July 24, 1997, concurrently with the sale of the 9% Senior
Subordinated Notes due 2004, the Company gave notice of exercise of option to
redeem all outstanding shares of the Company's Series B Preferred Stock to
Reading Australia PTY Limited ("Reading") a majority owned indirect subsidiary
of Craig Corporation ("Craig"). On August 4, 1997, the Company deposited
approximately $74.0 million into an Escrow Account for the benefit of Reading
Australia PTY Limited, the amounts required to redeem the Series B Preferred
Stock and to pay accrued and unpaid dividends up to and including August 4,
1997.
On July 31, 1997, the Company gave notice to terminate a five-year
consulting agreement with Craig that was entered into in connection with the
1994 Recapitalization. Annual fees payable to Craig under the Consulting
Agreement were $1.5 million per year.
10
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STATER BROS. HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART I - FINANCIAL INFORMATION (CONTD.)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RECAPITALIZATION TRANSACTION
In March 1994, the Company completed a Recapitalization Transaction (the
"Recapitalization") which transferred effective voting control of the
Company to La Cadena Investments ("La Cadena"), reclassified the
Company's outstanding equity, provided for certain cash payments and
distributions to Craig Corporation, previously a shareholder of the
Company, and provided the Company with an option to acquire Craig's
remaining equity in the Company. The Recapitalization was funded through
an offering of $165.0 million of 11% Senior Notes due 2001 which are
listed and trade on the American Stock Exchange.
Effective March 8, 1996, pursuant to options available to the Company
included in an Option Agreement entered into in March 1994, as part of
the Recapitalization between the Company and Craig, the Company
exercised its right to convert all of the Common Stock held by Craig
Corporation into 693,650 shares of 10.5% Series B Preferred Stock. The
redemption value of the Series B Preferred Stock is $100 per share for
an aggregate value of $69,365,000. Dividends on the Series B Preferred
Stock are due quarterly in arrears. On July 24, 1997, the Company gave
notice of exercise of option to redeem all outstanding shares of the
Company's Series B Preferred Stock to Reading Australia PTY Limited, a
majority owned indirect subsidiary of Craig.
Effective March 8, 1996, La Cadena became the sole Common Shareholder of
the Company and holds all of the shares of Class A Common Stock which
are entitled to 1.1 votes per share. La Cadena Investments is a
California General Partnership whose partners include Jack H. Brown,
Chairman of the Board, President and Chief Executive Officer of the
Company and other members of senior management of the Company. Jack H.
Brown has a majority interest in La Cadena and is the managing general
partner with the power to vote the shares of the Company held by La
Cadena.
11
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STATER BROS. HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain income statement components
expressed as a percent of sales for the thirteen and thirty-nine weeks
ended June 23, 1996 and June 29, 1997.
<TABLE>
<CAPTION>
Thirteen Weeks Thirty-Nine Weeks
----------------- -------------------
1996 1997 1996 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales 100.00% 100.00% 100.00% 100.00%
Gross profit 23.12 22.63 22.91 22.85
Operating Expenses:
Selling, general and
administrative expense 19.48 19.07 19.23 19.24
Depreciation and amortization .71 .77 .74 .76
Consulting fees .09 .09 .09 .09
Operating profits 2.84 2.70 2.85 2.76
Interest Income .14 .17 .11 .13
Interest expense (1.17) (1.14) (1.20) (1.15)
Equity in (loss) from
unconsolidated affiliate (.09) (.13) (.08) (.09)
Other income (loss)-net -- .02 (.02) .01
Earnings before income taxes 1.72% 1.62% 1.66% 1.66%
</TABLE>
Total sales for the thirteen weeks ended June 29, 1997 decreased .4% and
amounted to $427.4 million compared to $429.3 million for the like
period in 1996. Total sales for the thirty-nine weeks year to date ended
June 29, 1997 increased 3.9% and amounted to $1,292.3 million compared
to $1,244.3 million for the same period in 1996. Like store sales
decreased .4% for the quarter and increased 3.9% for the year to date
period. The Company operated 110 supermarkets at June 29, 1997 and at
June 23, 1996. The increase in sales in the thirty-nine weeks of 1997
compared to the like period of 1996 is due to many factors, including
the favorable customer response to the Company's 60th Anniversary
Marketing Program and slight improvements in the Southern California
economy. Sales also increased as a result of favorable customer response
to the Company's 1996 merchandising expansion and upgrading program
which included expanded product offerings in the deli, bakery, frozen
foods and dairy departments and the continuing introduction of fresh cut
flowers and prepackaged vegetables into the Company's supermarkets and a
decrease in competitive activity. Although comparisons of sales between
the third quarters of 1997 and 1996 are difficult, the slight decrease
in sales in the thirteen-week third quarter of fiscal 1997 can be
attributed to several items including the timing of the Easter holiday
and last year's departure of a competitor from the Southern California
market place. Sales from the Easter holiday were reported in the third
quarter of last year (the quarter ended June 23, 1996) and were reported
in the second quarter of this year (the quarter ended March 30, 1997).
Additionally, in the Company's second quarter of fiscal 1996, Smiths
Food & Drug ("Smith's") announced the termination of its Southern
California operations and began closing all of its supermarkets located
in Southern California. Approximately 15 Smith's competed with the
Company, of which five stores remain closed as of
12
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STATER BROS. HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTD.)
August 1, 1997 and of the remaining ten stores that were closed and
subsequently reopened by competitors, three stores reopened late in the
Company's 1996 second quarter, two stores reopened in the 1996 third
quarter and one store reopened in the Company's fourth quarter of fiscal
1996. Management believes it has been successful in attracting and
retaining many of the previous Smith's customers to its supermarkets.
Management believes that like store sales increased approximately 1.0%
in the third quarter of 1997, after adjusting for the Easter holiday and
the increase in sales in 1996 as a result of the departure of Smith's.
Gross profits for the thirteen weeks ended June 29, 1997, amounted to
$96.7 million or 22.63% of sales compared to $99.3 million or 23.12% of
sales in the same period of the prior year. For the thirty-nine week
year to date period, gross profits increased to $295.2 million or 22.85%
of sales compared to $285.1 million or 22.91% of sales in the prior
year. The decrease in gross profits, as a percent of sales, for the
third quarter and year-to-date periods reflects the Company's commitment
to retain its existing customer base and to attract new customers as the
Southern California economy continues to improve and experiences
increases in population in the Company's primary trading areas, through
its marketing strategy of Every Day Low Prices.
Operating expenses include selling, general and administrative expenses,
depreciation and amortization expenses and consulting fees. For the
thirteen weeks ended June 29, 1997, selling, general and administrative
expenses amounted to $81.5 million or 19.07% of sales compared to $83.6
million or 19.48% of sales for the like period of the prior year. For
the year to date period, selling, general and administrative expenses
amounted to $248.7 million or 19.24% of sales compared to $239.3 million
or 19.23% of sales for the like period of the prior year. The increase
in selling, general and administrative expenses in 1997 when compared to
1996 is due to the incremental costs and expenses incurred to operate at
the higher level of sales, the increase in net rent expenses from the
sale and leaseback of five supermarkets in January 1996 and an
additional four supermarkets in October 1996, and the suspension of
employer contributions to an over-funded collective bargaining benefits
trust in the first and second quarters of fiscal 1996.
Selling, general and administrative expenses in fiscal 1997 include
increases in rent expenses, net of reductions in depreciation expenses,
from the sale and leaseback of five supermarkets in January 1996 and an
additional four supermarkets in October 1996 of approximately $320,000
in the third quarter of fiscal 1997 and approximately $1.2 million in
the year to date period of fiscal 1997. Selling, general and
administrative expenses for the thirty-nine weeks ended June 23, 1996
reflect reductions in expenses for employer contributions to a
collective bargaining benefits trust of $3.8 million year to date. Such
collective bargaining health care benefits trust was overfunded and
employer monthly contributions to the trust were suspended for the
months of December 1995 and January 1996.
13
<PAGE> 14
STATER BROS. HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTD.)
Depreciation and amortization expenses amounted to $3.3 million and $9.9
million for the third quarter and year to date periods ended June 29,
1997, respectively. Depreciation and amortization expense amounted to
$3.1 million and $9.2 million for the quarter and year to date periods
of the prior year. Depreciation and amortization includes amortization
of a prepaid five-year covenant not to compete between the Company and
Craig which became effective as of March 8, 1994.
In conjunction with the March 1994 Recapitalization Transaction, the
Company entered into a five-year consulting and covenant not to compete
agreement (the "Consulting Agreement") with Craig Corporation. The
Consulting Agreement provided for a prepayment of $5.0 million, which is
amortized to expense over the five-year term of the covenant not to
compete. Amortization of the prepaid covenant not to compete amounted to
$250,000 and $750,000, respectively, for the thirteen and thirty-nine
weeks ended June 29, 1997 and June 23, 1996 and is included in
depreciation and amortization expense.
The Consulting Agreement also provided for annual consulting payments of
$1.5 million, paid quarterly in arrears. Consulting fees paid or accrued
to the benefit of Craig amounted to $375,000 for the thirteen weeks and
$1,125,000, for the thirty-nine weeks ended June 29, 1997 and June 23,
1996, respectively. On July 31, 1997, the Company gave notice to
terminate the five-year Consulting Agreement with Craig.
Operating profits for the third quarter of 1997 amounted to $11.5
million or 2.70% of sales, compared to $12.2 million or 2.84% of sales
in the third quarter of 1996. Operating profits for the thirty-nine
weeks year to date ended June 29, 1997, amounted to $35.6 million or
2.76% of sales, compared to $35.5 million or 2.85% of sales for the like
period in 1996.
Interest expense amounted to $4.9 million for the third quarter of 1997
and $5.0 million for the like period of 1996. For the year to date
periods of 1997 and 1996, interest expense amounted to $14.9 million.
Interest expense in the third quarter and year to date periods of 1997
and 1996, includes amortization of $295,000 and $885,000, respectively,
from fees and expenses incurred to acquire debt.
Income before income taxes amounted to $6.9 million and $7.4 million for
the third quarters of 1997 and 1996, respectively, and amounted to $21.4
million and $20.7 million for the year to date periods of 1997 and 1996,
respectively.
Net income for the third quarters of 1997 and 1996 amounted to $4.1
million or .95% of sales and $4.4 million or 1.02% of sales,
respectively, and for the year to date periods for 1997 and 1996,
amounted to $12.6 million or .98% of sales and $12.3 million or .99% of
sales, respectively.
14
<PAGE> 15
STATER BROS. HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has funded its daily cash flow requirements
through funds provided by operations and through borrowings from
short-term revolving credit facilities. The Company's short-term Bank
Credit Agreement is between a bank and Stater Bros. Markets, a wholly
owned subsidiary of the Company, and consists of revolving credit
facilities for working capital purposes of $15.0 million, all of which
was available at June 29, 1997, and a $25.0 million standby letter of
credit facility, of which $15.5 million was available at June 29, 1997,
maintained pursuant to its worker's compensation and general liability
self-insurance requirements. The Bank Credit Agreement expires on June
1, 1998. The Company intends to renew or replace its Bank Credit
Agreement with a three-year facility with terms and conditions
comparable, or better than the existing Bank Credit Agreement.
Working capital amounted to $72.8 million at June 29, 1997 and $63.5
million at September 29, 1996 and the Company's current ratios were
1.64:1, and 1.50:1, respectively. Fluctuations in working capital and
current ratios are not unusual in the industry.
The net cash provided by operating activities for the thirty-nine weeks
ended June 29, 1997 amounted to $3.7 million and consisted of reductions
in accounts payable and the deferred tax benefits arising from the
October 1996 sale and leaseback transaction. As of September 29, 1996,
the Company had increased its inventory and related accounts payable in
anticipation of the implementation of the Company's 60th Anniversary
Marketing Program in the first quarter of fiscal 1997. Accordingly, as
of June 29, 1997, the Company's investment in inventories and related
accounts payable were reflected at more traditional balances. The
increase in the deferred tax benefit of $2.1 million was due primarily
to the timing difference between tax and book requirements for gain
recognition and the resulting tax liability from the October 1996 sale
and leaseback transaction.
Net cash used by investing activities for the thirty-nine weeks ended
June 29, 1997, amounted to $2.8 million compared to $5.0 million
provided by investing activities in fiscal 1996. The difference between
the comparable periods is due to the Company's capital expenditures
during such periods, net of proceeds from asset dispositions and
additional investment in Santee Dairies. Capital expenditures for the
thirty-nine week periods amounted to $14.3 million in 1997 compared to
$13.7 million in 1996. During the thirty-nine weeks ended June 29, 1997,
the Company remodeled nine supermarkets. Capital expenditures for fiscal
1997 were financed from cash provided by the October 1996 sale and
leaseback transaction. Capital expenditures for fiscal 1997 are
estimated to be approximately $25.0 million and will include
expenditures incurred to construct two new supermarkets which are
estimated to open in early fiscal 1998.
15
<PAGE> 16
STATER BROS. HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTD.)
In October 1996, the Company completed a sale and leaseback transaction
with an unrelated third party for four of the Company's supermarkets.
The net proceeds from the sale of the four supermarkets amounted to
approximately $16.0 million, which approximated fair market value. The
Company entered into leases for the four supermarkets with initial terms
of 20 years and with options available to the Company which extend the
lease terms up to an additional 20 years. The Company believes the rents
due under the leases approximate fair market rents. The gains from the
sale of the supermarkets were approximately $2.5 million and will be
deferred and amortized into income over the initial term of the leases.
As a result of the additional rent expenses, net of reductions in
depreciation expense, due on the four supermarkets, operating expenses
for the 52-week 1997 fiscal year will increase by approximately $1.1
million.
In November 1996 and for approximately $200,000, the Company increased
its ownership in Santee to 50%. Santee provides the Company with a
significant amount of the fluid milk products offered for sale in the
Company's supermarkets. Additionally, during the first quarter of fiscal
1997, the Company acquired approximately $4.8 million worth of the
Preferred Stock of Santee. Hughes Family Markets ("Hughes"), located in
Irwindale, California, retained a 50% ownership in Santee and acquired a
like amount of the Preferred Stock of Santee. Both the Company and
Hughes subsequently exchanged the Santee Preferred Stock for Common
Stock of Santee Dairies, Inc. Santee operates a fluid milk processing
plant in Los Angeles, California and is constructing a new fluid milk
and other fluid dairy products processing plant in the City of Industry,
California. Mr. Jack H. Brown, Chairman of the Board, President and
Chief Executive Officer of Stater Bros. Markets also serves as Chairman
of the Board and Chief Executive Officer of Santee. Santee will, for the
foreseeable future, provide the Company's supermarkets with a supply of
high quality fluid milk and other dairy products.
Net cash used by financing activities amounted to $6.3 million and $3.0
million for 1997 and 1996, respectively, and consisted of payments on
the Company's capitalized lease obligations and the accretion or payment
of dividends on the Company's 10.5% Series B Preferred Stock. Such
preferred stock dividends are due quarterly and the requirement to make
such dividend payments on the Company's preferred stock commenced in
March 1996. At the request of the holder of the Series B Preferred Stock
the Company deferred dividend payments on the Preferred Stock until
approximately August 4, 1997. Accordingly, as of June 29, 1997,
dividends of $3.8 million have been accrued and remain unpaid. On July
24, 1997, the Company gave notice of exercise of option to redeem all
outstanding shares of the Company's Series B Preferred Stock to Reading
Australia PTY Limited, a majority owned indirect subsidiary of Craig.
16
<PAGE> 17
STATER BROS. HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTD.)
The Company is subject to certain covenants associated with its 11%
Senior Notes due 2001 and covenants included in the Bank Credit
Agreement between a bank and Stater Bros. Markets, a wholly owned
subsidiary of the Company. As of June 29, 1997, the Company was in
compliance with all such covenants. However, there can be no assurance
that the Company will be able to achieve the expected operating results
or implement the capital expenditure strategy upon which future
compliance with such covenants is based.
The Company believes that cash flow from operations and proceeds from
borrowings, including lease financings, and funds available under the
short-term revolving credit facility will be adequate to meet the
Company's currently identifiable working capital requirements.
THE BANK FACILITIES
Stater Bros. Markets, the Company's operating subsidiary, and Bank of
America National Trust and Savings Association (the "Bank") entered into
a Credit Agreement in March 1994, as amended and effective June 1, 1996,
whereby the Bank provides Stater Bros. Markets with a revolving
operating line of credit (the "Operating Facility") with a maximum
availability of $15.0 million, all of which was available at June 29,
1997 and a revolving letter of credit facility (the "LC Facility") with
a maximum availability of $25.0 million (collectively, the "Bank
Facilities"). As of June 29, 1997, approximately $15.5 million of the LC
Facility was available to the Company. The Bank Credit Agreement expires
on June 1, 1998. The Company intends to renew or replace its Bank Credit
Agreement with a three-year facility with terms and conditions at least
as favorable with the existing Bank Credit Agreement.
The Bank Facilities also contain certain financial and other covenants
applicable to Stater Bros. Markets, including without limitation,
requirements to (i) maintain a minimum current ratio of at least 1.20:1;
(ii) maintain minimum tangible net worth plus debt subordinated to the
Bank (as defined) of at least $145.0 million, (iii) maintain a ratio of
total liabilities to tangible net worth plus debt subordinated to the
Bank of not in excess of 1.30:1; (iv) maintain a minimum fixed charge
coverage ratio (as defined) of at least 1.10:1 for each consecutive four
fiscal quarters beginning with the four fiscal quarters ending on Stater
Bros. Markets' 1996 fiscal year end; (v) limit the sale of assets; (vi)
prohibit additional indebtedness except for normal trade credit,
permitted indebtedness and indebtedness secured only by real property
constructed or acquired within the prior twelve months; (vii) prohibit
additional liens except for liens for indebtedness secured by real
property pursuant to clause (v); (viii) prohibit the acquisition of
other business entities; (ix) restrict the payment of dividends (as
discussed below); (x) prohibit changes of ownership; (xi) prohibit the
liquidation, consolidation or merger of the business; and (xii) repay
all advances outstanding under the Operating Facility and not draw any
new advances for at least 5 calendar days each month.
17
<PAGE> 18
STATER BROS. HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE BANK FACILITIES (CONTD.)
As of June 29, 1997, for purposes of the Bank Facilities, Stater Bros.
Markets was in compliance with all restrictive covenants and had (i) a
current ratio of 1.89:1, (ii) tangible net worth and debt subordinated
to the Bank of $211.4 million; (iii) a ratio of total liabilities to
tangible net worth and debt subordinated to the Bank of 0.55:1 and (iv)
a fixed charge coverage ratio (as defined in the Bank Facilities) of
1.48:1. If for any reason Stater Bros. Markets is unable to comply with
the terms of the Bank Facilities, including the covenants contained
therein, such noncompliance would result in an event of default under
the Bank Facilities, and could result in acceleration of the payment of
indebtedness then outstanding under Bank Facilities or, in certain
situations, the prohibition of payments of dividends or advances to the
Company. In addition, no amendment, waiver or supplement may be made to
the Indenture without the prior written consent of the Bank if such
amendment, waiver or supplement adversely affects the rights of the Bank
as lender to Stater Bros. Markets. The financial and operational
covenants contained in the Bank Facilities significantly limit Stater
Bros. Markets' ability to pay dividends and make loans or advances to
the Company, the primary source of anticipated cash for the Company, and
could limit the Company's ability to respond to changing business and
economic conditions, and to finance future operations or capital needs
including the Company's ability to achieve its plans to remodel and
expand existing supermarkets and open new supermarkets.
THE PREFERRED STOCK
In March 1994, the Company acquired, for $14.7 million, an option
available to the Company to convert the Company's 50,000 shares of
Common Stock held by Craig Corporation into 693,650 shares of 10.5%
Series B Preferred Stock on or before March 8, 1996. On March 8, 1996,
the Company exercised its option to convert the Company's 50,000 shares
of Common Stock held by Craig Corporation into 693,650 shares of the
Company's Series B Preferred Stock. On July 24, 1997, the Company gave
notice of exercise of option to redeem all outstanding shares of the
Company's Series B Preferred Stock to Reading Australia PTY Limited, a
majority owned indirect subsidiary of Craig.
LABOR RELATIONS
The Company and other major supermarket employers in Southern California
negotiated a four-year contract, beginning October 1995, with the United
Food and Commercial Workers Union. The Company's collective bargaining
agreement with the International Brotherhood of Teamsters was renewed
for four years in September 1994. Management believes it has good
relations with its employees.
RECENT ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS
121), which the Company adopted at the beginning of fiscal year 1997.
18
<PAGE> 19
STATER BROS. HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RECENT ACCOUNTING STANDARDS (CONTD.)
Management believes that the adoption of SFAS 121 will not have a
material adverse effect on the Company's financial position or its
results of operations for fiscal 1997.
SUBSEQUENT EVENTS
Solicitation of Consents:
In July 1997, the Company solicited and obtained the requisite consents
from the majority of the noteholders of the Company's 11% Senior Notes
due 2001 which permitted the Company to amend the Indenture which
governs its 11% Senior Notes due 2001 as follows:
1) permit the Company to issue and sell up to $100 million
aggregate principal amount of its 9% Senior subordinated Notes
due 2004, and to use a portion of the net proceeds from the
issuance of the 9% Senior Subordinated Notes to redeem all
outstanding shares of the Company's Series B Preferred Stock,
held by Reading Australia PTY Limited ("Reading"),
2) designate Santee LLC and Santee Dairies, Inc., to the extent
such entities ever become Subsidiaries of the Company, as
Unrestricted Subsidiaries (as defined) which would not be
subject to certain significant covenants of the 11% Senior Note
Indenture,
3) permit the Company to make certain additional investments in
Santee LLC (including investments funded by La Cadena),
4) permit the Company to repay under limited circumstances
investments made by La Cadena in the Company to enable it to
increase its ownership interest in Santee LLC, and
5) make certain other amendments to the 11% Senior Note Indenture.
Offering of $100 million of 9% Senior Subordinated Notes due 2004:
On July 24, 1997, the Company completed an offering for $100 million of
9% Senior Subordinated Notes due 2004 under Rule 144a of the Securities
Act. Proceeds from the offering were used or will be used to pay for
consent solicitation fees of approximately $5.0 million, fees and
expenses related to the offering of approximately $4.0 million, pay a
financial advisory fee to La Cadena of $2.0 million and to pay
approximately $74.0 million to redeem all of the outstanding shares of
the Company's Series B Preferred Stock including accrued and unpaid
dividends.
19
<PAGE> 20
STATER BROS. HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUBSEQUENT EVENTS (CONTD.)
Redemption of Series B Preferred Stock:
On July 24, 1997, the Company gave notice of exercise of Option to
redeem all outstanding shares of the Company's Series B Preferred Stock
to Reading Australia PTY Limited, a majority owned indirect subsidiary
of Craig. On August 4, 1997, the Company deposited approximately $74.0
million into an Escrow Account for the benefit of Reading Australia PTY
Limited, to redeem the Series B Preferred Stock and to pay accrued and
unpaid dividends up to and including August 4, 1997.
Termination of Consulting Agreement
On July 31, 1997, the Company gave notice to terminate the five-year
Consulting Agreement with Craig that was entered into in connection with
the 1994 Recapitalization.
CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR PROVISIONS" OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements contained in this report are forward looking
statements. Such forward looking statements are subject to risks,
uncertainties and other factors which could cause actual results to
differ materially from future results expressed or implied. Potential
uncertainties and risks include, but are not limited to, changes in the
economic environment in the Company's market areas and changes in the
competitive environment. Due to risks and uncertainties, actual results
may differ from any future performance discussed in the Company's
filings with the Securities and Exchange Commission.
20
<PAGE> 21
STATER BROS. HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Various legal actions and claims are pending against the Company in the
ordinary course of business. In the opinion of management and its
general legal counsel, the ultimate resolution of such pending routine
legal actions and claims will not have a material adverse effect on the
Company's consolidated financial position.
For a description of legal proceedings, please refer to the footnote
entitled "Legal Proceedings" contained in the Notes to Consolidated
Financial Statements section of the Company's Annual Report on Form 10-K
for the fiscal year ended September 29, 1996.
ITEM 2. CHANGES IN SECURITIES
At the request of the holder of the 10.5% Cumulative Series B Preferred
Stock the Company deferred dividend payments on the 10.5% Preferred
Stock until approximately August 4, 1997. Accordingly, the Company had
deferred making dividend payments of $3.8 million on the Series B
Preferred Stock as of June 29, 1997.
In July 1997, the Company solicited and obtained the requisite consents
from the majority of the noteholders of the Company's 11% Senior Notes
due 2001 which permitted the Company to amend the Indenture which
governs its 11% Senior Notes due 2001 as follows:
1) permit the Company to issue and sell up to $100 million
aggregate principal amount of its 9% Senior subordinated Notes
due 2004, and to use a portion of the net proceeds from the
issuance of the 9% Senior Subordinated Notes to redeem all
outstanding shares of the Company's Series B Preferred Stock,
held by Reading Australia PTY Limited ("Reading"),
2) designate Santee LLC and Santee Dairies, Inc., to the extent
such entities ever become Subsidiaries of the Company, as
Unrestricted Subsidiaries (as defined) which would not be
subject to certain significant covenants of the 11% Senior Note
Indenture,
3) permit the Company to make certain additional investments in
Santee LLC (including investments funded by La Cadena),
4) permit the Company to repay under limited circumstances
investments made by La Cadena in the Company to enable it to
increase its ownership interest in Santee LLC, and
5) make certain other amendments to the 11% Senior Note Indenture.
21
<PAGE> 22
STATER BROS. HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2. CHANGES IN SECURITIES (CONTD.)
Offering of $100 million of 9% Senior Subordinated Notes due 2004:
On July 24, 1997, the Company completed an offering for $100 million of
9% Senior Subordinated Notes due 2004 under Rule 144a of the Securities
Act. Proceeds from the offering were used or will be used to pay for
consent solicitation fees of approximately $5.0 million, fees and
expenses related to the offering of approximately $4.0 million, pay a
financial advisory fee to La Cadena of $2.0 million and to pay
approximately $74.0 million to redeem all of the outstanding shares of
the Company's Series B Preferred Stock including accrued and unpaid
dividends
Redemption of Series B Preferred Stock:
On July 24, 1997, the Company gave notice of exercise of option to
redeem all outstanding shares of the Company's Series B Preferred Stock
to Reading Australia PTY Limited, a majority owned indirect subsidiary
of Craig. On August 4, 1997, the Company deposited approximately $74.0
million into an Escrow Account for the benefit of Reading Australia PTY
Limited, to redeem the Series B Preferred Stock and to pay accrued and
unpaid dividends up to and including August 4, 1997.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibits are as follows:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
4.1 First Supplemental Indenture, between the
Company and IBJ Schroder Bank & Trust Company,
as Trustee, for $165,000,000 11% Senior Notes
due 2001, dated as of July 22, 1997.
</TABLE>
22
<PAGE> 23
STATER BROS. HOLDINGS INC.
JUNE 29, 1997
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTD.)
(a) Exhibits
Exhibits are as follows:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
4.2 Indenture between the Company and First Trust of
New York, as Trustee, for $100,000,000 9% Senior
Subordinated Notes due 2004, dated as of July
24, 1997.
11 Calculation of Earnings Per Common Share
27 Financial Data Schedule
</TABLE>
Copies of Exhibits listed herein can be obtained by writing and
requesting such Exhibits from: Corporate Secretary, P. O. Box
150, Colton, California 92324.
(b) Reports on Form 8-K
None
23
<PAGE> 24
STATER BROS. HOLDINGS INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 11, 1997 /s/ Jack H. Brown
-------------------------------------
Jack H. Brown
Chairman of the Board, President,
and Chief Executive Officer
Date: August 11, 1997 /s/ Dennis N. Beal
-------------------------------------
Dennis N. Beal
Vice President, Finance and
Chief Financial Officer
(Chief Accounting Officer)
24
<PAGE> 1
EXHIBIT 4.1
STATER BROS. HOLDINGS INC.
------------------
FIRST SUPPLEMENTAL INDENTURE
------------------------
with respect to:
$165,000,000
11% Senior Notes Due 2001
Issued as of March 8, 1994
----------------
IBJ SCHRODER BANK & TRUST COMPANY,
Trustee
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE, dated as of July 22, 1997 (the
"SUPPLEMENT") between Stater Bros. Holdings Inc., a corporation duly organized
and existing under the laws of the State of Delaware (herein called the
"COMPANY"), having its principal office at 21700 Barton Road, Colton, California
92324, and IBJ Schroder Bank & Trust Company, a New York banking corporation, as
trustee (herein called the "TRUSTEE"), for the Company's 11% Senior Notes Due
2001 (the "SECURITIES").
The Company has heretofore executed and delivered to the Trustee an
Indenture, dated as of March 8, 1994 (the "INDENTURE"), under which the
Securities in the aggregate principal amount of $165,000,000 were issued and are
outstanding.
In accordance with Section 9.02 of the Indenture, the Company has
obtained the written consent of the Holders of a majority in principal amount of
the Securities to certain amendments to such Indenture. The Company is
authorized to enter into this Supplement by a Board Resolution and
simultaneously herewith the Trustee has received an Opinion of Counsel and an
Officers' Certificate in accordance with Section 10.04 of the Indenture stating
that the execution of this Supplement is permitted by the Indenture and all
conditions precedent under the Indenture relating to the execution of this
Supplement have been complied with.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
SECTION 101. Section 1.01 of the Indenture is amended by adding the
following definitions in alphabetical order:
A. "New Notes" means the Company's $100.0 million New Notes due
2004.
B. "Qualified La Cadena Investment" means an Investment in the
Company by La Cadena for the purpose of providing funds to either the
Company or Stater Bros. Markets, as the case
- 2 -
<PAGE> 3
may be, to purchase additional limited liability company interests in
Santee LLC, provided, however, that if such Investment is made in the
form of Indebtedness, then such Indebtedness shall be (a) unsecured
Indebtedness, and (b) Subordinated Indebtedness.
C. "Qualified Non-Recourse Indebtedness" means Indebtedness of
any Person (i) as to which neither the Company nor any of its
Subsidiaries (other than any Unrestricted Subsidiary) (a) provides
credit support of any kind (including any undertaking, agreement or
instrument that would constitute Indebtedness), (b) is directly or
indirectly liable (as a guarantor or otherwise) or (c) constitutes the
lender; and (ii) no default with respect to which (including any right
that the holders thereof may have to take enforcement action against
such Person) would permit (upon notice, lapse of time or both) any
holder of any other Indebtedness of the Company or any of its
Subsidiaries (other than any Unrestricted Subsidiary) to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; provided, however,
that the Company or any Subsidiary may execute and become obligated
under the Santee Documents and perform its obligations thereunder, and
such execution, obligation and performance shall not disqualify the
Indebtedness of Santee or Santee LLC from constituting Qualified
Non-Recourse Indebtedness.
D. "Revolving Credit Facility" means the Company's or any
Subsidiary's revolving credit facilities or any replacement facilities
with respect thereto.
E. "Santee" means Santee Dairies, Inc., a California corporation.
F. "Santee LLC" means Santee Dairies, LLC, a Delaware limited
liability company.
G. "Santee Documents" means that certain Product Purchase
Agreement between Stater Bros. Markets and Santee, that certain Owner
Consent between Stater Bros. Markets and the trustee pursuant to the
trust agreement executed as part of the Santee Financing, that certain
Limited Liability Company Agreement between Stater Bros. Markets,
Hughes Markets, Inc., and Santee, LLC and all documents effecting and
ancillary to the Santee Financing.
H. "Santee Financing" means the issuance by Santee of up to $80.0
million in principal amount of notes with respect to the construction
of a new dairy in the City of Industry,
- 3 -
<PAGE> 4
California, and all transactions incident and ancillary thereto.
I. "Santee Noteholders" means the purchasers of notes with
respect to the Santee Financing.
J. "Subordinated Indebtedness" means any Indebtedness of the Company or
any of its Subsidiaries (whether outstanding on the date of the
Indenture or thereafter incurred) that (i) matures no earlier than the
date that is one year after the maturity date of the Notes and (ii) is
subordinated with respect to payment of principal and interest to the
payment of principal and interest on the Notes (whether upon
dissolution, liquidation, or reorganization of the Company or any such
Subsidiary, or otherwise).
K. "Unrestricted Subsidiary" means, to the extent such Persons
become Subsidiaries, (i) Santee LLC, (ii) Santee, and (iii) any
subsidiary of an Unrestricted Subsidiary; provided, however, that any
Unrestricted Subsidiary that incurs Indebtedness other than Qualified
Non-Recourse Indebtedness shall no longer be deemed an Unrestricted
Subsidiary, for so long as such Indebtedness not constituting Qualified
Non-Recourse Indebtedness shall be outstanding; provided, further, that
at such time as any Unrestricted Subsidiary ceases to be an
Unrestricted Subsidiary, all Indebtedness of such Subsidiary shall be
deemed to have been incurred by the Company and such Subsidiary for the
purposes hereof.
SECTION 102. Section 1.01 of the Indenture is amended by deleting the
definition of "Consolidated Stockholders' Equity" therefrom in its entirety and
replacing such definition with the following:
"Consolidated Stockholders' Equity" as of any date means with
respect to any Person the amount by which the assets of such Person and
its Consolidated Subsidiaries exceed (a) the total liabilities of such
Person and its Consolidated Subsidiaries, plus (b) any redeemable
Preferred Stock (including Disqualified Capital Stock) of such Person
or any Preferred Stock of any Consolidated Subsidiary of such Person
issued to any Person other than such Person or a Wholly Owned
Subsidiary of such Person, in each case determined in accordance with
GAAP.
SECTION 103. Section 1.01 of the Indenture is amended by deleting the
definition of "Consolidated Subsidiary" therefrom in its entirety and replacing
such definition with the following:
- 4 -
<PAGE> 5
"Consolidated Subsidiary" of any Person means a Subsidiary
which for financial reporting purposes is or, in accordance with GAAP,
should be, accounted for by such Person as a consolidated subsidiary;
provided, however, that the Unrestricted Subsidiaries of any Person
shall not be included as Consolidated Subsidiaries of such Person for
purposes of this Indenture, regardless of whether such Unrestricted
Subsidiaries are or, in accordance with GAAP, should be, accounted for
as consolidated subsidiaries; provided, further, that any Person that
is not a subsidiary of a Person shall not be included as a Consolidated
Subsidiary of such Person for purposes of the Indenture, regardless of
whether such Person is, or in accordance with GAAP, should be,
accounted for as a consolidated subsidiary.
SECTION 104. Section 1.01 of the Indenture is amended by adding the
following sentence to the end of the definition of "Indebtedness" therein:
"For the avoidance of doubt, the Santee Financing and the
Santee Documents shall be deemed not to constitute, nor to have given
rise to, the incurrence of any Indebtedness of the Company or any of
its Subsidiaries."
SECTION 105. Section 1.01 of the Indenture is amended by deleting the
definition of "Person" therefrom in its entirety and replacing such definition
with the following:
"Person" means any individual, corporation, partnership, joint
venture, trust, estate, limited liability company, unincorporated
organization or government or any agency or political subdivision
thereof.
SECTION 106. Section 1.01 of the Indenture is amended by deleting the
definition of "Restricted Payments" therefrom in its entirety and replacing such
definition with the following:
"Restricted Payment" means (i) the declaration or payment of
any dividend or the making of any other distribution or other payment
(whether in cash, securities or other property or assets of the Company
or of any Subsidiary) of the Company's or any Subsidiary's Capital
Stock, or to the holders of the Company's or any Subsidiary's Capital
Stock or to any Affiliate of the Company, whether outstanding on the
Issue Date or thereafter (other than dividends or distributions payable
solely in Qualified Capital Stock of the Company, dividends or
distributions declared or paid by any Subsidiary to the Company); (ii)
any purchase, redemption, retirement or other
- 5 -
<PAGE> 6
acquisition for value of any Capital Stock of the Company or of any
Subsidiary or of any Affiliate of the Company, whether outstanding on
the Issue Date or thereafter, or any warrants, rights or options to
purchase or acquire shares of the Capital Stock of the Company or of
any Subsidiary or of any Affiliate of the Company, whether outstanding
on the Issue Date or thereafter, held by any Person other than the
Company or one of its Wholly Owned Subsidiaries (other than through the
issuance in exchange therefor solely of Qualified Capital Stock); (iii)
the prepayment, acquisition, decrease or retirement prior to maturity,
scheduled repayment or scheduled sinking fund payment of any
Indebtedness of the Company that is subordinated (whether pursuant to
its terms, structurally or by operation of law) to the Notes or (iv) to
incur, create, assume or suffer to exist any guarantee of Indebtedness
of, or make any loan or advancement to, or other Investment in, any
Related Person of the Company (other than a Wholly Owned Subsidiary
(other than an Unrestricted Subsidiary)). The dollar amount of any
non-cash dividend or distribution by the Company or any Subsidiary on
the Company's, any Subsidiary's or any of the Company's Affiliate's
Capital Stock shall be equal to the Fair Market Value of such dividend
or distribution at the time of such dividend or distribution.
Notwithstanding the foregoing, provided that no Default or Event of
Default shall have occurred and be continuing or would result as a
consequence thereof, the following shall not be or be deemed to be
Restricted Payments: (a) the repayment upon the consummation of an
Asset Sale of any Indebtedness of the Company permitted by Section 4.12
which is subordinated (whether pursuant to its terms or by operation of
law) to the Notes and which is secured by a Lien permitted by Section
4.14 to the extent that such Indebtedness is required to be repaid in
connection with such Asset Sale pursuant to the terms of the instrument
governing such Indebtedness and such Lien, provided that concurrent or
prior repayment of the Notes is provided for with the proceeds of such
Asset Sale if the Notes are secured by a Lien pari passu with or senior
to the Lien of such Indebtedness, or (b) the prepayment, acquisition,
retirement or decrease of Indebtedness of the Company that is
subordinated (whether pursuant to its terms or by operation of law) to
the Notes that is prepaid, acquired, decreased or retired by conversion
into or in exchange for Qualified Capital Stock.
SECTION 107. Section 4.05 of the Indenture is amended by deleting such
Section therefrom in its entirety and replacing such Section with the following:
- 6 -
<PAGE> 7
Section 4.05 Limitations on Restricted Payments and
Investments.
(a) The Company will not, and will not permit or cause any of
the Subsidiaries (other than any Unrestricted Subsidiary), directly or
indirectly, to, make any Restricted Payment or Investment after the
Issue Date unless, at the time of such proposed Restricted Payment or
Investment, and on a pro forma basis immediately after giving effect
thereto:
(A) no Default or Event of Default shall have
occurred and be continuing or shall occur as a consequence
thereof;
(B) the aggregate amount expended for all Restricted
Payments and Investments subsequent to June 30, 1997 would not
exceed the sum of:
(1) 50% of the aggregate Consolidated Net
Income of the Company (or if such Consolidated Net
Income is a loss, minus 100% of such loss) earned on
a cumulative basis during the period beginning on
June 30, 1997 and ending on the last date of the
Company's fiscal quarter immediately preceding such
proposed Restricted Payment or Investment; plus
(2) 100% of the aggregate Net Equity
Proceeds received by the Company from any Person
(other than a Subsidiary) from the issuance and sale
subsequent to June 30, 1997 of Qualified Capital
Stock (excluding (x) any Qualified Capital Stock paid
as a dividend on any Capital Stock of the Company or
of any Subsidiary or as interest on any Indebtedness
of the Company or of any Subsidiary, (y) the issuance
of Qualified Capital Stock upon the conversion of, or
in exchange for, any Capital Stock of the Company or
of any Subsidiary and (z) any Qualified Capital Stock
of the Company with respect to which the purchase
price thereof has been financed directly or
indirectly using funds (i) borrowed from the Company
or any Subsidiary, unless and until and to the extent
such borrowing is repaid, or (ii) contributed,
extended, guaranteed or advanced by the Company or
any Subsidiary (including, without limitation, in
respect of any employee stock ownership or benefit
plan)); plus
- 7 -
<PAGE> 8
(3) $5.0 million; and
(C) the Company shall be able to incur (assuming a
market rate of interest with respect thereto) at least $1.00
of additional Indebtedness under Section 4.12(a).
(b) Section 4.05(a) shall not prevent (a) the payment
of any dividend within 60 days after the date of its declaration if at
such date of declaration the payment of such dividend would comply with
the provisions set forth above, provided that such dividend will be
deemed to have been paid as of its date of declaration for the purposes
of this Section 4.05, (b) if no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof, the
purchase, redemption, retirement or acquisition of any shares of
Capital Stock of the Company or of any Subsidiary or any Indebtedness
of the Company that is pari passu with or subordinated to the Notes
solely with or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary or by a Subsidiary to one
of its subsidiaries) of shares of Qualified Capital Stock of the
Company or of a Subsidiary and neither such purchase, redemption,
retirement or acquisition nor the proceeds of any such sale will be
included in any computation made under clause (B)(2) above, (c)
payments pursuant to usual and customary indemnification arrangements
for directors and officers of the Company, any Subsidiary, Santee LLC
or Santee, (d) payment to Craig of up to $69,365,000 plus accrued and
unpaid dividends from the proceeds of the sale of the New Notes to
repurchase the outstanding Series B Preferred Stock, (e) the making of
Permitted Investments, (f) the making of Investments in any Subsidiary
(other than any Unrestricted Subsidiary)(including any Person who
becomes a Subsidiary as a result of any Investment, other than any
Unrestricted Subsidiary) by the Company or any other Subsidiary,
provided that any Indebtedness evidencing such Investment is not
subordinated to any Indebtedness or other obligation of such
Subsidiary, (g) the making of Investments in the Company by any
Subsidiary provided that any Indebtedness evidencing such Investment is
subordinated and junior to the Notes), (h) the making of Investments of
the type described in Section 4.20(b)(i), (ii) and (iii), (i) the
making of Investments in any Person, provided that the consideration
paid by the Company or a Subsidiary for such Investment consists solely
of Qualified Capital Stock, (j) payment to Texas Eastern of dividends
on the Markets Preferred Stock as in effect on the Issue Date, (k) the
making of Investments in Santee, LLC of up to $25.0 million; (l) the
making of Investments in Santee, LLC for the purpose
- 8 -
<PAGE> 9
of purchasing additional limited liability company interests in Santee
LLC with the proceeds of a Qualified La Cadena Investment, and (m) the
payment to La Cadena of an amount equal to the lesser of the amount of
(i) the sum of (X) any Qualified La Cadena Investment, plus (Y) an
amount equal to a commercially reasonable rate of interest on such
Qualified La Cadena Investment to the extent that the net proceeds
received by Stater Bros. Markets from the sale or disposition of that
portion of Stater Bros. Markets' interest in Santee LLC which was
acquired with the proceeds from such Qualified La Cadena Investment
exceeds the original amount of the Qualified La Cadena Investment; and
(ii) net proceeds received by Stater Bros. Markets from the sale or
disposition of that portion of Stater Bros. Markets' interest in Santee
LLC which was acquired with the proceeds from such Qualified La Cadena
Investment and (n) the payment of a financial advisory fee of up to
$2.0 million to La Cadena substantially contemporaneously with the
effective date of the First Supplemental Indenture to this Indenture;
provided that in each such case of clauses (f) through (j) above, no
Default or Event of Default has occurred and is continuing or would
result therefrom. The amounts expended or received, as applicable,
pursuant to clause (a) will be included, and clauses (b) through (n)
will be excluded, in computing the amounts available for Restricted
Payments and Investments for purposes of the immediately preceding
paragraph.
(c) For purposes of this Section 4.05, a distribution
to holders of the Company's Capital Stock of (i) shares of Capital
Stock of any Subsidiary or (ii) other assets of the Company, without,
in either case, the receipt of equivalent consideration therefor shall
be deemed to be the equivalent of a cash dividend equal to the excess
of the Fair Market Value of the shares or other assets being so
distributed at the time of such distribution over the consideration, if
any, received therefor.
SECTION 108. Section 4.12 of the Indenture is amended by deleting the
such Section therefrom in its entirety and replacing such Section with the
following:
Section 4.12 Limitation on Indebtedness.
(a) The Company will not, and will not permit any of its
Subsidiaries (other than any Unrestricted Subsidiaries), directly or
indirectly, to incur any Indebtedness, provided that if no Default or
Event of Default shall have occurred and be continuing at the time or
as a consequence of the incurrence of such Indebtedness, the Company
may incur
- 9 -
<PAGE> 10
Indebtedness if, on the date of the incurrence of such Indebtedness
after giving pro forma effect to the incurrence of such Indebtedness,
the Consolidated Fixed Charge Coverage Ratio of the Company is at least
2.0 to 1.
(b) The limitations set forth in Section 4.12(a) shall not
apply to: (i) Indebtedness under a revolving credit facility or any
replacement facility thereof, provided that Indebtedness under such
credit facility or any replacement facility, including unused
commitments, shall not at any time exceed the greater of (a) $15.0
million or (b) 15% of the Company's Consolidated Inventory, in
aggregate outstanding principal amount; (ii) Indebtedness of the
Company and its Subsidiaries existing on the Issue Date; (iii)
Indebtedness of the Company represented by the Notes and the New Notes;
(iv) Indebtedness of the Company and its Subsidiaries incurred in
exchange for or the net proceeds of which are used to extend,
refinance, renew, replace, substitute or refund ("Refinance")
Indebtedness referred to in clauses (i), (ii) and (iii) above and (ix)
below (the "Refinancing Indebtedness") plus any penalties, fees or
premiums incurred in connection therewith; provided that (A) the
principal amount of such Refinancing Indebtedness shall not exceed the
principal amount of the Indebtedness (including unused commitments) so
Refinanced (the "Existing Debt") as of the date of the proposed
incurrence of the Refinancing Indebtedness, (B) such Refinancing
Indebtedness shall have an Average Life equal to or greater than the
Average Life of the Existing Debt, (C) if the Existing Debt (including
the Notes) being Refinanced is pari passu with or subordinated to the
Notes then such Refinancing Indebtedness shall be pari passu with or at
least as subordinated to, as the case may be, the Notes, (D) the
Refinancing Indebtedness has a stated maturity date no earlier than the
Existing Debt as of the date of such proposed Refinancing and (E) if
the Existing Debt is Indebtedness solely of the Company, such
Refinancing Indebtedness will only be permitted if it is Indebtedness
solely of the Company; (v) Permitted Construction Indebtedness incurred
after March 8, 1994 not to exceed $10.0 million in the aggregate at any
time outstanding and designated as Permitted Construction Indebtedness
subject to this clause (v) in an Officer's Certificate delivered to the
Trustee; (vi) Indebtedness of the Company to a Wholly Owned Subsidiary
of the Company or by a Wholly Owned Subsidiary of the Company to the
Company or between Wholly Owned Subsidiaries of the Company; (vii)
Indebtedness under Interest Rate Protection Agreements entered into in
the ordinary course of business; (viii) Indebtedness arising from
agreements providing for indemnification, adjustment of purchase price
or similar
- 10 -
<PAGE> 11
obligations, or from guarantees of letters of credit, surety bonds or
performance bonds securing any obligations of the Company pursuant to
such agreements, incurred or assumed in connection with the disposition
of any business, assets or Subsidiary of the Company, other than
guarantees or similar credit support by the Company of Indebtedness
incurred by any Person acquiring all or any portion of such business,
assets or Subsidiary for the purpose of financing such acquisition;
provided that the maximum aggregate liability in respect of all such
Indebtedness described in this clause shall not exceed the net proceeds
actually received in connection with any such disposition; (ix)
Indebtedness to secure workers' compensation and other insurance
coverages, not to exceed the minimum amount required by the Company's
insurance carriers or other applicable regulatory agencies; and (x)
Indebtedness to La Cadena incurred by the Company in connection with a
Qualified La Cadena Investment; provided, however, that the repayment
of principal with respect to, and the payment of interest with respect
to, any such Qualified La Cadena Investment constituting Indebtedness
shall be subject to Section 4.05.
SECTION 109. Section 4.13 of the Indenture is amended by deleting such
Section therefrom in its entirety and replacing such Section with the following:
[Intentionally Omitted]
SECTION 110. Section 4.14 of the Indenture is amended by deleting such
Section therefrom in its entirety and replacing such Section with the following:
Section 4.14 Limitations on Liens.
The Company will not, and will not permit any of its
Subsidiaries (other than any Unrestricted Subsidiary) to, create,
incur, assume or suffer to exist any Liens securing Indebtedness,
except for (a) any Liens which may be granted to secure the Notes; (b)
Liens securing Indebtedness that is incurred pursuant to clause (i) of
Section 4.12(b); (c) Liens securing Indebtedness that is incurred in
accordance with this Indenture and that is pari passu with the Notes;
provided that the Notes are secured on an equal and ratable basis to
such Liens; (d) Liens securing Indebtedness incurred in accordance with
this Indenture and that is subordinated to the Notes; provided that the
Notes are secured by Liens ranking prior to such Liens; (e) Liens in
respect of Refinancing Indebtedness; provided that the terms of such
Liens in respect of such Refinancing Indebtedness are not less
favorable to the Holders than terms of the
- 11 -
<PAGE> 12
Liens securing the Existing Debt being Refinanced and do not extend to
or cover any property or assets of the Company or of any of the
Subsidiaries not securing such Existing Debt; (f) Liens in respect of
Acquired Indebtedness permitted to be incurred in accordance with this
Indenture; provided that such Liens in respect of such Acquired
Indebtedness do not extend to or cover any property or assets of the
Company or any Subsidiary other than the property or assets that
secured the Acquired Indebtedness prior to the time such Indebtedness
became Acquired Indebtedness of the Company or such Subsidiary; (g)
Liens securing Indebtedness of the Company or a Subsidiary, which
Indebtedness shall not exceed $15.0 million; and (h) Permitted Liens.
SECTION 111. Section 4.15 of the Indenture is amended by deleting such
Section therefrom in its entirety and replacing such Section with the following:
Section 4.15 Limitation on Payment Restrictions Affecting
Subsidiaries.
The Company will not, and will not permit any of its
Subsidiaries (other than any Unrestricted Subsidiary), directly or
indirectly, to create or suffer to exist or allow to become effective
any encumbrance or restriction of any kind (i) on the ability of any
Subsidiary (other than any Unrestricted Subsidiary) to (a) pay
dividends, in cash or otherwise, or make other payments or
distributions on its Capital Stock or any other equity interest or
participation in, or measured by, its profits, owned by the Company or
any Subsidiary or any of their respective subsidiaries, or make
payments on any Indebtedness owed to the Company or any Subsidiary or
any of their respective subsidiaries, (b) make loans or advances to the
Company or any of its Subsidiaries, (c) transfer any of their
respective property to the Company or any of its Subsidiaries or (ii)
on the ability of the Company or any of its Subsidiaries (other than an
Unrestricted Subsidiary) to receive or retain any such (x) dividends,
payments or distributions, (y) loans or advances or (z) transfer of
property (any such restriction being referred to herein as a "Payment
Restriction"), except for such encumbrances or restrictions existing
under or by reason of (A) agreements in effect as of the Issue Date,
(B) applicable laws, (C) this Indenture or the Indenture governing the
New Notes, (D) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of the Company
or any of the Subsidiaries, (E) Acquired Indebtedness incurred in
accordance with this Indenture; provided that such encumbrance or
restriction in respect of such Acquired
- 12 -
<PAGE> 13
Indebtedness is not applicable to any Person, or the property of any
Person, other than the Person, or the property of the Person, so
acquired whether or not such Acquired Indebtedness was incurred in
connection with or anticipation of such acquisition, (F) the Revolving
Credit Facility or (G) any agreement effecting a renewal, refunding,
refinancing or extension of Indebtedness referred to in clause (A), (E)
or (F) above; provided that the provisions contained in such renewal,
refunding, refinancing or extension relating to such encumbrance or
restriction are no more restrictive in any material respect than the
provisions contained in the agreement that is the subject thereof.
SECTION 112. Section 4.16 of the Indenture is amended by deleting such
Section therefrom in its entirety and replacing such Section with the following:
Section 4.16 Limitation on Issuance and Sale of Capital Stock of
Subsidiaries.
The Company will not permit any Subsidiary (other than any
Unrestricted Subsidiary) to issue any shares of its Capital Stock to
any Person other than the Company or one or more of its Wholly Owned
Subsidiaries (other than any Unrestricted Subsidiary) nor will the
Company permit any Person (other than the Company or one or more of its
Wholly Owned Subsidiaries (other than any Unrestricted Subsidiary) to
own or hold any such Capital Stock, other than the Markets Preferred
Stock held by Texas Eastern Corporation as of the Issue Date. The
Company will not and will not permit any Subsidiary (other than any
Unrestricted Subsidiary) to transfer, sell or otherwise dispose of any
Capital Stock of any Subsidiary to any Person (other than to the
Company or a Wholly Owned Subsidiary that is not an Unrestricted
Subsidiary) unless (i) such transfer, sale or other disposition is of
all the Capital Stock of such Subsidiary owned by the Company or any
Subsidiary and (ii) the Net Cash Proceeds from such transfer, sale or
other disposition are applied in accordance with Section 4.20.
SECTION 113. Section 4.17 of the Indenture is amended by deleting such
Section therefrom in its entirety and replacing such Section with the following:
Section 4.17 Limitations on Transactions with Related Persons.
The Company will not, nor will it permit any of its
Subsidiaries (other than an Unrestricted Subsidiary) to (a)
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<PAGE> 14
sell, lease, transfer or otherwise dispose of any of its property to,
(b) purchase any property from, (c) make any Investment in or (d) enter
into or amend any contract, agreement or understanding with or for the
benefit of, a Related Person of the Company or any Subsidiary (other
than the Company or any such Subsidiary (other than any Unrestricted
Subsidiary) in which no Related Person (other than the Company or a
Wholly Owned Subsidiary (other than any Unrestricted Subsidiary) of the
Company) owns, directly or indirectly, an equity interest) (each a
"Related Person Transaction"), other than (i) Related Person
Transactions that are on terms (which terms are in writing) that are
fair and reasonable to the Company or the Subsidiary and that are no
less favorable to the Company or such Subsidiary than those that could
be obtained in a comparable arm's length transaction by the Company or
such Subsidiary from an unrelated party as determined reasonably and in
good faith by the Board of Directors of the Company; provided that if
the Company or any Subsidiary enters into a Related Person Transaction
or series of Related Person Transactions involving or having an
aggregate value of more than $1.0 million such Related Person
Transaction shall, prior to the consummation thereof, have been
approved by a majority of the independent directors of the Company. The
restrictions of this Section 4.17 shall not apply to (a) any
transactions between Wholly Owned Subsidiaries (other than any
Unrestricted Subsidiary) of the Company, or between the Company and any
Wholly Owned Subsidiary (other than any Unrestricted Subsidiary) of the
Company, if such transaction is not otherwise prohibited by this
Indenture, (b) any payments or purchases permitted by Section 4.05, (c)
any reasonable and customary regular fees to directors of the Company,
(d) any transactions contemplated by the Santee Documents; provided
that such transactions are not otherwise prohibited by this Indenture
and (e) payment of a financial advisory fee of up to $2.0 million to La
Cadena substantially contemporaneously with the execution of the First
Supplemental Indenture to this Indenture.
ARTICLE TWO
SECTION 201. Effective Date of This Supplement.
This Supplement shall be effective as of the date first written above,
at and after such time as the Company has delivered to the Trustee evidence of
consent from the Holders of at least a majority in principal amount of the
Securities under the Indenture then outstanding; provided that the consent
payment (as provided for in the consent solicitation statement with
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<PAGE> 15
respect to this Supplement) has been made to each consenting Holder by the date
that is 90 days after the execution of this Supplement.
SECTION 202. Indenture Ratified.
Except as hereby otherwise expressly provided, the Indenture is in all
respects ratified and confirmed, and all the terms, provisions and conditions
thereof shall be and remain in full force and effect.
SECTION 203. Counterparts.
This Supplement may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
SECTION 204. Trustee Not Responsible.
The recitals contained herein shall be taken as the statements of the
Company and the Trustee assumes no responsibility for their correctness.
SECTION 205. Definitions and Terms.
Unless otherwise defined herein, all initially capitalized terms used
herein shall have the meanings assigned to such terms in the Indenture.
SECTION 206. Supplemental Indenture is an Indenture.
This Supplement is an amendment to and implementation of the Indenture,
and the Indenture and this Supplement shall be read together from and after the
effectiveness of this Supplement.
SECTION 207. Governing Law.
This Supplement shall be governed by and construed in accordance with
the internal laws of the State of New York.
[Remainder of Page Intentionally Left Blank]
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
STATER BROS. HOLDING INC.
By: _______________________________
Name:
Title:
Attest: ______________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY,
as TRUSTEE
By: _______________________________
Name:
Title:
Attest: ______________________
Name:
Title:
S-1
<PAGE> 1
EXHIBIT 4.2
--------------------------------------
STATER BROS. HOLDINGS INC.,
as Issuer
and
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
as Trustee
---------------------
INDENTURE
Dated as of July 24, 1997
---------------------
$100,000,000
9% SENIOR SUBORDINATED NOTES DUE 2004
--------------------------------------
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- - --------------- -----------------
<S> <C>
310(a)(1)............................................................. 7.10
(a)(2)............................................................ 7.10
(a)(3)............................................................ N.A.
(a)(4)............................................................ N.A.
(b)............................................................... 7.08; 7.10; 10.02
(c)............................................................... N.A.
311(a)................................................................ 7.11
(b)............................................................... 7.11
(c)............................................................... N.A.
312(a)................................................................ 2.05
(b)............................................................... 10.03
(c)............................................................... 10.03
313(a)................................................................ 7.06
(b)(1)............................................................ N.A.
(b)(2)............................................................ 7.06
(c)............................................................... 7.06; 10.02
(d)............................................................... 7.06
314(a)................................................................ 4.01; 10.02
(b)............................................................... N.A.
(c)(1)............................................................ 10.04
(c)(2)............................................................ 10.04
(c)(3)............................................................ N.A.
(d)............................................................... N.A.
(e)............................................................... 10.05
(f)............................................................... N.A.
315(a)................................................................ 7.01(b)
(b)............................................................... 7.05; 10.02
(c)............................................................... 7.01(a)
(d)............................................................... 7.01(c)
(e)............................................................... 6.11
316(a)(last sentence)................................................. 2.09
(a)(1)(A)......................................................... 6.05
(a)(1)(B)......................................................... 6.04
(a)(2)............................................................ N.A.
(b)............................................................... 6.07
317(a)(1)............................................................. 6.08
(a)(2)............................................................ 6.09
(b)............................................................... 2.04
318(a)................................................................ 10.01
</TABLE>
N.A. means not applicable.
- - ---------------
- i -
<PAGE> 3
*This Cross-Reference Table is not part of the Indenture.
- ii-
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE...................................................................... 1
Section 1.01 Definitions.......................................................................... 1
Section 1.02 Other Definitions................................................................... 17
Section 1.03 Incorporation by Reference of Trust Indenture Act................................... 17
Section 1.04 Rules of Construction............................................................... 18
ARTICLE 2
THE 1997 NOTES............................................... 18
Section 2.01 Form and Dating..................................................................... 18
Section 2.02 Execution and Authentication........................................................ 20
Section 2.03 Registrar; Paying Agent; Depositary; Global Note Custodian.......................... 20
Section 2.04 Paying Agent to Hold Money in Trust................................................. 21
Section 2.05 Noteholder Lists.................................................................... 21
Section 2.06 Transfer and Exchange............................................................... 21
Section 2.07 Replacement Notes................................................................... 26
Section 2.08 Outstanding 1997 Notes.............................................................. 26
Section 2.09 When Treasury Notes Disregarded..................................................... 26
Section 2.10 Temporary Notes..................................................................... 26
Section 2.11 Cancellation........................................................................ 27
Section 2.12 Defaulted Interest.................................................................. 27
Section 2.13 CUSIP Number........................................................................ 27
ARTICLE 3
REPURCHASE AND OPTIONAL REDEMPTION..................................... 28
Section 3.01 Purchase Offers..................................................................... 28
Section 3.02 Notices to Trustee.................................................................. 30
Section 3.03 Selection of 1997 Notes to Be Redeemed.............................................. 30
Section 3.04 Notice of Redemption................................................................ 31
Section 3.05 Effect of Notice of Redemption...................................................... 31
Section 3.06 Deposit of Redemption Price......................................................... 32
Section 3.07 1997 Notes Redeemed in Part......................................................... 32
ARTICLE 4
COVENANTS OF THE COMPANY.......................................... 32
Section 4.01 Payment of 1997 Notes............................................................... 32
Section 4.02 SEC Reports......................................................................... 32
Section 4.03 Compliance Certificate.............................................................. 33
Section 4.04 Maintenance of Office or Agency..................................................... 34
</TABLE>
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<TABLE>
<S> <C>
Section 4.05 Limitations on Restricted Payments and Investments.................................. 34
Section 4.06 Continued Existence................................................................. 36
Section 4.07 Taxes............................................................................... 36
Section 4.08 Maintenance of Properties........................................................... 36
Section 4.09 Insurance........................................................................... 36
Section 4.10 Investment Company Act.............................................................. 37
Section 4.11 Change of Control................................................................... 37
Section 4.12 Limitation on Indebtedness.......................................................... 37
Section 4.13 Limitations on Liens................................................................ 38
Section 4.14 Limitation on Payment Restrictions Affecting Subsidiaries........................... 39
Section 4.15 Limitation on Issuance and Sale of Capital Stock of Subsidiaries.................... 39
Section 4.16 Limitations on Transactions with Related Persons.................................... 39
Section 4.17 Compliance With Laws................................................................ 40
Section 4.18 Stay, Extension and Usury Laws...................................................... 40
Section 4.19 Limitation on Sales of ............................................................. 41
Section 4.20 Further Assurance to the Trustee.................................................... 42
Section 4.21 Restriction on Layering Debt........................................................ 42
ARTICLE 5
SUCCESSORS................................................. 42
Section 5.01 Merger, Consolidation, Etc.......................................................... 42
Section 5.02 Successor Corporation Substituted................................................... 43
Section 5.03 Purchase Offer on Change of Control................................................. 43
ARTICLE 6
DEFAULTS AND REMEDIES........................................... 43
Section 6.01 Events of Default................................................................... 43
Section 6.02 Acceleration........................................................................ 45
Section 6.03 Other Remedies...................................................................... 46
Section 6.04 Waiver of Past Defaults............................................................. 46
Section 6.05 Control by Majority................................................................. 46
Section 6.06 Limitation on Suits................................................................. 47
Section 6.07 Rights of Holders to Receive Payment................................................ 47
Section 6.08 Collection Suit by Trustee.......................................................... 47
Section 6.09 Trustee May File Proofs of Claim.................................................... 47
Section 6.10 Priorities.......................................................................... 47
Section 6.11 Undertaking for Costs............................................................... 48
ARTICLE 7
TRUSTEE.................................................. 48
Section 7.01 Duties of Trustee................................................................... 48
Section 7.02 Rights of Trustee................................................................... 49
Section 7.03 Individual Rights of Trustee........................................................ 50
</TABLE>
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<TABLE>
<S> <C>
Section 7.04 Trustee's Disclaimer................................................................ 50
Section 7.05 Notice of Defaults.................................................................. 50
Section 7.06 Reports by Trustee to Holders....................................................... 51
Section 7.07 Compensation and Indemnity.......................................................... 51
Section 7.08 Replacement of Trustee.............................................................. 52
Section 7.09 Successor Trustee by Merger, etc.................................................... 53
Section 7.10 Eligibility; Disqualification....................................................... 53
Section 7.11 Preferential Collection of Claims Against Company................................... 53
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE.................................. 53
Section 8.01 Termination of Company's Obligations................................................ 53
Section 8.02 Application of Trust Money.......................................................... 56
Section 8.03 Repayment to Company................................................................ 56
Section 8.04 Reinstatement....................................................................... 56
Section 8.05 Indemnity for Government Obligations................................................ 56
ARTICLE 9
AMENDMENTS................................................. 57
Section 9.01 Without Consent of Holders.......................................................... 57
Section 9.02 With Consent of Holders............................................................. 57
Section 9.03 Compliance with Trust Indenture Act................................................. 58
Section 9.04 Revocation and Effect of Consents................................................... 59
Section 9.05 Notation on or Exchange of 1997 Notes............................................... 59
Section 9.06 Trustee Protected................................................................... 59
ARTICLE 10
SUBORDINATION............................................... 60
Section 10.01 The 1997 Notes Subordinated to Senior Indebtedness.................................. 60
Section 10.02 Liquidation; Dissolution; Bankruptcy................................................ 60
Section 10.03 Default on Senior Indebtedness...................................................... 61
Section 10.04 When Distribution Must Be Paid Over................................................. 61
Section 10.05 Notice by Company................................................................... 62
Section 10.06 Subrogation......................................................................... 62
Section 10.07 Relative Rights..................................................................... 62
Section 10.08 Subordination May Not Be Impaired by Company........................................ 63
Section 10.09 Distribution or Notice to Representatives........................................... 63
Section 10.10 Rights of Trustee and Paying Agent.................................................. 63
Section 10.11 Trustee Entitled to Assume Payments Not Prohibited in Absence of
Notice.............................................................................. 63
Section 10.12 Application by Trustee of Monies Deposited With It.................................. 63
Section 10.13 Trustee's Compensation Not Prejudiced............................................... 64
Section 10.14 Officers' Certificate............................................................... 64
Section 10.15 Certain Payments.................................................................... 64
</TABLE>
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<TABLE>
<S> <C>
Section 10.16 Names of Representatives............................................................ 64
Section 10.17 Article 10 Not To Prevent Events of Default or Limit Right To
Accelerate.......................................................................... 64
Section 10.18 Reliance by Holders of Senior Indebtedness on Subordination
Provisions.......................................................................... 65
Section 10.19 Proof of Claim...................................................................... 65
Section 10.20 No Fiduciary Duty Created to Holders of Senior Indebtedness......................... 65
ARTICLE 11
GENERAL PROVISIONS............................................. 65
Section 11.01 Trust Indenture Act Controls........................................................ 65
Section 11.02 Notices............................................................................. 66
Section 11.03 Communication by Holders with Other Holders......................................... 66
Section 11.04 Certificate and Opinion as to Conditions Precedent.................................. 66
Section 11.05 Statements Required in Certificate or Opinion....................................... 66
Section 11.06 Rules by Trustee and Agents......................................................... 67
Section 11.07 Legal Holidays; Business Days....................................................... 67
Section 11.08 No Recourse Against Others.......................................................... 67
Section 11.09 Counterparts........................................................................ 67
Section 11.10 Other Provisions.................................................................... 67
Section 11.11 Governing Law....................................................................... 68
Section 11.12 No Adverse Interpretation of Other Agreements....................................... 68
Section 11.13 Successors.......................................................................... 68
Section 11.14 Severability........................................................................ 68
Section 11.15 Table of Contents, Headings, Etc.................................................... 69
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A Form of Private Placement Note
Exhibit B Form of Exchange Note
Exhibit C Certificate to be Delivered Upon Exchange or Registration of Transfer
of Notes
Exhibit D Form of Legal Opinion on Transfer
</TABLE>
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THIS INDENTURE, dated July 24, 1997 (the "Issue Date"), is
entered into between Stater Bros. Holdings Inc., a Delaware corporation (the
"Company"), and First Trust of New York, National Association, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Company's 9%
Senior Subordinated Notes due July 1, 2004 (the "Private Placement Notes") and
the Company's 9% Senior Subordinated Notes due July 1, 2004 to be issued in
exchange for the Private Placement Notes pursuant to the terms of the
Registration Rights Agreement (as hereinafter defined) (the "Exchange Notes"
and, together with the Private Placement Notes, the "1997 Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions.
"1994 Notes" means the Company's $165.0 million 11% Senior
Notes due 2001.
"Accredited Investor" means an accredited investor as defined
in the Securities Act, and the rules and regulations promulgated thereunder.
"Acquired Indebtedness" of any specified Person means
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person or assumed in
connection with the acquisition of assets from such other Person including,
without limitation, Indebtedness of such other Person incurred in connection
with or in anticipation of such other Person being merged with or into or
becoming a Subsidiary of such specified Person or such acquisition.
"Affiliate" means, when used with reference to any Person, any
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with such Person or any Person who beneficially owns,
directly or indirectly, 5% or more of the equity interests of such Person or
warrants, options or other rights to acquire or hold more than 5% of the equity
interests of such Person. For the purposes of this definition, "control" when
used with respect to any specified Person means the power to direct or cause the
direction of management or policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Agent" means any Registrar, Paying Agent or Co-Registrar.
"Applicable Law" means, with respect to a Person, all
provisions of the following applicable to such Person: (i) constitutions,
treaties, statutes, laws, rules, regulations and ordinances of any Governmental
Authority; (ii) Governmental Approvals; and (iii) orders, decisions, judgments,
awards and decrees of any Governmental Authority.
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<PAGE> 9
"assets" means any tangible or intangible assets or rights or
real, personal or mixed properties of any Person.
"Asset Sale" means any sale, lease, transfer, exchange or
other disposition (or series of related sales, leases, transfers, exchanges or
dispositions), including, without limitation, dispositions pursuant to merger,
consolidation or sale and leaseback transactions, of (i) shares of Capital Stock
of a Subsidiary, whether by such Subsidiary or another Person or (ii) any other
assets of the Company or any assets of the Subsidiaries outside the ordinary
course of business of the Company or such Subsidiary.
"Associate" of, or a Person "associated" with, any Person,
means (i) any trust or other estate in which such Person has a substantial
beneficial interest or as to which such Person serves as trustee or in a similar
fiduciary capacity and (ii) any relative or spouse of such person, or any
relative of such spouse, who has the same home as such person.
"Average Life" means, as of the date of determination, with
respect to any Indebtedness, the quotient obtained by dividing (a) the sum of
the products of (i) the number of years from such date to the date of each
successive scheduled principal payment of such Indebtedness multiplied by (ii)
the amount of such principal payment by (b) the sum of all such principal
payments.
"Board of Directors" means the Board of Directors of the
Company or any authorized committee of the Board of Directors.
"Business Day" means any day other than a Saturday, Sunday or
a Legal Holiday.
"Capital Stock" means, with respect to any Person, any and all
shares, interests (partnership or otherwise), participations, rights in, or
other equivalents (however designated and whether voting or non-voting) of, such
Person's capital stock, including each class of common or preferred stock of
such Person, whether outstanding on the Issue Date or issued after the Issue
Date, and any and all rights, warrants or options exchangeable for or
convertible into such capital stock (but excluding any debt security that is
exchangeable for or convertible into such capital stock).
"Capitalized Lease Obligation" means obligations under a lease
that are required to be classified and accounted for as a capital lease
obligation under GAAP and, the amount of such obligations at any date shall be
the capitalized amount of such obligations at such date, determined in
accordance with such principles.
"Cash" means U.S. dollars.
"Cash Equivalent" means (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support of such securities), (ii) time deposits
and certificates of deposit and commercial paper issued by the parent
corporation of any domestic commercial bank of recognized standing having
capital and surplus in excess of $500 million, (iii) repurchase obligations with
a term of not more than 30 days for underlying securities of the types described
in clauses (i) and (ii) above, (iv) commercial paper issued by others rated at
least A-2 or the equivalent thereof by Standard & Poor's Corporation or at least
P-2 or the equivalent thereof by Moody's
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<PAGE> 10
Investors Service, Inc. and in each case maturing within one year after the date
of acquisition and (v) investments in funds substantially all of whose assets
comprise securities of the type described in clauses (i) and (ii) above.
"Change of Control" means the occurrence of one or more of the
following events (whether or not approved by the Board of Directors): (a) an
event or series of events by which any Person or other entity or group of
Persons or other entities acting in concert as determined in accordance with
Section 13(d) of the Exchange Act (a "Group of Persons") (other than La Cadena)
together with its or their Affiliates and Associates shall, as a result of a
tender or exchange offer, open market purchases, privately negotiated purchases,
merger, consolidation or otherwise (i) be or become the beneficial owner (within
the meaning of Rule 13d-3 and Rule 13d-5 under the Exchange Act, whether or not
applicable, except that a Person shall be deemed to have "beneficial ownership"
of all securities that such Person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time) of 50% or more of
the combined voting power of the then outstanding Voting Stock of the Company or
(ii) have the ability to elect, directly or indirectly, a majority of the
members of the Board of Directors of the Company or other equivalent governing
body thereof, (b) the stockholders of the Company shall approve any plan or
proposal for the liquidation or dissolution of the Company (whether or not
otherwise in compliance with the provisions of this Indenture and the 1997
Notes), (c) a majority of the Board of Directors of the Company consists of
persons other than Continuing Directors or (d) the direct or indirect sale,
assignment, lease, exchange, disposition or other transfer, in one transaction
or a series of related transactions, of all or substantially all of the property
or assets of the Company to any Person or Group of Persons together with any
Affiliates thereof (whether or not otherwise in compliance with the provisions
of this Indenture and the 1997 Notes).
"Common Stock" means the Company's common stock.
"Company" means the party named as such above until a
successor replaces it in accordance with Article 5 of this Indenture and
thereafter means each successor and each successor thereto replaced in
accordance with Article 5 of this Indenture.
"Consolidated EBITDA" for any person means for any period for
which it is to be determined the sum of, without duplication, the amounts for
such period, taken as a single accounting period, of (i) Consolidated Net Income
and (ii) to the extent Consolidated Net Income has been reduced thereby, (A)
Consolidated Tax Expense of such Person paid or accrued in accordance with GAAP
for such period, (B) Consolidated Interest Expense of such Person for such
period, and (C) depreciation, depletion and amortization expenses (including,
without limitation, amortization of capitalized debt issuance costs) and other
non-cash expenses (other than any non-cash expense which requires the accrual of
or a reserve for cash charges for any future period) of such Person and its
subsidiaries for such period, less the amount of consolidated non-cash items
increasing Consolidated Net Income for such period, all as determined on a
consolidated basis in conformity with GAAP consistent with those applied in the
preparation of the audited financial statements of the Company and its
Consolidated Subsidiaries.
"Consolidated Fixed Charge Coverage Ratio" means, with respect
to any Person, the ratio of (a) the aggregate amount of Consolidated EBITDA of
such Person for the four full fiscal quarters ending on or immediately prior to
the date of the transaction (the "Transaction Date") giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio (such four full fiscal
quarter period
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<PAGE> 11
being referred to herein as the "Four Quarter Period") to (b) the aggregate
Consolidated Fixed Charges of such Person for such Four Quarter Period. For
purposes of this definition, if the Transaction Date occurs prior to the first
anniversary of the Issue Date, Consolidated EBITDA and Consolidated Fixed
Charges shall be calculated, in the case of the Company, after giving effect on
a pro forma basis as if the issuance of the 1997 Notes and the application of
the net proceeds therefrom occurred on the first day of such Four Quarter
Period. In addition to and without limitation of the foregoing, for purposes of
this definition, Consolidated EBITDA and Consolidated Fixed Charges shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to (i) the incurrence or retirement, as the case may be, of any
Indebtedness (including Acquired Indebtedness) of such Person or any of its
subsidiaries during the period commencing on the first day of the Four Quarter
Period to and including the Transaction Date (the "Reference Period"),
including, without limitation, the incurrence of the Indebtedness giving rise to
the need to make such calculation, as if such incurrence or retirement, as the
case may be, occurred on the first day of the Reference Period and (ii) the
Consolidated EBITDA during the Reference Period attributable to any acquired or
divested Person, business, property or asset, provided that with respect to any
such acquisition, only to the extent the EBITDA of such Person is otherwise
includable in the referent Person's Consolidated EBITDA, as if such transaction
occurred on the first day of the Reference Period. If the Person for whom this
ratio is being calculated or any of its subsidiaries directly or indirectly
guarantees Indebtedness of a third person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person or
any subsidiary of such Person had directly incurred or otherwise assumed such
guaranteed Indebtedness as of the first day of the Reference Period.
Furthermore, in calculating Consolidated Fixed Charges of this Consolidated
Fixed Charge Coverage Ratio, (1) interest on Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date; (2) if interest on any Indebtedness actually incurred on the Transaction
Date may be optionally determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Four Quarter Period; and (3) notwithstanding the
foregoing, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Rate
Protection Agreements, shall be deemed to accrue at the rate per annum resulting
after giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person
for any period, the sum of, without duplication, the amounts for such period,
taken as a single accounting period, of (i) Consolidated Interest Expense and
(ii) the aggregate amount of all dividends on Preferred Stock of such Person and
its Consolidated Subsidiaries, whether in cash or otherwise (except dividends
payable in shares of Qualified Capital Stock) declared or paid during such
period.
"Consolidated Interest Expense" means, with respect to any
Person for any period, the aggregate of the interest expense of such Person and
its Consolidated Subsidiaries for such period, on a consolidated basis, as
determined in accordance with GAAP, including all amortization of original issue
discount, the interest component of Capitalized Lease Obligations, net cash
costs under all Interest Rate Protection Agreements (including amortization of
fees) all capitalized interest, the interest portion of any deferred payment
obligations for such period and cash contributions to any employee stock
ownership plan to the extent such contributions are used by such employee stock
ownership plan to pay interest or fees to any Person (other than the referent
Person or one of its Wholly Owned Subsidiaries) in
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<PAGE> 12
connection with loans incurred by such employee stock ownership plan to purchase
capital stock of the referent Person, but net of any amortization of any debt
issuance costs.
"Consolidated Net Income" means, with respect to any Person
for any period, the consolidated net income (or deficit) of such Person and its
Consolidated Subsidiaries for such period, on a consolidated basis, as
determined in accordance with GAAP consistently applied, provided that the net
income of any other Person (other than a subsidiary) in which such Person or any
subsidiary of such Person has a joint interest with a third party (which
interest does not cause the net income of such other Person to be consolidated
into the net income of such Person in accordance with GAAP) shall be included
only to the extent of the lesser of (a) such net income that has been actually
received by such Person or such subsidiary in the form of cash dividends or
similar cash distributions or (b) the net income of such Person (which in no
event shall be less than zero), provided further that there shall be excluded
(i)(x) the net income (but not loss) of any subsidiary of such Person that is
subject to any restriction or encumbrance on the ability of such subsidiary to
make the payment of dividends or other distributions to such Person to the
extent of such encumbrance or restriction and (y) the net income of any Person
acquired in a pooling of interests transaction accrued prior to the date it
became a subsidiary of such Person or is merged into or consolidated with such
Person or any subsidiary of such Person; (ii) any restoration to income of any
contingency reserve, except to the extent that provision for such reserve was
made out of Consolidated Net Income accrued at any time following the Issue
Date; (iii) any gain (but not loss), together with any related provisions for
taxes, realized upon the sale or other disposition (including, without
limitation, dispositions pursuant to sale and leaseback transactions) of any
property or assets which are not sold or otherwise disposed of in the ordinary
course of business and upon the sale or other disposition of any Capital Stock
of any subsidiary of such Person; (iv) any gain arising from the acquisition of
any securities, or the extinguishment, retirement or repurchase, as determined
in accordance with GAAP, of any Indebtedness of such Person; (v) any
extraordinary gain (but not extraordinary loss) together with any related
provision for taxes on any such extraordinary gain and any one time gains or
losses (including, without limitation, those resulting from litigation
settlements and those related to the adoption of accounting standards under
GAAP), realized by the referent Person or any of its subsidiaries during the
period for which such determination is made; and (vi) in the case of a successor
to the Company by consolidation or merger or as a transferee of the Company's
assets (other than any calculation made under Article 5 hereof), any earnings of
the successor corporation prior to such consolidation, merger or transfer of
assets.
"Consolidated Net Worth" of a Person at any date means the
Consolidated Stockholders' Equity of such Person less (a) the amount of any gain
net of all applicable federal, state and local taxes resulting, directly or
indirectly, from the extinguishment, retirement or repurchase, as determined in
accordance with GAAP, of any Indebtedness of such Person or any of its
subsidiaries, (b) any revaluation or other write-ups subsequent to the Issue
Date in the book value of any asset owned by such Person or a Consolidated
Subsidiary, (c) the book value of all intangible assets (as determined in
accordance with GAAP) of such Person and its Consolidated Subsidiaries, (d) any
amounts attributable to the cost of treasury stock and the principal amount of
any promissory notes receivable from the sale of Capital Stock of such Person or
of any of its subsidiaries and (e) any gains from the sale of assets other than
in the ordinary course of business.
"Consolidated Stockholders' Equity" as of any date means with
respect to any Person the amount by which the assets of such Person and its
Consolidated Subsidiaries exceed (a) the total
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<PAGE> 13
liabilities of such Person and its Consolidated Subsidiaries, plus (b) any
redeemable Preferred Stock (including Disqualified Capital Stock) of such Person
or any Preferred Stock of any Consolidated Subsidiary of such Person issued to
any Person other than such Person or a Wholly Owned Subsidiary of such Person,
in each case determined in accordance with GAAP.
"Consolidated Subsidiary" of any Person means a Subsidiary
which for financial reporting purposes is or, in accordance with GAAP, should
be, accounted for by such Person as a consolidated subsidiary; provided however,
that the Unrestricted Subsidiaries of any Person shall not be included as
Consolidated Subsidiaries of such Person for purposes of this Indenture,
regardless of whether such Unrestricted Subsidiaries are or, in accordance with
GAAP, should be, accounted for as consolidated subsidiaries; provided further,
that any Person that is not a subsidiary of a Person shall not be included as a
Consolidated Subsidiary of such Person for purposes of the Indenture, regardless
of whether such Person is, or in accordance with GAAP, should be, accounted for
as a consolidated subsidiary.
"Consolidated Tax Expense" means, with respect to any Person
for any period, the aggregate of the federal, state and local tax expense
attributable to taxes based on income and foreign income tax expenses of such
Person and its Consolidated Subsidiaries for such period (net of any income tax
benefit), determined in accordance with GAAP, other than taxes (whether
liabilities or benefits) attributable to extraordinary, unusual or nonrecurring
gains or losses, or taxes attributable to Asset Sales.
"Continuing Director" means at any date a member of the Board
of Directors who (i) was a member of the Board of Directors on the Issue Date or
(ii) was nominated for election or elected to the Board of Directors with the
affirmative vote of at least a majority of the directors who were Continuing
Directors at the time of such nomination or election.
"Craig" means, collectively, Craig Corporation, a Delaware
corporation, and its assigns, including Reading Australia PTY Limited, an
Australian corporation.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Depositary" means, with respect to the 1997 Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the 1997 Notes, and any successor
thereto.
"Designated Senior Indebtedness" shall mean each issue of
Senior Indebtedness that (A) has an outstanding principal amount of at least
$25.0 million (including the amount of all reimbursement obligations pursuant to
letters of credit thereunder and the maximum principal amount available to be
drawn thereunder), and (B) has been designated as Designated Senior Indebtedness
pursuant to an Officers' Certificate of the Company received by the Trustee.
"Disqualified Capital Stock" means any Capital Stock that,
other than solely at the option of the issuer thereof, by its terms (or by the
terms of any security into which it is convertible or exchangeable) is, or upon
the happening of an event or the passage of time would be, required to be
redeemed or repurchased, in whole or in part, or has, or upon the happening of
an event or the passage of
- 6 -
<PAGE> 14
time would have, a redemption or similar payment due on or prior to the first
anniversary of the Maturity Date, or is convertible into or exchangeable for
debt securities at the option of the holder thereof at any time prior to the
first anniversary of the Maturity Date.
"Equity Offering" means any public or private sale of equity
securities (excluding Disqualified Capital Stock) of the Company other than any
private sales to an Affiliate of the Company.
"Event of Default" has the meaning set forth in Section 6.01
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means an offer to exchange Private Placement
Notes for Exchange Notes pursuant to the Registration Rights Agreement.
"Fair Market Value" or "fair value" means, with respect to any
asset or property, the price which could be negotiated in an arm's-length, free
market transaction, for cash, between a willing seller and a willing and able
buyer, neither of whom is under undue pressure or compulsion to complete the
transaction.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may have been approved by a significant
segment of the accounting profession of the United States, which are in effect
as of the date hereof.
"Global Note Custodian" means the Person specified in Section
2.03 hereof as custodian with respect to the Global Notes, or any successor
thereto.
"Governmental Authority" means any nation (including an Indian
nation), any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including any government authority,
agency, department, board, commission or instrumentality of the United States,
any State of the United States or any political subdivision thereof, and any
tribunal or arbitrator(s) of competent jurisdiction.
"guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation and (ii) an agreement, direct or indirect, contingent
or otherwise, the practical or legal effect of which is to assure in any way the
payment or performance (or payment of damages in the event of a non-performance)
of all or any part of such obligation, including, without limiting the
foregoing, the payment of amounts drawn down by letters of credit.
"Holder" or "Noteholder" means a person in whose name a 1997
Notes is registered in the Registrar's books.
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<PAGE> 15
"incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange, in
connection with an acquisition or otherwise), assume, guarantee or otherwise
become liable in respect of such Indebtedness or other obligation or the
recording, as required pursuant to GAAP or otherwise, of any such Indebtedness
or other obligation on the balance sheet of such Person (and "incurrence,"
"incurred," "incurable" and "incurring" shall have meanings correlative to the
foregoing), provided that a change in GAAP that results in an obligation of such
Person that exists at such time becoming Indebtedness shall not be deemed an
incurrence of such Indebtedness.
"Indebtedness" means, with respect to any Person, at any date,
any of the following, without duplication, (i) any liability, contingent or
otherwise, of such Person (A) for borrowed money (whether or not the recourse of
the lender is to the whole of the assets of such Person or only to a portion
thereof), (B) evidenced by a note, bond, debenture or similar instrument or
letters of credit (including a purchase money obligation) or (C) for the payment
of money relating to a Capitalized Lease Obligation or other obligation (whether
issued or assumed) relating to the deferred purchase price of property; (ii) all
conditional sale obligations and all obligations under any title retention
agreement (even if the rights and remedies of the seller under such agreement in
the event of default are limited to repossession or sale of such property), but
excluding trade accounts payable arising in the ordinary course of business that
are not overdue by 90 days or more or are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted; (iii) all
obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction entered into the ordinary
course of business; (iv) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien on any asset or property (including, without limitation,
leasehold interests and any other tangible or intangible property) of such
Person, whether or not such Indebtedness is assumed by such Person or is not
otherwise such Person's legal liability, provided that if the Indebtedness so
secured has not been assumed in full by such Person or is otherwise not such
Person's legal liability in full, the amount of such Indebtedness for the
purposes of this definition shall be limited to the lesser of the amount of such
Indebtedness secured by such Lien or the Fair Market Value of the assets or
property securing such Lien; (v) all Indebtedness of others (including all
dividends of other Persons the payment of which is) guaranteed, directly or
indirectly, by such Person or that is otherwise its legal liability or which
such Person has agreed to purchase or repurchase or in respect of which such
Person has agreed contingently to supply or advance funds; (vi) all Preferred
Stock issued by such Person and its subsidiaries (other than Qualified Capital
Stock) with the amount of Indebtedness represented by such Preferred Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its "maximum fixed repurchase price", but excluding accrued dividends if any;
and (vii) all obligations under Interest Rate Protection Agreements. For
purposes hereof, the "maximum fixed repurchase price" of any Preferred Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Preferred Stock as if such Preferred Stock were purchased
on any date on which Indebtedness shall be required to be determined under this
Indenture, and if such price is based upon, or measured by, the Fair Market
Value of such Preferred Stock, such Fair Market Value shall be determined
reasonably and in good faith by the board of directors of the issuer of such
Preferred Stock. For the avoidance of doubt, the Santee Financing and the Santee
Documents shall be deemed not to constitute, nor to have given rise to, the
incurrence of any Indebtedness of the Company or any of its Subsidiaries.
"Indenture" means this Indenture as amended or supplemented
from time to time.
- 8 -
<PAGE> 16
"Initial Purchaser" means BancAmerica Securities, Inc., as the
initial purchaser of the Private Placement Notes pursuant to the Purchase
Agreement, dated as of the date hereof, between the Company and BancAmerica
Securities, Inc.
"Interest Payment Date" when used with respect to any of the
1997 Notes means the stated maturity of an installment of interest specified in
such 1997 Notes.
"Interest Rate Protection Agreement" means any interest rate
swap agreement, interest rate cap agreement or other financial agreement
designed to protect a Person or any of its subsidiaries against fluctuations in
interest rates.
"Interest Record Date" when used with respect to any of the
1997 Notes means the date for determining the payee of an installment of
interest specified in such 1997 Notes.
"Investment" by any Person means any direct or indirect (i)
loan, advance or other extension of credit or capital contribution to (by means
of transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise), (ii) purchase or
acquisition of Capital Stock, bonds, notes, debentures or other securities or
evidences of Indebtedness issued by, any other Person (whether by merger,
consolidation, amalgamation or otherwise and whether or not purchased directly
from the issuer of such securities or evidences of Indebtedness), (iii)
guarantee or assumption of the Indebtedness of any other Person and (iv) all
other items that would be classified as investments (including, without
limitation, purchases of assets outside the ordinary course of business) on a
balance sheet of such Person prepared in accordance with GAAP. Investments shall
exclude extensions of trade credit and advances to customers and suppliers to
the extent in the ordinary course of business and made in accordance with
customary industry practice. The amount of any Investment shall be the original
cost of such Investment plus the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment.
"Issue Date" means the date on which the 1997 Notes were
originally issued under this Indenture.
"La Cadena" means La Cadena Investments, a California general
partnership.
"Legended Note" means any 1997 Note required to contain the
legend set forth in Section 2.06(h) hereof.
"Lien" means, with respect to any Person, any mortgage,
pledge, lien, encumbrance, charge or adverse claim affecting title or resulting
in an encumbrance against real or personal property of such Person, or a
security interest of any kind.
"Markets Preferred Stock" means the $11.00 Cumulative
Preferred Stock issued by Stater Bros. Markets.
"Maturity Date" means July 1, 2004.
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<PAGE> 17
"Net Cash Proceeds" means, with respect to any Asset Sale of
any Person, Cash and Cash Equivalents received therefrom, in each case net of
(a) all legal expenses and all title and recording tax expenses, all commissions
and other fees and expenses directly related to such Asset Sale, (b) all
federal, state or local taxes required to be accrued as a liability as a
consequence of such Asset Sale, and (c) all Indebtedness permitted under Section
4.12 that is secured by such assets, in accordance with the terms of any Lien
permitted under Section 4.13 upon or with respect to such assets that must by
the terms of such Indebtedness and such Lien, or in order to obtain a necessary
consent to such Asset Sale or by applicable law, be repaid out of the proceeds
from such Asset Sale and which is actually so repaid in Cash.
"Net Equity Proceeds" means (a) in the case of any sale by the
Company of Qualified Capital Stock, the aggregate net proceeds received by the
Company, after payment of expenses, commissions and the like incurred in
connection therewith, whether such proceeds are in cash or in other property
(valued as determined reasonably and in good faith by the Board of Directors, as
evidenced by a resolution approved by the Board of Directors, at the Fair Market
Value thereof at the time of receipt) and (b) in the case of any exchange,
exercise, conversion or surrender of any outstanding Indebtedness of the Company
or any Subsidiary for or into shares of Qualified Capital Stock, the amount of
such Indebtedness (or, if such Indebtedness was issued at an amount less than
the stated principal amount thereof, the accrued amount thereof as determined in
accordance with GAAP) as reflected in the consolidated financial statements of
the Company prepared in accordance with GAAP as of the most recent date next
preceding the date of such exchange, exercise, conversion or surrender (plus any
additional amount required to be paid by the holder of such Indebtedness to the
Company or to any Wholly Owned Subsidiary of the Company upon such exchange,
exercise, conversion or surrender and less any and all payments made to the
holders of such Indebtedness, and all other expenses incurred by the Company in
connection therewith), in the case of each of clauses (a) and (b) to the extent
consummated after June 30, 1997.
"Obligations" means (i) the due and punctual payment of
principal of and premium, if any, and interest on the 1997 Notes when due,
whether at maturity, by acceleration, by redemption or otherwise and all other
monetary obligations of the Company under the Indenture and the 1997 Notes, and
(ii) the due and punctual performance of all other obligations of the Company
under this Indenture or the 1997 Notes.
"Officer" means Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, the Chief Accounting
Officer, any Vice President, the Treasurer, the Secretary, any Assistant
Treasurer or any Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by two
Officers, one of whom must be the Chairman of the Board, the President, the
Treasurer or a Vice-President of the Company.
"Opinion of Counsel" means a written opinion in form and
substance, and from legal counsel, reasonably acceptable to the recipient of
such opinion, which opinion may be subject to any necessary or customary
qualifications, exceptions, or limitations. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Participants" means those Persons designated as participants
by the Depositary.
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<PAGE> 18
"Permitted Construction Indebtedness" means Indebtedness of
the Company or any Wholly Owned Subsidiary representing the deferred purchase
price of, or the net proceeds of which are used solely to finance the purchase
price, cost of construction, lease, or major remodeling or major refurbishment
of, any new or existing supermarket (including any fixtures therein) operated or
to be operated by the Company or Stater Bros. Markets. For purposes hereof,
"major remodeling" or "major refurbishment" of a supermarket shall mean a
remodeling or refurbishment of a supermarket in a single transaction or a series
of related transactions involving aggregate expenditures equal to or greater
than $1.0 million per project site.
"Permitted Investments" means the following kinds of
instruments if, in the case of instruments referred to in clauses (a) through
(d) below, on the date of purchase or other acquisition of any such instrument
by the Company or any Subsidiary, the remaining term to maturity is not more
than one year: (a) readily marketable obligations issued or unconditionally
guaranteed as to principal and interest by the United States or by any agency or
authority controlled or supervised by and acting as an instrumentality of the
United States; (b) repurchase obligations for instruments of the type described
in clause (a) for which delivery of the instrument is made against payment; (c)
obligations (including, but not limited to, demand or time deposits, banker's
acceptances and certificates of deposit) issued by a depository institution or
trust company incorporated or doing business under the laws of the United
States, any state thereof or the District of Columbia or a branch or subsidiary
of any such depository institution or trust company operating outside the United
States, provided that such depository institution or trust company has, at the
time of the Company's or such Subsidiary's investment therein or contractual
commitment providing for such investment, capital, surplus or undivided profits
(as of the date of such institution's most recently published financial
statements) in excess of $100.0 million; (d) commercial paper issued by any
corporation, if such commercial paper has, at the time of the Company's or any
Subsidiary's investment therein or contractual commitment providing for such
investment, credit ratings of A-1 by Standard & Poor's Corporation and P-1 by
Moody's Investors Service, Inc.; and (e) money market, mutual or similar funds
registered under the Investment Company Act of 1940, as amended, having assets
in excess of $100.0 million and whose sole investments are comprised of
securities of the type described in clauses (a) through (d), above, irrespective
of whether such funds are Affiliates of or otherwise associated with the
Trustee.
"Permitted Liens" means (a) Liens existing on the Issue Date
and renewals, extensions and replacements thereof; provided, that such renewals,
extensions or replacements shall not apply to any property or assets not
previously subject to such Liens or increase the principal amount of obligations
secured thereby, (b) Liens on deposits made in the ordinary course of business,
(c) Liens in favor of collecting banks having a right of setoff, revocation,
refund or chargeback with respect to money or instruments of the Company or any
Subsidiary on deposit with or in possession of such banks, (d) Liens for taxes
not yet due or which are being contested in good faith by appropriate
proceedings, provided that adequate reserves with respect thereto are maintained
on the books of the Company or its Subsidiaries, as the case may be, in
conformity with GAAP, (e) carriers', warehousemen's, mechanics' materialmen's,
repairmen's or other like Liens arising in the ordinary course of business and
not overdue for a period of more than 90 days or which are being contested in
good faith by appropriate proceedings, (f) pledges or deposits in connection
with workers' compensation, unemployment insurance and other social security
legislation, (g) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of like nature incurred in
the ordinary course of business, (h) easements, rights-of-way, restrictions and
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<PAGE> 19
other similar encumbrances incurred in the ordinary course of business which, in
the aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or materially
interfere with the ordinary course of business of the Company or its
Subsidiaries, as the case may be, and any exceptions to title set forth in any
title policies, (i) any attachment or judgment Lien so long as the execution or
other enforcement thereof is effectively stayed, the claims secured thereby are
being contested in good faith by appropriate proceedings, adequate reserves have
been established with respect to such claims in accordance with GAAP and no
Default or Event of Default would result thereby or occur as a consequence
thereof, (j) any Liens relating solely to property leased by the Company or any
Subsidiary and arising solely out of the lease for such property and (k) Liens
on assets securing any Permitted Construction Indebtedness permitted under
Section 4.13.
"Person" means any individual, corporation, partnership, joint
venture, trust, estate, limited liability company, unincorporated organization
or government or any agency or political subdivision thereof.
"Plan of Liquidation" means a plan (including by operation of
law) that provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously) (i) the sale,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company otherwise than as an entirety or substantially as an entirety and
(ii) the distribution of all or substantially all of the proceeds of such sale,
lease, conveyance or other disposition of all or substantially all of the
remaining assets of the Company to holders of Capital Stock of the Company.
"Preferred Stock" means, as applied to the Capital Stock of
any Person, the Capital Stock of such Person (other than the common stock of
such Person) of any class or classes (however designated) that ranks prior, as
to the payment of dividends or as to the distribution of assets upon any
voluntary or involuntary liquidation, dissolution or winding-up of such Person,
to shares of Capital Stock of at least one other class of such Person.
"principal" of Indebtedness, including the 1997 Notes, means
the principal of the security plus the premium, if any, on the security.
"Private Placement Notes" has the meaning ascribed thereto in
the preamble hereof.
"pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act.
"Qualified Capital Stock" means, with respect to any Person,
any Capital Stock of such Person that is not Disqualified Capital Stock or
convertible into or exchangeable or exercisable for Disqualified Capital Stock.
"Qualified La Cadena Investment" means an Investment in the
Company by La Cadena for the purpose of providing funds to either the Company or
Stater Bros. Markets, as the case may be, to purchase additional limited
liability company interests in Santee LLC, provided, however, that if such an
Investment is made in the form of Indebtedness, then such Indebtedness shall be
(a) unsecured Indebtedness, and (b) Subordinated Indebtedness.
- 12 -
<PAGE> 20
"Qualified Non-Recourse Indebtedness" means Indebtedness of
any Person (i) as to which neither the Company nor any of its Subsidiaries
(other than any Unrestricted Subsidiary) (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise) or (c) constitutes the lender; and (ii) no default with respect to
which (including any right that the holders thereof may have to take enforcement
action against such Person) would permit (upon notice, lapse of time or both)
any holder of any other Indebtedness of the Company or any of its Subsidiaries
(other than any Unrestricted Subsidiary) to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; provided, however, that the Company or any Subsidiary may
execute and become obligated under the Santee Documents and perform their
obligations thereunder, and such execution, obligation and performance shall not
disqualify the Indebtedness of Santee or Santee LLC from constituting Qualified
Non-Recourse Indebtedness.
"Qualified Santee LLC Interest Sale" means a sale by Stater
Bros. Markets of its interest in Santee LLC.
"Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, dated as of the date hereof, between the Company
and the Initial Purchaser.
"Related Person" means with respect to any Person (a) any
Affiliate of such Person, (b) any individual or other Person who directly or
indirectly is the registered or beneficial owner of 5% or more of any class of
Capital Stock of such Person or warrants, rights, options or other rights to
acquire more than 5% of any class of Capital Stock of such Person, (c) any
relative of such individual by blood, marriage or adoption not more remote than
first cousin and (d) any officer or director of such Person.
"Representative" means the indenture trustee or other trustee,
agent or representative, if any, for an issue of Senior Indebtedness.
"Restricted Payment" means (i) the declaration or payment of
any dividend or the making of any other distribution or other payment (whether
in cash, securities or other property or assets of the Company or of any
Subsidiary) of the Company's or any Subsidiary's Capital Stock, or to the
holders of the Company's or any Subsidiary's Capital Stock or to any Affiliate
of the Company, whether outstanding on the Issue Date or thereafter (other than
dividends or distributions payable solely in Qualified Capital Stock of the
Company, dividends or distributions declared or paid by any Subsidiary to the
Company); (ii) any purchase, redemption, retirement or other acquisition for
value of any Capital Stock of the Company or of any Subsidiary or of any
Affiliate of the Company, whether outstanding on the Issue Date or thereafter,
or any warrants, rights or options to purchase or acquire shares of the Capital
Stock of the Company or of any Subsidiary or of any Affiliate of the Company,
whether outstanding on the Issue Date or thereafter, held by any Person other
than the Company or one of its Wholly Owned Subsidiaries (other than through the
issuance in exchange therefor solely of Qualified Capital Stock); (iii) the
prepayment, acquisition, decrease or retirement prior to maturity, scheduled
repayment or scheduled sinking fund payment of any Indebtedness of the Company
that is subordinated (whether pursuant to its terms, structurally or by
operation of law) to the 1997 Notes, or (iv) to incur, create, assume or suffer
to exist any guarantee of Indebtedness of, or make any loan or advancement to,
or other Investment in, any Related Person of the Company (other than a Wholly
Owned Subsidiary (other than an Unrestricted Subsidiary)). The dollar amount of
any non-cash dividend or distribution by the
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<PAGE> 21
Company or any Subsidiary on the Company's, any Subsidiary's or any of the
Company's Affiliate's Capital Stock shall be equal to the Fair Market Value of
such dividend or distribution at the time of such dividend or distribution.
Notwithstanding the foregoing, provided that no Default or Event of Default
shall have occurred and be continuing or would result as a consequence thereof,
the following shall not be or be deemed to be Restricted Payments: (a) the
repayment upon the consummation of an Asset Sale of any Indebtedness of the
Company permitted by Section 4.12 which is subordinated (whether pursuant to its
terms or by operation of law) to the 1997 Notes and which is secured by a Lien
permitted by Section 4.13 to the extent that such Indebtedness is required to be
repaid in connection with such Asset Sale pursuant to the terms of the
instrument governing such Indebtedness and such Lien, provided that concurrent
or prior repayment of the 1997 Notes is provided for with the proceeds of such
Asset Sale if the 1997 Notes are secured by a Lien pari passu with or senior to
the Lien of such Indebtedness, or (b) the prepayment, acquisition, retirement or
decrease of Indebtedness of the Company that is subordinated (whether pursuant
to its terms or by operation of law) to the 1997 Notes that is prepaid,
acquired, decreased or retired by conversion into or in exchange for Qualified
Capital Stock.
"Revolving Credit Facility" means the Company's or any
Subsidiary's revolving credit facilities or any replacement facilities with
respect thereto.
"Santee" means Santee Dairies, Inc., a California corporation.
"Santee Documents" means that certain Product Purchase
Agreement between Stater Bros. Markets and Santee, that certain Owner Consent
between Stater Bros. Markets and the trustee pursuant to the trust agreement
executed as part of the Santee Financing, that certain Limited Liability Company
Agreement between Stater Bros. Markets, Hughes Markets, Inc. and Santee LLC and
all documents effecting and ancillary to the Santee Financing.
"Santee Financing" means the issuance by Santee of up to $80.0
million in principal amount of notes with respect to the construction of a new
dairy in the City of Industry, California, and all transactions incident and
ancillary thereto.
"Santee LLC" means Santee Dairies, LLC, a Delaware limited
liability company.
"Santee Noteholders" means the purchasers of notes with
respect to the Santee Financing.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor statute.
"Senior Indebtedness" means (x) all obligations of the Company
now or hereafter existing to pay the principal of, and interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization to the extent a claim for post-filing interest is allowed in such
proceedings) on, any Indebtedness (other than Capitalized Lease Obligations) of
the Company, whether outstanding on the date of this Indenture or thereafter
created, incurred, assumed, guaranteed or in effect guaranteed by the Company,
(y) Indebtedness of the Company represented by Capitalized Lease Obligations if
the instrument creating or evidencing the same expressly provides that such
Indebtedness
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<PAGE> 22
shall be senior in right of payment to the 1997 Notes and (z) Indebtedness of
the Company with respect to Interest Rate Protection Agreements. Notwithstanding
the foregoing, Senior Indebtedness shall not include (a) any Indebtedness, if
the instrument creating or evidencing the same or the assumption or guarantee
thereof expressly provides that such Indebtedness shall not be senior in right
of payment to the 1997 Notes, (b) in the case of each 1997 Note, the other 1997
Notes, (c) Indebtedness of the Company to, or guaranteed on behalf of, an
Affiliate of the Company (other than to a Subsidiary (other than an Unrestricted
Subsidiary)), (d) Indebtedness to trade creditors incurred or assumed in the
ordinary course of business in connection with obtaining goods, materials or
services, (e) any liability for federal, state, local or other taxes owed or
owing by the Company, (f) Indebtedness incurred in violation of Section 4.12,
(g) any Indebtedness which is, by its express terms, subordinated in right of
payment to any other Indebtedness of the Company and (h) Indebtedness
represented by Disqualified Capital Stock.
"Series B Preferred Stock" means the Series B Preferred Stock
of the Company.
"Shelf Registration Statement" means a registration statement
filed with the Commission pursuant to the Securities Act and Rule 415
promulgated thereunder in connection with the resale of 1997 Notes pursuant to
the terms set forth in the Registration Rights Agreement.
"Stater Bros. Markets" means Stater Bros. Markets, the
Company's principal operating Subsidiary.
"Subordinated Indebtedness" means any Indebtedness of the
Company or any of its Subsidiaries (whether outstanding on the date of the
Indenture or thereafter incurred) that (i) matures no earlier than the date that
is one year after the maturity date of the Notes and (ii) is subordinated with
respect to payment of principal and interest to the payment of principal and
interest on the Notes (whether upon dissolution, liquidation, or reorganization
of the Company or any such Subsidiary, or otherwise).
"subsidiary" of any Person means (a) a corporation a majority
of whose Voting Stock is at the time, directly or indirectly, owned by such
Person, by one or more subsidiaries of such Person or by such Person and one or
more subsidiaries of such Person or (b) any other Person (other than a
corporation) in which such Person, a subsidiary of such Person or such Person
and one or more subsidiaries of such Person, directly or indirectly, at the date
of determination thereof, have (i) at least a majority ownership interest or
(ii) the power to elect or direct the election of a majority of the directors or
other governing body of such Person.
"Subsidiary" means any subsidiary of the Company.
"Texas Eastern" means Texas Eastern Corporation.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb) as in effect on the date of execution of this Indenture.
"Trust Officer" means the Chairman of the Board, the President
or any other officer or assistant officer of the Trustee assigned by the Trustee
to administer its corporate trust matters.
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<PAGE> 23
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor.
"Unrestricted Subsidiary" means, to the extent such Persons
become Subsidiaries, (i) Santee LLC, (ii) Santee and (iii) any subsidiary of an
Unrestricted Subsidiary; provided however, that any Unrestricted Subsidiary that
incurs Indebtedness other than Qualified Non-Recourse Indebtedness shall no
longer be deemed an Unrestricted Subsidiary, for so long as such Indebtedness
not constituting Qualified Non-Recourse Indebtedness shall be outstanding;
provided further, that at such time as any Unrestricted Subsidiary ceases to be
an Unrestricted Subsidiary, all Indebtedness of such Subsidiary shall be deemed
to have been incurred by the Company and such Subsidiary for the purposes
hereof.
"Voting Stock" means, with respect to any Person, securities
of any class or classes of Capital Stock in such Person entitling the holders
thereof (whether at all times or only so long as no senior class of stock has
voting power by reason of any contingency) to vote in the election of members of
the board of directors or other governing body of such Person.
"Wholly Owned Subsidiary" means, with respect to any Person,
any subsidiary of such Person all the outstanding shares of Capital Stock (other
than directors' qualifying shares, if applicable) of which are owned directly by
such Person, and with respect to the Company, shall include Stater Bros. Markets
so long as the Company or any Wholly Owned Subsidiary of the Company owns all of
the outstanding shares of Capital Stock of Stater Bros. Markets, other than the
Markets Preferred Stock held by Texas Eastern on the Issue Date.
Section 1.02 Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Asset Sale Offer"................................................. 4.19(b)
"Asset Sale Offer Amount".......................................... 4.19(b)
"Asset Sale Offer Payment Date".................................... 4.19(b)
"Asset Sale Offer Trigger Date".................................... 4.19(b)
"Bankruptcy Law"................................................... 6.01
"Certificated Notes"............................................... 2.01
"Change of Control Date"........................................... 4.11
"Change of Control Offer".......................................... 4.11
"Change of Control Payment Date"................................... 4.11
"Consummation Date"................................................ 4.19(b)
"Co-Registrar"..................................................... 2.03
"covenant defeasance".............................................. 8.01(c)
"Custodian"........................................................ 6.01
"Default Rate"..................................................... 6.02
"Event of Default"................................................. 6.01
"Existing Debt".................................................... 4.12(b)
"Global Note"...................................................... 2.01
"legal defeasance"................................................. 8.01(b)
"Legal Holiday".................................................... 11.07
</TABLE>
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<PAGE> 24
<TABLE>
<S> <C>
"New York Office".................................................. 2.03
"Non-Global Purchasers"............................................ 2.01
"Notice of Default"................................................ 6.01
"Offer Amount"..................................................... 3.01(f)(ii)
"Paying Agent"..................................................... 2.03
"Payment Restriction".............................................. 4.14
"Payment Blockage Period".......................................... 10.03
"Purchase Date".................................................... 3.01(e)
"Purchase Offer"................................................... 3.01(a)
"Purchase Price"................................................... 3.01(f)
"Refinance"........................................................ 4.12(b)
"Refinancing Indebtedness"......................................... 4.12(b)
"Registrar"........................................................ 2.03
"Regulation S"..................................................... 2.06(a)
"Related Person Transaction"....................................... 4.16
"Successor"........................................................ 5.02
"Trustee Office"................................................... 2.03
"United States
"Government Obligations"........................................... 8.01
</TABLE>
Section 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"Commission" means the SEC;
"indenture securities" means the 1997 Notes;
"indenture security holder" means a Noteholder or Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the 1997 Notes means the Company or any other
obligor on the 1997 Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
Section 1.04 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
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<PAGE> 25
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP as in effect at the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular; and
(5) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
ARTICLE 2
THE 1997 NOTES
Section 2.01 Form and Dating.
The Private Placement Notes shall be substantially in the form
set forth in Exhibit A, and the Exchange Notes shall be substantially in the
form set forth as Exhibit B, which exhibits are part of this Indenture, with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture. The 1997 Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. The
Company shall approve the forms of the 1997 Notes and any notation, legend or
endorsement on them. Each 1997 Note shall be dated the date of its
authentication. The aggregate principal amount of the Private Placement Notes
shall be no greater than $100.0 million; if Exchange Notes are issued, the
aggregate principal amount of Private Placement Notes then outstanding shall be
reduced by the aggregate principal amount of Exchange Notes so issued.
Private Placement Notes sold to Qualified Institutional Buyers
will be initially issued in global form, substantially in the form of Exhibit A
(including footnotes 1 and 2 thereto) and the Exchange Notes, if any, issued to
Qualified Institutional Buyers in exchange for Private Placement Notes will be
initially issued in global form, substantially in the form of Exhibit B
(including footnotes 1 and 2 thereto) (each of Exhibit A and Exhibit B,
including such footnotes, hereinafter referred to as a "Global Note", and with
any Private Placement Notes issued in exchange therefor, the "Global Notes").
Each Global Note will represent such of the outstanding 1997 Notes as shall be
specified therein and will provide that it represents the aggregate amount of
outstanding 1997 Notes from time to time endorsed thereon and that the aggregate
amount of outstanding 1997 Notes represented thereby may from time to time be
reduced or increased, as appropriate, to reflect transfers, exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the amount of outstanding 1997 Notes represented thereby
shall be made by the Trustee or the Global Note Custodian, at the direction of
the Trustee, in accordance with instructions given by the Holder thereof.
Private Placement Notes (i) purchased by or transferred to
foreign purchasers or Accredited Investors who are not Qualified Institutional
Buyers or (ii) held by Qualified Institutional Buyers who elect to take physical
delivery of their certificates (collectively, the "Non-Global Purchasers") will
be issued in the registered form of certificated Notes, substantially in the
form of Exhibit A (excluding footnotes 1 and 2 thereto) and Exchange Notes that
are issued to Holders other than Qualified Institutional Buyers in exchange for
Private Placement Notes will initially be issued in the
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form of certificated Notes, substantially in the form of Exhibit B (excluding
footnotes 1 and 2 thereto) (collectively, the "Certificated Notes"). Upon the
transfer to a Qualified Institutional Buyer of Certificated Notes initially
issued to a Non-Global Purchaser, such Certificated Notes will, unless the
transferee requests otherwise or the Global Note has previously been exchanged
in whole for Certificated Notes, be exchanged for an interest in the Global
Note.
Payment of the principal of and premium, if any, and interest
on any Certificated Note shall be made to the Holder thereof.
Payment of the principal of and premium, if any, and interest
on the Global Note will be made to the Depositary or its nominee, as the case
may be, as the registered owner of the Global Note, for immediate credit to the
holders of beneficial interests therein through the accounts of the
Participants.
The terms and provisions contained in the 1997 Notes shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
Section 2.02 Execution and Authentication.
Two Officers shall sign the 1997 Notes for the Company by
manual or facsimile signature.
If an Officer whose signature is on a 1997 Note no longer
holds that office at the time the 1997 Note is authenticated, the 1997 Note
shall nevertheless be valid.
A 1997 Note shall not be valid until authenticated by the
manual signature of the Trustee. The signature shall be conclusive evidence that
the 1997 Note has been authenticated under this Indenture.
Upon a written order of the Company signed by an Officer of
the Company, the Trustee shall authenticate 1997 Notes for original issue up to
the aggregate principal amount of $100.0 million. The aggregate principal amount
of 1997 Notes outstanding at any time may not exceed that amount except as
provided in Section 2.07.
The 1997 Notes shall be issuable only in registered form
without coupons and only in denominations of $1,000 or any integral multiple
thereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate 1997 Notes. Unless limited by the terms of its
appointment, an authenticating agent may authenticate 1997 Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same right as an Agent to deal with the Company or an Affiliate.
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Section 2.03 Registrar; Paying Agent; Depositary; Global Note Custodian.
The Company shall maintain or cause to be maintained in the
City of New York, State of New York (the "Trustee Office"), and, to the extent
required by Applicable Law, (including without limitation any regulation or rule
of a national securities exchange), in the Borough of Manhattan, The City of New
York (the "New York Office"), State of New York, and in such other locations as
it shall determine: (i) an office or agency where securities may be presented
for registration of transfer or for exchange ("Registrar"); and (ii) an office
or agency where 1997 Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the 1997 Notes and of their transfer and
exchange. The Company may appoint one or more co-registrars (a "Co-Registrar"),
and one or more additional paying agents. The term Paying Agent includes any
additional paying agent. The Company may change any Paying Agent, Registrar or
Co-Registrar without prior notice to the Holders. The Company shall promptly
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture and shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or Co-Registrar not a party to this Indenture. The
agreement shall implement the provisions of this Indenture that relate to such
Agent. The Company or any of its subsidiaries may act as Paying Agent, Registrar
or Co-Registrar. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such, and the Trustee shall
initially act as such and shall be entitled to appropriate compensation in
accordance with Section 7.07. The Trustee shall cause to be maintained the
Trustee Office and the New York Office (to the extent required by Applicable
Law) as long as it acts as Registrar or Paying Agent.
The Company initially appoints The Depository Trust Company to
act as Depositary with respect to the Global Notes and initially appoints First
Trust of New York, National Association, as custodian, to act as Global Note
Custodian with respect to the Global Notes.
Section 2.04 Paying Agent to Hold Money in Trust.
Not later than two Business Days prior to each due date for
the payment of the principal of and premium, if any, and interest on any of the
1997 Notes, the Company shall deposit with a Paying Agent available funds
sufficient to pay such principal and interest so becoming due to Holders. The
Company shall require each Paying Agent (other than the Trustee, who hereby so
agrees), to agree in writing that the Paying Agent will hold in trust for the
benefit of Noteholders or the Trustee all money held by the Paying Agent for the
payment of principal or interest on the 1997 Notes, and will promptly notify the
Trustee in writing of any delay or default by the Company in making any such
payment. While any such delay in payment or default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company or a Subsidiary) shall have no further liability for such money. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Noteholders all money held by it as
Paying Agent.
Section 2.05 Noteholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Noteholders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee on or at least five (5) Business Days before each
interest
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payment date and at such other times as the Trustee may request in writing a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of Noteholders.
Section 2.06 Transfer and Exchange.
(a) Transfer and Exchange of Certificated Notes. When
Certificated Notes are presented to the Registrar or Co-Registrar with a request
to register the transfer of the Certificated Notes or to exchange such
Certificated Notes for an equal principal amount of Certificated Notes of other
authorized denominations, the Registrar or Co-Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transactions are met; provided, however, that the Certificated Notes presented
or surrendered for registration of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar or
Co-Registrar, duly executed by the Holder thereof or by such Holder's
attorney, duly authorized in writing; and
(ii) in the case of Legended Notes that are Certificated
Notes, shall be accompanied by the following additional information and
documents, as applicable:
(A) if such Legended Note is being delivered to the
Registrar or Co-Registrar by a Noteholder for registration in
the name of such Noteholder, without transfer, a certification
from such Noteholder to that effect (in substantially the form
of Exhibit C hereto); or
(B) if such Legended Note is being transferred to a
Qualified Institutional Buyer in accordance with Rule 144A
under the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 or Rule 145 under the
Securities Act or a transaction meeting the requirements of
Regulation S under the Securities Act ("Regulation S") or
pursuant to an effective registration statement under the
Securities Act, a certification to that effect (in
substantially the form of Exhibit C hereto); or
(C) if such Legended Note is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act or in a transaction exempt
from the registration requirements of the Securities Act, a
certification to that effect (in substantially the form of
Exhibit C hereto) and an Opinion of Counsel to the effect that
such transfer does not require registration under the
Securities Act (in substantially the form of Exhibit D
hereto).
(b) Restrictions on Transfer of a Certificated Note for a Beneficial
Interest in a Global Note. A Certificated Note may not be exchanged for a
beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Certificated
Note, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Trustee, together with:
(i) if such Certificated Note is a Legended Note,
certification (in substantially the form of Exhibit C hereto) that such
Certificated Note is being transferred to a Qualified
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Institutional Buyer in accordance with Rule 144A under the Securities
Act or in a transaction meeting the requirements of Regulation S; and
(ii) whether or not such Certificated Note is a Legended Note,
written instructions directing the Trustee to make, or to direct the
Global Note Custodian to make, an endorsement on the Global Notes to
reflect an increase in the aggregate principal amount of the 1997 Notes
represented by the Global Notes;
then the Trustee shall cancel such Certificated Note and cause, or direct the
Global Note Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Global Note Custodian, the
aggregate principal amount of 1997 Notes represented by the Global Notes to be
increased accordingly. If no Global Notes are then outstanding, the Company
shall issue and the Trustee shall authenticate a new Global Note in the
appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and exchange of
Global Notes or beneficial interests therein shall be effected through the
Depositary, in accordance with this Indenture (including the restrictions on
transfer set forth herein) and the procedures of the Depositary therefor.
(d) Transfer and Exchange of a Beneficial Interest in a Global Note for
a Certificated Note. Any Person having a beneficial interest in a Global Note
may upon request exchange such beneficial interest for a Certificated Note. Upon
receipt by the Trustee of written instructions including registration
instructions from the Depositary or its nominee on behalf of any Person having a
beneficial interest in a Global Note, and, in the case of a beneficial interest
in a Legended Note only, the following additional information and documents:
(i) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial owner, a
certification from such Person to that effect (in substantially the
form of Exhibit C hereto);
(ii) if such beneficial interest is being transferred to a
Qualified Institutional Buyer in accordance with Rule 144A under the
Securities Act or pursuant to an exemption from registration in
accordance with Rule 144 or Rule 145 or in a transaction meeting the
requirements of Regulation S or pursuant to an effective registration
statement under the Securities Act, a certification to that effect from
the transferee or transferor (in substantially the form of Exhibit C
hereto); or
(iii) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements of the
Securities Act, a certification to that effect from the transferee or
transferor (in substantially the form of Exhibit C hereto) and an
Opinion of Counsel to the effect that such transfer does not require
registration under the Securities Act (in substantially the form of
Exhibit D hereto);
then the Trustee, or the Global Note Custodian at the direction of the Trustee,
will cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Global Note Custodian, the aggregate principal
amount of the Global Note to be reduced and, following such reduction, the
Company will execute and the Trustee will authenticate and deliver a
Certificated Note to the transferee. Certificated Notes issued in exchange for a
beneficial interest in a Global Note pursuant to this Section 2.06(d) shall be
registered in such names and in such authorized denominations as the
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Depositary, pursuant to instructions from its direct or indirect Participants or
otherwise, shall instruct the Trustee. The Trustee shall deliver such
Certificated Notes to the Persons in whose names such 1997 Notes are so
registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in Section 2.06(f)), a Global Note may not be transferred
as a whole except by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any such nominee to a successor Depositary or a nominee
of such successor Depositary.
(f) Authentication of Certificated Notes in Absence of Depositary or at
Company's Election. If at any time (i) the Depositary for a Global Note notifies
the Company that the Depositary is unwilling or unable to continue as Depositary
for the Global Note and a successor Depositary for the Global Note is not
appointed by the Company within 90 days after delivery of such notice, or (ii)
the Company, at its sole discretion, notifies the Trustee in writing that it
elects to cause the issuance of Certificated Notes under this Indenture, then
the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Certificated Notes,
and, if requested, an Opinion of Counsel, will authenticate and deliver
Certificated Notes, in an aggregate principal amount equal to the principal
amount of the Global Note, in exchange for such Global Note.
(g) Cancellation and/or Adjustment of Global Note. At such time as all
beneficial interests in a Global Note have either been exchanged for
Certificated Notes, redeemed, converted, repurchased, or canceled or, with
respect to a Global Note that is a Private Placement Note, exchanged for
beneficial interests in Exchange Notes, such Global Note shall be returned to or
retained by and canceled by the Trustee. At any time prior to such cancellation,
if any beneficial interest in a Global Note is exchanged for Certificated Notes,
redeemed, converted, repurchased, canceled or, with respect to a Global Note
that is a Private Placement Note, exchanged for beneficial interests in Exchange
Notes, the aggregate principal amount of 1997 Notes represented by such Global
Note shall be reduced and an endorsement shall be made on such Global Note, by
the Trustee or the Global Note Custodian at the direction of the Trustee, to
reflect such reduction.
(h) Legends. Except as otherwise provided below, each certificate
evidencing the Global Notes and the Certificated Notes (and all 1997 Notes
issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the following form:
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (i)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT)
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IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d) TO
AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) or (7) OF THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED
INVESTOR")) THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE
FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER
IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN
$100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (e) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO
REQUESTS, (ii) TO THE ISSUER OR (iii) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE.
Upon any sale or transfer of a Legended Note (including any Legended
Note represented by a Global Note) that (i) satisfies the conditions set forth
in clauses (A)(c), (d) or (e) of the above legend, (ii) is effected pursuant to
an effective registration statement under the Securities Act, (iii) consists of
an exchange of Private Placement Notes for Exchange Notes pursuant to the
Registration Rights Agreement or (iv) in connection with which the Trustee
receives an Opinion of Counsel to the effect that such 1997 Note will no longer
be subject to resale restrictions under federal and state securities laws, then
(A) in the case of any Legended Note that is a Certificated Note, the Registrar
or Co- Registrar shall permit the Holder thereof to exchange such Legended Note
for a Certificated Note that does not bear the legend set forth above and shall
rescind any restriction on the transfer of such 1997 Note, and (B) in the case
of a Legended Note represented by a Global Note, such 1997 Note shall no longer
be subject to the restrictions contained in the above legend (but still subject
to the provisions of Section 2.06(c) hereof); provided, however, that with
respect to any request for an exchange of a Legended Note for a Certificated
Note that does not bear the above legend, which request is made in reliance upon
clause (i) or (ii) above, the Holder thereof shall certify to that effect in
writing to the Registrar or Co-Registrar (such certification to be substantially
in the form of Exhibit C hereto).
(i) Obligations with respect to Transfers and Exchanges of Certificated
Notes.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate
Certificated Notes and Global Notes at the Registrar's or
Co-Registrar's request.
(ii) No service charge shall be made to a Noteholder for
any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charges payable in connection therewith (other than any
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such transfer taxes or similar governmental charges payable upon
exchange or transfer pursuant to Sections 2.10, 3.01(d)(vii) and 9.05
hereof).
(iii) The Registrar or Co-Registrar shall not be
required to register the transfer or exchange of any Certificated Note
selected for repurchase pursuant to a Purchase Offer in whole or in
part, except the unpurchased portion of any Certificated Note being
repurchased in part.
(iv) All Certificated Notes and Global Notes issued upon
any registration of transfer or exchange of Certificated Notes or
Global Notes shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture,
as the Certificated Notes or Global Notes surrendered upon such
registration of transfer or exchange.
(v) The Company shall not be required (A) to issue,
register the transfer of or exchange 1997 Notes during a period
beginning at the opening of business 15 days before the Purchase Date
in connection with a Purchase Offer under Section 3.01 and ending at
the close of business on such Purchase Date, (B) to register the
transfer or exchange of any 1997 Note purchased in whole or in part,
except the unpurchased portion of any 1997 Note being purchased in
part, or (C) to register the transfer or exchange of a 1997 Note
between a record date and the next succeeding interest payment date.
(vi) Prior to due presentment for registration of
transfer of any 1997 Note, the Trustee, any Agent and the Company shall
deem and treat the Person in whose name any 1997 Note is registered as
the absolute owner of such 1997 Note for the purpose of receiving
payment of principal of and premium, if any, and interest on such 1997
Note and for all other purposes whatsoever, whether or not such 1997
Note is overdue, and neither the Trustee, any Agent nor the Company
shall be affected by notice to the contrary.
Section 2.07 Replacement Notes.
If any mutilated 1997 Note is surrendered to the Trustee or
any Holder claims, to the satisfaction of the Trustee and the Company, that any
1997 Note has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement 1997 Note if the Trustee's
requirements are met. If required by the Trustee or the Company as a condition
of receiving a replacement 1997 Note, the Holder shall provide an indemnity bond
sufficient, in the judgment of both the Company and the Trustee, to fully
protect the Company, the Trustee, any Paying Agent and any authenticating agent
from any loss that any of them may suffer if such 1997 Note is replaced. The
Company shall be entitled to charge the holders of such 1997 Note for its
expenses in replacing any such 1997 Note.
Each replacement 1997 Note shall be an additional Obligation
of the Company.
Section 2.08 Outstanding 1997 Notes.
The 1997 Notes outstanding at any time are all the 1997 Notes
properly authenticated by the Trustee except for those canceled by the Trustee,
those delivered to it for cancellation, and those described in this Section 2.08
as not outstanding.
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If a 1997 Note is replaced pursuant to Section 2.07 (other
than a mutilated 1997 Note surrendered for replacement), it shall cease to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced 1997 Note is held by a bona fide purchaser. A mutilated 1997 Note shall
cease to be outstanding upon surrender of such 1997 Note and replacement thereof
pursuant to Section 2.07.
If 1997 Notes are considered paid in full under Section 4.01,
they cease to be outstanding and interest on them ceases to accrue.
Subject to Section 2.09, a 1997 Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the 1997
Note.
Section 2.09 When Treasury Notes Disregarded.
In determining whether the Holders of the required aggregate
principal amount of 1997 Notes have concurred in any direction, waiver or
consent, 1997 Notes owned by the Company or an Affiliate of the Company shall be
considered as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only 1997 Notes which the Trustee knows are so
owned shall be so disregarded.
Section 2.10 Temporary Notes.
Until Notes in certificated form are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Notes.
Temporary Notes shall be substantially in the form of Notes in certificated form
but may have variations that the Company considers appropriate for temporary
Notes. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate Notes in certificated form in exchange for temporary Notes.
Until such exchange, such temporary Notes shall be entitled to the same rights,
benefits and privileges as the Notes in certificated form.
Section 2.11 Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange, or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement, or cancellation, shall dispose of
canceled Notes subject to record retention requirements of the Exchange Act, and
shall promptly provide the Company with a certificate executed by an authorized
signatory certifying such destruction. The Company may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation.
Section 2.12 Defaulted Interest.
If the Company fails to make a payment of interest on the 1997
Notes, it shall pay such defaulted interest plus, to the extent lawful, any
interest payable on the defaulted interest to the persons who are Noteholders on
a subsequent special record date in each case at the rate provided in the 1997
Notes and in Section 4.01. The Company shall set any such record date and
payment date and shall so notify the Trustee in writing at least 18 Business
Days before such record date, unless the Trustee shall elect to set the record
date pursuant to Section 6.10 hereof. At least 15 Business Days before any such
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record date, the Company (or the Trustee, in the name of, upon written direction
by, and at the expense of, the Company) shall mail to Noteholders a notice that
states the record date, payment date, and amount of such interest to be paid on
account of each 1997 Note.
Section 2.13 CUSIP Number.
The Company in issuing the 1997 Notes may use a CUSIP number,
and if so, such CUSIP number shall be included in notices of redemption or
exchange as a convenience to Holders; provided, however, that any such notice
may state that no representation is made as to the correctness or accuracy of
the CUSIP number printed in the notice or on the 1997 Notes and that reliance
may be placed only on the other identification numbers printed on the 1997
Notes. The Company shall promptly notify the Trustee of any change in the CUSIP
number.
ARTICLE 3
REPURCHASE AND OPTIONAL REDEMPTION
Section 3.01 Purchase Offers.
(a) In the event that, pursuant to Section 4.11 or 4.19
hereof, the Company shall commence an offer to purchase 1997 Notes (a "Purchase
Offer"), the Company shall follow the procedures in this Section 3.01.
(b) Notice of a Change of Control Offer shall be sent to the
Trustee not more than 25 days after the Change in Control Date and to the
Noteholders as shown on the register of Holders and the Trustee not more than 30
days after the Change in Control Date. The Change of Control Offer shall
commence on the date such notice is given and shall remain open for not less
than 30 days and nor more than 45 days, except to the extent that a longer
period is required by Applicable Law. Upon expiration of such Change in Control
Offer, the Company shall promptly purchase for Cash the 1997 Notes delivered for
purchase at a purchase price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest thereon, if any.
(c) Notice of an Asset Sale Offer shall be sent to the Trustee
within five days after the Asset Sale Offer Trigger Date as shown on the
register of Holders and the Trustee in writing and pursuant to Section 3.01(f)
and to the Noteholders within 10 days following the Asset Sale Offer Trigger
Date, and shall comply with the procedures reasonably determined by the Company.
An Asset Sale Offer shall remain open for a period of 20 Business Days or such
longer period as may be required by Applicable Law. Upon expiration of such
Asset Sale Offer, the Company shall promptly purchase for Cash the 1997 Notes
delivered for purchase at a purchase price equal to 100% of the outstanding
principal amount thereof, plus accrued and unpaid interest thereon, if any. To
the extent Holders properly tender 1997 Notes in an amount exceeding the Asset
Sale Offer Amount, the Trustee shall select the 1997 Notes to be redeemed on a
pro rata basis or by lot, subject to compliance with the requirements of any
national securities exchange on which the 1997 Notes are then listed.
Notwithstanding the foregoing, if an Asset Sale Offer Amount is less than $5.0
million, the application of the Net Cash Proceeds constituting such Asset Sale
Offer Amount to an Asset Sale Offer may be deferred until such time as such
Asset Sale Offer Amount plus the aggregate amount of all Asset Sale Offer
Amounts arising subsequent to the Asset Sale Offer Trigger Date relating to such
initial Asset Sale Offer Amount from all
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Asset Sales by the Company and its Subsidiaries aggregate at least $5.0 million
at which time the Company or said Subsidiary shall apply all Net Cash Proceeds
constituting all Asset Sale Offer Amounts that have been so deferred to make an
Asset Sale Offer (the first date the aggregate of all such deferred Asset Sale
Offer Amounts is equal to $5.0 million or more shall be deemed to be an Asset
Sale Offer Trigger Date). Pending application to an Asset Sale Offer the Company
shall invest such Asset Sale Offer Amounts in Permitted Investments.
(d) Upon receiving notice of a Purchase Offer under this
Section 3.01, Holders may elect to tender their 1997 Notes in whole or in part
in integral multiples of $1,000 in exchange for Cash. Tenders by Holders will be
revocable until 4 P.M., New York City time, on the Business Day immediately
preceding the applicable payment date. For purposes of any Purchase Offer, the
Company will not act as paying agent.
(e) If the last day of the applicable Purchase Offer period
(the "Purchase Date") is on or after an interest payment record date and on or
before the related interest payment date, any accrued interest will be paid to
the Person in whose name a 1997 Note is registered at the close of business on
such record date.
(f) The Company (with written notice to the Trustee) or the
Trustee (at the expense and written direction of the Company) shall send, by
first class mail, a notice to each of the Noteholders, which shall govern the
terms of the Purchase Offer and shall state:
(i) that the Purchase Offer is being made pursuant to this
Section 3.01 and, as applicable, Section 4.11 or 4.19 hereof and the
length of the Change in Control Offer or Asset Sale Offer, as
applicable;
(ii) the amount of 1997 Notes to be purchased pursuant to the
applicable Purchase Offer (the "Offer Amount"), the price at which the
1997 Notes will be purchased pursuant to the applicable Purchase Offer
(the "Purchase Price") and the Purchase Date and (A) in the case of a
Purchase Offer made pursuant to Section 4.19 hereof, the amount of the
remaining Net Cash Proceeds resulting from the Asset Sale, and (B) in
the case of a Purchase Offer made pursuant to Section 4.11 hereof, that
all 1997 Notes tendered will be accepted for payment;
(iii) that any 1997 Note not tendered or accepted for payment
will continue to accrue interest;
(iv) that any 1997 Note accepted for payment pursuant to the
Purchase Offer shall cease to accrue interest after the Purchase Date;
(v) that Noteholders electing to have a 1997 Note purchased
pursuant to any Purchase Offer will be required to surrender the 1997
Note, with the form entitled "Option of Noteholder to Elect Purchase"
on the reverse of the 1997 Note completed, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the
address specified in the notice;
(vi) that Noteholders will be entitled to withdraw their
election if the Company, depositary or Paying Agent, as the case may
be, receives, not later than the expiration of the Change in Control
Offer or Asset Sale Offer, as applicable, or such longer period as may
be required by applicable law, a letter or a telegram, telex, facsimile
transmission (promptly
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followed by a letter) setting forth the name of the Noteholder, the
principal amount of the 1997 Note the Noteholder delivered for purchase
and a statement that such Noteholder is withdrawing such Noteholder's
election to have the 1997 Note purchased; and
(vii) that Noteholders whose 1997 Notes are purchased only in
part will be issued new 1997 Notes equal in principal amount to the
unpurchased portion of the 1997 Notes surrendered.
(g) At least one Business Day prior to the Purchase Date, the
Company shall irrevocably deposit with the Trustee or a Paying Agent in
immediately available funds an amount equal to the aggregate Purchase Price of
the 1997 Notes to be purchased pursuant to the Purchase Offer, to be held for
payment in accordance with this Section 3.01; provided that such funds shall be
invested in Permitted Investments for the benefit of the Company until the
Purchase Date. On the Purchase Date, the Company shall, to the extent lawful,
(i) accept for payment 1997 Notes or portions thereof validly tendered pursuant
to the Purchase Offer, up to the Offer Amount, (ii) deliver or cause the
Depositary or Paying Agent to deliver to the Trustee Notes so accepted and (iii)
deliver to the Trustee an Officers' Certificate stating such 1997 Note or
portions thereof have been accepted for payment by the Company in accordance
with the terms of this Section 3.01. The Paying Agent or the Trustee, as the
case may be, shall promptly (but in any case not later than ten days after the
Purchase Date) mail or deliver to each tendering Noteholder an amount equal to
the Purchase Price of the 1997 Notes tendered by such Noteholder and accepted by
the Company for purchase, and the Trustee shall promptly authenticate and mail
or deliver to such Noteholders a new 1997 Note equal in principal amount to any
unpurchased portion of the 1997 Note surrendered. Any 1997 Notes not so accepted
shall be promptly mailed or delivered by or on behalf of the Company to the
Holder thereof. The Company shall publicly announce in a newspaper of general
circulation the results of the Purchase Offer on the Purchase Date.
(h) The Purchase Offer shall be made by the Company in
compliance with all tender offer rules, including but not limited to, Section
14(e) under the Exchange Act and Rule 14e-1 thereunder, to the extent applicable
to such offer, and shall include all instructions and materials necessary to
enable Noteholders to tender their 1997 Note.
Section 3.02 Notices to Trustee.
If the Company elects to redeem the 1997 Notes pursuant to the
optional redemption provisions of paragraph 5 of the 1997 Notes, it shall notify
the Trustee in writing of the redemption date and the principal amount of the
1997 Notes to be redeemed at least 10 days prior to the date the notice required
pursuant to Section 3.04 was sent to Holders.
The Company shall give each notice provided for in this
Section not less than 40 nor more than 70 days before the scheduled redemption
date (unless a shorter notice period shall be satisfactory to the Trustee);
provided, however, that the Trustee shall have no liability to any Holder if it
deems such shorter notice period satisfactory to it in its sole discretion and
without consideration of the benefit of any Holder.
Section 3.03 Selection of 1997 Notes to Be Redeemed.
Except as provided below, if less than all of the 1997 Notes
are to be redeemed, the Trustee shall select the 1997 Notes or portions thereof
to be redeemed on a pro rata basis or by lot among
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the Holders of the 1997 Notes in accordance with a method the Trustee considers
fair and appropriate (in such manner as complies with applicable legal and stock
exchange requirements, if any).
The amount of 1997 Notes shall be calculated as the aggregate
principal amount of 1997 Notes originally issued under this Indenture less the
aggregate principal amount of any 1997 Notes previously redeemed or tendered
pursuant to Section 3.01. The Trustee shall make the selection not more than 60
days and not less than 30 days before the redemption date from outstanding 1997
Notes not previously called for redemption or tendered pursuant to Section 3.01.
The Trustee shall promptly notify the Company of the 1997
Notes or portions of 1997 Notes to be called for redemption. The Trustee may
select for redemption portions of the principal amount of 1997 Notes that have
denominations of $1,000 or larger. 1997 Notes and portions of them the Trustee
selects shall be in amounts of $1,000 or integral multiples of $1,000.
Provisions of this Indenture that apply to 1997 Notes called for redemption also
apply to portions of 1997 Notes called for redemption.
Section 3.04 Notice of Redemption.
At least 30 days but not more than 60 days before a redemption
date, the Company shall mail by first class mail, postage prepaid a notice of
redemption to each Holder whose 1997 Notes are to be redeemed at its address of
record; provided that the Company shall notify the Trustee in writing of any
such redemption date not less than 40 days prior to such redemption date.
The notice shall identify the 1997 Notes to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price;
(3) if any 1997 Notes are being redeemed in part, the
portion of the principal amount of such 1997 Note to be redeemed and
that, after the redemption date, upon surrender of such 1997 Note, a
new 1997 Note or 1997 Notes in principal amount equal to the unredeemed
portion will be issued;
(4) the name and address of the Paying Agent;
(5) that 1997 Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price plus
accrued interest;
(6) that, unless the Company defaults in making the
redemption payment, interest on 1997 Notes called for redemption ceases
to accrue on and after the redemption date, and that if 1997 Notes are
redeemed on or after an interest record date but on or prior to the
related interest payment date, then any accrued and unpaid interest
shall be paid to the Person in whose name such 1997 Notes were
registered at the close of business on such record date; and
(7) the paragraph of the 1997 Notes pursuant to which
the 1997 Notes called for redemption are being redeemed.
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At the Company's written request, the Trustee shall give the
notice of redemption in the Company's name and at its expense.
Section 3.05 Effect of Notice of Redemption.
Once notice of redemption is mailed, 1997 Notes called for
redemption become due and payable on the redemption date at the price set forth
in the 1997 Notes. Unless the Company defaults in making the redemption payment,
on and after the redemption date, interest shall cease to accrue on the 1997
Notes or the portions of 1997 Notes called for redemption. If a 1997 Note is
redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest shall be paid to the
person in whose name such 1997 Note was registered at the close of business on
such record date. If any 1997 Notes called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the redemption date at the rate borne by
the 1997 Notes.
Section 3.06 Deposit of Redemption Price.
No later than one Business Day prior to the redemption date,
the Company shall deposit with the Trustee or with the Paying Agent immediately
available funds sufficient to pay the redemption price of and accrued interest
on all 1997 Notes to be redeemed on that date; provided that such funds shall be
invested for the benefit of the Company in Permitted Investments until the
redemption date. The Trustee or the Paying Agent shall promptly return to the
Company any money not required for that purpose.
Section 3.07 1997 Notes Redeemed in Part.
Upon surrender of a 1997 Note that is redeemed in part, the
Company shall issue and the Trustee shall authenticate for the Holder at the
expense of the Company a new 1997 Note equal in principal amount to the
unredeemed portion of the 1997 Note surrendered.
ARTICLE 4
COVENANTS OF THE COMPANY
Section 4.01 Payment of 1997 Notes.
The Company shall pay the principal of and premium, if any,
and interest on the 1997 Notes on the dates and in the manner provided in this
Indenture and the 1997 Notes. Principal, premium and interest shall be
considered paid on the date due if the Trustee or Paying Agent (other than the
Company or a subsidiary) holds on that date money designated for and sufficient
to pay all principal, premium, if any, and interest then due. To the extent
lawful, the Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on (i) overdue principal, at the rate borne
by the 1997 Notes, compounded semiannually, and (ii) overdue installments of
interest (without regard to any applicable grace period) at the Default Rate.
Notwithstanding the foregoing, at no time shall the maximum aggregate interest
rate borne by the 1997 Notes exceed the lesser of (a) the initial interest rate
payable on the 1997 Notes plus 2.50% per annum and (b) the maximum amount
permitted under applicable usury laws. The interest rate borne by the 1997 Notes
shall be reduced by the amount
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of any additional interest pursuant to paragraph 1 of the 1997 Notes on and
after the date, if any, on which the Company satisfies its obligations with
respect to the Exchange Offer and/or the Shelf Registration Statement.
Section 4.02 SEC Reports.
(a) The Company shall deliver to the Trustee, and to the
Holders, within 15 days after it files them with the SEC, copies of the annual
and quarterly reports and of the information, documents, and other reports (or
copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) that the Company is required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act, provided that the Company
shall not be required to deliver to the Trustee more than one set of any
exhibits to any of the foregoing and the Trustee shall not be required to
deliver copies of any such exhibits to the Holders. The Company shall timely
comply with its reporting and filing obligations under the applicable federal
securities laws.
(b) To the extent that the Company is not subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall file with the SEC and provide to the Trustee, and to the Holders, such
annual and quarterly reports and such information, documents and other reports
(or copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) as are specified in Sections 13 and 15(d) of the Exchange
Act, provided that the Company shall not be required to deliver to the Trustee
more than one set of any exhibits to any of the foregoing and the Trustee shall
not be required to deliver copies of any such exhibits to the Holders. The
Company shall also make such reports available to prospective purchasers of the
1997 Notes, securities analysts and broker-dealers upon their request. In
addition, the Company shall furnish to Holders of the 1997 Notes and prospective
purchasers of the 1997 Notes designated by the Initial Purchaser, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act until such time as the Company either exchanges Private
Placement Notes for a like principal amount of Exchange Notes or has registered
the 1997 Notes for resale under the Securities Act pursuant to the Shelf
Registration (as defined in the Registration Rights Agreement) and such Shelf
Registration has remained effective for a period of three years. Upon the
effectiveness of any registration statement called for by the Registration
Rights Agreement and thereafter so long as the 1997 Notes are outstanding, the
Company shall not file with the SEC a Form 15 or take any other action to
terminate the registration of the 1997 Notes under the Exchange Act or suspend
the Company's duty to file reports under Section 13 or 15(d) of the Exchange
Act.
(c) The Company also shall comply with the other provisions of
TIA Section 314(a).
Section 4.03 Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year of the Company, an Officers' Certificate
stating that a review of the activities of the Company and the Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether the Company has fully
performed its obligations under this Indenture, and further stating, as to each
such Officer signing such certificate, that to the best of his or her knowledge
the Company has kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and is not in default in the performance or
observance of any of the terms and conditions hereof (or, if a Default or Event
of Default shall have occurred, describing all such Defaults or
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Events of Default of which he or she may have knowledge and whatever action the
Company is taking or plans to take to cure all such Defaults or Events of
Default).
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, at
the time the Officers' Certificate required by Section 4.03(a) is delivered, the
Company shall cause to be delivered to the Trustee a letter or statement of the
Company's independent accountants who shall have certified the financial
statements of the Company for its preceding fiscal year in connection with the
annual report of the Company to its stockholders for such year to the effect
that, in making the examination necessary for certification of such financial
statements, nothing came to their attention that caused them to believe that the
Company was not in compliance with any of the terms or conditions contained in
Sections 4.01, 4.05, 4.07, 4.12, 4.14, 4.15, 4.16 and 4.19 and Article 5 of this
Indenture, which Default remains uncured at the date of such letter or statement
or, if they shall have obtained knowledge of any such uncured Default,
specifying in such letter or statement such Default or Defaults and the nature
thereof, it being understood that such accountants shall not be liable directly
or indirectly for failure to obtain knowledge of any such Default or Defaults
and that their examination was not directed primarily toward obtaining knowledge
of such noncompliance.
(c) The Company shall, so long as any of the 1997 Notes are
outstanding, deliver to the Trustee forthwith upon any officer of the Company
becoming aware of (i) any Default, Event of Default or default in the
performance of any term or condition in this Indenture or (ii) any event of
default under any other Indebtedness as such term is used in Section 6.01(f), an
Officers' Certificate specifying such Default, Event of Default or default.
Section 4.04 Maintenance of Office or Agency.
(a) The Company shall maintain or cause to be maintained the
office or agency required by Section 2.03. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office and agency not maintained by or with the Trustee. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 10.10.
(b) The Company may also from time to time designate one or
more other offices or agencies where the 1997 Notes may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designation; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain or cause to be
maintained an office or agency in the City of New York for such purpose to the
extent required by any applicable law, regulation or rule. The Company will give
prompt written notice to the Trustee of such rescission or designation.
Section 4.05 Limitations on Restricted Payments and Investments.
(a) The Company will not, and will not permit or cause any of
the Subsidiaries (other than any Unrestricted Subsidiary), directly or
indirectly, to, make any Restricted Payment or Investment after the Issue Date
unless, at the time of such proposed Restricted Payment or Investment, and on a
pro forma basis immediately after giving effect thereto:
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(A) no Default or Event of Default shall have occurred
and be continuing or shall occur as a consequence thereof;
(B) the aggregate amount expended for all Restricted Payments
and Investments, without duplication, subsequent to June 30, 1997 would
not exceed the sum of:
(1) 50% of the aggregate Consolidated Net Income of
the Company (or if such Consolidated Net Income is a loss,
minus 100% of such loss) earned on a cumulative basis during
the period beginning on June 30, 1997 and ending on the last
date of the Company's fiscal quarter immediately preceding
such proposed Restricted Payment or Investment; plus
(2) 100% of the aggregate Net Equity Proceeds
received by the Company from any Person (other than a
Subsidiary) from the issuance and sale subsequent to June 30,
1997 of Qualified Capital Stock (excluding (x) any Qualified
Capital Stock paid as a dividend on any Capital Stock of the
Company or of any Subsidiary or as interest on any
Indebtedness of the Company or of any Subsidiary, (y) the
issuance of Qualified Capital Stock upon the conversion of, or
in exchange for, any Capital Stock of the Company or of any
Subsidiary and (z) any Qualified Capital Stock of the Company
with respect to which the purchase price thereof has been
financed directly or indirectly using funds (i) borrowed from
the Company or any Subsidiary, unless and until and to the
extent such borrowing is repaid, or (ii) contributed,
extended, guaranteed or advanced by the Company or any
Subsidiary (including, without limitation, in respect of any
employee stock ownership or benefit plan)); plus
(3) $5.0 million; and
(C) the Company shall be able to incur (assuming a market rate
of interest with respect thereto) at least $1.00 of additional
Indebtedness under Section 4.12(a).
(b) Section 4.05(a) shall not prevent (a) the payment of any
dividend within 60 days after the date of its declaration if at such date of
declaration the payment of such dividend would comply with the provisions set
forth above, provided that such dividend will be deemed to have been paid as of
its date of declaration for the purposes of this Section 4.05, (b) if no Default
or Event of Default shall have occurred and be continuing or would occur as a
consequence thereof, the purchase, redemption, retirement or acquisition of any
shares of Capital Stock of the Company or of any Subsidiary or any Indebtedness
of the Company that is pari passu with or subordinated to the 1997 Notes solely
with or out of the net cash proceeds of the substantially concurrent sale (other
than to a Subsidiary or by a Subsidiary to one of its subsidiaries) of shares of
Qualified Capital Stock of the Company or of a Subsidiary and neither such
purchase, redemption, retirement or acquisition nor the proceeds of any such
sale will be included in any computation made under clause (B)(2) above, (c)
payments pursuant to usual and customary indemnification arrangements for
directors and officers of the Company, any Subsidiary, Santee LLC or Santee, (d)
payment to Craig of up to $69,365,000 plus accrued and unpaid dividends from the
proceeds of the sale of the 1997 Notes to repurchase the outstanding Series B
Preferred Stock, (e) the making of Permitted Investments, (f) the making of
Investments in any Subsidiary (other than an Unrestricted Subsidiary) (including
any Person who becomes a Subsidiary as a result of any Investment, other than an
Unrestricted Subsidiary) by the Company or any other Subsidiary, provided that
any Indebtedness evidencing such Investment is not subordinated to any
Indebtedness or other obligation of
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such Subsidiary, (g) the making of Investments in the Company by any Subsidiary,
provided that any Indebtedness evidencing such Investment is subordinated and
junior to the 1997 Notes), (h) the making of Investments of the type described
in Section 4.19(b)(i), (ii) and (iii), (i) the making of Investments in any
Person, provided that the consideration paid by the Company or a Subsidiary for
such Investment consists solely of Qualified Capital Stock, (j) payment to Texas
Eastern of dividends on the Markets Preferred Stock as in effect on the Issue
Date, (k) the making of Investments in Santee LLC of up to $25.0 million; (l)
the making of Investments in Santee LLC for the purpose of purchasing additional
limited liability company interests in Santee LLC with the proceeds of a
Qualified La Cadena Investment, (m) the payment to La Cadena of an amount equal
to the lesser of the amount of (i) the sum of (X) any Qualified La Cadena
Investment, plus (Y) an amount equal to a commercially reasonable rate of
interest on such Qualified La Cadena Investment to the extent that the net
proceeds received by Stater Bros. Markets from the sale or disposition of that
portion of the State Bros. Markets' interest in Santee LLC which was acquired
with the proceeds from such Qualified La Cadena Investment exceeds the original
amount of the Qualified La Cadena Investment; and (ii) net proceeds received by
Stater Bros. Markets from the sale or disposition of that portion of Stater
Bros. Markets' interest in Santee LLC which was acquired with the proceeds from
such Qualified La Cadena Investment and (n) the payment of a financial advisory
fee of up to $2.0 million to La Cadena substantially contemporaneously with the
effective date of the 1997 amendments to the indenture governing the 1994 Notes;
provided that in each such case of clauses (f) through (j) above, no Default or
Event of Default has occurred and is continuing or would result therefrom. The
amounts expended or received, as applicable, pursuant to clause (a) will be
included, and clauses (b) through (n) will be excluded, in computing the amounts
available for Restricted Payments and Investments for purposes of the
immediately preceding paragraph.
(c) For purposes of this Section 4.05, a distribution to
holders of the Company's Capital Stock of (i) shares of Capital Stock of any
Subsidiary or (ii) other assets of the Company, without, in either case, the
receipt of equivalent consideration therefor shall be deemed to be the
equivalent of a cash dividend equal to the excess of the Fair Market Value of
the shares or other assets being so distributed at the time of such distribution
over the consideration, if any, received therefor.
Section 4.06 Continued Existence.
Subject to Article 5, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect its existence
as a corporation and will refrain from taking any action that would cause its
existence as a corporation to cease, including without limitation any action
that would result in its liquidation, winding up or dissolution.
Section 4.07 Taxes.
The Company shall, and shall cause each Subsidiary to, pay
prior to delinquency all taxes, assessments and governmental levies, except as
contested in good faith and by appropriate proceedings or where the failure to
do so would not have a material adverse effect on the Company and the
Subsidiaries, taken as a whole.
Section 4.08 Maintenance of Properties.
The Company shall, and shall cause each of the Subsidiaries
to, take reasonable action to maintain in appropriate condition each of its
principal properties that in the judgment of management is significant to the
business operations of the Company and the Subsidiaries, taken as a whole, and
the loss
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of which would have a material adverse effect on the financial condition of the
Company and the Subsidiaries, taken as a whole.
Section 4.09 Insurance.
From and at all times after the Issue Date, the Company and
its Subsidiaries will have in effect customary insurance for general liabilities
and other risks on terms and in amounts as are customarily carried by similar
businesses and reasonably sufficient to avoid a material adverse change in the
financial condition or results of operation of the Company and its Subsidiaries
taken as a whole. The Company shall provide to the Trustee a summary of all
insurance coverage prepared by the Company's insurance broker, which expressly
states the expiration date for such coverage and which shall appear as an
exhibit to the Officer's Certificate delivered to the Trustee pursuant to
Section 4.03(a).
Section 4.10 Investment Company Act.
Neither the Company nor any Subsidiary shall become an
investment company subject to registration under the Investment Company Act of
1940, as amended.
Section 4.11 Change of Control.
Upon the occurrence of a Change of Control (the date of each
such occurrence being the "Change of Control Date"), the Company will promptly
notify the Trustee and the Holders in writing of such occurrence and will make
an offer to purchase (the "Change of Control Offer"), on a Business Day (the
"Change of Control Payment Date") not later than 45 days following the date
notification of the Change of Control is first given to the Holders, all 1997
Notes then outstanding at a purchase price equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
such Change of Control Payment Date (subject to the right of Holders of record
on the relevant Interest Record Date to receive interest due on the relevant
Interest Payment Date). Notice of a Change of Control will be mailed by the
Company to the Trustee not more than 20 days after any Change of Control Date
and to the Holders not more than 30 days after any Change of Control Date. The
Change of Control Offer is required to remain open for not less than 30 days,
nor more than 45 days, and until the close of business on any such Change of
Control Payment Date. Failure to make, maintain or complete a Change of Control
Offer as required under the terms of this Indenture and the 1997 Notes will
constitute an Event of Default.
Section 4.12 Limitation on Indebtedness.
(a) The Company will not, and will not permit any of its
Subsidiaries (other than any Unrestricted Subsidiary), directly or indirectly,
to incur any Indebtedness, provided that if no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness, the Company may incur Indebtedness if, on the
date of the incurrence of such Indebtedness after giving pro forma effect to the
incurrence of such Indebtedness, the Consolidated Fixed Charge Coverage Ratio of
the Company is at least 2.0 to 1.
(b) The limitations set forth in Section 4.12(a) shall not
apply to: (i) Indebtedness under a revolving credit facility or any replacement
facility thereof, provided that Indebtedness under such credit facility or any
replacement facility, including unused commitments, shall not at any time exceed
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$50.0 million in aggregate outstanding principal amount; (ii) Indebtedness of
the Company and its Subsidiaries existing on the Issue Date; (iii) Indebtedness
of the Company represented by the 1994 Notes and the 1997 Notes; (iv)
Indebtedness of the Company and its Subsidiaries incurred in exchange for or the
net proceeds of which are used to extend, refinance, renew, replace, substitute
or refund ("Refinance") Indebtedness referred to in clauses (i), (ii) and (iii)
above and (ix) below (the "Refinancing Indebtedness") plus any penalties, fees
or premiums incurred in connection therewith, provided that (A) the principal
amount of such Refinancing Indebtedness shall not exceed the principal amount of
the Indebtedness (including unused commitments) so Refinanced (the "Existing
Debt") as of the date of the proposed incurrence of the Refinancing
Indebtedness, (B) such Refinancing Indebtedness shall have an Average Life equal
to or greater than the Average Life of the Existing Debt, (C) if the Existing
Debt (including the 1997 Notes) being Refinanced is pari passu with or
subordinated to the 1997 Notes then such Refinancing Indebtedness shall be pari
passu with or at least as subordinated to, as the case may be, the 1997 Notes,
(D) the Refinancing Indebtedness has a stated maturity date no earlier than the
Existing Debt as of the date of such proposed Refinancing and (E) if the
Existing Debt is Indebtedness solely of the Company, such Refinancing
Indebtedness will only be permitted if it is Indebtedness solely of the Company;
(v) Permitted Construction Indebtedness incurred after March 8, 1994 not to
exceed $10.0 million in the aggregate at any time outstanding and designated as
Permitted Construction Indebtedness subject to this clause (v) in an Officer's
Certificate delivered to the Trustee; (vi) Indebtedness of the Company to a
Wholly Owned Subsidiary of the Company or by a Wholly Owned Subsidiary of the
Company to the Company or between Wholly Owned Subsidiaries of the Company;
(vii) Indebtedness under Interest Rate Protection Agreements entered into in the
ordinary course of business; (viii) Indebtedness arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from guarantees of letters of credit, surety bonds or
performance bonds securing any obligations of the Company pursuant to such
agreements, incurred or assumed in connection with the disposition of any
business, assets or Subsidiary of the Company, other than guarantees or similar
credit support by the Company of Indebtedness incurred by any Person acquiring
all or any portion of such business, assets or Subsidiary for the purpose of
financing such acquisition, provided that the maximum aggregate liability in
respect of all such Indebtedness described in this clause shall not exceed the
net proceeds actually received in connection with any such disposition; and (ix)
Indebtedness to secure workers' compensation and other insurance coverages, not
to exceed the minimum amount required by the Company's insurance carriers or
other applicable regulatory agencies; and (x) Indebtedness to La Cadena incurred
by the Company in connection with a Qualified La Cadena Investment; provided,
however, that the repayment of principal with respect to, and the payment of
interest with respect to, any such Qualified La Cadena Investment constituting
Indebtedness shall be subject to Section 4.05 hereof.
Section 4.13 Limitations on Liens.
The Company will not, and will not permit any of its
Subsidiaries (other than any Unrestricted Subsidiary) to, create, incur, assume
or suffer to exist any Liens securing Indebtedness, except for (a) any Liens
which may be granted to secure the 1997 Notes; (b) Liens securing Senior
Indebtedness or Indebtedness that is incurred pursuant to clause (i) of Section
4.12(b); (c) Liens securing Indebtedness that is incurred in accordance with
this Indenture and that is pari passu with the 1997 Notes; provided that the
1997 Notes are secured on an equal and ratable basis to such Liens; (d) Liens
securing Indebtedness incurred in accordance with this Indenture and that is
subordinated to the 1997 Notes; provided that the 1997 Notes are secured by
Liens ranking prior to such Liens; (e) Liens in respect of Refinancing
Indebtedness; provided that the terms of such Liens in respect of such
Refinancing Indebtedness are not less favorable to the Holders than terms of the
Liens securing the Existing Debt being Refinanced and do not extend to or cover
any property or assets of the Company or
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of any of the Subsidiaries not securing such Existing Debt; (f) Liens in respect
of Acquired Indebtedness permitted to be incurred in accordance with this
Indenture; provided that such Liens in respect of such Acquired Indebtedness do
not extend to or cover any property or assets of the Company or any Subsidiary
other than the property or assets that secured the Acquired Indebtedness prior
to the time such Indebtedness became Acquired Indebtedness of the Company or
such Subsidiary; (g) Liens securing Indebtedness of the Company or a Subsidiary,
which Indebtedness shall not exceed $15.0 million; and (h) Permitted Liens.
Section 4.14 Limitation on Payment Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any of its
Subsidiaries (other than any Unrestricted Subsidiary), directly or indirectly,
to create or suffer to exist or allow to become effective any encumbrance or
restriction of any kind (i) on the ability of any Subsidiary (other than any
Unrestricted Subsidiary) to (a) pay dividends, in cash or otherwise, or make
other payments or distributions on its Capital Stock or any other equity
interest or participation in, or measured by, its profits, owned by the Company
or any Subsidiary or any of their respective subsidiaries, or make payments on
any Indebtedness owed to the Company or any Subsidiary or any of their
respective subsidiaries, (b) make loans or advances to the Company or any of its
Subsidiaries, (c) transfer any of their respective property to the Company or
any of its Subsidiaries or (ii) on the ability of the Company or any of its
Subsidiaries (other than an Unrestricted Subsidiary) to receive or retain any
such (x) dividends, payments or distributions, (y) loans or advances or (z)
transfer of property (any such restriction being referred to herein as a
"Payment Restriction"), except for such encumbrances or restrictions existing
under or by reason of (A) agreements in effect as of the Issue Date, (B)
applicable laws, (C) this Indenture or the indenture governing the 1994 Notes,
(D) customary provisions restricting subletting or assignment of any lease
governing a leasehold interest of the Company or any of the Subsidiaries, (E)
Acquired Indebtedness incurred in accordance with this Indenture, provided that
such encumbrance or restriction in respect of such Acquired Indebtedness is not
applicable to any Person, or the property of any Person, other than the Person,
or the property of the Person, so acquired whether or not such Acquired
Indebtedness was incurred in connection with or anticipation of such
acquisition, (F) the Revolving Credit Facility or (G) any agreement effecting a
renewal, refunding, refinancing or extension of Indebtedness referred to in
clause (A), (E) or (F) above, provided that the provisions contained in such
renewal, refunding, refinancing or extension relating to such encumbrance or
restriction are no more restrictive in any material respect than the provisions
contained in the agreement that is the subject thereof.
Section 4.15 Limitation on Issuance and Sale of Capital Stock of
Subsidiaries.
The Company will not permit any Subsidiary (other than any
Unrestricted Subsidiary) to issue any shares of its Capital Stock to any Person
other than the Company or one or more of its Wholly Owned Subsidiaries (other
than any Unrestricted Subsidiary) nor will the Company permit any Person (other
than the Company or one or more of its Wholly Owned Subsidiaries) (other than
any Unrestricted Subsidiary) to own or hold any such Capital Stock, other than
the Markets Preferred Stock held by Texas Eastern Corporation as of the Issue
Date. The Company will not and will not permit any Subsidiary (other than any
Unrestricted Subsidiary) to transfer, sell or otherwise dispose of any Capital
Stock of any Subsidiary to any Person (other than to the Company or a Wholly
Owned Subsidiary that is not an Unrestricted Subsidiary) unless (i) such
transfer, sale or other disposition is of all the Capital Stock of such
Subsidiary owned by the Company or any Subsidiary and (ii) the Net Cash Proceeds
from such transfer, sale or other disposition are applied in accordance with
Section 4.19.
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Section 4.16 Limitations on Transactions with Related Persons.
The Company will not, nor will it permit any of its
Subsidiaries (other than an Unrestricted Subsidiary) to (a) sell, lease,
transfer or otherwise dispose of any of its property to, (b) purchase any
property from, (c) make any Investment in or (d) enter into or amend any
contract, agreement or understanding with or for the benefit of, a Related
Person of the Company or any Subsidiary (other than the Company or any such
Subsidiary (other than any Unrestricted Subsidiary) in which no Related Person
(other than the Company or a Wholly Owned Subsidiary (other than any
Unrestricted Subsidiary) of the Company) owns, directly or indirectly, an equity
interest) (each a "Related Person Transaction"), other than Related Person
Transactions that are on terms (which terms are in writing) that are fair and
reasonable to the Company or the Subsidiary and that are no less favorable to
the Company or such Subsidiary than those that could be obtained in a comparable
arm's length transaction by the Company or such Subsidiary from an unrelated
party as determined reasonably and in good faith by the Board of Directors of
the Company, provided that if the Company or any Subsidiary enters into a
Related Person Transaction or series of Related Person Transactions involving or
having an aggregate value of more than $1.0 million such Related Person
Transaction shall, prior to the consummation thereof, have been approved by a
majority of the independent directors of the Company. The restrictions of this
Section 4.16 shall not apply to (a) any transactions between Wholly Owned
Subsidiaries (other than any Unrestricted Subsidiary) of the Company, or between
the Company and any Wholly Owned Subsidiary (other than any Unrestricted
Subsidiary) of the Company, if such transaction is not otherwise prohibited by
this Indenture, (b) any payments or purchases permitted by Section 4.05, (c) any
reasonable and customary regular fees to directors of the Company, (d) any
transactions contemplated by the Santee Documents; provided that such
transactions are not otherwise prohibited by this Indenture and (e) payment of a
financial advisory fee of up to $2.0 million to La Cadena substantially
contemporaneously with the effective date of the 1997 amendments to the
indenture governing the 1994 Notes.
Section 4.17 Compliance With Laws.
The Company shall comply, and shall cause each of the
Subsidiaries to comply, in all material respects with all Applicable Laws except
to the extent any such Applicable Law is contested in good faith by appropriate
proceedings and adequate reserves have been established as required by GAAP.
Section 4.18 Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not, and shall cause the Subsidiaries not to, at any time
insist upon, plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or waiver law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of or premium, if any, or interest on the 1997 Notes as contemplated
herein, wherever in force, now or at any time hereafter in force, or that may
materially affect the covenants or the performance of this Indenture or the 1997
Notes in a manner inconsistent with the provisions hereof or thereof and (to the
extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it shall not, and shall
cause the Subsidiaries not to, hinder, delay or impede the execution of any
power granted to the Trustee under this Indenture or the 1997 Notes, but will
suffer and permit the execution of every such power as though no such law
existed.
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Section 4.19 Limitation on Sales of Assets.
(a) The Company will not, and will not permit any of its
Subsidiaries (other than any Unrestricted Subsidiary) to, consummate any Asset
Sale (other than a Qualified Santee LLC Interest Sale) unless (i) such Asset
Sale is for at least Fair Market Value and (ii) at least 85% of the
consideration therefrom received by the Company or such Subsidiary is in the
form of Cash or Cash Equivalents, provided that for purposes of this Section
4.19 Cash shall mean U.S. dollars or such money as is freely convertible into
U.S. dollars, provided further that any non-Cash consideration that becomes Net
Cash Proceeds will thereafter be subject to the provisions of Section 4.19(b)
and provided further that any sale by Stater Bros. Markets of its interest in
Santee LLC pursuant to the terms of the limited liability company agreement
governing Santee LLC shall not be deemed to be an Asset Sale for purposes of
this Section 4.19. Compliance by the Company with clause (i) of the preceding
sentence shall be evidenced by (x) an Officers' Certificate if the Net Cash
Proceeds resulting from such Asset Sale are less than or equal to $1.0 million
(y) subject to clause (z) below, a resolution of the Board of Directors, which
shall be approved by at least a majority of the independent directors of the
Company, if the Net Cash Proceeds resulting from such Asset Sale exceed $1.0
million or (z) an Officer's Certificate if such Asset Sale involves the sale of
property in a shopping center developed or held for resale by the Company or in
connection with a sale-leaseback transaction for a newly constructed or
remodeled supermarket and the Net Cash Proceeds resulting from such Asset Sale
are less than or equal to $10.0 million.
(b) Upon the date of consummation of any Asset Sale which,
taken individually or together with all Asset Sales since the Issue Date,
results in the receipt of Net Cash Proceeds in excess of $5.0 million, such Net
Cash Proceeds and all Net Cash Proceeds from all Asset Sales consummated
concurrently therewith or consummated thereafter (such first consummation date
and each such date thereafter a "Consummation Date") shall be applied by the
Company within 18 months of the relevant Consummation Date (or, in the event of
a Qualified Santee LLC Interest Sale, within 24 months of the relevant
Consummation Date) at its election to either: (i) investments in assets or
business in the same line of business as the Company or such Subsidiary; (ii)
the repayment of any Indebtedness which is secured by or incurred to construct
such assets; (iii) the repayment of Senior Indebtedness; or (iv) a combination
of payment and investment permitted by the foregoing clauses (i), (ii) and
(iii). On the earlier of the day after the 18 month period following a
Consummation Date (or in the event of a Qualified Santee LLC Interest Sale,
within 24 months of the relevant Consummation Date) or such date as the Board of
Directors of the Company or of such Subsidiary determines (as evidenced by a
resolution of the Board of Directors) not to apply the Net Cash Proceeds
relating to such Consummation Date as set forth in clauses (i), (ii) and (iii)
of the preceding sentence (each, an "Asset Sale Offer Trigger Date"), such
aggregate amount of Net Cash Proceeds which has not been applied on or before
such Asset Sale Offer Trigger Date as permitted in clauses (i), (ii) and (iii)
of the preceding sentence (each an "Asset Sale Offer Amount") shall be applied
by the Company or such Subsidiary to make an offer to purchase (the "Asset Sale
Offer") on a date (the "Asset Sale Offer Payment Date") not less than 30 nor
more than 60 days following the applicable Asset Sale Offer Trigger Date, from
all Holders on a pro rata basis, that amount of 1997 Notes equal to the Asset
Sale Offer Amount at a price equal to 100% of the aggregate principal amount of
the 1997 Notes to be repurchased, plus accrued and unpaid interest thereon, if
any, to the date of repurchase. Notwithstanding the foregoing, if an Asset Sale
Offer Amount is less than $5.0 million the application of the Net Cash Proceeds
constituting such Asset Sale Offer Amount to an Asset Sale Offer may be deferred
until such time as such Asset Sale Offer Amount plus the aggregate amount of all
Asset Sale Offer Amounts arising subsequent to the Asset Sale Offer Trigger Date
relating to such initial Asset Sale Offer Amount from all Asset Sales by the
Company and its Subsidiaries aggregate at least $5.0
million at which time the Company or said Subsidiary shall apply all Net Cash
Proceeds
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constituting all Asset Sale Offer Amounts that have been so deferred to make an
Asset Sale Offer (the first date the aggregate of all such deferred Asset Sale
Offer Amounts is equal to $5.0 million or more shall be deemed to be an Asset
Sale Offer Trigger Date). Pending application to an Asset Sale Offer the Company
shall invest such Asset Sale Offer Amounts in Permitted Investments.
Section 4.20 Further Assurance to the Trustee.
The Company shall, upon request of the Trustee, execute and
deliver such further instruments and do such further acts or provide such
further assurances as may reasonably be necessary or proper to carry out more
effectively the provisions of this Indenture and the 1997 Notes.
Section 4.21 Restriction on Layering Debt.
The Company shall not incur any Indebtedness that is
subordinate or junior in right of payment to Senior Indebtedness and senior in
any respect in right of payment to the 1997 Notes.
ARTICLE 5
SUCCESSORS
Section 5.01 Merger, Consolidation, Etc.
The Company will not, in a single transaction or series of
related transactions, consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets to, any Person or adopt a Plan of Liquidation unless: (i) either (1) the
Company shall be the surviving or continuing corporation or (2) the Person (if
other than the Company) formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance, transfer or lease the
properties and assets of the Company substantially as an entirety or in the case
of a Plan of Liquidation, the Person to which assets of the Company have been
transferred (x) shall be a corporation organized and validly existing under the
laws of the United States or any State thereof or the District of Columbia and
(y) shall expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee), executed and delivered to the Trustee, the due and
punctual payment of the principal of and premium, if any, and interest on all of
the 1997 Notes and the performance of every covenant of the 1997 Notes and this
Indenture on the part of the Company to be performed or observed; (ii)
immediately after giving effect to such transaction and the assumption
contemplated by clause (y) above (including giving effect to any Indebtedness
(including Acquired Indebtedness) incurred or anticipated to be incurred in
connection with or in respect of such transaction), the Company (in the case of
clause (1) of the foregoing clause (i)) or such Person (in the case of clause
(2) thereof) (a) shall have a Consolidated Net Worth (immediately after the
transaction but prior to any purchase accounting adjustments relating to such
transaction) equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction and (b) shall be permitted to incur
(assuming a market rate of interest with respect thereto) at least $1.00 of
additional Indebtedness under Section 4.12(a), provided that this clause (ii)
shall not apply if the purpose of such transaction is solely to change the
jurisdiction of incorporation of the Company; (iii) immediately before and after
giving effect to such transaction and the assumption contemplated by clause (y)
above (including giving effect to any Indebtedness (including Acquired
Indebtedness) incurred or anticipated to be incurred in connection with or in
respect of the transaction) no Default or Event of Default shall
have occurred or be continuing or
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shall occur as a consequence thereof; (iv) the Company or such Person shall have
delivered to the Trustee (A) an Officers' Certificate and an Opinion of Counsel
(which counsel shall not be in-house counsel of the Company), each stating that
such consolidation, merger, conveyance, transfer or lease or Plan of Liquidation
and, if a supplemental indenture is required in connection with such
transaction, such supplemental indenture, comply with this Section 5.01 and that
all conditions precedent relating to such transaction have been satisfied and
(B) a certificate from the Company's independent certified public accountants
stating that the Company has made the calculation required by clause (ii) above
in accordance with this Section 5.01; and (v) neither the Company nor such
Person, as the case may be, would thereupon become obligated with respect to any
Indebtedness (including Acquired Indebtedness), nor any of its property become
subject to any lien, unless the Company or such Person, as the case may be,
could incur such Indebtedness (including Acquired Indebtedness) or create such
lien under this Indenture (giving effect to such Person being bound by all the
terms of this Indenture).
Section 5.02 Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01, the Successor shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such Successor had been named as the
Company herein; provided, however, that the predecessor Company in the case of a
sale, lease, conveyance or other disposition shall not be released from the
obligation to pay the principal of and premium, if any, and interest on the 1997
Notes in accordance with the terms of the 1997 Notes and this Indenture.
Section 5.03 Purchase Offer on Change of Control.
This Article 5 shall not affect the obligations of the Company
under Sections 4.11 and 4.19 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.
The following are "Events of Default":
(a) default in the payment of principal of the 1997 Notes when
due at maturity, upon repurchase, upon acceleration or otherwise,
including, without limitation, failure of the Company to repurchase the
1997 Notes duly tendered for purchase following a Change of Control
Offer or an Asset Sale Offer;
(b) default in the payment of any installment of interest on
the 1997 Notes when due and continuance of such Default for more than 30 days;
(c) the Company or any Subsidiary (other than any Unrestricted
Subsidiary) fails to observe, perform or comply with any of the
provisions described under Sections 4.11 and 5.01.
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(d) default (other than a default set forth in clauses (a),
(b) and (c) above) in the performance, or breach, of any other covenant
or warranty of the Company in this Indenture or the 1997 Notes and
failure to remedy such default or breach within a period of 60 days
after written notice from the Trustee or the Holders of at least 25% in
aggregate principal amount of the then outstanding 1997 Notes;
(e) failure to pay at maturity or default on any other
Indebtedness, whether outstanding on the Issue Date or thereafter, of
the Company or any Subsidiary (other than any Unrestricted Subsidiary)
if either (x) such default results from the failure to pay principal
of, or premium, if any, or interest on, such Indebtedness when due in
excess of $5.0 million or (y) as a result of such default, the maturity
of such Indebtedness has been accelerated prior to its scheduled
maturity, and the principal amount of such Indebtedness, together with
the principal amount of any other such Indebtedness which has not been
paid at maturity or is in default, or the maturity of which has been so
accelerated, aggregates $5.0 million or more;
(f) the entry by a court of one or more judgments or orders
against the Company or any Subsidiary or any of their respective
properties in an aggregate amount in excess of $2.0 million and that
are not covered by insurance underwritten by third parties, which
judgments or orders have not been vacated, discharged, satisfied or
stayed pending appeal within 60 days from the entry thereof; or
(g) (i) the Company or any Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case for relief from
its creditors,
(B) consents to the entry of an order for relief
against it in an involuntary case for relief from its
creditors,
(C) consents to the appointment of a Custodian
of it or for all or substantially all of its property,
(D) makes a general assignment for the benefit
of its creditors, or
(E) admits in writing its inability generally to
pay its debts as the same become due; or
(ii) a court of competent jurisdiction enters a judgment,
order or decree under any Bankruptcy Law that:
(A) is for relief from its creditors in respect of
the Company or any Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any
Subsidiary or for all or substantially all of its property, or
(C) orders the liquidation of the Company or any
Subsidiary,
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and the order or decree remains unstayed and in effect for 60
days;
The term "Bankruptcy Law" means title 11 of the United States
Code or any similar federal or state Law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
The notice referred to in subsection (e) above must specify
the Default, demand that it be remedied and state that the notice is a "Notice
of Default."
Section 6.02 Acceleration.
(a) If an Event of Default (other than an Event of Default
specified in Section 6.01(g) above with respect to the Company) occurs and is
continuing, then and in every such case the Trustee or the Holders of not less
than 25% in aggregate principal amount of the then outstanding 1997 Notes may
declare the unpaid principal of and accrued and unpaid interest thereon, if any,
on all the 1997 Notes then outstanding to be due and payable, by a notice in
writing to the Company (and to the Trustee, if given by Holders) and upon such
declaration such principal amount, and accrued and unpaid interest thereon, if
any, will become immediately due and payable, notwithstanding anything contained
in this Indenture or the 1997 Notes to the contrary. If an Event of Default
specified in Section 6.01(g) above with respect to the Company occurs, all
unpaid principal of and accrued and unpaid interest thereon, if any, the 1997
Notes then outstanding will ipso facto become due and payable without any
declaration or other act on the part of the Trustee or any Holder. The Holders
of no less than a majority in aggregate principal amount of 1997 Notes are
authorized to rescind such acceleration if all existing Events of Default have
been cured or waived except for an Event of Default with respect to the
non-payment of the principal of and premium, if any, and interest on the 1997
Notes that have become due solely by such acceleration.
(b) Prior to the declaration of acceleration of the maturity
of the 1997 Notes, the holders of a majority in aggregate principal amount of
the 1997 Notes at the time outstanding may waive on behalf of all such holders
any default, except a default in the payment of principal of or interest on any
1997 Note not yet cured, or a default with respect to any covenant or provision
that cannot be modified or amended without the consent of the holder of each
outstanding 1997 Note affected.
(c) Upon an acceleration as provided in this Section 6.02, all
amounts owed by the Company to the Trustee or Holders, including the aggregate
principal of, and all premium and accrued and unpaid interest thereon, if any,
the 1997 Notes and any and all expenses, fees, or other amounts owing under this
Indenture shall bear interest at the then applicable rate of interest payable on
the 1997 Notes plus 2% per annum (the "Default Rate") until such amounts have
been paid or such acceleration has been rescinded pursuant to Section 6.02(a).
Section 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or premium, if any, or interest on the 1997 Notes or to
enforce the performance of any provision of the 1997 Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the 1997 Notes or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any
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Noteholder in exercising any right or remedy accruing upon an Event of Default
shall not impair the right or remedy or constitute a waiver of or acquiescence
in the Event of Default. All remedies are cumulative to the extent permitted by
law.
Section 6.04 Waiver of Past Defaults.
At any time after declaration of acceleration with respect to
the 1997 Notes has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee or the Holders, where applicable, the
Holders of a majority in aggregate principal amount of the then outstanding 1997
Notes, by written notice to the Company and the Trustee, may rescind and annul
such declaration and its consequences if (a) the Company has paid or deposited
with the Trustee a sum sufficient to pay (i) all overdue installments of
interest on all the 1997 Notes, (ii) the principal of any 1997 Notes that have
become due otherwise than by such declaration of acceleration and interest
thereon at the rate or rates prescribed therefor in the 1997 Notes, (iii) to the
extent that payment of such interest is lawful, interest on the defaulted
interest at the rate or rates prescribed therefor in the 1997 Notes, and (iv)
all money paid or advanced by the Trustee under this Indenture and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents, counsel and other advisors and (b) all Defaults and Events of
Default, other than the non-payment of the principal of 1997 Notes that have
become due solely by such declaration of acceleration, have been cured or waived
as provided in this Indenture. No such rescission will affect any subsequent
Default or impair any right consequent thereon.
When a Default is waived, it is cured and stops continuing. No
waiver shall extend to any subsequent or other Default or impair any right
consequent thereto but any Event of Default arising from such Default shall be
deemed to have been cured for every purpose of this Indenture. This Section 6.04
shall be in lieu of TIA Section 316(a)(1)(B) and said TIA section is hereby
expressly excluded from this Indenture, as permitted by the TIA.
Section 6.05 Control by Majority.
The Holders of a majority in aggregate principal amount of the
then outstanding 1997 Notes will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on such Trustee, provided that (a) such
direction is not in conflict with any rule of law or with this Indenture and (b)
the Trustee may take any other action it deems proper that is not inconsistent
with such direction. The Trustee may refuse to follow any direction that
conflicts with law or this Indenture, is unduly prejudicial to the rights of
other Noteholders, or would involve the Trustee in personal liability. This
Section 6.05 shall be in lieu of TIA Section 316(a)1(A) and said TIA section is
hereby expressly excluded from this Indenture, as permitted by the TIA.
Section 6.06 Limitation on Suits.
No Holder will have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee or for any other remedy under this Indenture, unless (a)
such Holder has previously given written notice to the Trustee of a continuing
Event of Default, (b) the Holders of not less than 25% in aggregate principal
amount of the then outstanding 1997 Notes have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as trustee under this Indenture, (c) such Holder or Holders have offered to
the Trustee an indemnity, adequate in the sole reasonable discretion of the
Trustee, against the
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costs, expenses and liabilities to be incurred in compliance with such request,
(d) the Trustee for 30 days after its receipt of such notice, request and offer
of indemnity has failed to institute any such proceeding and (e) no direction
inconsistent with such written request has been given to the Trustee during such
30-day period by the Holders of a majority in aggregate principal amount of the
outstanding 1997 Notes.
A Noteholder may not use this Indenture to prejudice the
rights of another Noteholder or to give or obtain a preference or priority over
another Noteholder.
Section 6.07 Rights of Holders to Receive Payment.
Each Holder will have the right, which is absolute and
unconditional, to receive payment of the principal of and interest on, such 1997
Note on the stated maturity thereof and to institute suit for the enforcement of
any such payment, and such right may not be impaired without the consent of such
Holder.
Section 6.08 Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b)
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid on the 1997 Notes and interest on
overdue principal and, to the extent lawful, interest and such further amounts
as shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents, counsel and other advisors.
Section 6.09 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the Noteholders allowed in any judicial proceedings relative to the
Company, its Subsidiaries, its creditors or its property. Nothing contained
herein shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Noteholder any plan of reorganization,
arrangement, adjustment or composition affecting the 1997 Notes or the rights of
any Holder thereof, or to authorize the Trustee to vote in respect of the claim
of any Noteholder in any such proceeding.
Section 6.10 Priorities.
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Noteholders for amounts due and unpaid on the 1997 Notes
for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable
on the 1997 Notes for principal and interest, respectively;
and
Third: to the Company.
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The Trustee may fix a record date and payment date for any payment or
distribution of property or securities to Noteholders in accordance with Section
2.12 and may set a record date or payment date as necessary to effectuate its
obligations under this Indenture and the 1997 Notes.
Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.07, or a suit by Holders of more than 10% in
aggregate principal amount of the then outstanding 1997 Notes.
ARTICLE 7
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this
Indenture and covenants and agrees to perform the same, as herein expressed.
Section 7.01 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no implied
covenants shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of an Officer's Certificate or
Opinion of Counsel required to be furnished to the Trustee, the Trustee
shall examine the certificates and opinions to determine whether or not
they conform on their face to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
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(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
Subparagraph (c)(iii) shall be in lieu of TIA Section 315(d)(3) and said TIA
section is hereby expressly excluded from this Indenture, as permitted by the
TIA.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) The Trustee may refuse to perform any duty or exercise any
right or power unless it is provided with adequate funds or indemnity, adequate
in the sole reasonable discretion of the Trustee, against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 7.02 Rights of Trustee.
(a) The Trustee may rely and shall be protected from acting or
refraining from acting based on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting with
respect to any matter contemplated by this Indenture, it may require an
Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through attorneys and agents and shall
not be responsible for the misconduct or negligence of any attorney or agent
appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers.
(e) The Trustee may consult with counsel, and the advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection from liability irrespective of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(f) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
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entitled to examine the books, records and premises of the Company and
its Subsidiaries, personally or by agent or attorney.
(g) Except with respect to Section 4.01, the Trustee shall
have no duty to inquire as to the performance of the Company's covenants in
Article 3, 4 and 5 hereof. In addition, the Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any Event of Default
occurring pursuant to Sections 6.01(a) (other than a failure of the Company to
repurchase the 1997 Notes duly tendered for purchase following a Change of
Control Offer or an Asset Sale Offer), Section 6.01(b) and Section 4.01, (ii)
any Default or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.
(h) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers unless repayment of such funds shall reasonably be assured to
it or the Trustee is provided adequate indemnity in its sole reasonable
discretion.
Section 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of 1997 Notes and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
7.10 and 7.11.
Section 7.04 Trustee's Disclaimer.
The Trustee shall not be responsible and makes no
representation as to the validity or adequacy of this Indenture or the 1997
Notes, it shall not be accountable for any statement made by the Company or for
the Company's use of the proceeds from the 1997 Notes, and it shall not be
responsible for any statement in this Indenture or any statement in the 1997
Notes other than its authentication.
Section 7.05 Notice of Defaults.
If a Default of Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to each Noteholder a
notice of the Default within 90 days after it occurs. Except in the case of a
Default in any payment due on any 1997 Note (including any failure to make any
mandatory redemption payment required hereunder), the Trustee may withhold the
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of Noteholders. The
second sentence of Section 7.05 shall be in lieu of the proviso to TIA Section
315(b) and said TIA section is hereby expressly excluded from this Indenture, as
permitted by the TIA.
Section 7.06 Reports by Trustee to Holders.
Within 60 days after the reporting date stated in Section
10.10, the Trustee shall mail to Noteholders, if required by TIA Section 313(a),
a brief report dated as of such reporting date that complies with such Section
313(a). The Trustee also shall comply with TIA Section 313(b)(2) and transmit by
mail all reports as required by TIA Section 313(c).
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After this Indenture has been qualified under the TIA, a copy
of each report at the time of its mailing to Noteholders shall be filed with the
SEC and each stock exchange on which the 1997 Notes are listed. The Company
shall promptly notify the Trustee in writing when the 1997 Notes are listed on
any stock exchange.
Section 7.07 Compensation and Indemnity.
The Company shall pay to the Trustee, paying agents and
registrars from time to time reasonable compensation (as the Company and such
parties may agree) for their respective services hereunder. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred by it. Such expenses may include the
reasonable compensation and out-of-pocket fees and expenses of the Trustee's
agents, counsel and other advisors.
The Company shall indemnify the Trustee, paying agents and
registrars, and their respective agents, counsel and other advisors, and shall
hold them harmless against any claim or demand (including but not limited to
attorney's fees and expenses) made against or as incurred by them in connection
with the acceptance of this trust or the administration of this Indenture and
their respective duties hereunder, except as set forth in the next paragraph.
The Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. However, failure of the Trustee to do so shall not relieve the
Company of its obligations hereunder. The Company shall defend the claim at its
own expense with counsel, who may be outside counsel to the Company but shall in
all events be reasonably satisfactory to the Trustee, and the Trustee shall
cooperate in the defense; provided, however, that the Trustee may, at its
option, retain its own separate counsel to defend such claim and the Company
shall pay the reasonable fees and expenses of such separate counsel. In
addition, if the Company does not so defend the Trustee or if at any time the
counsel so selected is ethically prohibited from representing the Trustee
(whether because of a conflict of interest or the provisions of the TIA), then
the Trustee may retain one separate counsel and the Company shall pay the
reasonable fees and expenses of such separate counsel. The indemnification
herein extends to any settlement, provided that the Company will not be liable
for any settlement made without its consent, and provided further that such
consent will not be unreasonably withheld.
The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through negligence or bad
faith of the Trustee.
To secure the Company's payment obligations in this Section,
the Trustee and any such predecessor trustee shall have a lien prior to the 1997
Notes on all money or property held or collected by the Trustee or the Holders,
except that held in trust to pay principal of and premium, if any, and interest
on the 1997 Notes.
When the Trustee, or its agents, counsel or advisors, incurs
fees or expenses or renders services after an Event of Default specified in
Section 6.01(g) occurs, the fees, expenses and the compensation for the services
are intended to constitute expenses of administration under any Bankruptcy Law.
Section 7.08 Replacement of Trustee.
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A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The
Holders of a majority in aggregate principal amount of the then outstanding 1997
Notes may remove the Trustee by so notifying the removed Trustee and the Company
and may appoint a successor Trustee with the Company's consent. The Company may
remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in aggregate principal amount of the then outstanding 1997
Notes may appoint a successor Trustee to replace the successor Trustee appointed
by the Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in aggregate principal amount of the then
outstanding 1997 Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective without
any further act, deed or conveyance, and the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. The successor
Trustee shall mail a notice of its succession to Noteholders. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee. Notwithstanding the replacement of the Trustee pursuant to
this Section 7.08, the Company's obligations and the Trustee's rights under
Section 7.07 hereof shall continue for the benefit of the retiring Trustee with
respect to expenses and liabilities incurred by it prior to such replacement.
Section 7.09 Successor Trustee by Merger, etc.
Subject to Section 7.10, if the Trustee consolidates with,
merges or converts into, or transfers all or substantially all of its corporate
trust business to, another corporation, the resulting, surviving or transferee
corporation without any further act shall be the successor Trustee. Such
succession shall also occur without any further act with respect to all agency
roles in which the Trustee then serves.
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Section 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee shall always have a combined
capital and surplus as stated in Section 10.10. The Trustee is subject to TIA
Section 310(b), including TIA Section 310(b)(9); provided, however, that there
shall be excluded from the operation of Section 310(b)(1) any indenture or
indentures under which other securities are outstanding if the requirements of
Section 310(b)(1) are met. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect specified herein.
Section 7.11 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship set forth in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE
Section 8.01 Termination of Company's Obligations.
(a) This Indenture shall cease to be of further effect (except
that the Company's obligations under Section 7.07, 8.04, 8.05 and 9.06, and the
Company's, Trustee's and Paying Agent's obligations under Section 8.03 shall
survive) when all outstanding 1997 Notes theretofore authenticated and issued
have been delivered (other than destroyed, lost or stolen 1997 Notes that have
been replaced or paid) to the Trustee for cancellation or the Company has paid
all sums payable hereunder. In addition, the Company may elect to have either
Section 8.01(b) or 8.01(c) below be applied to the outstanding 1997 Notes upon
compliance with the conditions set forth in Section 8.01(d).
(b) Upon the Company's exercise under Section 8.01(a) of the option
applicable to this Section 8.01(b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
1997 Notes on the date the conditions set forth below are satisfied
(hereinafter, "legal defeasance"). For this purpose, such legal defeasance means
that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding 1997 Notes, which shall thereafter
be deemed to be "outstanding" only for the purposes of the Sections of and
matters under this Indenture referred to in (i) and (ii) below, and to have
satisfied all its other obligations under such 1997 Notes and this Indenture
insofar as such 1997 Notes are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following which shall survive until otherwise terminated or discharged
hereunder: (i) the rights of Holders of outstanding 1997 Notes to receive solely
from the trust fund described in Section 8.01(d) below and as more fully set
forth therein, payments in respect of the principal of and premium, if any, and
interest on such 1997 Notes when such payments are due, (ii) the Company's
obligations with respect to such 1997 Notes under Sections 2.06, 2.07 and 4.04,
and, with respect to the Trustee, under Section 7.07 and 9.06, (iii) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and (iv) this
Section 8.01. Subject to compliance with this Section 8.01, the Company may
exercise its option under
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this Section 8.01(b) notwithstanding the prior exercise of its option under
Section 8.01(c) below with respect to the 1997 Notes.
(c) Upon the Company's exercise under Section 8.01(a) of the
option applicable to this Section 8.01(c), the Company shall be released and
discharged from its obligations under any covenant contained in Article 5 and in
Sections 4.02, 4.04, 4.05, 4.07, 4.08, 4.09, 4.11 through 4.19 with respect to
the outstanding 1997 Notes on and after the date the conditions set forth below
are satisfied (hereinafter, "covenant defeasance"), and the 1997 Notes shall
thereafter be deemed to be not "outstanding" for the purpose of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the outstanding 1997 Notes, the Company
may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01, but, except as specified above, the
remainder of this Indenture and such 1997 Notes shall be unaffected thereby.
(d) The following shall be the conditions to the
application of either Section 8.01(b) or Section 8.01(c) above to the
outstanding 1997 Notes:
(i) the Company has irrevocably deposited in trust with
the Trustee or, at the option of the Trustee, with a trustee,
satisfactory to the Trustee and the Company, and conveyed all right,
title, and interest for the benefit of the Holders of such 1997 Notes,
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds solely for the benefit of
the Holders for that purpose, Cash and/or United States Government
Obligations maturing as to principal and interest in such amounts and
at such times as are sufficient without consideration of any
reinvestment of such interest to pay principal of and premium, if any,
and interest on such outstanding 1997 Notes to maturity, and to pay all
other sums payable by it hereunder and including all amounts owing
under Section 7.07; provided that (1) the trustee of the irrevocable
trust shall have been irrevocably instructed to pay such money or the
proceeds of such United States Government Obligations to the Trustee
and (2) the Trustee shall have been irrevocably instructed to apply
such money or the proceeds of such United States Government Obligations
to the payment of said principal and interest with respect to the 1997
Notes;
(ii) the Company has delivered to the Trustee an
Officers' Certificate stating that (1) all conditions precedent
provided for relating to either the legal defeasance under Section
8.01(b) above or the covenant defeasance under Section 8.01(c) above,
as the case may be, have been complied with and (2) if any other
Indebtedness of the Company shall then be outstanding or committed,
such legal defeasance or covenant defeasance will not violate the
provisions of the agreements or instruments evidencing such
Indebtedness;
(iii) no Default or Event of Default shall have occurred
and be continuing on the date of such deposit;
(iv) such legal defeasance or covenant defeasance shall
not result in a breach or violation of, or constitute a Default or
Event of Default under, this Indenture or any other
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agreement or instrument to which the Company or any Subsidiary is a
party or by which it is bound;
(v) in the case of an election under Section 8.01(b)
above, the Company shall have delivered to the Trustee an Opinion of
Counsel from counsel reasonably acceptable to the Trustee to the effect
that (1) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling or (2) since the date of this
Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that the Holders of the outstanding
1997 Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such legal defeasance and will be subject
to federal income tax on the same amount and in the same manner and at
the same time as would have been the case if such legal defeasance had
not occurred; and
(vi) in the case of an election under Section 8.01(c)
above, the Company shall have delivered to the Trustee an Opinion of
Counsel from counsel reasonably acceptable to the Trustee to the effect
that (1) the Holders of the outstanding 1997 Notes will recognize
income, gain or loss for federal income tax on the same amount and in
the same manner and at the same time as would have been the case if
such covenant defeasance had not occurred or (2) the Company has
received from, or there has been published by, the Internal Revenue
Service a ruling to the foregoing effect.
(v) in the case of an election under either Section 8.01(b)
or (c) above, the Company shall have delivered to the Trustee an
Opinion of Counsel from counsel reasonably acceptable to the Trustee to
the effect that (1) the Company's exercise of its option under Section
8.01(b) or (c), as applicable, will not result in any of the Company,
the Trustee or the trust created by the Company's deposit of funds
pursuant to this provision becoming or being deemed to be an
"investment company" under the Investment Company Act of 1940, as
amended, and (2) after the passage of 90 days following deposit, the
trust funds will not be subject to Section 547 of the United States
Bankruptcy Code.
After such irrevocable deposit made pursuant to this Section
8.01 and satisfaction of the other conditions set forth herein, the Trustee upon
written request by the Company shall acknowledge in writing the discharge of the
Company's obligations under this Indenture except for those surviving
obligations specified above.
As used herein, "United States Government Obligations" means
direct obligations of the United States of America for the payment of which the
full faith and credit of the United States of America is pledged. In order to
have money available on a payment date to pay principal or interest on the 1997
Notes, the United States Government Obligations shall be payable as to principal
or interest on or before such payment date in such amounts as will provide the
necessary money. United States Government Obligations shall not be callable at
the issuer's option.
Section 8.02 Application of Trust Money.
The Trustee shall hold in trust money or United States
Government Obligations deposited with it pursuant to Section 8.01. It shall
apply the deposited money and the money from United States Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of and premium, if any, and interest on the 1997 Notes.
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Section 8.03 Repayment to Company.
Subject to Section 7.07 and to this Article 8, the Trustee and
the Paying Agent shall promptly pay to the Company upon receipt of an Officer's
Certificate any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon
receipt of an Officer's Certificate any money held by them for the payment of
principal or interest that remains unclaimed for two years after the date upon
which such payment shall have become due; provided, however, that the Company
shall have first caused notice of such payment to the Company to be mailed to
each Noteholder entitled thereto no less than 30 days prior to such payment.
After payment to the Company, Noteholders entitled to the money must look to the
Company for payment as general creditors unless an applicable abandoned property
law designates another Person.
Section 8.04 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money in
accordance with Section 8.01 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the 1997 Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.01 until such time as the Trustee or Paying Agent is permitted to
apply all such money in accordance with Section 8.02; provided, however, that if
the Company makes any payment of interest on or principal of any 1997 Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such 1997 Notes to receive such payment from the
money held by the Trustee or Paying Agent.
Section 8.05 Indemnity for Government Obligations.
The Company shall pay and shall indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against United States
Government Obligations deposited with or pursuant to Section 8.01 or the
principal and interest received on such United States Governmental Obligations.
ARTICLE 9
AMENDMENTS
Section 9.01 Without Consent of Holders.
The Company, when authorized by a resolution of its Board of
Directors, and the Trustee may, without the consent of the Holders of any
outstanding 1997 Notes, amend, waive or supplement this Indenture or the Notes
for certain specified purposes, including, among other things:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Section 5.01;
(3) to provide for uncertificated Notes in addition to
certificated Notes;
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(4) to make any change that does not adversely affect the
legal rights hereunder of any Noteholder;
(5) to add to the covenants, conditions and restrictions of
the Company, for the benefit of the Noteholders, or to surrender any
right or power herein conferred upon the Company, or
(6) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA, or under any similar
federal statute hereafter enacted,
provided however, that in the case of a change pursuant to clauses (1) or (4) of
this sentence, the Company has delivered to the Trustee an Opinion of Counsel
stating that such change does not adversely affect the rights of any Holder.
Section 9.02 With Consent of Holders.
Subject to Section 6.07, the Company and the Trustee may amend
this Indenture or the 1997 Notes with the written consent of the Holders of at
least a majority in aggregate principal amount of the then outstanding 1997
Notes.
Subject to Sections 6.02, 6.04 and 6.07, the Holders of a
majority in aggregate principal amount of the 1997 Notes then outstanding may
also waive compliance in a particular instance by the Company with any provision
of this Indenture or the 1997 Notes.
This Indenture may be amended or modified or rights thereunder
may be waived with the consent of Holders of at least a majority of the
aggregate principal amount of 1997 Notes then outstanding provided that, without
the consent of each Holder affected thereby, no such amendment, modification or
waiver may:
a. reduce the percentage in outstanding aggregate
principal amount of 1997 Notes the Holders of which must consent to an
amendment, supplement or waiver of any provision of this Indenture or
the 1997 Notes;
b. reduce the rate of or change the time for payment of
interest on any 1997 Note;
c. reduce the aggregate principal amount outstanding of
or change the fixed maturity of any 1997 Note;
d. waive a default in the payment of the principal of,
premium, if any, or interest on, or an offer to purchase required under
this Indenture with respect to, any 1997 Note (except a rescission of
acceleration of the 1997 Notes and a waiver of the payment default that
resulted from such acceleration);
e. make the principal of or interest on any 1997 Note
payable in money other than that stated in the 1997 Note;
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f. amend, change or modify the obligation of the Company
to make and consummate a Change of Control Offer in the event of a
Change of Control or to make and consummate the Asset Sale Offer with
respect to any Asset Sale or modify any of the provisions or
definitions with respect thereto; or
g. modify any of the provisions relating to amendments
or modifications of this Indenture requiring the consent of Holders or
relating to the waiver of past Events of Default or waive any default
in payment in respect of the 1997 Notes or impair the right to
institute suit for the enforcement of payment of the 1997 Notes.
To secure a consent of the Holders under this Section 9.02, it
shall not be necessary for the Holders to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof. The calculation of holders so consenting shall
be made pursuant to Section 2.09 hereof.
After an amendment or waiver under this Section 9.02 becomes
effective, the Company shall mail to Noteholders and the Trustee a notice
describing the amendment or waiver, provided that failure to give the required
notice shall not affect the validity and effect of such amendment or waiver.
Section 9.03 Compliance with Trust Indenture Act.
Every amendment to this Indenture or the 1997 Notes shall be
set forth in a supplemental indenture that complies with the TIA as then in
effect.
Section 9.04 Revocation and Effect of Consents.
Until the earlier of the time that an amendment or waiver
becomes effective or for a period of 90 days from the date the consent was
given, a consent to an amendment or waiver by a Holder of a 1997 Note is a
continuing consent by the Holder and every subsequent Holder of a 1997 Note or
portion of a 1997 Note that evidences the same debt as the consenting Holder's
Note, even if notation of the consent is not made on any 1997 Note. Any such
Holder or subsequent Holder may, however, revoke its consent as to its 1997 Note
or portion of a 1997 Note if the Trustee receives notice of revocation before
the date on which the Trustee receives an Officers' Certificate certifying that
the Holders of the requisite principal amount of 1997 Notes have consented to
the amendment or waiver (or before such later date as may be required by law or
stock exchange rule).
The Trustee may, upon written direction of the Company, or as
otherwise required hereunder or by Applicable Law, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment or
waiver. If a record date is fixed, then notwithstanding the provisions of the
immediately preceding paragraph, those Persons who were Holders at such record
date (or their duly designated proxies), and only those Persons, shall be
entitled to consent to such amendment or waiver or to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No consent shall be valid or effective for more than 90 days after
such record date unless consents from Holders of the aggregate principal amount
of 1997 Notes required hereunder for such amendment or waiver to be effective
shall have also been given and not revoked within such 90-day period.
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<PAGE> 65
After an amendment or waiver becomes effective it shall bind
every Noteholder, unless it is of the type described in any of clauses (a)
through (g) of Section 9.02. In such case, the amendment or waiver shall bind
each Holder of a 1997 Note who has consented to it.
Section 9.05 Notation on or Exchange of 1997 Notes.
If an amendment, supplement or waiver changes the terms of the
1997 Notes, the Trustee may require each Holder thereof to deliver its 1997
Notes to the Trustee. The Trustee may place an appropriate notation about an
amendment or waiver on any 1997 Note thereafter authenticated. The Company in
exchange for all 1997 Notes may issue and the Trustee shall authenticate new
1997 Notes that reflect the amendment or waiver. Failure to make the appropriate
notation or issue a new 1997 Note shall not affect the validity or effect of
such amendment or waiver.
Section 9.06 Trustee Protected.
The Trustee shall sign all supplemental indentures and
amendments authorized pursuant to this Article 9, except that the Trustee need
not sign any supplemental indenture that adversely affects its rights. The
Trustee, subject to Sections 7.01 and 7.02, shall be entitled to receive if
requested, an indemnity satisfactory to it in its sole reasonable discretion and
shall be entitled to be fully protected in relying upon, an Opinion of Counsel
stating that any amendment, supplement or waiver is authorized or permitted by
this Indenture and that such supplemental indenture and this Indenture, as so
amended or supplemented, constitute the valid and binding obligations of the
Company, enforceable against it in accordance with their respective terms
(subject to customary and necessary exceptions) and all conditions precedent
have been complied with.
ARTICLE 10
SUBORDINATION
Section 10.01 The 1997 Notes Subordinated to Senior Indebtedness.
The Company agrees, and each Holder by accepting a 1997 Note
agrees, that the Indebtedness evidenced by the 1997 Notes, including for all
purposes of this Article 10, all repurchase and redemption obligations with
respect to the 1997 Notes, is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment in full of
all existing and future Senior Indebtedness and that the subordination is for
the benefit of and enforceable by the holders of Senior Indebtedness, and
authorizes and directs the Trustee to take such action as may be required by
such holders of Senior Indebtedness to acknowledge or effectuate the
subordination as provided in this Article 10 and appoints the Trustee as
attorney-in-fact for any and all such purposes.
Only Indebtedness of the Company that is Senior Indebtedness
shall rank senior to the Notes in accordance with the provisions set forth in
this Indenture. This Article 10 shall remain in full force and effect as long as
any Senior Indebtedness is outstanding or any commitment to advance Senior
Indebtedness exists, assuming in the case of the Revolving Credit Facility that
all conditions precedent to any such advance could be satisfied.
Section 10.02 Liquidation; Dissolution; Bankruptcy.
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Upon any payment or distribution, whether of Cash, securities
or other property, to creditors of the Company in a liquidation (total or
partial), reorganization or dissolution of the Company, whether voluntary or
involuntary, or in a bankruptcy, reorganization, insolvency, receivership,
assignment for the benefit of creditors, marshalling of assets or similar
proceeding relating to the Company or its property:
(1) holders of Senior Indebtedness shall be entitled
to receive payment in full, in Cash or Cash equivalents, of such Senior
Indebtedness before Holders shall be entitled to receive any payment of
principal of, or interest on, or any other distribution with respect
to, the 1997 Notes; and
(2) until the Senior Indebtedness is paid in full as
provided in clause (1) above, any distribution to which Holders would
be entitled but for this Article 10 shall be made to the holders of
Senior Indebtedness as their interests may appear;
in each case except that Holders may receive shares of stock and debt securities
that are subordinated to Senior Indebtedness to at least the same extent and
pursuant to the same or more stringent terms as are the 1997 Notes.
Upon any distribution of assets of the Company, referred to in
this Section 10.02, the Trustee and the Holders shall be entitled to rely upon
any order or decree of a court of competent jurisdiction in which such
bankruptcy, reorganization, insolvency, receivership, assignment for the benefit
of creditors, marshalling of assets or similar proceedings are pending, or a
certificate of the liquidating trustee or agent or other such Person making any
distribution to the Trustee or to the Holders, for the purpose of ascertaining
the persons entitled to participate in such distribution, the holders of Senior
Indebtedness, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Section
10.02. The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing itself to be a holder of Senior Indebtedness or
a Representative, as the case may be, to establish that such notice has been
given by a holder of Senior Indebtedness or a Representative, as the case may
be. In the event that the Trustee determines, in good faith, that further
evidence is required with respect to the right of any Person, as a holder of
Senior Indebtedness, to participate in any payment or distribution pursuant to
this Section 10.02, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, as to the extent to which such Person is
entitled to participation in such payment or distribution and as to other facts
pertinent to the rights of such Person under this Section 10.02, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person (or
to the Noteholder) pending judicial determination as to the right of such Person
to receive such payment.
Section 10.03 Default on Senior Indebtedness.
No direct or indirect payment by or on behalf of the Company
under the 1997 Notes shall be made if (i) any Designated Senior Indebtedness is
not paid when due or (ii) any other default on Designated Senior Indebtedness
occurs and in the case of this clause (ii) the maturity of such Designated
Senior Indebtedness is accelerated in accordance with its terms, unless, in
either case, (x) the default has been cured or waived and any such acceleration
has been rescinded or (y) such Designated Senior Indebtedness has been paid in
full; provided, however, that the Company may make any such direct or indirect
payment under the 1997 Notes without regard to the foregoing if the Company and
the Trustee
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receive written notice approving such payment from the Representative of such
Designated Senior Indebtedness. In addition, during the continuance of any other
event of default with respect to Designated Senior Indebtedness pursuant to
which the maturity of such Designated Senior Indebtedness may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods,
upon the occurrence of (a) receipt by the Trustee of written notice from the
Representative with respect to, or the holders of at least a majority in
aggregate principal amount of, such Designated Senior Indebtedness then
outstanding or (b) if such event of default results from the acceleration of the
1997 Notes, the date of such acceleration, no direct or indirect payment may be
made by the Company upon or in respect of the 1997 Notes for a period (a
"Payment Blockage Period") commencing on the earlier of the date of receipt of
such notice by the Trustee or the date of such acceleration and ending 180 days
thereafter (unless such Payment Blockage Period shall be terminated by written
notice to the Trustee from such Representative or such holders). Not more than
one Payment Blockage Period in the aggregate may be commenced with respect to
the Notes during any period of 360 consecutive days, irrespective of the number
of defaults with respect to Senior Indebtedness during such period. In no event
will a Payment Blockage Period extend beyond 179 days from the date such payment
upon or in respect of the Notes was due, and there must be 180 days in any
360-day period in which no Payment Blockage Period is in effect as to the
Company. For all purposes of this Section 10.03, no default or event of default
that existed or was continuing on the date of the commencement of the Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or be made, the basis for the
commencement of a subsequent Payment Blockage Period by the Representative or
requisite holders of such Designated Senior Indebtedness whether or not within a
period of 360 consecutive days unless such default or event of default shall
been cured or waived for a period of not less than 90 consecutive days.
Section 10.04 When Distribution Must Be Paid Over.
In the event that the Company shall make any payment to the
Trustee pursuant to the 1997 Notes at a time when such payment is prohibited by
Section 10.02 or 10.03, such payment shall be held by the Trustee, in trust for
the benefit of, and shall be paid forthwith over and delivered to, the holders
of Senior Indebtedness (pro rata as to each of such holders on the basis of the
respective amounts of Senior Indebtedness held by them) or their
Representatives, as their respective interests may appear, for application to
the payment of all Senior Indebtedness remaining unpaid to the extent necessary
to pay all Senior Indebtedness in full in accordance with its terms, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
If a distribution is made to Holders that because of this
Article 10 should not have been made to them, the Holders who receive the
distribution shall hold it in trust for holders of Senior Indebtedness and pay
it over to them as their interests may appear.
Section 10.05 Notice by Company.
The Company shall promptly notify the Trustee and any Paying
Agent by an appropriate Officers' Certificate of the Company delivered to a
Trust Officer and the Paying Agent of any facts known to the Company that would
cause a payment under the 1997 Notes of principal of or interest on the 1997
Notes to violate this Article 10, but failure to give such notice shall not
affect the subordination of the 1997 Notes to the Senior Indebtedness provided
in this Article 10.
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<PAGE> 68
Section 10.06 Subrogation.
After all Senior Indebtedness is paid in full and all
commitments to advance Senior Indebtedness have been terminated, and until the
1997 Notes are paid in full pursuant to the 1997 Notes and this Indenture or
otherwise, Holders shall be subrogated to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to Holders have been applied to
payment of Senior Indebtedness. A distribution made under this Article 10 to
holders of Senior Indebtedness that otherwise would have been made to Holders is
not, as between the Company and the Holders, a payment by the Company on Senior
Indebtedness.
Section 10.07 Relative Rights.
This Article 10 defines the relative rights of Holders and
holders of Senior Indebtedness. Nothing in this Indenture (but subject to the
provisions of paragraph 5 of the 1997 Notes) shall:
(1) impair, as between the Company and the Holders,
the obligation of the Company, which is absolute and unconditional, to
pay principal of and interest on the 1997 Notes in accordance with
their terms;
(2) affect the relative rights of Holders and
creditors of the Company other than such creditors as are holders of
Senior Indebtedness;
(3) prevent the Trustee or any Holder from exercising
its available remedies upon a Default or Event of Default, subject to
the rights of holders of Senior Indebtedness to receive distributions
otherwise payable to Holders; or
(4) create or imply the existence of any commitment
on the part of the holders of Senior Indebtedness to extend credit to
the Company, other than as set forth in the terms governing such Senior
Indebtedness.
Section 10.08 Subordination May Not Be Impaired by Company.
No right of any present or future holder of Senior
Indebtedness to enforce the subordination of the Indebtedness evidenced by the
1997 Notes and this Article 10 shall be impaired by any act or failure to act by
the Company or anyone in custody of its assets or property or by its failure to
comply with this Indenture.
Section 10.09 Distribution or Notice to Representatives.
Whenever a distribution is to be made or a notice given to
holders of Senior Indebtedness, the distribution may be made and the notice
given to their Representatives, if any.
Section 10.10 Rights of Trustee and Paying Agent.
Notwithstanding Section 10.02 or 10.03, the Trustee or any
Paying Agent may continue to make payments of principal of or interest on the
1997 Notes unless, in the case of the Trustee, a Trust Officer or, in the case
of a Paying Agent other than the Trustee, an officer of such Paying Agent, shall
have received, at least three Business Days prior to the date such payments are
due and payable, written
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notice of the occurrence of an event under Section 10.02 or 10.03 and that any
payment under the 1997 Notes would violate this Article 10. Only the Company or
a Representative with respect to or holders of at least a majority in principal
amount of an issue of Designated Senior Indebtedness may give such notice.
Nothing contained in this Section 10.10 shall limit the right of any holder of
Senior Indebtedness to recover payments as contemplated by Section 10.04.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. The Trustee shall be entitled to all
the rights set forth in this Article 10 with respect to Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any
of its rights as such holder, except as otherwise provided by the TIA.
Section 10.11 Trustee Entitled to Assume Payments Not Prohibited in Absence
of Notice.
Notwithstanding any of the provisions of this Article 10 or
any other provision of this Indenture, unless a Trust Officer has received a
written notice pursuant to Section 10.10, the Trustee shall not at any time be
charged with knowledge of the existence of any facts that would prohibit the
making of any payment to or by the Trustee, and in the absence of such written
notice the Trustee may make such payment without liability or obligation to any
holder of Senior Indebtedness.
Section 10.12 Application by Trustee of Monies Deposited With It.
Nothing contained in this Article 10 or elsewhere in this
Indenture, or in the 1997 Notes, shall (i) affect the obligation of the Company
to make, or prevent the Company from making, at any time except as specified in
Section 10.02 or 10.03 to the extent provided therein, payments at any time
pursuant to the 1997 Notes, (ii) prevent the application by the Trustee or any
Paying Agent of any monies or the proceeds of any United States Government
Obligations received from the Company and held by the Trustee or such Paying
Agent in trust for the benefit of the Holders of 1997 Notes as to which notice
of redemption shall have been given, to the payment of or on account of the
principal of or interest on the 1997 Notes, if, at the time such notice was
given, a payment by the Company under the 1997 Notes would not have been
prohibited by the foregoing provisions of this Article 10 or (iii) prevent the
application by the Trustee or any Paying Agent of any monies or the proceeds of
any United States Government Obligations deposited with it by the Company under
Article 8 hereof to the payment of or on account of the principal of or interest
on the 1997 Notes, if, at the time of such deposit, a payment by the Company
under the Notes would not have been prohibited by the foregoing provisions of
this Article 10.
Section 10.13 Trustee's Compensation Not Prejudiced.
Nothing in this Article 10 shall apply to claims of, or
payments to, the Trustee pursuant to Section 7.07.
Section 10.14 Officers' Certificate.
If there occurs any event referred to in Section 10.02, the
Company shall promptly give to the Trustee an Officers' Certificate (on which
the Trustee may conclusively rely) identifying all
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holders of Senior Indebtedness and the principal amount of Senior Indebtedness
then outstanding held by each such holder and stating the reasons why such
Officers' Certificate is being delivered to the Trustee.
Section 10.15 Certain Payments.
Nothing in this Article 10 shall prevent or delay (i) the
Company from or in redeeming any 1997 Notes pursuant to paragraph 5 of the 1997
Notes or otherwise purchasing any 1997 Notes or (ii) the receipt by the Holders
of payments of principal of and interest on the Notes as provided in Section
8.02.
Section 10.16 Names of Representatives.
The Company shall from time to time, upon request of the
Trustee, provide to the Trustee an Officers' Certificate setting forth the name
and address of each Representative of all outstanding Senior Indebtedness.
Section 10.17 Article 10 Not To Prevent Events of Default or Limit Right To
Accelerate.
The failure to make a payment pursuant to the Notes by reason
of any provision in this Article 10 shall not be construed as preventing the
occurrence of a Default. Nothing in this Article 10 shall have any effect on the
right of the Holders or the Trustee to accelerate the maturity of the Notes.
Section 10.18 Reliance by Holders of Senior Indebtedness on Subordination
Provisions.
Each Holder by accepting a 1997 Note acknowledges and agrees
that the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior Indebtedness,
whether such Senior Indebtedness was created or acquired before or after the
issuance of the 1997 Notes, to acquire and continue to hold, or to continue to
hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be
deemed conclusively to have relied on such subordination provisions in acquiring
and continuing to hold, or in continuing to hold, such Senior Indebtedness. No
provision in any supplemental indenture that modifies this Article 10 in any
manner adverse to the holder of Senior Indebtedness shall be effective against
the holders of Senior Indebtedness who have not consented thereto in accordance
with the provisions of the documents governing such Senior Indebtedness.
Section 10.19 Proof of Claim.
In the event that the Company is subject to any proceeding
under any Bankruptcy Law and the Holders and the Trustee fail to file any proof
of claim permitted to be filed in such proceeding with respect to the 1997
Notes, then any Representative of Senior Indebtedness may file such proof of
claim no earlier than the later of (i) the expiration of 15 days after such
Representative notifies the Trustee of its intention to do so and (ii) 30 days
preceding the last day permitted to file such claim.
Section 10.20 No Fiduciary Duty Created to Holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article 10, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into
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this Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness, and, subject to the
provisions of Article 7, the Trustee shall not be liable to any holder of Senior
Indebtedness if it shall mistakenly pay over or deliver to Holders, the Company
or any other person, monies or assets to which any holder of Senior Indebtedness
shall be entitled by virtue of this Article 10 or otherwise.
ARTICLE 11
GENERAL PROVISIONS
Section 11.01 Trust Indenture Act Controls.
This Indenture, whether or not qualified under the TIA, shall
be subject to the terms and provisions if the TIA as if so qualified.
If any provision of this Indenture limits, qualifies, or
conflicts with another provision that is required to be included in this
Indenture by the TIA as in effect at the date hereof or, to the extent required
by law, as amended after the date hereof, the required provision shall control.
Section 11.02 Notices.
Any notice or communication by the Company or the Trustee to
the other is duly given if in writing and delivered in person or mailed by
first-class mail, nationally recognized overnight courier, telex or telecopier
to the other's address stated in Section 11.10. The Company or the Trustee by
written notice to the other may designate an additional or different address for
subsequent notices or communications.
Any notice or communication to a Noteholder shall be mailed by
first-class mail to its address shown on the register kept by the Registrar.
Failure to mail a notice or communication to a Noteholder or any defect in it
shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication is given in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Noteholders,
it shall mail a copy to the Trustee and each Agent at the same time.
All other notices or communications shall be in writing.
Section 11.03 Communication by Holders with Other Holders.
Noteholders may communicate pursuant to TIA Section 312(b)
with other Noteholders with respect to their rights under this Indenture or the
1997 Notes. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
Section 11.04 Certificate and Opinion as to Conditions Precedent.
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Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate stating that, in the opinion of
the Company, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with; and
(3) where applicable, a certificate or opinion by an
independent certified public accountant satisfactory to the Trustee
that complies with TIA Section 314(c).
Section 11.05 Statements Required in Certificate or Opinion.
Each certificate or opinion of a Person with respect to
compliance with a condition or covenant provided for in this Indenture shall
include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, such
Person has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with; provided,
however, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate.
Section 11.06 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Noteholders. The Registrar or Paying Agent may make reasonable rules
and set reasonable requirements for its functions.
Section 11.07 Legal Holidays; Business Days.
A "Legal Holiday" is a day on which banking institutions in
the City of New York or the State of California are not required to be open. If
a payment date is a Legal Holiday at a place of payment, payment may be made at
that place on the next succeeding Business Day, and no interest shall accrue for
the intervening period.
Section 11.08 No Recourse Against Others.
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A director, officer, employee or stockholder, as such, of the
Company shall not have any liability for any obligations of the Company under
the 1997 Notes or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Noteholder by accepting a
1997 Note waives and releases all such liability. The waiver and release are
part of the consideration for the 1997 Notes. Each director, officer, employee
and stockholder is a third party beneficiary of this Section 11.08.
Section 11.09 Counterparts.
This Indenture may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
Section 11.10 Other Provisions.
The Company initially appoints the Trustee as Paying Agent,
Registrar and authenticating agent.
The first certificate pursuant to Section 4.03(a) shall be for
the fiscal year ending on September 25, 1994. The reporting date for Section
7.06 is March 31 of each year. The first reporting date is March 31, 1995.
The Trustee shall always have, or shall be a subsidiary of a
bank or bank holding company that has, a combined capital and surplus of at
least $100.0 million as set forth in its most recent published annual report of
condition pursuant to applicable law.
The Company's address is:
Stater Bros. Holdings Inc.
21700 Barton Road
Colton, California 92324
Telecopier: (909) 783-5098
Attention: Chief Financial Officer
The Trustee's address is:
First Trust of New York, National Association
100 Wall Street, Suite 1600
New York, New York 10005
Attention: Corporate Trust Administration
Telecopier: (212) 809-5459
Section 11.11 Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN THIS
INDENTURE AND THE 1997 NOTES, WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS
THEREOF TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION
WOULD BE REQUIRED THEREBY. IF ANY ACTION OR
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PROCEEDING SHALL BE BROUGHT BY A HOLDER OF ANY OF THE 1997 NOTES OR BY THE
TRUSTEE IN ORDER TO ENFORCE ANY RIGHT OR REMEDY UNDER THIS INDENTURE OR UNDER
THE 1997 NOTES, THE COMPANY HEREBY CONSENTS AND WILL SUBMIT TO THE JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK SITTING IN THE CITY OF NEW YORK OR ANY
FEDERAL COURT SITTING IN THE CITY OF NEW YORK. THE COMPANY HEREBY AGREES TO
ACCEPT SERVICE OF PROCESS BY NOTICE GIVEN TO IT PURSUANT TO THE PROVISIONS OF
SECTION 11.02.
Section 11.12 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or a Subsidiary. Any such other indenture,
loan or debt agreement may not be used to interpret this Indenture.
Section 11.13 Successors.
All agreements of the Company in this Indenture and the 1997
Notes shall bind its successor. All agreements of the Trustee in this Indenture
shall bind its successor.
Section 11.14 Severability.
In case any provision in this Indenture or in the 1997 Notes
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 11.15 Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
[signature page follows]
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<PAGE> 75
The parties have caused this Indenture to be duly executed and
attested, all as of the date first above written, signifying their agreements
contained in this Indenture.
The Company:
STATER BROS. HOLDINGS INC.
By:
----------------------------------
Jack H. Brown
Chairman, President and Chief
Executive Officer
Attest:
---------------------------------
Bruce D. Varner
Secretary
Trustee:
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
By:
----------------------------------
Attest:
---------------------------------
Name:
Title:
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<PAGE> 76
EXHIBIT A
FORM OF PRIVATE PLACEMENT NOTE
SEE REVERSE FOR TRANSFER RESTRICTIONS
STATER BROS. HOLDINGS INC.
9% SENIOR SUBORDINATED NOTE DUE JULY 1, 2004
$________________ Los Angeles, California
Note No. ________ July 24, 1997
Interest Payment Dates: July 1 and January 1
Record Dates: June 15 and December 15
FOR VALUE RECEIVED, the undersigned, Stater Bros. Holdings
Inc., a Delaware corporation (the "Company") hereby promises to pay to the
holder hereof, or its registered assigns, the principal sum of
________________________ (or so much thereof as shall not have been prepaid) on
July 1, 2004.
This is one of the Notes Dated: July 24, 1997 mentioned in the
within-mentioned Indenture.
FIRST TRUST OF NEW YORK, STATER BROS. HOLDINGS INC.
NATIONAL ASSOCIATION
as Trustee
By: By:
------------------------ ------------------------
Authorized Signatory Name:
Title:
By:
------------------------
Name:
Title:
A - 1
<PAGE> 77
BACK OF NOTE
9% Senior Subordinated Note
Due July 1, 2004
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC") to Issuer or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.1
"THE SECURITY EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (i)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF THE SECURITIES ACT) THAT,
PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH
CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT
OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $100,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, OR (e) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL
- - --------
1 This is to be included only if the Note is in global
form.
A - 2
<PAGE> 78
IF THE ISSUER SO REQUESTS), (ii) TO THE ISSUER OR (iii) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
1. Interest. Stater Bros. Holdings Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. The Company shall pay interest semiannually on July
1 and January 1 of each year. Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the first date on which any Notes are issued. Interest will be computed on
the basis of a 360-day year of twelve 30-day months. If (i) a registration
statement under the Securities Act to exchange the Private Placement Notes for
the Exchange Notes (the "Exchange Offer") or Shelf Registration Statement has
not been filed by the date 30 days after the Issue date, or (ii) such Exchange
Offer or Shelf Registration Statement has not become effective by the date 120
days after the date such registration statement has been filed, or (iii) (A) the
Company has not exchanged Exchange Notes for all Private Placement Notes validly
tendered in accordance with the terms of the Exchange Offer on or prior to 30
days after the date on which the Exchange Offer was declared effective or (B)
the Exchange Offer Registration Statement ceases to be effective at any time
prior to the time that the Exchange Offer is consummated or (C) if applicable,
the Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the second
anniversary of its effective date (each such event referred to in Clauses (i)
through (iii), a "Registration Default"), then commencing on the first day
following the occurrence of a Registration Default, additional interest
("Additional Interest") shall be accrued on the Notes over and above the accrued
interest at a rate of 0.50% per annum; provided, however, that (1) upon the
filing of the Exchange Offer Registration Statement or a Shelf Registration
Statement (in the case of (i) above), (2) upon the effectiveness of the Exchange
Offer Registration Statement or a Shelf Registration Statement (in the case of
(ii) above), or (3) upon the exchange of Exchange Notes for all Notes tendered
(in the case of (iii)(A) above), or upon the effectiveness of the Exchange Offer
Registration Statement which had ceased to remain effective (in the case of
(iii)(B) above), or upon the effectiveness of the Shelf Registration Statement
which had ceased to remain effective (in the case of (iii)(C) above), such
Registration Default shall be deemed cured and Additional Interest on the Notes
as a result of such clause (or the relevant subclause thereof), as the case may
be, shall cease to accrue.
Any amounts of Additional Interest due pursuant to clauses (i), (ii) or
(iii) above will be payable in Cash, on the same original interest payment dates
as the Notes. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Notes, multiplied by a fraction, the numerator of which is the number of
days such Additional Interest rate was applicable during such period (determined
on the basis of a 360-day year comprised of twelve 30-day months), and the
denominator of which is 360.
Notwithstanding the foregoing, at no time shall the maximum aggregate
interest rate borne by the Notes exceed the lesser of (a) the initial interest
rate payable on the Notes plus 2.50% per annum and (b) the maximum amount
permitted under applicable usury laws. The interest rate borne by the Notes
shall be reduced by the amount of any Additional Interest on and after the date,
if any, on which the
A - 3
<PAGE> 79
Company satisfies its obligations with respect to the Exchange Offer and/or the
Shelf Registration Statement.
To the extent lawful, the Company shall pay interest on overdue
installments of interest at the Default Rate, as defined in Section 6.02(c) of
the Indenture.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) to the persons who are registered holders of Notes
at the close of business on the record date for the next interest payment date
even though Notes are canceled after the record date and on or before the
interest payment date. Holders must surrender Notes to a Paying Agent to collect
principal payments and premium payments, if any. The Company shall pay
principal, premium, if any, and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company may pay principal, premium, if any, and interest by check
payable in such money. It may mail an interest payment check to a Holder's
registered address.
3. Paying Agent and Registrar. First Trust of New York, National
Association, 100 Wall Street, Suite 1600, N.Y., N.Y. 10005 (the "Trustee") will
act as the initial Paying Agent and Registrar. The Company may change the Paying
Agent, Registrar or Co-Registrar without prior notice without prior notice to
the Holders. The Company or any of its subsidiaries may act in any such
capacity.
4. Indenture. The Company issued the Notes under an Indenture dated as
of July 24, 1997 (the "Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code ss.ss.77aaa-77bbbb) as in effect on the date of the Indenture. The
Notes are subject to, and qualified by, all such terms, certain of which are
summarized hereon, and Noteholders are referred to the Indenture and such Act
for a statement of such terms. The Notes are obligations of the Company limited
to $100.0 million in aggregate principal amount. Capitalized terms not defined
below have the meaning given to them in the Indenture.
5. Optional Redemption. The Notes will not be redeemable prior to July
1, 2000. Thereafter, the Notes will be redeemable, at the option of the Company,
in whole or in part, at the following redemption prices (expressed as
percentages of the principal amount), if redeemed during the 12-month period
beginning July 1 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000................................ 104.50%
2001................................ 103.00%
2002................................ 101.50%
2003................................ 100.00%
</TABLE>
In addition, up to $35.0 million aggregate principal amount of the
Notes will be redeemable at any time on or prior to July 1, 2000 at the option
of the Company from the net proceeds to the Company of one or more Equity
Offerings at a redemption price equal to 109% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the redemption date,
provided that not less than
A - 4
<PAGE> 80
$65.0 million in aggregate principal amount of the Notes remains outstanding
immediately after the occurrence of such redemption.
If less than all of the Notes are to be redeemed, the Trustee shall
select the Notes or portions thereof to be redeemed pro rata, by lot or by any
other method the Trustee shall deem fair and reasonable; provided, however, that
the Notes will not be redeemed in amounts less than the minimum authorized
denomination of $1,000. Notice of redemption will be mailed by first class mail
not less than 30 days nor more than 60 days prior to the scheduled redemption
date to each holder of a Note to be redeemed at its registered address. On and
after the registration date, interest will cease to accrue on the Notes or
portions thereof called for redemption.
6. Change of Control. Upon a Change of Control, the Company shall make
a Purchase Offer to purchase all outstanding Notes at a price equal to 101% of
the aggregate principal amount thereof plus accrued and unpaid interest thereon,
if any, to the date of purchase. To accept the Purchase Offer, the Holder hereof
must comply with the terms thereof, including surrendering this Note, with the
"Option of Holder to Elect Purchase" portion hereof completed, to the Company, a
depositary, if appointed by the Company, or a Paying Agent, at the address
specified in the notice of the Purchase Offer mailed to Holders as provided in
the Indenture, prior to termination of the Purchase Offer.
7. Repurchase Upon Sales of Assets. Upon the date of consummation of
any Asset Sale which, taken individually or together with all Asset Sales since
the Issue Date, results in the receipt of Net Cash Proceeds in excess of $5.0
million, such Net Cash Proceeds and all Net Cash Proceeds from all Asset Sales
consummated concurrently therewith or consummated thereafter (such first
consummation date and each such date thereafter a "Consummation Date") shall be
applied by the Company within 18 months of the relevant Consummation Date (or,
in the event of a Qualified Santee LLC Interest Sale, within 24 months of the
relevant Consummation Date) at its election to either: (i) investments in assets
or business in the same line of business as the Company or such Subsidiary; (ii)
the repayment of any Indebtedness which is secured by or incurred to construct
such assets; (iii) the repayment of Senior Indebtedness; or (iv) a combination
of payment and investment permitted by the foregoing clauses (i), (ii) and
(iii). On the earlier of the day after the 18 month period following a
Consummation Date (or, in the event of a Qualified Santee LLC Interest Sale, the
day after the 24 month period following a relevant Consummation Date) or such
date as the Board of Directors of the Company or of such Subsidiary determines
(as evidenced by a resolution approved by the Board of Directors) not to apply
the Net Cash Proceeds relating to such Consummation Date as set forth in clauses
(i), (ii) and (iii) of the preceding sentence (each, an "Asset Sale Offer
Trigger Date"), such aggregate amount of Net Cash Proceeds which has not been
applied on or before such Asset Sale Offer Trigger Date as permitted in clauses
(i), (ii) and (iii) of the preceding sentence (each an "Asset Sale Offer
Amount") shall be applied by the Company or such Subsidiary to make an offer to
purchase (the "Asset Sale Offer") on a date (the "Asset Sale Offer Payment
Date") not less than 30 nor more than 60 days following the applicable Asset
Sale Offer Trigger Date, from all Holders on a pro rata basis, that amount of
Notes equal to the Asset Sale Offer Amount at a price equal to 100% of the
aggregate principal amount of the Notes to be repurchased, plus accrued and
unpaid interest thereon, if any, to the date of repurchase. Notwithstanding the
foregoing, if an Asset Sale Offer Amount is less than $5.0 million the
application of the Net Cash Proceeds constituting such Asset Sale Offer Amount
to an Asset Sale Offer may be deferred until such time as such Asset Sale Offer
Amount plus the aggregate amount of all Asset Sale Offer Amounts arising
subsequent to the Asset Sale Offer Trigger Date relating to such initial Asset
Sale Offer Amount from all Asset Sales by the Company
A - 5
<PAGE> 81
and its Subsidiaries aggregate at least $5.0 million at which time the Company
or said Subsidiary shall apply all Net Cash Proceeds constituting all Asset Sale
Offer Amounts that have been so deferred to make an Asset Sale Offer (the first
date the aggregate of all such deferred Asset Sale Offer Amounts is equal to
$5.0 million or more shall be deemed to be an Asset Sale Offer Trigger Date).
Pending application pursuant to an Asset Sale Offer the Company shall invest
such Asset Sale Offer Amounts in Permitted Investments.
8. Subordination. The Notes are subordinated to Senior Indebtedness, as
defined in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness must be paid before payments in respect of the Notes may be made
under the Notes and the Indenture. The Company agrees, and each Securityholder
by accepting a Note agrees, to the subordination provisions contained in the
Indenture and authorizes the Trustee to give them effect and appoints the
Trustee as attorney-in-fact for such purpose.
9. Denominations, Transfer, Exchange. The Notes sold to Qualified
Institutional Buyers are initially issued in global form. The Global Note
represents such of the outstanding Notes as shall be specified therein or
endorsed thereon in accordance with the Indenture. The Notes that are not sold
to Qualified Institutional Buyers are initially issued in the form of
Certificated Notes. The Certificated Notes are in registered form without
coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. As a condition of transfer, the Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Notes may be amended with the consent of the Holders of at
least a majority in aggregate principal amount of the then outstanding Notes,
and any existing default may be waived with the consent of the Holders of a
majority in aggregate principal amount of the then outstanding Notes. Without
the consent of any Noteholder, the Indenture or the Notes may be amended (i) to
cure any ambiguity, defect or inconsistency; (ii) to comply with restrictions on
mergers, consolidations and certain asset dispositions; (iii) to provide for
uncertificated Notes in addition to certificated Notes; (iv) to make any change
that does not adversely affect the legal rights hereunder of any Noteholder; (v)
to add to the covenants, conditions and restrictions of the Company, for the
benefit of the Noteholders, or to surrender any right or power herein conferred
upon the Company, or (vi) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualification of
this Indenture under the TIA, or under any similar federal statute hereafter
enacted.
12. Defaults and Remedies. An Event of Default includes, in summary
form: default for 30 days in payment of interest on the Notes; default in
payment of principal of and premium, if any, on the Notes; failure by the
Company for 60 days after notice to it to comply with any of its other
agreements in the Indenture or the Notes; certain events of bankruptcy or
insolvency; certain final judgments which remain undischarged; certain events of
default under other Indebtedness of the Company or any of its Subsidiaries;
failure to commence any of the Purchase Offers described in paragraphs 6 or 7 of
this Note by the time specified in the Indenture or to pay for Notes tendered
pursuant thereto; and failure by the
A - 6
<PAGE> 82
Company to maintain its corporate existence or to comply with the restrictions
on changes of control, mergers, consolidations and certain asset dispositions.
If an Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in aggregate principal amount of the then outstanding
Notes may declare all the Notes to be due and payable immediately, except that
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes become due and payable without further action
or notice. Noteholders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Notes. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Noteholders notice of any continuing default (except a default
in payment of principal or interest) if it determines that withholding notice is
in their interests. The Company must furnish an annual compliance certificate to
the Trustee.
13. Trustee Dealings with the Company. The Trustee under the Indenture,
or any of its Affiliates, in their individual or any other capacities, may make
or continue loans to or guaranteed by, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if the Trustee were not Trustee.
14. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
Noteholder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the Notes.
15. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
Noteholder or an assignee, such as: TEN CO (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
The Company shall furnish to any Noteholder upon written request and
without charge a copy of the Indenture. Requests may be made to: CHIEF FINANCIAL
OFFICER, STATER BROS. HOLDINGS INC., 21700 Barton Road, Colton, California
92324.
A - 7
<PAGE> 83
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to:
---------------------------------------------
(Assignee)
---------------------------------------------
(Assignee's soc. sec. or tax I.D. no.)
---------------------------------------------
(Assignee's name, address and zip code)
and irrevocably appoint:
---------------------------------------------
as agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him or her.
Dated: _____________________
-----------------------------------
(name as appears on the face of the Note)
By:
-------------------------------
Signature guaranteed by:
-------------------
A - 8
<PAGE> 84
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 3.01, 4.11 or 4.19 of the Indenture and paragraph 5 or 6 of
this Note, check the box:
[ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 3.01, 4.11 or 4.19 of the Indenture and
paragraph 5 or 6 of this Note, state the amount:
$
---------------------
(in an integral multiple of $1,000)
Date: Your Signature:
--------------- --------------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
A - 9
<PAGE> 85
SCHEDULE OF EXCHANGES OF CERTIFICATED SECURITIES2
The following exchanges of a part of this Global Note for Certificated Notes
have been made:
<TABLE>
<S> <C> <C> <C> <C>
Principal Amount Signature of
Amount of Amount of Increase of this Global Note authorized officer
Decrease in in Principal following such of Trustee or
Principal Amount Amount of this decreases (or Global Note
Date of Exchange of this Global Note Global Note increases) Custodian
</TABLE>
- - --------
2 This is to be included only if the Note is in global form.
A - 10
<PAGE> 86
EXHIBIT B
FORM OF EXCHANGE NOTE
SEE REVERSE FOR TRANSFER RESTRICTIONS
STATER BROS. HOLDINGS INC.
9% SENIOR SUBORDINATED NOTE DUE JULY 1, 2004
$________________ Los Angeles, California
Note No. ________ July 24, 1997
Interest Payment Dates: July 1 and January 1
Record Dates: July 15 and December 15
FOR VALUE RECEIVED, the undersigned, Stater Bros. Holdings
Inc., a Delaware corporation (the "Company") hereby promises to pay to the
holder hereof, or its registered assigns, the principal sum of
________________________ (or so much thereof as shall not have been prepaid) on
July 1, 1994.
This is one of the Notes Dated: July 24, 1997 mentioned in the
within-mentioned Indenture.
FIRST TRUST OF NEW YORK, STATER BROS. HOLDINGS INC.
NATIONAL ASSOCIATION
as Trustee
By:________________________ By:________________________
Authorized Signatory Name:
Title:
By:________________________
Name:
Title:
B - 1
<PAGE> 87
BACK OF NOTE
9% Senior Subordinated Note
Due July 1, 2004
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC") to Issuer or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.1
1. Interest. Stater Bros. Holdings Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. The Company shall pay interest semiannually on July
1 and January 1 of each year. Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the first date on which any Notes are issued. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
Notwithstanding the foregoing, at no time shall the maximum aggregate
interest rate borne by the Notes exceed the lesser of (a) the initial interest
rate payable on the Notes plus 2.50% per annum and (b) the maximum amount
permitted under applicable usury laws.
To the extent lawful, the Company shall pay interest on overdue
installments of interest at the Default Rate, as defined in Section 6.02(c) of
the Indenture.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) to the persons who are registered holders of Notes
at the close of business on the record date for the next interest payment date
even though Notes are canceled after the record date and on or before the
interest payment date. Holders must surrender Notes to a Paying Agent to collect
principal payments and premium payments, if any. The Company shall pay
principal, premium, if any, and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company may pay principal, premium, if any, and interest by check
payable in such money. It may mail an interest payment check to a Holder's
registered address.
3. Paying Agent and Registrar. First Trust of New York, National
Association, 100 Wall Street, Suite 1600, N.Y., N.Y. 10005 (the "Trustee") will
act as Paying Agent and Registrar. The Company may change the Paying Agent,
Registrar or Co-Registrar without prior notice without prior notice to the
Holders. The Company or any of its subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated as
of July 24, 1997 (the "Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss.77aaa- 77bbbb) as in effect on the date of the Indenture. The Notes are
subject to, and qualified by, all such terms, certain of which are summarized
hereon, and Noteholders are referred to the Indenture and such Act for a
statement of such terms. The Notes are obligations of the Company limited to
$100.0 million in aggregate principal amount. Capitalized terms not defined
below have the meaning given to them in the Indenture.
- - --------
1 This is to be included only if the Note is in global form.
B - 2
<PAGE> 88
5. Optional Redemption. The Notes will not be redeemable prior to July
1, 2000. Thereafter, the Notes will be redeemable, at the option of the Company,
in whole or in part, at the following redemption prices (expressed as
percentages of the principal amount), if redeemed during the 12-month period
beginning July 1 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000................................ 104.50%
2001................................ 103.00%
2002................................ 101.50%
2003................................ 100.00%
</TABLE>
In addition, up to $35.0 million aggregate principal amount of the
Notes will be redeemable at any time on or prior to July 1, 2000 at the option
of the Company from the net proceeds to the Company of one or more Equity
Offerings at a redemption price equal to 109% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the redemption date,
provided that not less than $65.0 million in aggregate principal amount of the
Notes remains outstanding immediately after the occurrence of such redemption
If less than all of the Notes are to be redeemed, the Trustee shall
select the Notes or portions thereof to be redeemed pro rata, by lot or by any
other method the Trustee shall deem fair and reasonable; provided, however, that
the Notes will not be redeemed in amounts less than the minimum authorized
denomination of $1,000. Notice of redemption will be mailed by first class mail
not less than 30 days nor more than 60 days prior to the scheduled redemption
date to each holder of a Note to be redeemed at its registered address. On and
after the registration date, interest will cease to accrue on the Notes or
portions thereof called for redemption.
6. Change of Control. Upon a Change of Control, the Company shall make
a Purchase Offer to purchase all outstanding Notes at a price equal to 101% of
the aggregate principal amount thereof plus accrued and unpaid interest thereon,
if any, to the date of purchase. To accept the Purchase Offer, the Holder hereof
must comply with the terms thereof, including surrendering this Note, with the
"Option of Holder to Elect Purchase" portion hereof completed, to the Company, a
depositary, if appointed by the Company, or a Paying Agent, at the address
specified in the notice of the Purchase Offer mailed to Holders as provided in
the Indenture, prior to termination of the Purchase Offer.
7. Repurchase Upon Sales of Assets. Upon the date of consummation of
any Asset Sale which, taken individually or together with all Asset Sales since
the Issue Date, results in the receipt of Net Cash Proceeds in excess of $5.0
million, such Net Cash Proceeds and all Net Cash Proceeds from all Asset Sales
consummated concurrently therewith or consummated thereafter (such first
consummation date and each such date thereafter a "Consummation Date") shall be
applied by the Company within one year of the relevant Consummation Date (or, in
the event of a Qualified Santee LLC Interest Sale, within 24 months of the
relevant Consummation Date) at its election to either: (i) investments in assets
or business in the same line of business as the Company or such Subsidiary; (ii)
the repayment of any Indebtedness which is secured by or incurred to construct
such assets; (iii) the repayment of Senior Indebtedness; or (iv) a combination
of payment and investment permitted by the foregoing clauses (i), (ii) and
(iii). On the earlier of the day after the 18 month period following a
Consummation Date (or, in the event of a Qualified Santee LLC Interest Sale, the
day after the 24 month period following a relevant Consummation Date) or such
date as the Board of Directors of the Company or of such Subsidiary determines
(as evidenced by a resolution approved by the Board of Directors) not to apply
the Net Cash Proceeds relating to such Consummation Date as set forth in clauses
(i), (ii) and (iii) of the preceding sentence (each, an "Asset Sale Offer
Trigger Date"), such aggregate amount of Net Cash Proceeds which has not been
applied on or before such Asset
B - 3
<PAGE> 89
Sale Offer Trigger Date as permitted in clauses (i), (ii) and (iii) of the
preceding sentence (each an "Asset Sale Offer Amount") shall be applied by the
Company or such Subsidiary to make an offer to purchase (the "Asset Sale Offer")
on a date (the "Asset Sale Offer Payment Date") not less than 30 nor more than
60 days following the applicable Asset Sale Offer Trigger Date, from all Holders
on a pro rata basis, that amount of Notes equal to the Asset Sale Offer Amount
at a price equal to 100% of the aggregate principal amount of the Notes to be
repurchased, plus accrued and unpaid interest thereon, if any, to the date of
repurchase. Notwithstanding the foregoing, if an Asset Sale Offer Amount is less
than $5.0 million the application of the Net Cash Proceeds constituting such
Asset Sale Offer Amount to an Asset Sale Offer may be deferred until such time
as such Asset Sale Offer Amount plus the aggregate amount of all Asset Sale
Offer Amounts arising subsequent to the Asset Sale Offer Trigger Date relating
to such initial Asset Sale Offer Amount from all Asset Sales by the Company and
its Subsidiaries aggregate at least $5.0 million at which time the Company or
said Subsidiary shall apply all Net Cash Proceeds constituting all Asset Sale
Offer Amounts that have been so deferred to make an Asset Sale Offer (the first
date the aggregate of all such deferred Asset Sale Offer Amounts is equal to
$5.0 million or more shall be deemed to be an Asset Sale Offer Trigger Date).
Pending application pursuant to an Asset Sale Offer the Company shall invest
such Asset Sale Offer Amounts in Permitted Investments.
8. Subordination. The Notes are subordinated to Senior Indebtedness, as
defined in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness must be paid before payments in respect of the Notes may be made
under the Notes and the Indenture. The Company agrees, and each Securityholder
by accepting a Note agrees, to the subordination provisions contained in the
Indenture and authorizes the Trustee to give them effect and appoints the
Trustee as attorney-in-fact for such purpose.
9. Denominations, Transfer, Exchange. The Notes sold to Qualified
Institutional Buyers are initially issued in global form. The Global Note
represents such of the outstanding Notes as shall be specified therein or
endorsed thereon in accordance with the Indenture. The Notes that are not sold
to Qualified Institutional Buyers are initially issued in the form of
Certificated Notes. The Certificated Notes are in registered form without
coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. As a condition of transfer, the Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Notes may be amended with the consent of the Holders of at
least a majority in aggregate principal amount of the then outstanding Notes,
and any existing default may be waived with the consent of the Holders of a
majority in aggregate principal amount of the then outstanding Notes. Without
the consent of any Noteholder, the Indenture or the Notes may be amended (i) to
cure any ambiguity, defect or inconsistency; (ii) to comply with restrictions on
mergers, consolidations and certain asset dispositions; (iii) to provide for
uncertificated Notes in addition to certificated Notes; (iv) to make any change
that does not adversely affect the legal rights hereunder of any Noteholder; (v)
to add to the covenants, conditions and restrictions of the Company, for the
benefit of the Noteholders, or to surrender any right or power herein conferred
upon the Company, or (vi) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualification of
this Indenture under the TIA, or under any similar federal statute hereafter
enacted.
12. Defaults and Remedies. An Event of Default includes, in summary
form: default for 30 days in payment of interest on the Notes; default in
payment of principal of and premium, if any, on the Notes; failure by the
Company for 60 days after notice to it to comply with any of its other
agreements in the Indenture or the Notes; certain events of bankruptcy or
insolvency; certain final judgments which remain undischarged; certain events of
default under other Indebtedness of the Company or any of its Subsidiaries;
failure to commence any of the
B - 4
<PAGE> 90
Purchase Offers described in paragraphs 6 or 7 of this Note by the time
specified in the Indenture or to pay for Notes tendered pursuant thereto; and
failure by the Company to maintain its corporate existence or to comply with the
restrictions on changes of control, mergers, consolidations and certain asset
dispositions.
If an Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in aggregate principal amount of the then outstanding
Notes may declare all the Notes to be due and payable immediately, except that
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes become due and payable without further action
or notice. Noteholders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Notes. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Noteholders notice of any continuing default (except a default
in payment of principal or interest) if it determines that withholding notice is
in their interests. The Company must furnish an annual compliance certificate to
the Trustee.
13. Trustee Dealings with the Company. The Trustee under the Indenture,
or any of its Affiliates, in their individual or any other capacities, may make
or continue loans to or guaranteed by, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if the Trustee were not Trustee.
14. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
Noteholder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the Notes.
15. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
Noteholder or an assignee, such as: TEN CO (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
The Company shall furnish to any Noteholder upon written request and
without charge a copy of the Indenture. Requests may be made to: CHIEF FINANCIAL
OFFICER, STATER BROS. HOLDINGS INC., 21700 Barton Road, Colton, California
92324.
B - 5
<PAGE> 91
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to:
---------------------------------------------
(Assignee)
---------------------------------------------
(Assignee's soc. sec. or tax I.D. no.)
---------------------------------------------
(Assignee's name, address and zip code)
and irrevocably appoint:
---------------------------------------------
as agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him or her.
Dated: _____________________
----------------------------------
(name as appears on the face of the Note)
By:
------------------------
Signature guaranteed by:
----------
B - 6
<PAGE> 92
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 3.01, 4.11 or 4.19 of the Indenture and paragraph 5 or 6 of
this Note, check the box:
[ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 3.01, 4.11 or 4.19 of the Indenture and paragraph 5
or 6 of this Note, state the amount:
$___________________
(in an integral multiple of $1,000)
Date: Your Signature:
---------------- --------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
B - 7
<PAGE> 93
SCHEDULE OF EXCHANGES OF CERTIFICATED SECURITIES2
The following exchanges of a part of this Global Note for Certificated
Notes have been made:
<TABLE>
<S> <C> <C> <C> <C>
Principal Amount Signature of
Amount of Amount of Increase of this Global Note authorized officer
Decrease in in Principal following such of Trustee or
Principal Amount Amount of this decreases (or Global Note
Date of Exchange of this Global Note Global Note increases) Custodian
</TABLE>
- - --------
2 This is to be included only if the Note is in global form.
B - 8
<PAGE> 94
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF NOTES
Re: Senior Subordinated Note due 2004 of Stater Bros. Holdings Inc.
This Certificate relates to $___________ principal amount of Notes held
in * _____________ book-entry or * ______________ certificated form by
________________ (the "Transferor").
The Transferor*:
[ ] has requested the Trustee by written order to deliver in
exchange for its beneficial interest in the Global Note held
by the Depositary, a Note or Notes in certificated, registered
form of authorized denominations and an aggregate principal
amount equal to its beneficial interest in such Global Note
(or the portion thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or
register the transfer of a Note or Notes.
In connection with such request and in respect of each such
Note, the Transferor does hereby certify as follows:
[ ] Such Note is being acquired for its own account, without
transfer.
[ ] Such Note is being transferred to a qualified institutional
buyer (as defined in Rule 144A under the Securities Act of
1933, as amended (the "Securities Act")), in reliance on Rule
144A or in accordance with Rule 145 or Regulation S under the
Securities Act.
[ ] Such Note is being transferred in accordance with Rule 144
under the Securities Act, or pursuant to an effective
registration statement under the Securities Act.
[ ] Such Note is being transferred in reliance on and in
compliance with an exemption from the registration
requirements of the Securities Act, other than Rule 144A, 144
or 145 or Regulation S under the Securities Act. An opinion of
counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this
Certificate.
--------------------------------
Insert Name of Transferor
By: ____________________________
Dated:
- - -------------------------
* Check applicable box
C - 1
<PAGE> 95
EXHIBIT D
FORM OF LEGAL
OPINION ON TRANSFER
------------------, -----
- - -----------------------
- - -----------------------
- - -----------------------
Re: 9% Senior Subordinated Notes Due July 1, 2004
of Stater Bros. Holdings Inc.
Ladies and Gentlemen:
This opinion is being furnished to you in connection with the sale by
_________________ (the "Transferor") to __________________ (the "Purchaser") of
$________ aggregate principal amount of 9% Senior Subordinated Notes due 2004 of
Stater Bros. Holdings Inc. (the "Notes").
We have examined such documents and records as we have deemed
appropriate. In our examination of the foregoing, we have assumed the
authenticity of all documents, the genuineness of all signatures and the due
authorization, execution and delivery of the aforementioned by each of the
parties thereto. We have further assumed the accuracy of the representations
contained in the documents referred to above made by the parties executing such
documents. We have also assumed that the sale of the Notes to the Transferor was
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (the "Securities Act").
Based on the foregoing, we are of the opinion that the sale to the
Purchaser of the Notes does not require registration of such Notes under the
Securities Act.
Very truly yours,
D - 1
<PAGE> 1
Exhibit 11
STATER BROS. HOLDINGS INC.
Calculation of Earnings Per Common Share
(Unaudited)
(In thousands, except number of shares and per share amounts)
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
----------------- ------------------
June 23, June 29, June 23, June 29,
1996 1997 1996 1997
------ ------ ------- -------
<S> <C> <C> <C> <C>
Net income $4,385 $4,078 $12,323 $12,627
Less preferred dividends 1,816 1,816 2,155 5,448
------ ------ ------- -------
Net income available to common shareholders $2,569 $2,262 $10,168 $ 7,179
====== ====== ======= =======
Earnings per common share $51.38 $45.24 $126.75 $143.58
====== ====== ======= =======
Average common shares outstanding 50,000 50,000 80,220 50,000
====== ====== ======= =======
Common shares outstanding at end of period 50,000 50,000 50,000 50,000
====== ====== ======= =======
</TABLE>
25
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-START> SEP-30-1996
<PERIOD-END> JUN-29-1997
<CASH> 39,830
<SECURITIES> 0
<RECEIVABLES> 19,410
<ALLOWANCES> 0
<INVENTORY> 115,739
<CURRENT-ASSETS> 186,037
<PP&E> 199,473
<DEPRECIATION> 93,452
<TOTAL-ASSETS> 330,443
<CURRENT-LIABILITIES> 113,276
<BONDS> 184,509
0
69,365
<COMMON> 1
<OTHER-SE> (36,707)
<TOTAL-LIABILITY-AND-EQUITY> 330,443
<SALES> 1,292,267
<TOTAL-REVENUES> 1,292,267
<CGS> 997,032
<TOTAL-COSTS> 997,032
<OTHER-EXPENSES> 258,960
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,871
<INCOME-PRETAX> 21,404
<INCOME-TAX> 8,777
<INCOME-CONTINUING> 12,627
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,627
<EPS-PRIMARY> 143.58
<EPS-DILUTED> 143.58
</TABLE>
